Hello everyone!

It’s so great when readers send comments and questions.

First of all, I enjoy the interaction and makes me question my own opinions and situation. If the dialogue can help someone, amazing. And if it can make my weekly Journal writing easier, all the better. I read and respond to all emails, so, fire away, happy to chat!

Second, if you’re reading this and enjoy it, can I ask a big favour? Please send this to your friends. It goes a long way to help my page and let’s not forget how it might help your friends too! Thank you, gracias, adiós amigos.

PS. Canadian Artic Security: Imagine what we can achieve if we would be as bold today as the pioneers of Canada were in the 1800s. Spanning across one of the largest countries in the world, the Canadian Pacific Railway absolutely transformed Canada. And it only took 15 years to build, in the god-dang 1800s—time to be bold!

Personal Finance

Goodwill Investing Journal Reader:

Hypothetical question for you!

We have $20,000. Option 1: lump sum on the mortgage at 4.38% (variable); Option 2: instead put it in the TFSA that has contribution room.

What's the play?

Me:

Good question...

• Option 1. TFSA

• Option 2. Mortgage

• Option 3. 50/50

• Option 4. leave in cash.

Mathematically, TFSA is a better option, and you can see with the charts, the more money you invest, early and for a longer amount of time, the future dollars are pretty epic. Max funding your TFSA should be a priority.

If you are a bit risk averse and will take more emotional benefit of slightly less overhead expenses (by reducing your monthly payment) or simply having less debt, then put the $20k onto the mortgage...it is an immediate, risk free, guaranteed, after tax return of 4.38%, to plunk down 20k on the mortgage. A solid return on money. 

Obviously it's ok if your TFSAs aren't max funded this year, but set a goal to make sure you get them fully funded as soon as possible. Can't push the ball down the road for too long otherwise the magic won't end up happening. 

Maybe option 3 will placate both the risk averse and the growth oriented sides of you.

Always depends!

Goodwill Investing Journal Reader:

Awesome answer and makes total sense!! Thank you!

Maybe option 3 is the sweet spot.

Me:

No problemo - this will be next week's newsletter entry :) 

Goodwill Investing Journal Reader:

Happy to provide content! lol

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Stock Markets

Trump is really creating a ruckus.

BE that as it may, lets not forget the old adage from Mr Buffet:

“Be fearful when others are greedy and greedy when others are fearful.”

Translation:

For the long term investor, stocks going down is a good thing!

You get to buy great companies at big discounts.

A too-much-information chart I did up below highlights the opportunities that come when “volatility spikes”:

Now, “VIX” spikes don’t mean stocks down today go up tomorrow. But usually, couple years hence, they are up. And sometimes, by a lot.

A few “stock discounts” on offer at the local store:

• Facebook, 26% off

• Google, 26% off

• West Fraser, 25% off

• Walmart, 16% off

• Home Depot, 17% off

• S&P500, 12% off

If these were discount banners on the side of Lululemon or Hudson’s bay, you’d see a full parking lot.

Very different in stock land, even though it shouldn’t be.

See the Simply Investing Masterclass for lessons about investing your parents and teachers didn’t give you.

Real Estate

One thing that Trump has done for sure is reduce the chances that I’ll be making any ‘big money’ for a little while.

I make most of my bucks in Real Estate, acquiring, improving, and selling commercial properties after we’ve ‘added value’.

Most of the money comes when we sell a deal for a large profit, such that the LP investors make lot’s of money. And they are happy for us to make lot’s of money, too. Win win.

Unfortunately, it’ll be slow going for a while because the business model of acquisitions and dispositions requires Real Estate Capital Market transaction activity to be rolling.

We need volumes to buy; we need volumes to sell into.

No volumes? No money!

So while everyone might be optimistic about real estate because bond yields are decreasing, in other words, interest rate costs coming down, to me, it’s not so rosy, at least from a volume perspective.

Indeed, the cost of money is made up of two things: cost of debt, and cost of equity, and the latter has sky rocketed.

Meaning, a good chunk of investors that back our deals, and Commercial Real Estate in general, have gone pen’s down.

This is likely notable in the residential market as well, though I’ll defer to others here. Interest rates coming down makes the cost to purchase a home more palpable. But the uncertainty in the world is keeping lot’s of people on the sidelines…

Will see how this all plays out but it’ll be generally quiet for a while, I think.

Good thing golfing season is here 😉 

1 Quote

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”

Thomas Edison

A Question

I guess no one got this far last week!? I asked for some quote contributions and I got SWEET F ALL 🤣 

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Thank you

Eddie Gudewill, CFA

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