Investment Ideas for 2015: Part 1

I use a top-down investing method. I analyze global markets, specific market sectors and individual stocks from a big picture point of view. My first step is to determine the world economy’s health. I spend time analyzing not only the developed countries but also emerging market countries. A quick way to determine an economy’s health is to look at gross domestic product (GDP) growth over the past few years and the estimates going forward

The next step is to do a more in-depth analysis of the economy along with the stock market’s health in particular. By examining the economic numbers such as interest rates, inflation and employment, I can determine the current market strength and have a better idea of what the future holds.

Living in Canada, I have learned that money has no flag and no country. It moves around the world persistently looking for higher returns. In three short years, the Canadian dollar has done from $1.05 to $0.86 when compare to the U.S. dollar.

My preliminary investigation is to follow the flow of money which is going into the U.S. dollar. The Euro Zone is still using QE (Quantitative Easing – money printing) to lower the value of the Euro and Japan is also using QE to lower the value of the Yen. The U.S. has stopped QE and there is some speculation that the Fed may raise interest rates sometime in 2015. I think the best place to invest is still the U.S.

What Sectors to Do I like

  1. As mentioned in a previous blog post, due to falling oil prices I like the transportation industry and consumer discretionary companies. They will benefit the most from lower fuel costs.
  2. The baby boomer generation (me) are getting older and will be spending more money on health care and joint replacement parts like knees & hips. A good sector to be in for long-term.
  3. The technology sector still has a lot of growth potential, companies that provide products and services to corporations could benefit the most. Corporations still have a lot of cash on their balance sheets which could be spent in 2015 on upgrading their systems.
  4. Small cap companies over the long-term outperform large cap. There are many hidden gems that Wall Street analysts do not follow. It requires a lot of your time researching but could be very profitable. The majority of today’s large cap companies were at one time or another a small cap. You could simply by a small cap ETF.
  5. I have a love – hate relationship with the banking industry. I hate their fees, their business practices and their greed that caused the great recession. They are not all bad so I do love their dividends and growth prospects. There are some Canadian banks that are listed on the New York stock exchange that have branches in the U.S. and have a higher dividend yield than U.S. banks.            (Ticker symbol TD, RY,BMO)


What to Avoid

  1. While I am a big believe in asset allocation and diversification, where are times when these strategies fall short in protecting your wealth. I no longer hold any bonds in my investment portfolio. The bond market is in bubble territory. French & German ten-year bonds are yielding less than 1%, even Italian bonds are below 2% while the U.S ten year bonds have a yield under 2.5% ! The high yield bond market is yielding around 5% with a high degree of default risk. The rate of returns on bonds are way too low and the risk is too high if the U.S. raises interest rates.
  2. I find that the price of gold and gold stocks are too difficult to figure out. There are just too many conflicting factors. Inflation fears, crisis situations, used as an alternate currency and central banks purchases can all affect the price of gold. I avoid investing in a market that I don’t understand.
  3. The basic materials sector relies heavily on infrastructure spending but governments worldwide have huge debt problems, even China has reduced spending in this area. However, this sector also includes chemical producers and forestry products. Some of these individual stocks could be okay to buy.
  4. The energy sector has an oversupply problem. Some oil companies will continue to supply oil because they have future contracts at higher prices. Oil producing wells from fracking have a fast depletion rate so it could be better to lose some money than lose the oil. Things could change quickly if Saudi Arabia cuts production.

One of many investing mistakes that I made when I was young was “Herd Mentality” – the herd is running to the U.S. I am going to protect my portfolio by keeping some of my money in Canada plus look for some investment opportunities outside of North America.

Now it is time to do some in-depth research on the sectors that I like. I like looking at long-term charts to confirm a uptrend. I then look at a one year chart and moving averages to determine entry and exit points.

Disclaimer: I have a degree in economics so my investment approach is somewhat bias. The information is only my opinion and  for discussion purposes only. Do your own research or consult with an investment professional before you invest.

Your comments are welcome, even if you disagree with me.


How Can You Profit From Falling Oil Prices



Has the price of oil hit a bottom? It is time to put some money into the oil sector? Could this be a buying opportunity? I believe that the answers are No! No! and No! It is the holiday season which means many investors are away so the trading volume in the markets are lower than normal which allows speculators to move market prices. It takes time to confirm that the oil price has made a bottom. Read my post on “Don’t  catch a falling knife & dead cat bounce”

You can still profit from falling oil prices without buying oil stocks. Lower fuel prices have already benefit airlines, cruise lines, trucking companies and delivery service companies.  The chart below compares the I-Shares transportation index YIT to the S&P 500 index SPY.



Why try to pick a bottom in the oil sector? The genius of investing is recognizing the direction of a trend – not catching highs and lows . A common Wall Street phrase is “the trend is your friend” There are lots of transportation stocks to choose from. Some have preformed better than others, with some good research, you should be able to find some winners.

Lower fuel costs will also benefit consumers. The weekly saving is small so consumers will in most cases spend on small pleasures. Eating out,  going to the movies, ordering take out…. etc. If you are a stock picker than companies like Starbucks, McDonald’s, Walt Disney, Wal-Mart, Walgreen, Comcast, Dollar General could be worth looking into.

Another option is to buy a consumer discretionary  ETF that contains many of the stocks mentioned above. Here are two that I have found that look interesting. I-Shares IYC and Vanguard  VCR


It is difficult to predict how consumers will spend that little extra cash in their wallets. However, a drop in fuel prices is like getting a tax cut and it takes time for the effects to ripple through the economies of the world. Remember that consumer spending accounts for 70% of economic growth. Are you going to save, spend or invest those extra dollars?

Disclaimer: Make sure to do your own research before investing or consult with a financial advisor. Plus for purposes of full disclosure, I personally own shares in Starbucks and Walt Disney in my investment accounts.






Money Lessons From “Its a Wonderful Life”



Spoiler alert, if you have never seen this movie, then I suggest that you watch it before reading this post. This movie is a Christmas classic because so many people can relate to the many different heart warming themes. Most of us have experienced similar life struggles regarding our career and the lack of money that George faces in the film. This post isn’t about being like Mr. Potter, the evil,  heartless, money grabbing businessman.  However, if you look deep enough there are some important lessons regarding money.

1. George has a plan, he has delayed going to college until he saved enough money. He stuck to his plan even though most of his friends are almost finished college.


2. George sees an old broken down house but Mary sees the potential of it coming a home. Sometimes the best deals are not obvious to most people. Buying a fixer upper can be a good investment.


3. Despite George’s lack of education, the board members offer him a job because of his passionate speech and working experience. Employers put a lot more weight on work experience compared to education when hiring.


4. George convinces his shareholders not to panic, selling to Mr. Potter at $0.50 on the dollar isn’t the right thing to do. “Mr. Potter isn’t selling, he is buying!” Succumbing to fear is a sure way to lose money.

5. Having a good financial adviser could help you avoid making bad investment decisions.


6. George  makes a large impact in his community by building affordable houses.  Although it is shown in a positive light in the movie, loaning out money to individuals with low credit scores is dangerous. The crash of the sub-prime mortgage market  which helped cause the recession of 2008-2009 in the U.S. is a perfect example.


7.  Mr. Potter offers George an overly generous short term  job offer. George is tempted until he realizes that the offer sounds too good to be true and it is.


8. George needs to borrow money to stay out of jail. Financial institutions don’t care about your character or work experience. They loan money based on your credit score, collateral and income. George’s life insurance wasn’t good collateral, maybe he should have used the equity in his home.


9. Family, friends and business associates are important sources for funds in times of great need. The key is ensuring that the loans are documented and paid back.

I hope you enjoyed reading my outlook on the money theme in this movie.

Happy Holidays!!!!



Games that Fund Managers Play


Fund managers are paid bonuses based on performance and some for attracting investors to buy their funds. Hedge funds are notorious for high bonus structures on performance. It is important to know the games that fund managers play at the end of every quarter.

Window Dressing

It is a strategy to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high-flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings.

Another variation of window dressing is investing in stocks that don’t meet the style of the mutual fund. For example, a value fund manager might invest in stocks that are in a hot sector at the time, disguising the fund’s holdings, so clients really have no idea what they are paying for.

The Dec 31 yearend quarter is by far the most important quarter because they want to attract investors that don’t contribute money into their retirement accounts until the first part of the new year.

Closet Indexing

A portfolio manager practicing closet indexing picks stocks in terms of weighting, industry sector or geography that are very similar to an index that they are supposed to beat. A manager’s performance is usually compared to his or her benchmark index, so there is an incentive for managers to gain returns that are at least similar to the index.


Do Your Homework

  1. Check the quarterly 10 ten listings and compare.
  2. Does the performance of the fund consistently beat the benchmark index?
  3. Does the mutual fund have a high stock turnover rate?
  4. Is the current fund manager responsible for the long-term past performance numbers?
  5. Was the manager performance based on skill or just luck because of an over exuberant bull market?

    Window dressing and closet indexing may make a fund appear more attractive, but they can’t hide poor performance for long.

Don’t Catch a Falling Knife & Dead Cat Bounce

The above chart is the price of the Spider oil sector exchange traded fund (XLE). It illustrates two slang phrases used by the financial industry. Trying to predict where an investment will stop falling is a fool’s game and is a sure way to lose money.

Don’t try to catch a falling knife because knives cut people. There are very few situations when the price of a falling investment immediately reverses. XLE price started to fall in price at the end of July from $100 to $80 by mid-October. A 20% drop in price in just over 75 days illustrates that prices fall further and faster than anyone could predict. Trying to buy these drops might make you feel like a superior investor until your account gets wiped out. You may make a quick profit, or you may cut off some fingers. (now down 25% and is still falling)

A dead cat bounce is a small, brief recovery in the price of a declining investment. Derived from the idea that “even a dead cat will bounce if it falls from a great height”, the phrase, which originated on Wall Street, is also popularly applied to any case where an investment experiences a brief resurgence during or following a severe decline. XLE had a dead cat bounce up from $80 to around $88 in 30 days but resumed to fall in price. (My apologies to all cat lovers)

Before I would invest in an oil stock or an oil ETF, I would play it safe by waiting for a bottom to form. It may take three to six months or more to verify that the price has stop falling.


The chart above shows what a price bottom should look like. 

Additional factors to consider before investing in the oil market:

  • There is still a lot of fear in the oil market.
  • The so called experts are often wrong when predicting where the price of oil will stabilize. 
  • It takes time for oil companies to stop pumping out oil from existing wells. It is more complicated than just closing the tap.
  • Oil companies have make some commitments to spend money on new drill sites that can’t be postponed.
  • Oil prices are falling due to over supply and OPEC  says that it isn’t going to cut production.
  • Hedge funds are short selling oil stocks driving the price even lower.
  • Tax loss selling season isn’t over yet.

Before you invest, you need to do your homework, stay clam and be rational.

Two sites that I use for drawing charts are:

Are you interested in more information on how to use charts to improve your investment returns? Please post your comments on this topic or email me

Disclaimer: I am no longer licenced to give investment advice. This post is only for educational purposes. Please consult a qualified financial advisor before investing.


The Pressure to Spend


Guest blogger: My daughter – Deanna Di Lello

It’s hard to save. (It is!) And not because you don’t make enough money. It’s because you’re under enormous pressure to spend.

Oh, those ads…

They’re everywhere and they’re all telling us the same thing “Buy this and you’ll be happy!” We think we can tune them out, but between subway ads, bill boards, commercials and pop-ups, that message is going to sink in.


Friendly persuasion

Being social usually involves money – going out to dinner, having drinks, seeing a movie… Friends with higher levels of income may also encourage you to buy tickets to sporting events or arts and culture activities which you really can’t afford.


The trouble with Tech

I-phones, I-pads, google glasses… everyone wants to have the next new toy. Keeping up with the latest technologies (when your old one would do just as well) is costly.


The cost of relaxation

“The best things in life are free.” But many companies specializing in leisure would have you believe otherwise. Do you like yoga? You’ll need the right yoga pants. Want to go hiking? Where are your boots?! It seems as though activities that were once fun and free are now super pricey.

Those deals!

Black Friday, Cyber Monday, Boxing Day… merchants have us convinced that we’d be suckers not to take advantage of these great deals.


Fear of collapse

Without buyers there can be no sales and without sales, there are no salaries. How often have we heard that spending is “good for the economy.” No wonder it’s hard to save. 

Here are a some tips to keep the pressure off:

  • Acknowledge that you’re under pressure and remember that you still have the power. It’s your CHOICE to spend or to save.
  • Get very specific when it comes to saving goals. Are you looking to get out of debit? Buy a new car? Go on vacation? It’s easier to save when you have an end goal in mind.
  • Tell your friends about your saving goals. They will be more likely to forgive you when you pass on their next outing suggestion.
  • When you go to buy really think about if it’s something you need v. something you want.
  • Try your best to focus on non-material things. Spend some time in nature. Go for walks with your family. Realize that happiness does not need to be bought. Happy saving!



You can read more by Deanna at

Suggestions for President Obama & the Republicans on Tax Reform

white house                 gop


Today, I was watching CNBC while eating lunch. The President talked to business leaders about issuing facing America. One issue was corporate tax reform which to me doesn’t make sense, when 70% of economic growth comes from consumer spending. U.S. corporations have so much cash that they are buying back shares instead of expanding their businesses. Giving them more cash by lower taxes will not lead to more economic growth.

On the other hand, student debt is crippling the American economy, young people are putting off starting a family and buying their first home. Middle class families are also suffering with additional debt because they make too much income to get government aid for their kids but not enough to pay tuition fees. Interest payments on debt doesn’t create jobs or economic growth.

Any tax policies that increase student aid, lower interest rates on student loans or larger tax deductions will put more cash into young people’s pockets. Family formations leads to spending and economic growth. The problem is the government still has large annual deficits, so how can they pay for these changes.

I have two suggestions:

  1. Increase the tax on corporate stock options, fat cat executives’ pay low capital gains tax on options. Image making a million dollars in stock options and only paying tax on half of it. Hold the options for over a year and pay the lower long-term tax rate. These same executives take company cash to buy back shares to artificially increase the price of their stock.
  2. Mortgage interest deductibility has to have a limit. U.S. tax payers are bankrolling the cost of mansions and second homes. Imagine that a yacht is classified as a second home and is eligible for mortgage interest deductibility.

The outstanding student debt levels in the U.S. is over 1.2 trillion dollars and still climbing! It is time for the 1% to help give the next generation the opportunity to succeed!

5 Investing Mistakes to Avoid


Take a good look at the above picture! Notice the date, Sept 24/80 and the price of silver was $24.20 per ounce. Look at the exchange rate between the Canadian and U.S. dollar (1.1685). That was the first investment that I made excluding the purchasing of my first home. The current price of silver is around $16.50 an ounce. Yes, I didn’t avoid the following mistakes:

Mistake #1 – Herd mentality, investing in something just because everyone else is going it, not a good way to invest. The price of silver went sky high only to come crashing down.

Mistake #2 – I knew nothing about the silver market, had no idea why prices were moving up or down. I learned a valuable lesson, never invest in things that you don’t understand.

Mistake #3 – The price that you pay for something at a particular point in time has little to do with its future value. The price of silver didn’t bounce back to the $24.00 level until 2010! (30 YEARS LATER)

Mistake # 4 – Admit that you made a mistake and take the investment loss. Investors have a hard time taking a loss, holding on too long will only increase the amount you lose.

Mistake # 5 – I didn’t take into consideration that investing in another currency not only adds costs but additional risks. ($485.21 U.S. cost me $566.97 Canadian)


I still own the bar of silver as a reminder that I can make investment mistakes. Yes, I was young, in my late twenties  at the time. However, I still see people make those same mistakes today.  I take it out and show young people that my wisdom comes from making mistakes. Avoid them if you can but also learn from them. Most important, try not to make the same mistakes over and over again.

I plan to share other investment mistakes that I made in future blog posts and some that I managed to avoid.

8 Yearend Tax Planning Tips


With only _______ shopping days before Christmas and you want me to read a blog post about tax planning?   Sounds crazy, but not everyone celebrates Christmas, almost everyone pays taxes. You could be glad in April because tax planning now could generate a tax refund. (You could  even pay for next year’s Christmas presents.)

Tip 1

Get out your lasts year’s tax return and see if this year’s income will be higher than last year. Will you be in a higher tax bracket? If yes, an extra contribution to your tax deductible retirement account could generate a bigger tax saving.

Tip 2

Add up your medical bills from this year and compare them to last year. If you have spent less, you may want to reschedule your dentist appointment from early January to December. Why wait until next year if you need new eyeglasses, buy them now. Planning a winter vacation that requires medical shots, get them now.

Tip 3

Add up your charitable donations and compare them to last year. If you have donated less or nothing at all, now would be a good time to be generous. Wealthy people donate stocks, ETFs and mutual funds that have a capital gain instead of money. They don’t have to pay any tax on the gain and they get a bigger tax deduction.

Tip 4

Have you sold any investments in 2014 that will generate a capital gain? Consider doing some tax loss selling of investments that are underwater to offset the capital gains. A capital gain loss can be carried back 3 taxation years to offset capital gains incurred in that year. You can always buy them back later. (You will have to wait 31 days to re-buy to avoid “superficial loss rules”)

Tip 5

Postpone selling your investment winners in non-registered accounts until Jan to avoid paying tax in April.

Tip 6

Look for ways to legally split income by transferring income producing assets to family members that are in a lower tax bracket.

Tip 7

Getting a big year-end bonus? It may be better to postpone getting it to January or have your employer deposit the bonus directly into your retirement account!

Tip 8

Check to see if there are any changes to tax laws that could affect your tax return for 2014 & 2015. There could be some new tax deductions or some loss deductions.( in Canada, a safe deposit box is no longer tax-deductible)

tax 1

The tax man is happy to pick your pockets for more money. It is up to you to legally avoid paying them too much. Remember, rich people stay wealthy because they can afford the best tax specialist to reduce the amount of tax that they pay.

Teaching Kids the Joy of Giving & Save Money

  • gringe       

It is the season for spending. American Thanksgiving is only is only a week away. Black Friday in the U.S. is the biggest and busiest Christmas shopping day of the year. Retailers are going to entice you to spend more than you had planned. Some of them even plan on staying open on Thanksgiving! It is sad but many families will go into debt this year by over spending. I find it depressing that exchanging gifts has become the focal point of Christmas.

For me, the magic of Christmas is spending time with family and friends. It is a time to be thankful for what we have and help those who are less fortunate. Don’t get me wrong, I love to watch children opening presents on Christmas morning, getting down on the floor and playing with them. But let’s put some focus on the act of giving and not receiving.

Some Gift Ideas for Kids to Give

  • Letter writing – If they are old enough to write a letter to Santa then get them to write a letter to grandma & grandpa telling them why they love them so much. (Expect some tears of joy)
  • Homemade gifts- there are many cheap crafts ideas available for kids of all ages that can be make into gifts. If you like to bake, get your kids to help make cookies to give as presents.
  • Donate toys– go through their toy box and encourage them to give away a toy to your local charity.
  • IOU coupons – to make dinner, take out the garbage, clean the house, wash the car….etc
  • Use part of their allowance– take your children to the grocery store to buy a small food item to give to your local food bank or buy a new toy to donate to charity
  • Donate Time – get your children to donate time to a charity like helping out at your local food bank, better yet, go together
  • Be a role model– show them how you give to those who are less fortunate
  • Christmas movies – watch them as a family to reinforce the concept of giving

There are many Christmas movies that are ideal to reinforce the concept of giving. My two favorites for young children are Dr. Seuss “How the Grinch Stole Christmas” and “the Muppet Christmas Carol”! Make sure that you watch as a family and make it an annual tradition.

Save Money

  1.  Homemade gifts are not only a great way to save money but could be appreciated much more than a store bought gift.
  2.  IOU coupons for; a home cook meal, a Sunday afternoon to watch a sporting event on T.V., instead of a gift card for the movies, go with them, time spent with family & friends is a great gift, use your imagination.
  3.  Donate to Charity, pick the person’s favourite charity, not only does it help the less fortunate but you get a tax deduction.
  4.  Secret Santa, for large families, reduce the number of gifts, put family names in a hat and pick one to buy a Christmas gift.
  5.  Steal a gift, everyone buys or makes a gift, set a dollar limit, a number is put into a hat for each family member, each person draws a number out of a hat and #1 picks a gift, #2 can steal #1’s gift or pick another one, the stealing is over when the last number picks the last gift. Great fun for young & old.

Some of my fondest Christmas memories was  playing rummoli on Christmas Eve and  watching “It is a Wonderful Life” and “Scrooge” with my teenage daughter. (Scrooge with Alastair Sim 1951 is our favourite)

If your children don’t learn the joy of giving when they are young, don’t expect them to be generous as adults.


life-movie             scrooge