~A 20 year old's journey out of the rat race~

[kcowan]

What do you like about CLL?

[mrPPincer]

I just checked out your site.. looks good.

I particularly liked the lecture* from Robert Shiller on behavioral finance: the role of psychology.
I have recently checked out at lot of lectures and interviews with Fama and French** and really like their work, but Shiller really clearly shows to me, by graphing stock price (or expected value) with actual future dividends over time that we as humans collectively are not valueing risk vs returns rationally.

* link - http://ratracefreedom.net/2012/02/15...cient-markets/
**link - http://www.dimensional.com/famafrench/

One could say that there is no way to factor out this irrationallity so we might as well ignore it and call the markets efficient, because they are as efficient as possible with any knowledge we have being factored in to stock price, but after watching Stiller's lecture I for one am gonna try to avoid using the term market efficiency as I think it can be kind of deceptive terminology without another side of the coin, human psychology.

Thought provoking stuff, thanks

[cannadian]

What do you like about CLL?

It used to have a terrible management, and it has a terrible balance sheet - BUT - it does have a solid asset.

I think the company is trading at less than 25% of its NAV still, and the old management just got kicked out and they hired Goldman Sachs to sell the company (and GS has been buying lots of shares recently). A couple private investors own a decent amount of CLL so they want a good deal if it is sold. And China is looking to invest 200 billion over the next couple of years I believe in the canadian oil sands: CLL is the PERFECT takeover target for a large company.

CLL sucks on its own because of its massive debt and lack of free cash to expand their operations, but they're sitting on a goldmine (of oil...). A chinese company could buy them out for less than 50% of their Net Asset Value and the shareholder would still get a 25-50% premium. The large oil company gets a steal of a deal, the shareholders benefit, and the large company can immediately pay off the debt, expand operations, and exploit the asset.

That and I think they'll rock earnings next week.

I set my target price at $1 and bought 2500 shares at 0.98, waited a day to see if it would drop more, then bought 2500 more at 1.02 for an avg of 1.

I just checked out your site.. looks good.

I particularly liked the lecture* from Robert Shiller on behavioral finance: the role of psychology.
I have recently checked out at lot of lectures and interviews with Fama and French** and really like their work, but Shiller really clearly shows to me, by graphing stock price (or expected value) with actual future dividends over time that we as humans collectively are not valueing risk vs returns rationally.

* link - http://ratracefreedom.net/2012/02/15...cient-markets/
**link - http://www.dimensional.com/famafrench/

One could say that there is no way to factor out this irrationallity so we might as well ignore it and call the markets efficient, because they are as efficient as possible with any knowledge we have being factored in to stock price, but after watching Stiller's lecture I for one am gonna try to avoid using the term market efficiency as I think it can be kind of deceptive terminology without another side of the coin, human psychology.

Thought provoking stuff, thanks

Thanks man! I'm actually completely overhauling the site at the moment, trying to make it a more simple and enjoyable site to read/navigate, less cluttered and more personal/minimalist you know?

Agreed, people are very bad at predicting future dividends. And you're right that it is hard to factor this irrationality - I don't think it's impossible though. For example, history consistently shows that people always wished they'd bought stocks during economic crises. Fear is a very powerful thing. I'm not sure it would be possible to tell when we're in bubble phases, but I do think the objective person can prey on the market when there's a lot of doom and gloom in the air.

Portfolio Update:

My portfolio is now worth around $17,000, I added more TGL to it, and recently picked up CLL. Sold most of my other positions to lock in decent gains.

[cannadian]

Hey everyone, it's been a while since I last posted - I moved out to Vancouver a few weeks back (will be studying finance/accounting at UBC come September!!), found work, and am currently in the interview process to volunteer at a cognitive neuroscience lab which I'm stoked about (just something I've always wanted to experience)!

Anyways, I took some of the money that I've recently made and purchased 25 ounces of silver when it was at @27 CAD. Other than that there haven't been any TFSA contributions for a while as I'm trying to build a firewall/emergency fund of 4-6k before I start moving more money into the TFSA. I'm going to attempt working 2-3 days a week throughout the school year and I hope that by Christmas time, if I get a chance to sell this silver for $40+ I'll be able to add 3-4k more to my TFSA.

So the portfolio has been changed up quite a bit - and I'll post my reasoning behind each of those positions all in due time, but I'm very happy with it right now and every holding in it is a minimum of 3-5 years unless something very significant happens to any of the individual companies. I took a beating when the market rolled over, and that was compounded by my attempting to learn how to day trade - I won't be making that mistake again for a long time.

The portfolio, as it stands, is a value/contrarian portfolio. My goal is to find the place where value-oriented investments intersect with growth-oriented investments - which usually only occurs during some sort of contrarian situation, the portfolio:

TGL - 600 shares
PEY - 175 shares
BAC - 250 shares
FEZ - 65 shares

Total portfolio equity: $13,717.83
Total portfolio return: +20.65%

[humble_pie]

i this post.

so, you now have over half a kilo of silver hidden in the sock drawer, plus old friend transglobe, new friend peyto, a contrarian big name US bank plus something that suggests you think europe has broken down sufficiently & will be on the mend soon ...

it's a great portf for a smart, cool kid. There's a lot of risk but i'm sure you know that. Somehow i think the sock drawer is going to pay up. Wishing you all the best.

[cannadian]

Appreciate it humble - I wrote up a brief little tidbit on my view of natural gas/peyto if you want to check it out here: http://canadianmoneyforum.com/showth...nd-Development

let me know what you think!

On Europe - I think the Europe/the world can't afford a full-scale collapse of the eurozone, even for Germany who would be bailing out the peripheral countries, the costs associated with leaving seem to be far greater than the costs associated with making it all work out.

They still have a ton of problems ahead - but I think they'll gradually move towards eurobonds, more political, fiscal, and banking union (i.e., a proper monetary union, kind of like the united states of europe type thing...) And that when that happens people will wish they'd bought in the height of the crisis when the European market is down over 240% and the total market cap of all of europe's banking industry is less than that of Canada's, whose GDP isn't even a tenth of theirs...

The risk is very high, I agree, but I just can't see any other way out of this mess - so I think over the next few years this is what'll happen, and that just like in the midst of the US crisis nobody wanted to invest in stocks - it proved to be THE time to invest in them (when fear and uncertainty are high, sometimes people get caught up in seeing their wealth evaporate and they forget that the problems are only temporary).

Anyways, I'm tired and that's very brief - just a short bit on my views on Europe..

Just working full-time now until school really starts to pick up (usually mid-late September), trying to stash $250 a week into my "rainy day fund" until it hits 5k. Does anyone have any advice on how to hold that 5k emergency fund? High-interest savings account? Treasuries? Money markets? GICs? Where's the best place to store cash that needs to be available for emergencies??


Also, how's your portfolio comin along humble??

[GOB]

There are two schools of thought on where to stash an emergency fund.

1) HISA or chequing account

You know the cash will always be there ready for you to use. However, you sacrifice return on this money which could be significant.

2) Invest the funds normally, use a credit card for emergencies and pay it off as soon as you can

This is obviously higher risk but will allow you to make full use of your available dollars. If you have any investments you want to sell, you can do so and pay off the card without any problems. If not, it may take a few months to save up the money and you would pay interest on the balance. Your total gains over time on the money invested may or may not easily cover this interest expense so it is a definite uncertainty.

The decision will be based on many factors - what is your risk tolerance, your age, if you have any dependants, the size of the emergency fund, etc. Often if you have $5000 in a chequing account your bank may waive any fees and offer a decent credit card with no annual fee so that may be a good option, as it provides some sort of "return" on those funds. However, if you are making 20% investment returns you're essentially giving up $1000/yr by not investing the money (although consistent 20% gains is unlikely).

I currently have no dependents and am young so I personally don't keep a defined emergency fund. I have investments I can take profit on if the need arises. Health care is covered and my car is under warranty. People I care about are in the position to support themselves if they happen upon a large unexpected expense. If I lose my job I'll get a few weeks of severance pay. The odds of needing $5000 immediately are low for me, so I've chosen option 2. If you have been tracking my diary you'll see how much I can potentially make from $5000 so the decision is quite easy for me at this point in time. Once I have a family of my own I'm sure I will ramp down my level of risk.

[humble_pie]

what i'd like to comment on is your writing style. You may not realize it, being such a young person, but the language signature is casual, easygoing, friendly, with an appealing hint of argot here & there. It's perfect for a young writer addressing a population of youthful investors who might never have the time or even the inclination to read the stodgy, formal reports by professional analysts which proliferate in the industry.

at the same time your reports are serious enough to command respect from all age groups. Your insights are good & your arguments & conclusions are well backed up (not to say i necessarily agree with all of them, though.)

might i mention one slightly negative thing, now that we are on the subject of branding. I don't much care for this rat stuff, if i may say so. If it were myself, i might consider dumping the rat, choosing a more appealing animal as totem & changing the name of the blog away from ratrace. You're in BC now; there are lots of totem creatures in first nation mythology.

[cannadian]

There are two schools of thought on where to stash an emergency fund.

1) HISA or chequing account

You know the cash will always be there ready for you to use. However, you sacrifice return on this money which could be significant.

2) Invest the funds normally, use a credit card for emergencies and pay it off as soon as you can

This is obviously higher risk but will allow you to make full use of your available dollars. If you have any investments you want to sell, you can do so and pay off the card without any problems. If not, it may take a few months to save up the money and you would pay interest on the balance. Your total gains over time on the money invested may or may not easily cover this interest expense so it is a definite uncertainty.

The decision will be based on many factors - what is your risk tolerance, your age, if you have any dependants, the size of the emergency fund, etc. Often if you have $5000 in a chequing account your bank may waive any fees and offer a decent credit card with no annual fee so that may be a good option, as it provides some sort of "return" on those funds. However, if you are making 20% investment returns you're essentially giving up $1000/yr by not investing the money (although consistent 20% gains is unlikely).

I currently have no dependents and am young so I personally don't keep a defined emergency fund. I have investments I can take profit on if the need arises. Health care is covered and my car is under warranty. People I care about are in the position to support themselves if they happen upon a large unexpected expense. If I lose my job I'll get a few weeks of severance pay. The odds of needing $5000 immediately are low for me, so I've chosen option 2. If you have been tracking my diary you'll see how much I can potentially make from $5000 so the decision is quite easy for me at this point in time. Once I have a family of my own I'm sure I will ramp down my level of risk.

Thanks GOB, that's a pretty interesting idea - hadn't really thought of it before since I have a phobia of debt!

I guess to clarify the purpose of the "emergency fund" - it's for stock market emergencies as well as life emergencies. I would never go below 2k in it, period, but in the event that there's a major stock market crash or correction I never want to be fully invested - I'd like to have enough on the sidelines to jump in if things get really cheap you know? A 5k e-fund would allow me to move ~3k into the market on a whim while still having a solid rainy day fund left over for real life.

I usually only feel comfortable buying stocks when it looks like the apocalypse is coming hah!

Would a money market fund perhaps be the best place to store 5k?

what i'd like to comment on is your writing style. You may not realize it, being such a young person, but the language signature is casual, easygoing, friendly, with an appealing hint of argot here & there. It's perfect for a young writer addressing a population of youthful investors who might never have the time or even the inclination to read the stodgy, formal reports by professional analysts which proliferate in the industry.

at the same time your reports are serious enough to command respect from all age groups. Your insights are good & your arguments & conclusions are well backed up (not to say i necessarily agree with all of them, though.)

might i mention one slightly negative thing, now that we are on the subject of branding. I don't much care for this rat stuff, if i may say so. If it were myself, i might consider dumping the rat, choosing a more appealing animal as totem & changing the name of the blog away from ratrace. You're in BC now; there are lots of totem creatures in first nation mythology.

Thanks for the compliments humble!

1. Rat thing - Don't worry, I love constructive criticism. Initially I liked the name because the blog is supposed to track my journey out of the rat race, but after I had already built the site I kind of changed my mind. However, I'm so busy with work, reading, studying, etc, that the blog is more of a very small hobby at this point so I just don't have the time/motivation to start a new site and move everything over just yet - perhaps next summer? I liked the name "GuruInvesting" but that was already taken

Anyways, I appreciate your comments on my writing (though too much of it is done when I'm running on no sleep!), but I still feel way too "nooby" if you know what I mean. I've only been at this for about 8 months so far and I'm only now beginning to realize how little I actually know. Over the next couple of years I want to expand my knowledge/understanding of business, economics, accounting, finance/investing etc to an absurd level. I know it sounds lame, but I truly want to become a guru at this.

And I'm in a very fortunate position where half my tuition is covered through scholarships, and my parents will help me out with the other half provided I keep my grades up. And I talked to my dad about my plan, and him being a frugal guy himself loved it, he's paying my rent for this year and officially cutting me loose next year on all bills except tuition (he made me sign an agreement hah!).

So basically throughout the school year I'll keep all of my monthly expenses below $400 (it's easy to do when in uni, especially with the free bus pass), bring in ~$1000 a month through working, which'll allow me to do three things:

1. Put $200 a month into my rainy day fund (which the silver, once sold, will also be added).
2. Put $200 a month into my checking account - to prepare/build a buffer for living completely on my own next year.
3. Put $200 a month into my TFSA.

That's a very rough outline, it'll definitely change - I basically want this rainy day fund completed within the next 6 months, and have a 1-2k buffer in the checking account by next summer, then I'll work full-time and put almost all of it into the TFSA.

So I'll be able to expand not only my knowledge/understanding of investing over the next couple of years, but also my investment account/financial position itself


Edit: the numbers themselves are very small, mind you, but what matters to me is continually making progress/moving forward towards my goal.

[cannadian]

Also, if anyone has been following TGL some good events are coming up:

1. Al-Azayem-1 is being spud soon - this is a convoluted story, but goes something like this - some company did a bunch of 3D seismic on the south mariut property, found a large 4 way closure with several stacked horizons going over 14,500 feet deep which could contain over 250 million barrels of recoverable oil. They were bought out before they got a chance to drill it though. The company that bought them out only want their refinery assets so they sold off all the exploration properties. The company that bought the exploration properties wanted nothing to do with Egypt so they packaged it with 50% of south alamein and sold it to TGL for cheap.

This could be a game changer for the company, and that's based on only 1 well on the concession (there could be others). This could more than double the company if successful.

2. EGPC bid results - the bid results should be announced in the next few weeks. TGL bid on 4 properties, 3 of which are located near their current powerhouse of West Gharib/West Bakr. Good news is that Egypt recently had an offshore natural gas bid round which didn't go over so well, which is bad for Egypt but good for TGL (increases their odds of successful bids).

3. Political environment seems to be settling in Egypt.

4. Saudi Arabia and Qatar have been aiding Egypt through the economic turbulence. The IMF is meeting with Egypt's finance minister this week to discuss a 4.8 billion dollar aid package - conditions for it are providing an economic plan for egypt, and crucially important - one condition was that Egypt must make itself favourable to foreign investment. Obviously good news for TGL.

5. Yemen is back online, but who knows for how long, I've basically written those assets off but for the time being they're providing cash flow to TGL.

There's lots more. To be honest their last earnings were a little disappointing. Their accounts receivables is a little worrisome as well, but it's all owed to them by EGPC - and if egypt wants to make itself favourable to foreign investment the last thing they can do is default on payment. They're working with TGL right now to address the AR problem.

All in all I think it's a really exciting little company with a ton of explosive potential. And I'm probably missing a ton of other updates here, but ah well. Another plus is brent prices are quite high right now - all this is just cash in the bank..