A Money Coach in Canada

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Does the word “economics” trigger a yawn and glazed eyes from you? I was the same… until I started tasting a bit of what some basic, common sense understanding of economics can do. Case in point: I bought a stock on May 1st, 2007 for $3.66. As of today (Aug. 7), it’s trading at $7.02. “What is it?!?” you eagerly enquire, gentle reader?Stock Market Bull

It’s a company that’s not glamorous or sexy at all. It’s canadian, it uses some best practices of sustainability, and it produces silicon – the stuff that is used in computer micro chips, and lcd screens (most flat screens), and most importantly in this case, solar cells (the things that convert light into energy). It’s called Timminco.

Why is it doing so well? Back in March, it won a big contract to produce solar cells and in April it won a second contract. Then, the company successfully got an investor (an investment firm, actually) to lend it a lot of money to build a facility for this new level of production. The loan rate: US prime plus 1%. Low rate loan + new facility + 2 good contracts = a company poised for success. And it’s part of the whole sustainability movement. It’s all good.

Full disclosure: in this case, I didn’t twig onto this company. My mom did. She, like me, does not have any formal education in financial planning (so NOTE: I’m not advising anyone to buy this stock! I’m just an amateur sharing a story!). But she, like me, makes it a point to be informed about what’s going on in the world of finances and economics. Term deposits at 4%? Yeah, I guess… but I’d rather put a bit of energy and interest into becoming informed and doubling my money now and then, wouldn’t you?

Lululemon, Vancouver’s Chip Wilson’s wild success story, went from $18usd to $29.98usd between Friday, when it first became available for the public to purchase,  and this morning (Tuesday).yoga pants

It’s sexy, exciting and you won’t catch me buying it.

Why not?  I’ve purchased a couple clothing companies which had  flashes of glory (Le Chateux did me well),  but I’ve also purchased a few Cdn. companies that tried to make it big in the states, only to come home with their tail between their legs (to my regret, as much as anyone!).   I’m simply not convinced lululemon will manage to take it to the next level (ie. U.S. retail market) and continue being profitable enough to justify the current stock price.

But don’t just take my word for it.  Others who are credentialled (I’m not!  This is just an amateur’s take on the thing!) say yes, go for it.  Plus, I declined buying google, thinking it was overpriced.  Alas.  I could have been a millionaire by now! So make up your own mind.  I’m just sayin’ ….

We have a red hot economy, a sustained red-hot real estate market (just because it’s not white hot doesn’t mean it’s anything like ‘normal’… whatever that means, these days), the olympics coming, and we’re starting to come apart at the seams.

Vancouver city staff are on strike. One of the biggest provocations – and frankly, I’d be choked too – is that in today’s tight labour-market, the city wants to offer significantly higher salaries to attract new workers, while keeping current staff at the same rate.

And meanwhile, disaster, utter disaster, in Burnaby. For 25 minutes, a ruptured pipeline shot oil 30 metres into the air. It rained down on homes and also Burrard Inlet. Kinder Morgan, an energy transportation company, broke the line. The Tyee pointed out Kinder Morgan as having a history of negligence way back in 2005, when it was attempting to take over Terasen Gas. Kinder Morgan is blaming city contractors for poorly marking the line.

These are the ways in which the bigger economy is directly impacting our backyard.

Now here’s some really fun economic gossip!

celphone.jpg1. Turns out Rogers Canada (owned in large part by AT&T) charges Canadians about 6 (six!) times the price for wireless data than AT&T charges their US customers. Canada: $299/month. US: $63/month. There’s an online petition to Rogers if you care to protest.

2. And on the tech theme, Google just bought Postini Inc. What’s postini? It provides security for e-mail. This means gmail will become even more popular. Google’s stock price rose by $3.16US, while Microsoft fell by 10¢.

3. But that’s all boring compared to what’s happening in China, with their answer go google. It’s a search engine called Baitu, its stock is up 78% this year, and profits will likely increase by 45% each year over the next few years. Its current stock price (P) is also trading at over 100 times what each share earned (E) last year – P/E ratio of 107. (note: this is just a blog! Do your own research – I’m not a financial advisor, simply a humble money coach at Your Money by Design.

Cdn pennyWell, since it’s still Canada Day season, thought I should investigate how our federal tax dollars are contributing to making Canada, Canada. Le voila:

  • $0.15 – interest on the debt (pays our Canada Savings Bonds interest, for example)
  • $0.53 – given to the provinces and territories and individuals to do good stuff with. We hope.
    • $0.23 – go to individual Canadians (like Old Age Security – $0.13, and Employment Insurance – $0.06, Child Tax Benefit – $0.04)
    • $0.19 – given to provinces and territories to implement federal programs like healthcare-$0.08, education & social assistance -$0.03
  • $0.11 – grants to things like the arts, farmers, aboriginal programs, bilingualism, sports
  • $0.25 – operating costs of running the federal gov’t (eg. Nat’l Defence – $0.07, RCMP – $0.03 and our favourite, the CRA itself – $0.02)
  • $0.03 – crown corporations like CBC, CMHC and Atomic Energy (huh? who knew?)
  • $0.06 – surplus, used to reduce the federal debt.

There you have it. Note that some of the things we love to hate, social assistance and employment insurance, were only about $0.06 cents of the dollar, whereas old age security is actually the largest single item after interest on the debt.Now we know!

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