Eye Of The Tornado – my late commentary

As the American public sits back – some reacting, some not – and wonders what their administration plans to do with their money, I set my sights on pounding out a new post on one of my all time favorite areas; investing and finance. I don’t write about it often, but it is a practical hobby of mine to swing-trade and invest, even in these sketchiest of times.

How does it feel, my friends, to have no power while your country may go another $700+ billion into debt? That China and the Middle East own massive amounts of your money? I’m actually asking, not just being rhetorical. Canada may see similar problems soon seeing as we mirror our neighbours down south eventually. That’s okay with me, as four years from now may be the perfect time to buy a house. I hope to buy one from a really depressed young couple with 1.5 children who jumped in too early for the sake of image and lifestyle. It would make me “the” happiest to buy a home in an aura of dark humour.

Here’s where I stand on the stock market: it will continue to shit and/or puke blood. Not all in a row – but until this sorts itself out.

Citibank Chart - which way is down again?

(chart from somewhere within Timing Logic)

My general thinking is that we have another 50% (value) more to fall before we reach 2002-2003 levels – which is when money, oh, sorry, CREDIT, really started to be snatched up out of thin air. The key is that this is not money money. This is money without the inflation (cheap credit) – and the inflation is yet to come. That comes when the bailout forces the hand of god to create more money out of again, nowhere. Something from nothing is still nothing.

Those who thought that being able to afford a house and or lifestyle that was clearly reserved for the actua-rich had this coming – now the other millions have to pay for it. Perhaps we could blame it all on Gen-Xers.

On Oil and Gas I feel the same. Their charts are looking mighty “sick” as some would say. The thin air between today’s (and especially 2007’s) levels is low pressure air looking to collapse. This chart covers the support/resistance points. He sees a short term bounce before we break that level at 140 which was set in 2007. It was all fake and trade – and we’re probably going to see it fail.

Basic trend - Oil and Gas

(chart stolen from Slope of Hope – Tim Knight)

I find it unfortunate that Natural Gas will follow suit in an Oil stock failure, but that’s how it’ll go as they’re linked in trade. Natural Gas may eventually trade as an alternative energy, as it’s better for the environment – but for now one cannot invest in Natural Gas under the impression that it is a clean alternative.

So as the stock market, economy, and world markets tremble like a flame-throwing lion with a bad case of the shits, I wish you the best. Be smart, and don’t buy in the “dips”, at least not yet. I’m short both the S&P and Oil/Gas using ETFs SDS and DUG. Don’t take my “advice” though, read-up or stay out of the markets. Oh yea, and if you own mutual funds try to go more conservative with them too – as low as 30% equity.

More to come…

The Dip Lets You In / And Out

Look at almost any North American or Global equity and you’ll see that we’re in a bit of a dip here. That’s little rallies notwithstanding, like this week so far. I use this Dip idea and analogy for lots of things. My Business Communications class will have heard me speak about it just recently.

Initially a book by this man, Van Tharp, allowed me to see that investing analogies can be used for many aspects of my life: like how being an arbitrator allows you to fill a necessary niche. Forget the buy-low sell-high, it’s about filling a certain gap, making it yours. Then I sat in Chapters and read Seth Godin’s The Dip because it’s a tiny little book that’s not worth reading more than once (but is worth checking out). He points out that a dip in anything – think price, attitude, project realities etc. – should be used as an effective point to get in or out of something.

There will be lulls in your blogging ‘career’. There just will be. If it’s not about readership, then it is about creativity. Quitting’s just not an option unless you really just don’t have the time anymore. But that dip is a good time for massive change, like readjusting a portfolio or rethinking your strategies.

Open new themes, try new things and see how that works out. Change your mission statement, investigate new areas or even leave old ones behind that just weren’t working out for you. I’ve done both: massive change in a lull, as well as adding change during a peak. Both have given me momentum.

The Dip allows for healthy change in management. This is where I insert my token theme of land/forest management where I know there is a big need for change. Until now change has been ridiculously hard to implement, or in my case just observe as I just don’t see it! But I believe I will soon…

In the next 10 years there is going to be the massive changeover from old growth to fully second-growth timber harvesting. There is a lot of speculation as to how this will play out, but the general sentiment is ‘Not Good’, or ‘Questionably’. One of the largest concerns is how marketable this new, and in some cases cloned, mid-quality timber will be. I also don’t know when this change happened, or will happen in the US. I’ve read that there’s less than 4% original forest left in the US, so it’s probably a non-issue considering its protection by now.

The point here is management and ideology change within the dip. In a way I cheer failure because only then do those with the power to change finally implement it. As we see a younger, differently trained, and idealistic workforce take charge, we can start to hope that care of the land will be based on the land, and not the bottom-line only. I would like so strongly to believe that the next generation of management will take this into account, and not just follow models of the recent generations. I am not a forester, I cannot tell or guess yet.

So, tangent above included. Think of dips as advantages. You know that investors certainly do.

The other side of the Dip is accelerating out of it by quitting when the time is right:

According to bestselling author Seth Godin, what really sets superstars apart from everyone else is the ability to escape dead ends quickly, while staying focused and motivated when it really counts.

Winners quit fast, quit often, and quit without guilt – until they commit to beating the right Dip for the right reasons. In fact, winners seek out the Dip. They realize that the bigger the barrier, the bigger the reward for getting past it.

Just remember that in the end, shitty times aren’t about how shitty they are: they’re about whatcha do about it!!

Delayed Satisfaction, Now!

Almost nothing happens immediately. For example, it takes a series of decisions before you’re brave enough to begin a battle with foot fungus; it takes years of professional upgrading before entrepreneurship is certain; and growing a career takes, if not actual planning, then a series of well planned decisions. Open your views to delayed satisfaction now, and you’re building a door for opportunity to knock on.

I think that Rebecca makes a good point in that the less you try to plan and instead live in opportunities now, the better your career will naturally lay itself out before you. But, as some commented on her post, without plans to at least give you a range of decisions to work with there will be no road to travel on.

Professional upgrading can be expensive and leave you planning less for the time being (because as you get through it you need to be stable), but it will definitely pay off when you put it into action as part of a plan. Eventually.

I cannot use my upcoming certification in proposals yet, which is a bummer because the work and funding is there – while I am in part-time school I have to know that it may take two years to pay off. Know this, and be comfortable with it.

Building a network as an action plan will have a delayed pay-off. I have a number of business cards and connections that I cannot, frustratingly, put into action yet. I tried too early once, and in being overly keen may have scared off a potential client. If you are the service provider, make that connection, but have the potential client contact you when the time is right. If you sell yourself well upon initially meeting them, the call will come in.

Think of this: when our forests are re-stocked, they are planned as harvestable in 40 to 80 years. Sometimes more. That means that the company with the lease on the land plans to exist for that amount of time, a rather lofty goal. Often the lease is auctioned off, but then the next company needs to believe in that future target. Knowing the condition of the market and industry right now the risk is massive, but the goal of that satisfaction is fair: the larger the time frame, the more disbursed the risk is.

When I finish my nearly two year investment in school I am taking that risk that more opportunities will have risen in a two-year period. Realize your niche, and bank on growth, it’s usually worth it.

Lastly, something that I am familiar with, putting your time in as an intern may suck the life out of you at times, but it is an investment that will give you a business-shoe foot in the door. Because of my 6 months (with my current company), I know lines and levels of the firm that many other employees never bothered to notice. Take pride in where you stand as an employee and use it to make your boss look good: it will pay off in time.

So, as review:

• Professional Upgrading;
• Networking;
• Interning; and
• Banking on growth of a niche

…are three specific factors that you need to have some patience in. Growing a career path takes time and patience. More often than not it is about growing that path, and not a career: you may not know where that path leads to.

It Is An Investment When…

Am I right in thinking that Gen-Y encompasses a new mindset? A modern one? An earth conscious one? Or is all we care about our comfort in the workplace, and if we really are getting what we deserve…?

The problem is that we have a lot on our minds. We’re at an age where it finally matters if we are politically aware, we’re wondering if and when we can buy our first house on our current salary, and then thirdly (or sixthly) hoping that we are leaving a relatively small ecological footprint. It is clear that we are most willing to be green or earth friendly when we are getting something back.

…Which is why this current Green trend is still on a bull run, because it basically reflects a series of investments which also happen to be easy on the earth.

…Which is why you should focus on those things that will benefit you. Like green corporate investments, which show results over time in energy savings, it’s okay to choose what pays.

Living car-free is not just a commitment, it is an investment. Most Gen-Y’s without cars just never bought one, and are still riding those original benefits like not paying for its running and maintenance, but soon enough it will become a commitment. Seeing it as an investment makes it more fun to calculate your savings. When you finally have the time to walk, you may suddenly see your city differently which is healthy in its own right, as is the mild exercise you’re getting.

Cars are becoming unnecessary for daily living, accept that fact. If we could be the first generation in which almost none of us use cars daily, or even weekly, we could make a world of difference. No lie. Check out the benefits to your bank account and it’ll make this mindset much more appealing.

Rent a house, buy a woodlot. There are many benefits to staying a renter. If you can do so, and own land outside of the city – most of which could be a woodlot – you are suddenly a double-smart investor. In 60 years you’ll have harvestable timber, and a cottage property to boot (selective logging would be easier on the eye than clearcutting). Thinking in terms of super-delayed satisfaction, it is something that your offspring can benefit from if that’s what it comes down to. Investing in wood is like investing in solar energy, and it’s profitable at its end result.

It all started when down the street from my apartment I noticed a Monkey Puzzle tree with three little seedlings growing beneath it. Monkey Puzzle trees are native to Chile and Argentina and are harvested for their quality wood for carpentry. I doubt that these seedlings will be surviving much longer hunched under their parent, so I keep meaning to talk to the homeowners and ask if I could take a seedling or two to cultivate for myself. It may sound far-fetched, but if owning a woodlot became a possibility, I’d do it in a heartbeat.

Use less power at home. Much less. In the last year and a half we used so little power at home that we unknowingly built up credit with our distributor. They still owe us $160, and I haven’t paid a bill in 2 months.

Turn your fridge way down (it’s probably just filled with condiments anyway), switch to those energy efficient bulbs, turn off your computer when you’re not using it, microwave less, and watch less TV. We don’t have a TV in use until hockey playoffs come around in April. For those two months when we may be watching TV twice a day on weekends (imagine that!), our bill goes up almost 20%.

Those are three, really easy pseudo-tips. I don’t run a ‘green your life’ website, but I do think that people should start to embrace the little things that count to put less stress on our land and general consumption. When benefits are introduced, people suddenly take note.

Green your wallet!

Invest, Quick! While The R-word Counts!

Little bits about investing have been written here on my page, but lets break it down to how to get started, and what to avoid.

Most readers here are into that corporate or working world; either new, a few years in, or about to enter it. Tons of fun is just around the corner in properly, and responsibly, taking account of your own finances. Of course I’m no pro, but based on experience I can help you with more truths and advice than advisors would give you. Advisors work for someone who wants your money in their hands. I just want page visits, connections, and maybe some ‘props’.

Here’s how to start becoming aware:

Mutuals: These are your basic ways to get in on equities. You might have a couple already, but that’ll be enough. And maybe you’re into them through work benefits, which is well and good. I think people should have, say, 30% of their savings in bank owned mutuals, any more and you’ll be paying MERs (Management Expense Ratios) and fees out your wazoo.

Each mutual, unless guaranteed otherwise, takes about 2% of your holdings in Management Fees per year. Think about it this way: on a bad year, like the next few are looking up to be, that’s 2% on top of what you may loose. Of course this market loss is not ‘lost’ money, but it’ll take time to recover. The statement you WILL hear from money managers is to “let the professionals who know what they’re doing handle your money”, or, “these guys have been doing this their entire lives”. Alright, true enough, but these people just want to stay out of trouble and not lose money – that’s why they want your money to grow.

ETFs: Exchange Traded Funds are much like mutuals (collections of equities and sometimes other markets) except they are traded like individual stocks, and cost much much less. There are many many of these out there in the sectors of your choice, so have a look around cause these are the epitome of diversification if you invest in several sectors.

That’s how I began, and that’s how I keep it simple. Start with opening a brokerage account, then get into researching. Of course I suggest one’s due diligence for at least half a year, just to get familiar with terms, trends and what’s out there – but in the long run having your own collection of stocks, as well as ETFs will be more involved and profitable than mutuals.

Also:

*Stick with what you know: if you work in technology you’re already a step ahead. If you work for the internet, you know where to tread. I keep a watchful eye on forest and resource stocks. Even local papers reporting what group is campaigning against which development tells me who’s investing in their company future future. I found a great little coal company that way.

*Look around your city: what’s doing well, what companies are tres pop?

* Read up on something called Position Sizing and Expectancy. Simply put, if you have %10,000 to invest, do so with 5 positions of $2,000. Don’t try to convince yourself that ‘X-Awesome’ is going to double your money and go in with five grand.

* That being said, don’t think you can be a trader, you can’t. Most people can’t.

* Start following some investor blogs, just to start familiarizing yourself.

Remember that most stocks are taking a beating right now, and I’m in no way implying that it’s a good opportunity to buy. Sooner than later though, you’d want to have the resources and mindset ready to go when the time comes.

The internet is your friend.

A Green Machine?

What does Green mean? Maybe its relative and personal. What does it mean to you? I’ll stick with ‘environmentally conscious investment and construction, by making a point to minimize energy consumption’. For this post that’ll have to do…

It’s a fairly broad topic, and I’ve written a post (on my old closed blog) on a small issue with a ‘Green’ development here in town. They came under fire for needing to remove a tree on their proposed site for a Green development. For those of you who remember that, I kind of came down on the protesters for misunderstanding the meaning of greed – oh, i mean Green – and pointed out that Green was not about saving the trees. Well, the development co. is now spending an approximate $100,000 more, and sacrificing at least 2 condo units to keep the tree around. What happened? Well, the tree became monumental. It became a symbol. I’m going to go ahead and say that in some way the co. will make their money back and more by making this move, but the key here was responsibility. It was in fact a good move, and they can market that. So, a round of a applause for the planners, eh?

There’s a new phenomenon that I’m becoming increasingly familiar within my work of land-based consulting, and that’s Run-of-the-River power generation.

Wiki’s description of it is okay, but generally the ones that I know of are small, don’t use damming, and divert water from a stream only only to re-introduce it later after the power generators. There’s many that argue that they are taking advantage of it’s seemingly enviro-friendly methods: that it destroys more habitat than they say it does, and that it can effectively dry out sections of a stream – or river – when the season’s not right and they’ve overestimated the flow of the stream. Generally, they are built at high elevations, nearer the source of the stream as they catch it mid-size, and at point where it takes a big vertical drop – so you can imagine that it can wreak havoc on the lower river if they slack off on their research.

Another havoc-wreaker: (apparently) almost every stream in southwest BC that has been deemed able to generate power (and that’s thousands) has got a lease application on it. That’s a good amount of meddled-with ecosystems. And though it’s relatively minimal per generator, that’s a lot of displaced land and water.

Positives: that’s a lot of employment and contract work for the Native population people who live on, and lay claim to the land. That’s literally an economies builder if the communities are able and willing to accept the work that goes into building the sites and transmission lines – years of work per site.

Another: the companies involved are little more than financed start-ups, some listed on the TSX Venture index (CVE). These penny stocks are worth looking into, as they’ll be selling their power to BC Hydro on a contract basis – but not yet. Really. They run into land (Aboriginal rights), parkland and contract issues often. Furthermore they’re just getting started, so nothing is ever firm with their projects. These land issues are always touch and go.

So there it is, an introduction into the world of apparently-green power generating.

In my opinion it is more Green than not as the waste output is minimal, and it’s renewable – though moderately seasonal. The ecosystem issues and water displacement, well, I’ll leave that to the scientists. I like the elements that build local economies and relations with the Nations: as long as the corporations involved are responsible enough to contract a good amount of the work to the aboriginal workers. Going green, and culturally sensitive (culture=land) is the safer and more responsible route (and it’s marketable!!).

Keeping Industry Eyes

I have been adding bits to posts here and there about an impending turnaround in Forestry and Timber. I think it’s possible, but it still stays extremely unpredictable. Things will need to continually consolidate, and I probably shouldn’t call it a ‘turnaround’.

Partly, I think we are close to the cheapest company stocks have been (some are not performing at all) – but I can’t say that they won’t continue to go down.

Someone important, or rich, has just purchased a goodly amount of Canfor stock. But that doesn’t mean he’s predicting future awesomeness anytime soon. Someone brightly commented that they may be doomed without such a purchase, so maybe he’s doing favours. Nevertheless, Canfor has also started to purchase sawmills in the US. Canadian sawmills generally close and open often. It’s something I don’t keep up with cause it bores me and it’s depressing.

Another company who’s stock I watch is Norbord. They’re international, produce a variety of boards and furniture products, but they are highly dependent on US and European housing – in which case I only keep an eye, but you know to hit em when they’re low.

AbitibiBowater is also on my watch list. They just combined forces, and look to me like a good combination. They have a large lease area, I’ve worked for them, they pay well, and they’re organized. They are not as focused on building material, more so on paper and publishers, and have an international customer base. Thing is, I don’t know how to follow paper and print trends. I’m sure the internet affects it all, but if anything that particular decline has already had it’s major effect on the industry.

The reason I don’t fully trust a turnaround in precisely because of any housing slump that’s going to take some time to fully be felt before it recovers. Timber industries generally feel the hurt several quarters, or even years after the initial slump.

The mountain pine beetle (MPB) killed wood in BC and parts of Alberta does not mean that suddenly so much wood is going to generate sales and profits for mills and operators. More generally it’s the opposite – too much wood will hurt them, especially diseased and low-quality wood.

Also, some say that this seedling producer, PRT, is set to go because of all the need for new trees to replace MPB killed stands. I would be cautious, again, the industry takes some time to really feel the true hurt of the fact that not as much wood is being sold. At the moment the stock is rebounding from takeover speculation. I think it would be a good purchase if it were to dip again, but it may still be too early. Just because there are areas to be reforested, it doesn’t mean someone wants to pay to have it done. When there’s less money to go around, there’s less money for reforestation. The positive here is that reforestation is an obligation.

Note: I can’t say much for my stock-based research skills. I’m an amateur investor, and being involved in the sector, I get some information and perspective. Overall, I am willing to start building a natural resource based portfolio for myself based on Timber, but backed by diversity.

I can speak at a general industry level: wood and it’s products are not going away, the operators and producers want to be a target of investment again, and this is all renewable. Go Canada!

It’s About Comfort Levels

I wrote in my last post that I need to find an area in my field of work that I’m comfortable with. I’m looking for a ‘growth sector’, cause there’s time and I can, but I’m also looking for security. Similarly, when investing, though I am able to consider growth (it’s about time-spans allowing for volatility) – since I cannot predict the future, I need to focus most importantly on comfort levels. Moneygardener inspired me to work on this theme with his recent post here.

When I first dove into the stock market, I did literally that, dove. I had been reading everything from news, magazines, blogs and several books – but nothing got me learning like finally opening my online brokerage account and being forced to pay attention and learn what I had just done. At first I invested too little, which costed too much because of transaction fees. I had read up on position sizing, so that kept me stable. But I didn’t have enough in, so when I gained – as in 45% back in March on uranium speculation – it was a miniature 45%. Today I wouldn’t WANT to have major cash in a spec now that I’ve learned since my start not long ago. Since then, for a while there, I thought investing for me was about making money, money, moh-ney. It’s not. It’s about focusing a strategy, and being comfortable with your portfolio. Really actually comfortable. I would not have learned that, had I not known what being uncomfortable with my investments was like.

I finally feel totally comfortable now. I finally don’t check my Google Finance listings everyday. I finally realize that I’m not a ‘trader’, and never will be one. I finally don’t lie in bed when I can’t sleep and wonder what market sentiment will be for, say…ethanol next month. There will continue to be a ‘consider moneymaking‘ section within my portfolio, but not as a major component of my investing strategy.

I also really like the dividend investing idea, and will be taking that all in with my next RRSP dump. There will be nothing like the comfort of making dollars and cents all the time, even through bear markets.

This comes at a good time, as it looks like we’re staring a bear in the face. But I think and know that by reading and keeping track of what others think and know:  just another reason why we should do what we can to feel comfortable about where we are in the market.