Monday, January 07, 2008

canned goods & ammo



I have had a few people write to ask me what I do with my cash while waiting for a correction. Frankly, I do not know what the heck to do with it. Stuff it in my mattress? Hide it in plain sight? Good question.

My response has been that I am very conservative with my capital, and because it is so hard to come by, I keep it in the bank - either in GIC's, or these days, in a "high" interest (4%) savings account at a big bank. I have had the option of putting it into market-linked GIC's, but stayed with the staid old cashable GIC.

So, I am making 4%, but factor in inflation (supposedly ~3%, and income tax on the earned interest, and I am not really getting any further ahead. I could gamble with ABCP, oil futures, pork belly futures, precious metals, the stock market, or the casino, but those are not guaranteed safe havens. I sure could have made money in TSX-linked GIC's, or gold, but I also could have lost money. I could have bought a few pre-sales and made money too (if I bought 3 years ago, and sold this past summer, I would have done well), but I also could have lost it all (I have been expecting a correction for a while...).

What are your safe havens? My 4% earned does not add up to a hill of beans.

25 comments:

Anonymous said...

I was keeping a lot of money in 4.x% GICs until I made the mistake of admitting it to a few friends. A pile of well-intentioned advice and one conservative mutual fund purchase later, I'm down several thousand and not sure whether to bail out and make my losses real or stay put and watch the investment bleed. Those not-amounting-to-a-pile-of-beans GICs look pretty good from this perspective...

Manyfranks

the pope said...

Good topic solipsist! I think its human nature to look at how other people made easy money and want to do the same, this leads most people to jump into a market at just the wrong moment.

Its easy to get the impression that everyone else is making 20% a year on their money because people tend to boast about fortunate investments and not mention losing ones.

I am not an investment expert and can't give you any tips on winning strategies, but I would like to throw this into the conversation if any one else is:

What about offshore savings accounts? Does anyone here have any experience with these? For instance Anglo Irish Bank offers a supposedly guaranteed 6.8% on a one year term deposit of at least 5k pounds sterling.

Obviously this throws in the extra risk of currency trading, but would this be a reasonable choice for someone that wants to protect capitol but earn as much interest as possible?

--And a shameless plug: VancouverCondo.Info redesigned!

fish10 said...

We are moving from a scenario of return ON capital being important to one of return OF capital.

Imagine holding CICB stock instead of CIBC GIC for the few months. The difference is 20%!

(you will have to look up which one did better if you dont know)

M- said...

My money's parked in GICs and savings accounts, all insured.

My wife found some 5.25% 18-month GICs at the North Shore Credit Union a few months back, though they were only a two-week special (I had to scramble to get money out of mutual funds to get in on that deal).

Canadian Western Bank (cwbank.com) is offering 4.55% on their Summit Savings Account.

Just remember to keep your account balances below $100K in each insurable class, as I'm predicting that there will be some bank failures coming up in the next few years.

Anonymous said...

Crappy tire bank is offering 5.5% for the first 90 days, which to me is an extra 400 bucks for that amount of time and then I will be like Canadian tire who?

Then my advice is to go with m's hat tip for CWB. They seem to be the highest.

And I totally agree with Pope that people are a lot quicker to let you know about their capital gains than they are their losses!

Panda said...

I've always thought the scarier the mainstream news the better the time to be in equities. I'm more content to be an owner when bad news is priced in than when equities are priced for perfection.

mohican said...

I am in a premium money market fund (90% of my capital), some 2009 gmac bonds, agricultural commodities etf (DBA), some cdn bank preferred shares, some income trust units, and a precious metals fund gets a contribution each month from the interest I earn.

mohican said...

PS - I have ammo and canned goods too!

hhv said...

CIBC is paying a dividend of over $3/share, they also have a yield of 5.1%. At today's price they are a decent buy and hold. Blue chip stocks have many ways of rewarding investors beyond capital gains and losses.

I'm not much of a fan of GICs and other debt related instruments. I can stomach a bit more risk, I'm far from needing my money, so I look at a few balanced, value and growth funds as being decent longer term holds.

trotter said...

I’ve GIC’s both term and cashable. Recently sold my Barrick shares for a modest 20% gain.

Patiently Waiting said...

I have a 4.75% savings account at TD. It was a special offer and only lasts a few more months. Otherwise, mostly insured GICs. A little bit in a RRSP mutual fund, long term.

Anonymous said...

Mine is in plain old bank account earning 4%.

Anonymous said...

My safe haven: Vancouver Real Estate.

werelnon said...

M- said...

"Just remember to keep your account balances below $100K in each insurable class"

I've been wondering what that means exactly? Does that mean less than a $100K in each financial institution? So, I can have $99K in AGF Home Trust and $99K in National Bank, and the total amount of my GICs is insured?

Thanks for any light you can shed on this.

just my view said...

I'll not touch any bank shares yet
shocking - CIBC
http://stockcharts.com/h-sc/ui

for reasons:

http://tinyurl.com/2y7l2s
Subprime infections make financial sector a ticking time bomb
DAVID PARKINSON
From Friday's Globe and Mail
December 21, 2007 at 6:25 AM EST

http://tinyurl.com/yqrb3v
Thursday, December 13, 2007
Counterparty Risk: CIBC and ACA

http://tinyurl.com/278k8x
Harper Rejects `Bottomless' Canada Commercial-Paper Bailout
By Theophilos Argitis and David Scanlan

Dec. 20 (Bloomberg) -- Canadian Prime Minister Stephen Harper opposes bailing out investors facing losses of up to 50 percent on $33 billion worth of short-term debt.
``If the government became the day-to-day underwriter of market risk in commercial securities markets, that's a bottomless pit,'' Harper said in an interview in Ottawa. A government rescue wouldn't be ``healthy for the long-term growth of the Canadian economy.''

Patiently Waiting said...

I'm not a Conservative, but Harper has earned my respect on this one. If he actually cracked down on the CHMC, he might even get my vote...once.

M- said...

Werelnon: go to www.cdic.ca to see which accounts are protected, and how to spread your money out to keep it all insured.

Note that CDIC does not cover credit unions, which are covered by CUDIC in BC. Link: http://tinyurl.com/33zjyn

Anonymous said...


My safe haven: Vancouver Real Estate.

1/08/2008 11:22 AM


[grin]

hehe. Here's my situation, FWIW: about 20% in gold and silver (CEF, XGD) and the rest in cash in laddered 1-year term deposits (4.5%) with a credit union. Also some XRB (real return bond index). I have cash left over from the UK, 90% of which is in 1-year term deposits (6.7% right now in the UK) and 10% of which is in inflation-linked bonds from National Savings and Investments.

Most of our savings are for a down payment on a house, but I'm pretty bearish, so even though most of these savings are in 1-year terms, I don't care, since I have no sense of urgency about buying. I'm not going to seriously start thinking about buying for 3 years, and by then I expect there to be so much blood on the streets that I still won't be fussed.

Billy TwoBaulz

Patiently Waiting said...

"I'm not going to seriously start thinking about buying for 3 years, and by then I expect there to be so much blood on the streets that I still won't be fussed."

That's exactly what I'm thinking. There are far worse fates than renting all my life.

Imagine buying a leaky condo and having to deal with an incompetent Strata. Then seeing your the market crash, then losing your job and being unable to go where work is, then seeing your building taken over by bottom-feeding investors who fill it with drug-abusers. When you are a renter, you can escape a bad situation quite easily.

werelnon said...

M- said...

"Werelnon: go to www.cdic.ca to see which accounts are protected, and how to spread your money out to keep it all insured."

Thanks for the link. The institutions which hold my GICs are both CDIC members (thank goodness). Anyway, it is clear to me that the CDIC covers up to $100K per institution, but I can't seem to find a concrete confirmation that they would cover $200K if you had $100K GICs at two different member institutions and they both failed.

Obviously this is quite unlikely, but we seem to be a bit of a paranoid bunch around here :).

M- said...

Werelnon: yes, if you have $100K at RBC and $100K at HSBC and $100K at Canadian Western, then if all three went under, CDIC would pay out $300K.

Also, if you have $100K at RBC in your account, $100K in your wife's RBC account, and $100K in your shared RBC account, CDIC covers you for $300K if RBC goes under.

casual observer said...

mohican said...
"I am in a premium money market fund (90% of my capital), some 2009 gmac bonds, agricultural commodities etf (DBA), some cdn bank preferred shares, some income trust units, and a precious metals fund gets a contribution each month from the interest I earn."

You may want to take a look at the RJA (Amex) exchange traded note. It just came out a couple of months ago and it's linked to the Rogers International Commodity Index - Agriculture (RICI-A). It's more diversified (20 commodities) than the DBA (4 commodities), and of course Jim Rogers' influence can't hurt either. There's also the RJI which is based on the full RICI index, and a couple other ones based on sub-indexes.

Anonymous said...

Be very careful about info @RET
% change from Dec 2006 for Regina was 46.5% and Saskatoon 45.6%
http://tinyurl.com/2fbh4z
Winnipeg managed only a miserable 6.8% - if you’d invested there after your costs + airtickets, you would have a negative gain.
So be very very careful of scum boasting of 300% and 500% gains.

lost money said...

4% is just fine. I too was sour on real estate and expecting a correction thus stayed away. I entered stocks on the advice of "pros". THe pros did not liek the stock s I picked and instead steered me to what they thought were undervalued income trusts. I lost 80% of the 250k I put into them.

The money I have in ING, is still safe. Maybe worth a little less due to inflation but its all there.

As you said - no risk = no loss.

Downtown condo owner said...

You lost 80% of 250K in the stock market and you thought buying real estate was risky?!?

You're bat shit crazy...