TransAlta

When I was writing the blog entry on "A Few Good Companies", I wondered how I would have done on this stock if I had just left it alone after I bought it rather than mucking about with it because of reports I read. The beauty of spreadsheets is that you can look at "What if" scenarios.

I originally bought TransAlta Corp (TSX-TA, NSYE-TAC) stock in July of 1987 (1200 shares after split of 1988). Because there were adverse reports on this stock in June of 2000, I sold some shares (400) which would be about a third of my holding. It was being again suggested as a buy in February of 2009 and I bought some shares (600). In August 2008 it was being panned again so I sold some shares (200).

I am again at 1200 shares. So, what did all buying and selling do for me? Well, I have a total return of 6.92% per year on this stock. If I had just left it alone, I would have had a total return of 7.43% per year or 0.51% more per year. This works out to around $6,866.00 more return if I had left it alone.

Can there be any other conclusion but that I should have just left it alone? See my spreadsheet at transalta.htm.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

A Few Good Companies 2

To pick a few good companies, start with companies in the TMX sectors of Consumer Discretionary, Consumer Staples, Metals and Mining, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Telecommunication Services, Utilities and REIT. On the TMX site these sectors are shown under TSX Capped Indexes.

So you look at the TMX web site for this list. If you click on an index and then go to the bottom of the page and click on Constituents, you can see what companies are on these lists. Only the bigger companies tend to be on these lists and these are the potential companies you are looking for.

For example if you click on Consumer Discretionary Index and look at the constituents, you would see companies like Canadian Tire (TSX-CTC.A). Do you shop there? This might be a good place to start.

You can also look TMX Indexes list. You might want to see what companies are in the 60 Index. These are the 60 biggest companies in the TSX and might get ideas of companies here to invest in. The other good index list is Canadian Dividend Aristocrats Index. These are considered the best dividend growth companies.

I want to insert here one word of caution. Just because a company is listed on one of these indexes does not automatically make it a good company. For example a company on the Canadian Dividend Aristocrats Index might be paying out too much of their profits in dividends in order to stay on this list. Such a company would not be a good one for investment.

If you are thinking of investing in a company, get to know it. You can Google the company and go to the company's web site. For example the first company on the Canadian Dividend Aristocrats Index is Ag Growth International Inc. (TSX-AFN). If you Google this name you get their site of www.aggrowth.com/. In the top right hand corner of the site you can see the word "Investors". If you click on this word, you get their investor information section. Run your cursor over the word "Investors" you can get financial and dividend information.

You might want to get some opinions on some stocks you are considering. A site worth visiting would be Stock Chase. This site gives analysts' opinions from the media and gives the person and date the opinion was given.

If you have a trading account (and you will need one to buy stocks), most stock brokers give you access to their reports on companies.

On my other blog I am today writing about Calloway Real Estate Investment Trust (TSX-CWT.UN, OTC-CWYUF)...continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

A Few Good Companies

There is a lot of evidence that most investors do not do well in the stock market. However, this is not true of businesses. Most companies do make money or they would not stay around. Some companies are rather cyclical in their profit making, but overall do make a profit.

I think that if most investors had picked a few good companies and stuck with them they would probably have done just fine. Most companies on the TSX have been around for a while and most have been making money.

I think that it is best to pick companies that pay dividends as this tends to substantiate that profits are being made. You do not need to make brilliant choices, just companies that can endure.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Space 2

On Monday I talked about seeing men land on the moon in 1969 and then not much happening in regards to space and space travel my humans. This is now changing with talks about both a Mars fly by and colonization of Mars.

There are other interesting things going on. NASA has a site that looks at simulating problems with long term space travel or going to Mars. They built a habitat in Hawaii and looked at cooking or food preparation for space travel.

There was a Humans 2 Mars Summit in May of this year at George Washington University. This summit was to discuss what was necessary to send people to Mars. You can go to Explore Mars Webcast to look at some of the discussions.

Go to Elon Musk's SpaceX site and see what he has been up to with his space company.

You can also visit the Mars Society website and see how they are promoting the exploration and possible settlement of Mars.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Space

I saw men land on the moon in 1969. I felt that the space age had begun. It had not. Moon landings continued for a while and then nothing. We waited and waited and nothing happened. Now, some 40 years later things seem to be looking up.

Humans may go to Mars and we may not have to wait much longer to see this. Both a Mars fly by and colonization of Mars are in the planning stages. Possibly the best place to get space news is at Space.com.

The nonprofit Inspiration Mars foundation was founded by Dennis Tito and they are planning the Mars Flyby in 1918. This is just 5 years away. To read more about this, you can go to his site called Inspiration Mars. There is a unique opportunity for a Flyby because in 1918, Mars will be the closes to earth as it ever gets. Inspiration Mars plans to send a two-man American crew, possibly a couple, to fly within 100 miles around Mars and return home.

The other mission to Mars is to start a settlement there. The first crew is expected to leave earth in 2022 and land in 2023. By the time they get there Mars One is expected to have already sent a rover (2018) and cargo (2020). The cargo will be living units and supplies. See more information on Mars One web site.

Both of these efforts are being done by very rich men. The Mars Flyby is by Dennis Tito who was a space tourist, paying Russia to send him to the space station. The Mars One organization was started by Bas Lansdorp who is a Dutch entrepreneur.

On my other blog I am today writing about MacDonald, Dettwiler & Associates (TSX-MDA, OTC-MDDWF)...continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Pension Assumptions

e have a lot to worry about with Pension Plans. Part of the problem is that when anyone assesses the solvency of a pension plan, they do the assessment based on assumptions using interest rates (or investment return rates) and mortality.

Currently we are hearing a lot about US pension plans that are using interest rates assumptions that many believe are too high. Using too high interest rate assumptions and a pension plan will look more solvent than it actually is. I doubt if this problem is confined to US pension plans. I am sure we probably have such problems also in Canada

A recent Canadian Institute of Actuaries (CIA) study says that improving mortality will affect the funding of pension plans, or increase what we have to pay into them for retirement benefits.

The most recently CIA report is here. However it is pretty dense. You might be better off looking at the Pension Pulse blogger who has a good blog report on this subject.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Pension Woes

As far as pensions go, the generation before the boomers did very well. The early boomers will probably do ok as well, but the later ones probably not so well. (We early boomers also did much better in the job market than the later boomers.) The younger you are in the current system the less likely you are to fine in the pension department unless something is done to fix pensions.

With the declining birthrate, a picture of the ages of our populations goes from a pyramid shape to a column shape. (I know that people are thinking that it will go to an upside down pyramid, but this is not what is happening.) The problem was that most pension plans were set up as a pay as you go type and in the future there will not be enough people paying into pensions to supply pensions to those retired.

In a pay as you go pension, the current pension money collected goes to pay the pension of the people already retired. This can work for a while. There are a couple of problems. As more and more people are able to retire to get a pension, the number of pensioners grows. With a declining birth rate, there are fewer and fewer people to pay into pensions.

With CPP the boomers' parents did well. My father told me that he only had to pay into the CPP for 10 years to get a full CPP pension. That was a great deal for him. For my parents, my father got OAS, CPP and a company pension. He also had some savings and a paid for home. My mother got OAS. They did very well.

I also have done well with CPP. Because my husband died and I had a child, I got a widow's pension. I also got an orphan's pension for my son. I start to collect my CPP at 60 because I got my pension money plus the widow's pension. (The pension money was decreased at 65.)

Not all pensions were supposed to be run as a pay as you go, but most were. That has led to pension plans that are underfunded. The underfunding of pension plans is especially bad in the US. The Detroit government workers' pension plan is only the tip of the iceberg in US. There is also a problem with the Social Security Plan in the US. Money collected went into the government's general funds, as I understand it, and when the payout has to be higher than the current collection, they will have problems.

There are some problems in Canada. The CPP premiums were raised substantially in 2000. The CPP Investment Board (CPPIB), the organization responsible for maintaining the national pension plan's investment assets, said in 2009 that their actuaries said that the plan was solvent for the next 75 years. However, I have heard others say that it will only be fine for the next 20 years.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Retiring Using 8%, 4% Rule

In trying to figure out how to handle retirement, I came across the 8%, 4% rule. There are three main risks to retirees. They are longevity risk, inflation risk and market risk.

The 8%, 4% rule means that you should count on making 8% a year on your investments and you should count on spending 4% a year from your investments. The 8% return is not too difficult, especially if you have some good dividend paying stocks in your portfolio. You can usually count on making 2% extra on dividend paying stocks. It is a good idea if you use stocks that increase their dividends at least at the long term background inflation ration rate of 3%.

To get an idea on what your pensions are worth, say a pension like the CPP, multiply your annual pension amount by 20. CPP is indexed to inflation so the 20 factor is about right. However, if you have a pension that is not indexed to inflation, the factor to use would be 5 or 10.

So, roughly, if you say have saved in an investment or other accounts $1,000,000, you can spend $40,000 and you would hope to make $80,000. The next year you will start with $1,040,000 and can take out $41,600 and expect to earn $83,200. If you are receiving the top CPP amount for 2013 of $ $1,012.50 and you have the in an investment or other accounts of $1,000,000, you can spend $49,806.40 the first year. Your CPP would be worth $1,012.50x 12 x 20 or $ $245,160.00 so you will start with $1,245,160.00 and 4% of this is $49,806.40

No one knows how long he or she will live, so with the 8%, 4% rule, you will have money until you die. Yes, you might leave an estate, but you also might have high expenses the last few years of life. This plan basically plans on 4% increase in income per year to help with inflation. The long term background inflation maybe 3%, but it can vary greatly. There is also the market risk. With the higher than inflation increase per year, you will have some flexibility to decrease the amount you spent each year.

I stopped working and have been living on my dividend income from 1999. I started off using this 8%, 4% rule, but changed my mind after the 2000 stock crash. I now only take out what I earn in dividends each year. In 2000 I was taking out 4% and earning 3% in dividends. I changed this to 3.5% withdrawals and 3.5% dividend income. Currently I am earnings still around 3.5% income and I expect to take out just under 3% this year.

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This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Regulation and Capitalism

Some interference by the government is good for market systems like capitalism. If the government backs money that is trusted this is a boon. Having regulations that deal with weights and measurements is also great. The western style of rule of law is good. Generally clear and enforced rules are good.

However, rules can go too far. Too much red tape will harm markets and can kill off companies. Often times complying with government rules can cost companies lots of money. Often people only look at what taxes are paid by companies. However, government red tape can sometimes add more costs for business.

Yes, we need regulation of business. However, governments tend to produce new rules every time there is a problem. Over the years we end up with lots and lots of rules, but you have to wonder if this is working as we always seem to get new problems and get more new rules and this keeps going on.

On my other blog I am today writing about Exchange Income Corp. (TSX-EIF, OTC-EIFZF)…continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Buy Stocks for Income

The problem with buying stocks for dividends is that at first you do not get much in the way of returns. Your yield would be between 1 and 5%. So if you save some $10,000 and buy some stock, you are looking at annual income of $100 to $500.

However, if you buy dividend growth companies, your dividends on the companies you own will growth over time. The lower the dividend yield, the higher the growth in dividends is likely to be. If you keep at buying dividend growth companies over a period of time, you should be able to build a portfolio that will be able to provide you with some income during the tough times.

I previously wrote an article on dividend yields on original investments. This talks about the tradeoff between dividend yields and dividend growth. The article is here. I have put it spreadsheet that goes with this article on my site.

On my other blog I am today writing about Wajax Corp (TSX-WJX, OTC-WJXFF)... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.