Archive for September, 2009

Did your portfolio break even?

September 16, 2009

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In a recent column, Jon Chevreau noted that despite a strong bounce back in stock prices, many stock markets still need to gain 40 percent to 60 percent from current levels to hit the previous peak. But, as the Sleepy Mini Portfolio’s experience showed, many investors have probably already recovered from the crash. That’s what I’m seeing in my personal portfolios, which are, on average, up roughly 20% from the previous peak in set August 2008 due to: (1) Rebalancing by selling some bonds and buying some stock (2) Reinvesting dividends, interest and income trust distributions and (3) Adding regular savings, RBC Direct Investing bonus, Employee Stock Purchase Plan profits etc. The additions to the portfolio amounted to 14% of the value of the portfolio at the end of August 2008. Even after netting out the book value of additions to the portfolio, the current value has surpassed the previous peak. Has your portfolio recovered from the crash yet?

No Green Shoots says Warren Buffett

September 15, 2009

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In a chat with Fortune magazine’s Poppy Harlow (available here), Warren Buffett noted that he is not seeing any green shoots in the seventy-odd businesses that Berkshire Hathaway is involved in. But he isn’t seeing any deterioration either. Still, Buffett says he is buying stocks: “We are buying stocks this morning, I can tell you that… I’m not buying based on whether we are coming out of the recession in three months or six months or a year. I’m buying them because I think we are getting good value over time. And I think it’s a mistake for investors to focus on business forecasts instead of looking at the intrinsic value of a business.”

Asked if even the Oracle of Omaha has learned an investment lesson in all this, Buffett replied: “Well, it’s always a terribly interesting thing obviously to watch… but, the dangers of leverage, the dangers of everybody getting a belief of some huge asset class that can do nothing but go up… you know… the dangers of joining the crowd just because the crowd made money yesterday and the week before… all of those things they just recur throughout history. So, you’ve seen an extreme version in certain aspects of the economy but there is really nothing new”.

Savings Products from Canadian Direct, Peoples Trust and Ally

September 13, 2009

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Several new players are now offering high-interest savings accounts with significantly better rates than traditional leaders like ING Direct, President’s Choice Financial and Canadian Tire Financial. If you have a savings account with ING Direct you’ll earn 1.05%, just 0.75% with PC Financial and 1.20% with Canadian Tire. The new players are offering rates that are even better than Outlook Financial, which typically has the top rates (currently 1.5%) but no CDIC guarantee (Outlook’s deposit insurance is through Credit Union Deposit Guarantee Corporation).

Canadian Direct Financial, a division of Canadian Western Bank, is offering a savings account that currently pays 2% and non-redeemable GICs with slightly better rates than ING Direct. However, note that the savings account allows one free withdrawal per month but subsequent electronic transfers cost $2.50.

While Peoples Trust’s clunky website does not make a good first impression, it offers a top rate of 2.1% on its savings account. Again watch for those fees: the first five transactions are free but subsequent withdrawals cost $1.50. Peoples Trust does offer GICs but the rates are much less than those of its competitors.

Ally, a division of ResMor Trust, seems to be the most promising new comer. Launched just the other day, Ally offers a 2% rate on the savings account and redeemable GICs with top interest rates. On a 5-year GIC, Ally offers a rate of 3.5% compared to 3.0% at ING Direct. Ally’s early redemption rates are also higher. For a GIC term of 1 year, cash out will include all the earned interest. For terms greater than 12 months, the current early redemption rate is 1.5% (subject to change) according to a representative I spoke to today (customer service is available 24/7). Compare this with ING Direct’s early redemption rate of 0.5%. It does seem that Ally is so far living up to its promise:

We promise to be among the top rates always, with no monthly fees, no minimum deposits, no minimum balances, and no “special” rates that drop when you’re not looking.

Since Ally also offers tax-free savings accounts, its top savings rate, top GIC rates and top cashable rate makes it a top choice for a savings TFSA. Too bad Ally did not open its doors before I went looking for a TFSA account.

Canadian Direct, Peoples Trust and Ally all members of Canadian Deposit Insurance Corporation (CDIC).