What do you do with your money?

If you’re waiting out the current real estate market in the hope for a return to sane prices, chances are you’re saving up at least some of the difference between rent and sales prices.  The question then is: what are you doing with your money?  Do you have it stuffed in a mattress or buried in a jar in the backyard?  What are your expectations of return on capital and do you expect to beat inflation?

Stock markets are way up again, the local real estate market is close to it prior peak again and rock bottom interest rates mean any guaranteed returns are pretty low, so the challenge is to find sectors with room to grow.  Are you content with the 2% you can get on a saving account or are you playing the markets and buying up bonds and GICs?

59 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
Meat Robot

Where the heck is my money? The OP's question got me to briefly assess my situation, so thanks for the reminder.

About 60% in equities, with a slant toward small-cap value stocks (a la Fama/French research). Got hammered last Oct to March, but seem to have bounced right back.

Remaining 40% in cash. Cash still feels like a pretty comfortable hedge to me, because I'm anticipating significant deflation in house prices over 5 years. If I'm wrong about house prices, I'll shift the cash over to bonds.

Not too sexy, but it's edging me ever closer to financial independence. I am not persuaded by arguments which insist on home ownership as a necessary condition of financial independence, so I agree with the mood of many posters here.

VultureBoy

Well, I meant to say I don't use specialized merger arbitrage sites. I take my news from the standard sources, globeanddmail, sedar, stockhouse, etc and of course also googling …

VultureBoy

@Jim: Hi Jim, The most obvious indicator is the spread between the proposed transaction price and the market price. The larger the spread, the bigger the risk (on average!). I try to think about the transaction. Does it make sense to everyone involved? The BCE deal is a clear-cut case where it made no sense to the buyers or to the lenders. That eliminated BCE from my purchase criteria. You certainly have to take on risk with merger arbitrage. There are so many things that could go wrong, although each is very unlikely, taken together, there is serious risk. So I don't recommend it to anyone, but of course I do lots of stupid(?) things that I wouldn't recommend to someone else. Some risk can be contained by spreading your bets around, risking a smallish proportion of one's money or… Read more »

Bently

@Anonymous:

Rents are falling.

read on

crabman, yet they can still sign mortgage contracts….

Jim

@VultureBoy: Thanks for the explanation of merger arbitrage, it almost seems too simple, but I can see where it could get pretty risky. Looks like you'd need to make big bets to make it pay off at those margins. Are there any warning signs for mergers that are likely to fall through, or central source for merger news?

crabman

After reading <a href="http://www.vancouversun.com/news/Please+donate+Raise+Reader+money+well+spent/2023098/story.html&quot; rel="nofollow">this article in yesterdays Sun, this RE market is starting to make a little more sense!

If you can read that sentence — well, you're lucky. A recent study by the Canadian Council on Learning found that 41 per cent of Vancouver-area residents aged 16 and older have the capacity to deal only with simple, clear material involving uncomplicated tasks. And more than one-third of Metro Vancouver adults don't possess the literacy skills to understand a public bus schedule, read directions on a pill bottle or keep up with technological advances in the workplace.

realpaul

The voice of OZ is tinted with hallucination.

http://www.federalreserve.gov/newsevents/press/mo

How can anyone read this and not laugh?

This is either the over view of a new financial paradigm or a hint that when they pull back on the spending you better be ready to stand on your own two feet.

anon

I promised to post this when I found it. So far only BCTC has published their salaries for 2008. The other crown corps havent' yet. There is an org chart to see who does. What. It is sick to think of the disparity between private sectro empoloyees and crown corp workers in BC.

http://www.bctc.com/about_bctc/reports_performanc

NO -LYMPICS

48 stagnate

I agree:

Condo buyers will likely be the most vulnerable in a downturn for a number of reasons. One of them is that they are on the cusp of affordability for most buyers.

Condos that have not had an engineering report tp determine the degree of leaking ( Note: ALL condos leak to some degree) should be avoided.

The best condo buys re: value are those that have gone through a proper restoration with a building envelope specialist , other than those that were built correctly to start.

VultureBoy

@Jim: Hi Jim, Merger arbitrage is most easily explained with an example. Say Company X offers to buy Company Y at 10 bucks with the transaction expected to close in late November. Company Y agrees to the purchase. Company Y might trade for 9.80. The idea is to buy Company Y stock now, and collect 10bucks in November. It is a measly 2 percent, but do that a few times a year, and you have serious returns. Also, with some luck you might see a deal "sweetened", ie, the offer price increased. When that happens, it is very sweet indeed! You have to exercise a lot of caution, since if a deal falls through you might lose your shirt. Academic studies on merger arbitrage are all over the place in terms of how successful it is. All I can say… Read more »

stagnate

for those with healthy cash reserves there is going to be big opportunities in leaky condos. with the government pulling the plug on the loan program there will be plenty of owners not be able to make the assessment and needing to liquidate. for a decent negotiator easy 40-50,000 dollar profit per pop. like taking candy from a baby. the globe article is spot on, for those with a mortgage the best investment is payments against the mortgage, hands down.

best place on meth

I was hoping the DOW would get to 9999 before collapsing but I'll settle for 9917.

Got gold?

cashisking

They just painted my 4,000 sq ft house as well … approx value c$10k

cashisking

My rent went down 10%

Anonymous

@patriotz:

Rents are not falling.

pundit bandit

@RealPaul, #27…thanks for the excellent advice!

NO - LYMPICS

The best investment? Paying off your mortgage

http://www.theglobeandmail.com/globe-investor/inv

Anonymous

VHB used to have a great historical chart of Vancouver RE prices which he brought up-to-date from time to time. Does anyone have a similar chart? I though it was a perfect example of a picture telling more than a thousand words.

NO - LYMPICS

From Kuntsler's blog http://kunstler.com/blog/2009/09/original-sin.htm… It was also ironic, tragically so, that during this same period Wall Street began to seek some new way to make real money beyond stock and bond markets, which didn't seem to produce wealth at all for more than a decade when inflation was factored in. By a fortuitous coincidence, the revolution in computers enabled Wall Street bankers to concoct abstruse new species of tradable paper securities based on bundles of debt that seemed to produce miraculous earnings. It had the added advantage of being inscrutable to both investors and financial regulators. Due diligence became impossible and moral hazard spread like ringworm in a dormitory. The bulk of the securitized debt originated in home mortgages and the larger result was a gigantic racket ramped up between Wall Street and the US government to conceal all the… Read more »

NO - LYMPICS

From Mish's blog So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they're worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save. Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed "takeover" of health care, autos, housing, energy, and finance? Their anguished cries… Read more »

NO - LYMPICS

30 patriotz:

I agree, and I fail to see why the Gov't wants to stick its nose in.

Stratas are supposedly a democracy, and many of them may be forced to change their bylaws to allow renters , or all it would take is a majority of non -residents to change the bylaw.

As you allude to and I agree with your point, it's probably a lifeline, but I don't think it will limit the supply, only encourage more, but that the Gov't would even consider it is a cause for concern .

read on

Hovering Says:

September 23rd, 2009 at 11:40 am

face it supraboy you’re a tosser.

—————-

Fixed it for you.

Superlittleboy

25

"So how’s that spike on the stock markets for all you bears feeling today? muhahahaa, up we go!"

Ummm Superlittleboy, the markets went down today. How's that decline working for all you bulls.

Another day of last minute flash trading by institutions – you know, the ones "loading up"! Lol – too funny

Stay away from investment advice superlittleboy, and stick to dungeons and dragons in your "shared" house with your family.

Superlittleboy

#3

"Put it into the stock markets. Anyone who puts it into GIC is plain stupid. Overload commodities on dips. Too bad this isn’t a stock forum."

Superlittleboy, nobody wants investment advice from someone that plays the imaginary stock market. Nor does anyone want advice from someone who gets it from their mommy and daddy, all the while waiting for them to pass on, so you can switch from "sharing" your parents home to "owning it."