Saturday, August 20, 2016

Differences Between Canada and the USA #2

I now have a better perspective on the differences between Canada and the USA. These variations are not dramatic, but they are interesting. In an effort to discourage anyone still reading this blog, I will write a series of posts about these contrasts.

The Post Office

In the USA, the post office is a political football.  Republicans point to it as a money-losing government boondoggle with nasty unions.  However, all congressmen (Republican and Democrat) want all post offices to stay open, stamps to be cheap, special services to be offered (passport anyone?), and door to door mail delivery everywhere 6 days a week.  Letter volume is dropping in spite of these handouts, parcel volume is increasing due to Internet shopping.

In Canada, the post office has to break even.  Therefore, most post offices are run by private companies, stamps are expensive, no more door to door delivery and only 5 days a week.  Letter volume is dropping dramatically, parcel volume is increasing due to Internet shopping.

Recycling


Recycling in the USA is considered a necessary evil if you care about the world your children inherit.  If you don't have kids or don't care about them, forget recycling because its a pain in the behind.  Outside of the home, recycling is never done.

In Canada, recycling is a universal religious activity practiced by everyone.  There are public recycling stations everywhere, you must separate your recycling into 4 different types, and you would never admit to anyone that you do not believe in recycling.

Christian Religion

In USA, religion is almost universal.  There are big churches everywhere, and you would never say in polite company that you do not believe in God.  You are expected to be able to characterize your Church, e.g. "Association of Reformed Baptist Churches of America".  If your church is not satisfactory, there is probably one you will like better within a mile or two.

Religion in the Canada is considered an interesting but little practiced historical custom.  If you don't have kids or don't care about them, you probably don't go to Church often if at all. Many church buildings are shared by 4 different branches of Christianity. Churches are few and far between, many of the older ones have been converted into condominiums or community centers (Americans, I kid you not!).


Friday, August 19, 2016

Differences Between Canada and the USA #1

I now have a better perspective on the differences between Canada and the USA.  These variations are not dramatic, but they are interesting.  In an effort to discourage anyone still reading this blog, I will write a series of posts about these contrasts.

Customer Service

In the USA, the customer is always right and must be treated with utmost respect even when demanding something that is not allowed.  For example, you bought a set of storage shelves, but they did not fit, you bring them back in a green plastic garbage bag with pieces missing without a receipt and jump the return line - no problem, cheerful refund.

In Canada, everyone has to follow the rules, even if they are unwritten.  If you break the rules, you will be denied the service you desire.  You did not bring the item back in "resellable condition with original receipt" - no refund for you!

Border Patrol

In the USA, the border patrol is most interested in who you are and are you a threat (terrorist, criminal..).  They really don't care if you are bringing back $15K of items you bought, as long as you declare them.  The duty is not worth collecting in most cases. 

In Canada, the goal of the border people is to get the taxes and duty you owe to pay for government services including the border patrol.  Don't try to smuggle those $50 flowered board shorts back from Plattsburgh, the border patrol wants the 12% HST and 8% excise tax.

Grocery Store

The US grocery store stocks about 40,000 different items.  If you want low calorie gluten free sugar free Parmesan Ranch dressing in the family size, they have it.

In Canada, the average store stocks 20,000 items, and a lot of them are no-name money-saving items.  Parmesan Ranch salad dressing any kind any size, forget about it.  How about some no-name French dressing for $0.99?

Tattoos and Army Boots on Young Women

Tattoos and boots are probably pretty common in New York City and other "urban" cities.  I never saw them in Northern Virginia.

In Canada, your 14 year old daughter will be bugging you because 10 of her friends have florescent pink army boots, pierced tongues, and tattoos on their arms, legs, and unmentionables.

Wednesday, August 17, 2016

Why Low Inflation Is Better than Return (Just a Bit)

There are lots of complaints about the low return from stocks, bonds, and saving due to the intervention of central banks.  Central banks have driven interest rates down to negative levels in some areas, and this drives down the return on all other financial assets.

The return on a balanced portfolio of stocks and bonds is likely between 3 and 5%, which seems very low to most folks.

But inflation is also at low levels, 1-2% in the USA, and similar or lower rates elsewhere.

Should we care more about inflation or low rates?  At first glance, it should not matter.  If inflation is 3% and you are getting 6% return that should be the same as inflation at 1% and a 4% return.  Funnily enough, low inflation is slightly more beneficial than higher return by my calculations.

The formula for adjusting a return for inflation is:

Inflation-Adjusted Return

So let's look at some combinations of return and inflation:

inflationrate of returnDifference RoR & Iadjusted rate of return
3.00%4.00%1.00%0.97%
4.00%5.00%1.00%0.96%
2.00%4.00%2.00%1.96%
3.00%5.00%2.00%1.94%
4.00%6.00%2.00%1.92%
1.00%4.00%3.00%2.97%
2.00%5.00%3.00%2.94%
3.00%6.00%3.00%2.91%

For the same difference between return and inflation (third column), a lower inflation gives you slightly more return.  The combination of 4% and 1% (yellow) is slightly better than 6% and 3% (green).

This may be obvious to most people, but it was a bit of a revelation to me.  We should be a little thankful for low inflation in a time of low returns.

Tuesday, July 19, 2016

The Phases of Selling a House

As you sell your house, you realize that you go through distinct phases:

  1. Before you sell the house - neighbors and real estate agents compliment your house and tell you that you will have no trouble selling it.
  2. When you interview and pick your listing agent - you are told your house is great and the market is great.  High numbers are mentioned.
  3. Before you list the house - your agent tells you that the market is not as good as it was before.  The staging expert recommends that all appliances should be replaced, fixtures changed, furniture removed, mirrors replaced in bathrooms, grout cleaned in bathrooms, painting touched up, flooring changed, countertops changed, rugs removed, pictures taken down, all traces of human habitation removed.
  4. When you decide on a starting price - your agent tells you that the market is not good and there are multiple competing houses within a stones throw of your house.  There are also multiple problems with your house: the basement is not right, it faces in the wrong direction, the brick is the wrong color, the backyard shape is not right, it is too remote or too close to other houses, the driveway is too short or long, there are not enough garages/bathroom, etc.
  5. You list the house - your neighbors tell you that your house is priced for a quick sale.  Your agent tells you that we will have to see the traffic before dropping the price further.
  6. You get multiple showings, where you get kicked out of your house for an hour at a time.  
  7. You get an offer - your neighbors tell you it is a lowball and to reject it.  Your agent points out that there are multiple competing houses within a stones throw and the buyer could go for one of these.
  8. You accept the offer - your agent immediately puts a sign out front saying "under contract" and gives you a list of all the things that have to be done before the offer is final:
    1. Home inspection
    2. termite inspection
    3. HOA inspection
    4. Radon inspection
    5. Appraisal
    6. Financing obtained
    7. Moon is in the seventh house and Jupiter aligns with Mars (not really)
    8. Anything else the buyer throws in
  9. HOA inspection report comes in, they want you to paint your mailbox and move the satellite dish you installed 10 years ago.
  10. Home inspection report comes in - the buyer wants the house refurbished to new condition within 3 days.  This includes fixing interior doors that don't close easily.  Your counter with something reasonable, they counter with "give me a further discount on your house".  You counter with repairs plus some money and get really angry.
  11. The buyers realize that buying a house involves working with a bank to get a mortgage, and this takes time.  They apply for a mortgage and are convinced that it will magically be approved with no effort on their part.
  12. Closing date slips because buyers are still trusting Harry Potter or some other magician will fix their mortgage problems.  Days pass and you frantically adjust your plans.  You issue an ultimatum to get the financing or lose the house, your agent becomes frantic that she will lose the sale and starts to panic.  You take down the "under contract" sign and the buyers notice and ask why.
  13. Buyers finally get their act together about the mortgage but now the bank cannot process the 300 pagers of paperwork required to get a mortgage since the housing crisis.  Closing dates slip, you frantically adjust your plans.
  14. All is ready, closing date now set for 2 weeks later than planned.
  15. Their bank calls you to ask for an extra day because they still cannot get out of their own way to fund a mortgage.  Luckily, you are one of the few Americans who does not own a gun so no lives are at risk.
  16. The buyer does a walkthrough then hangs around to cheerfully tell you all about their problems.  Luckily, you still don't own any weapons.
  17. The sale closes, an hour late because the buyers again had some minor financial issue. :-(
  18. You are sick and tired of the whole process and are glad to get out of this g&d damned house and neighborhood and go somewhere else.  You swear never to buy a house again, only rent.

Friday, July 15, 2016

Stock Markets Hit a New Record - Time to Rebalance Your Portfolio


The stock markets in the USA are hitting new records, 18,000+ for the Dow Jones etc.  This happens about once a decade or so, and is unpredictable.  It means your stocks, ETFs, Equity Mutual Funds are probably at all time highs as well.

You probably have a desired portfolio allocation for stocks, bonds, international stocks, cash, etc.  Check your holdings and you will probably find you are over-weighted in stocks because of the price rise.

So now is a good time to rebalance your portfolio if your allocation is out of balance by more than a few percent.  Sell those winning domestic equity holdings, buy bonds or international stocks or whatever you are underweight.  This means take some of your winnings off the table.

This technique of keeping a balanced portfolio is recommended by Warren Buffet, Vanguard, Fidelity, and most other respected investment authorities.

Disclaimer: this is not professional investment advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Photo credit: flickr

Saturday, July 2, 2016

Allstate Digital Locker Review


To prepare for our move, I wanted to take an inventory of our house.  Of course, I searched for software and applications to help with this and stumbled across a free service from our insurance company, called "Allstate Digital Locker".  This is a cloud based service that runs on PC or MAC withing a browser, or as a stand alone app on Ipads, Iphones, and Android devices.  It is free to use for Allstate customers, I am not sure how it works for others.

You fill out forms and take pictures of items in your home and it keeps an inventory in the cloud.  You can download the database and manipulate it manually as well.  It works satisfactorily, particularly if you use an Iphone or Ipad.

Pros

  1. Its free and it works
  2. Plenty of fields that you can fill out if you wish: description, room, cost, quantity etc.  
  3. Information can be downloaded as a PDF file or in a comma delimited file (CSV) that can be imported into a spreadsheet program like Excel or Libreoffice
  4. Reasonably quick on an up to date Iphone, but slower on other devices.  It takes about 1-3 seconds to add an item after you input the data.

Cons

  1. Very slow on a PC.  It takes at least 10 seconds to add an item to its database.
  2. The comma delimited file download has bugs and skips fields, so you will need to do some editing in your spreadsheet to make it useable.
  3. The PDF file is big and uses a lot of paper if you print it
  4. No easy way to skip steps or automate collecting data.  For example, every time you say you want to add a photograph, you have to answer the question of whether you will take the photo, use an existing photo, or use a stock photo in their database.

Wednesday, June 29, 2016

Brexit Again


My thoughts on how the Brexit situation may play out:

  1. The Conservative party picks a new prime minister in 3 months.
  2. Meanwhile, the pound and UK stocks go down.
  3. A motion to trigger article 50 of the EU for exit is tabled in Parliament.  It is important enough to be considered a motion of confidence.
  4. The motion fails because the new PM cannot clearly specify what will happen if UK exits.
  5. A general election is called.  Stocks go down some more due to uncertainty.
  6. The Conservatives win a majority of about the same size as current majority, but half of the MPs elected favor staying in the EU.  Labour party is minority but all of their MPs favor staying.
  7. Motion to trigger exit again fails in Parliament.
  8. New referendum is called and Remain wins.
  9. Britain stays in EU.
Who knows if this will happen, but it is certainly feasible.