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This and That: The cost of thrift, market recovery and more…

May 29th, 2009 · 12 Comments

Thread of the Week: If you are interested in bonds, check out this thread on bond basics on the Canadian Money Forum. You can browse the discussions on the forum but you need to register to post your thoughts.

  1. The age of thrift reportedly sweeping the continent is having some unintended consequences. The New York Times on how saving money ends up costing some people even more.
  2. Jason Zweig on what Ben Graham would say about stocks moving from the edge of the bargain bin to the full-price rack in a matter of weeks.
  3. Jon Chevreau interviews three pension experts to find out the implications of recent changes made to the Canada Pension Plan.
  4. Rob Carrick reminds readers to update their insurance when making expensive additions to their home.
  5. Ma Bell makes Michael James an offer he could easily refuse.
  6. Million Dollar Journey finds out that it pays to check store receipts for mistakes.
  7. Remember how bloggers were hyperventilating over peer-to-peer lending and wondering if it could replace fixed income portion of their portfolio? Mr. Cheap wrote about the dark side of being a micro-banker.
  8. Just reading it makes my head hurt. Preet runs some experiments with shorting double-exposure ETFs.
  9. Get Money Energy came up with a list of things to feel rich that has nothing to do with the bank balance.
  10. Riscario Insider shares the nuggets of wisdom he found in “Get Smarter” (a book by Seymour Schulich).

Have a great weekend everyone!

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12 responses so far ↓

  • 1 Michael James // May 29, 2009 at 11:07 am

    Thanks for the mention. I’ll be careful to avoid do-it-yourself home repairs that I can’t handle :-)

  • 2 WhereDoesAllMyMoneyGo.com // May 29, 2009 at 11:32 am

    Thanks for the link CC – have a great weekend!

  • 3 MDJ // May 29, 2009 at 11:58 am

    Thanks for the link Ram!

  • 4 Phil S // May 29, 2009 at 12:39 pm

    It looks like many of the posters on the bond thread of the Canadian Money Forum have exactly the same concerns as I have… That there is no fully transparent, publicly accessible bond trading market in Canada. The closest thing that we HAD was the burgeoning Income Trust market which our Government in their infinite wisdom has decided to completely blow-up!!!

    In my opinion, the ideal situation would be to have an exchange which lists the bid / ask for all sorts of bonds – corporate, government and agency bonds. Then the discount brokers would offer a fixed trading fee just like they have for stocks and we as individuals would know exactly how much commission we are paying for those bonds. The current system of trading only with your broker’s bond trading desk and their system of “baked-in” commissions only serves to rip us (the small investors) off!!!

    I find this to be such an outrage!!! But often times, I feel like maybe I am the ONLY small investor in Canada who is buying bonds, so that’s why I figured that my complaints always fall on deaf ears. It is good to see on Canadian Money Forum that I am at least not the only person who feels this way!!! There are maybe 4 or 5 of us!!! :)

  • 5 MoneyEnergy // May 29, 2009 at 1:25 pm

    Nice round up, thanks for sharing my article. I agree with Phil’s comment above. It’s easy enough to buy government bonds, but I’m not sure how to go the corporate or municipal route other than through ETFs and funds. Compared to the US at least, us Canadians have a lot of “baked in” fees everywhere – trading commissions alone are abominable compared to the offerings a la Zecco et al.

  • 6 Four Pillars // May 29, 2009 at 2:44 pm

    Thanks for the mention.

  • 7 Robillard // May 29, 2009 at 3:47 pm

    Thanks for linking the discussion thread in the forum.

    Phil S – Income trusts are a lot different from bonds. They are basically equity, and will only pay out when the company the trust holds makes money. Companies are obligated to make interest payments on bonds even when losing money.

    I agree that it would be nice if bonds were traded on a public exchange instead of over-the-counter. I’m not sure it would work well though because there are many more bond issues than there are stock issues. Also, in an exchange environment, you need to have market makers/specialists with lots of limit orders. Bonds are not as liquid as stocks because they don’t get traded as much and because there are not many discrete bundles of a bond issue outstanding. If the minimum bond holding is $5000 of face value, and a there is $500 million in face value worth of that bond issue outstanding, then you can think of there really only being up to 100,000 discrete bundles of the bond issue on the market. By comparison, shares are issued in the millions or billions, so there are a lot more shares available to be traded, even if only a fraction of them are traded in a single day.

  • 8 Phil S // May 29, 2009 at 5:49 pm

    @Robillard. In the absence of a true open bond trading market, the income trust structure was the “closest” thing that we had to that… While you are accurate in MOST cases that income trusts are equities, there were /are many cases where income trust structures held debt. Canada Trust used to have an IT holding fixed income products (CT.UN) but it’s already been taken private and de-listed, but I currently still hold FC.UN which is an IT that only holds mortgage debt. So, not all income trusts were equities, although most of them are / were… H&R converted to some kind of strange structure where you have a REIT unit with a debt note “stapled” to it – all because of the Government’s rule changes. So, if you buy an H&R unit, you are buying both equity & debt. I don’t know every example where an income trust is structured around debt, but those are the ones that I currently own or owned at one point in time.

  • 9 Canadian Capitalist // May 29, 2009 at 5:54 pm

    Phil S: I don’t buy bonds but I thought some brokers publish the Buy/Sell price for the same bond — it is easy to see the spread from that. Bonds make up just 20% of my portfolio, so it has been pretty easy so far. I simply hold XSB, though a ladder of GICs as proxy for part of the bond holdings is in the works.

    I find GICs to be a good deal. Giving up liquidity and getting a small boost in yield is an interesting trade-off.

  • 10 WhereDoesAllMyMoneyGo.com // May 29, 2009 at 6:40 pm

    The brokers who publish the bid/asks are only publishing THEIR bid/asks that they are offering to the retail client. Also, note that some fixed income desks are set up as profit centres and some are not.

  • 11 Robillard // May 29, 2009 at 6:57 pm

    Phil S
    Sorry, I stand corrected. I was making a sweeping generalisation.

  • 12 MoneyEnergy // May 30, 2009 at 12:51 am

    Man I am tired of all these content thiefs. I really doubt this is a site you run on the side, but much of your site and this whole article has been copied and reproduced here: http://www.moneyvsdebt.com/2009/05/29/this-and-that-the-cost-of-thrift-market-recovery-and-more%E2%80%A6/comment-page-1/#comment-30388

    Another article of mine was ripped off today by adviceworld.info.

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