Categories
Investing

Canadian Peer-to-Peer Lending

I love it when a good idea comes to fruition. I thought about starting up Craigslist in Canada before they came here (I’d used it in San Francisco and loved it – I even registered a domain for it!). I was going to build a dating site based on collaborative filtering, and I wanted to start a Canadian P2P Lending site like Lending Club and Zopa, and someone has finally done it!

In case you haven’t read about P2P lending, its basically eBay for banking. Instead of borrowing (or saving) money through a bank, the borrowers and lenders communicate directly and cut out the middle man. In theory, the massive profits that the big banks make should go into giving both sides better rates and leading to a more efficient capital market.

We’re still in the infancy, so I wouldn’t say we’re quite at that point yet, but its still a very exciting new place to borrow and invest. Through an American friend I managed to set up a Prosper account and have been scraping by with around a 5.5% return on our investment there (we’ve had MASSIVE defaults).

One of the best things about these types of sites (from an operator perspective), is that lending laws are different in every country (and often from province-to-province or state-to-state). This gives the chance to set up a “local” version in your country, and not have to compete with the current site dominating the market (as would be the case if you tried to start a local auction site or a local classifieds site).

I have my fingers crossed that CommunityLend will improve on the business models of Lending Club, Prosper and Zopa. Even if they don’t, I’m happy that at least we’ll have a Canadian version available to us.

In case you’re reading this and wondering why I’m happy people made money on “my” ideas, my feeling is that ideas are cheap. With a company, creation and operation is the hard part (and deserve the bulk of the returns). Frank Herbert (the author of Dune) once had a guy come up to him and say “I have a great idea for a book, I’ll tell you, you write it, and we’ll split the profits 50/50”. Mr. Herbert said “no way, coming up with ideas is the fun and easy part, writing the book is hard work!”.

People have made similar observations about video games. If there’s any market for ideas, I certainly haven’t found it (please tell me where it is so I can cash in and retire!). The only way you can “sell” an idea is to find someone naive enough to give value to ideas on their own merit, convince them to do all the work and give you equity for your initial idea (“you build it and we’ll split the profits 50/50), hope that they are naive but very bright and productive (I haven’t met many people who would fit this bill), then sell the results and cash in.

An idea that I had (that no one has actually done yet) was to build a website, say “ideasarecheap.com”. On it people could write up their ideas for businesses, post a business plan if they have it, and list what resources they bring to the table (what portion of the start-up capital they have, skills they possess, contacts, etc.) and what resources they don’t have but would need. People with those resources (or people just wanting to offer advice), could connect with the budding entrepreneurs. Money could be made off of advertising (I know, I know, this business model is *SO* 1999).

Anyone have $1000 / month to front me while I build it? 😉

Other resources

Categories
Announcements

Switching to Weekdays Only

I’ve been posting daily for the last couple of months, and judging from my more experienced fellow PF bloggers, this is a tough pace to maintain. Viewing this as a “marathon rather than a sprint” I’ve decided to pull back to weekdays only. Hopefully this will improve the quality of individual posts (or not) but should certainly help me keep posting longer without getting burned out (which I’m not feeling or worried about yet, but maybe its better to try to switch to a more reasonable pace while I’m still feeling good about it). Besides which, since my traffic drop significantly on the weekends, this should save my Monday readers from having to plow through 3 days of my drivel ;-).

I get the feeling that other bloggers really do “write every post on the day”, while I’ll often write a few days posts at a time when I’m feeling creative, then queue them up for posting one per day. Is this a blogging no-no? What is people’s motivation for writing daily?

I’m going to lump in holidays with weekends, so after today’s post, see you next Tuesday!

Categories
Opinion

SuperBlog?

On Canadian Dream’s post today he talks about the possibility of forming a new shared personal finance blog with multiple writers. This got me thinking a bit about the concept and I thought I would share some of my thoughts.First of all I think a group blog is a great idea. There are lots of bloggers who only want to post infrequently and sharing a blog would help keep the traffic up so that there would be people still reading your posts even if you only posted once or twice a week. I personally haven’t “hit the wall” yet but if I ever get to a point where I just can’t or won’t post several times a week then sharing a blog with a couple of other bloggers would be ideal.

I’m guessing there could be other motives for forming a group blog and they would be financial. A lot of blogs have advertising but as successful as some blogs are in terms of hits, it’s difficult for a single person to expand that blog without quitting their day job to write content for the site. The answer of course is the shared blog. However if the shared blog is to be run like a company then I’m not sure how well it would work if there a lot of bloggers involved. Who has the final say on things? Who controls the money? Who decides the layout?

My suggestion would be that a better idea is to have one person who is keen on creating a profitable site and has access to financing, to be the owner of the new site. They would get other bloggers to write posts by paying them. It could be small amounts at first and then maybe more money if the site takes off. I wouldn’t be surprised if you could get a lot of quality posts for $10/post. The idea would be to create a “must visit” blog which will drive traffic to the point where the advertising revenue can create a profit.I didn’t think of this idea of course, one example that I’m thinking of is hockeybuzz.com which is a hockey blog run by a guy named Eklund who supposedly has a lot of nhl connections. If I’m not mistaken, he started the blog himself and then later added posts from other writers. I would assume at this point that he pays those writers but I don’t know that for a fact. Who can do this? Someone with a lot of drive, access to money, good webmaster skills would help. You could start a site from scratch but nothing breeds success like success so I would suggest that you follow the Eklund model and expand on an already popular site. Canadian Capitalist comes to mind as well as Million Dollar Journey. CC has built up his traffic over the last several years while MDJ worked some kind of magic to quickly create a very popular site.I don’t think either of those guys wants to start writing more posts per day but if they could get other people to write the extra posts then that would be a way of expanding their sites.Why don’t I want to do something like this? For one thing I don’t believe the Canadian personal finance world is big enough to support a blog like hockeybuzz.com. The hockey blog world much, much bigger than the Canadian personal finance blogworld. Plus I rather like having my own little blog.

Categories
Personal Finance

Retiring Overseas

I’ve toyed with the idea of retiring outside of Canada as a way to get more “bang for my retirement buck” or to retire sooner then I’d be able to here in Canada. I’ve met and read about people who really seem to be able to be able to do well by setting up camp in places where a modest Canadian passive income goes a long ways.

A friend of mine has an uncle who retired to Thailand. He’s living the good life with a 35 year old girlfriend (he’s in his late 60’s). According to him he’s able to live like a king on his Canadian pension. Most people would worry about health care in developing countries, but apparently the care is exceptional in Thailand, and its always possible to get evacuation protection where they’ll bring you back to Canada in case of serious emergency complications.

My brother some time ago talked about going to Buenos Aires for 6 months to study Spanish and learn how to surf. They call it the “Paris of South America” and apparently it has gorgeous architecture and cafes with very low prices. I’m tempted to steal his dream vacation and go set up camp there for a while, how sweet would that be?

Apparently some American plan to move to Nova Scotia, buy ocean-front property, and live the good life on the cheap. Being able to sell a condo in Toronto and use the proceeds to buy ocean-front property sounds like a pretty good deal to me!

Some people talk about retiring to Mexico, and I think that could be a retirement (as long as you weren’t in an area where they like to kill Canadians 😉 ).

My “requirements” for where I live are fairly basic. I’d need air conditioning if it gets hot at all (I won’t even live in Toronto without AC during the summer). I’d need high speed internet. And I’d like to be able to eat sushi occasionally.

In Tim Ferriss’ “The 4-hour Workweek” he recommends Buenos Aires, Madrid, and Berlin as places that you can have a really nice lifestyle for a comparatively low price.

Anyone have other ideas for places where you get a great lifestyle for a low price?

Categories
Investing

Why I Suck At Trading

I’ve come to the realization that I would not make a very good stock trader. The evidence leading to this conclusion became glaringly apparent when I made my first ever stock purchases over the last couple of months. Both trades were Bank of Montreal purchased for my leveraged stock plan.

After doing a bit of research on the mechanics of buying stocks along with practicing on the trading simulator at Questrade, I was able to get comfortable with getting the real time quotes and placing an order with a limit. The limit probably wasn’t necessary since I was buying board lots of a heavily traded company, but better safe than sorry.

The other part of being on the “buy side” was waiting for a dip. I had read in many books and blogs that the best way to accumulate dividend stocks was to “buy on dips”. It seemed pretty obvious that all one had to do was wait until said dip appeared and then let the trading begin! The only problem was an an extreme lack of patience on my part. Once I got it into my head that I was going to be buying some stocks then I kept a close eye on the price in order to identify a dip at which point I would pull the trigger. However due to the feverish excitement I was in, I ended up spending way too much time at work checking the price of the stock. I’m sure my co-workers were suspicious since I was spending a lot more time glued to my computer than I normally do. After a while I decided that dip or no dip it was probably better to pay a couple of bucks too much for the stock rather than lose my job because I was checking real time quotes all day long. The other problem I had was a constant irrational fear that the price would skyrocket and if I didn’t buy right away I would never get it for that price again.

I ended up buying the first 100 shares of BMO at $71 which was after the shares had been hanging around $68 for a while because of the trading scandal. The reason I couldn’t buy when the stock was lower was because I didn’t have the account set up yet and it took a while for that to happen. For the next trade I told myself that I would wait patiently until the stock hit the very bottom (wherever that is). But history repeated itself and I ended up buying 200 shares at $68.60 which felt a lot better than $71 but of course, better deals could have been had with a little patience.

Since my plan is to hold these shares for a long time, the initial purchase price isn’t all that important but the competitive spirit in me demands that I get the best price possible. I didn’t accomplish that goal with my purchases this time but I’m hoping that next time I’ll be able to stay cool long enough to get a good deal. If not, the dividend cheques will help make up for it.

Categories
Book Review

The Investment Zoo by Stephen Jarislowsky

It always bugs me having junk around in my life. In my youth I was quite a “book horder”, and have forced myself to keep the number of books I own to a minimum (my new trick is unless I *LOVE* a book, I try to give it away to someone who’ll enjoy it). I find it hard to get rid of books that were given to me as a gift, but I definitely accumulate them if I let myself.

I just got a Toronto library card and am kicking myself for not having got one sooner. It’s a perfect compromise of being able to get books I want to read, for a low price (Mr. Cheap likes free!) and I can give it back to the library and get it out of my life after I’ve read it. I’m pretty sure there’s even a way to get the library to bring in books you want to read (I haven’t figured out this process for the Toronto library yet, but I’m sure it’s there).

I’ve been meaning to read Investment Zoo since a few of my fellow PF bloggers made reference to it, and I finally bit the bullet, got a library card, and tore through this very readable book.

Overall the book was interesting, although I found it unfortunately a little light on specifics. A big chunk is devoted to Jarislowsky’s life, which while interesting, seemed to go beyond his stated purpose of “why the reader should listen to him”. I think a page or two would have been enough for that, and he could have written up his recollections of doing well in school and whatnot in a separate biography.

Another chunk which was interesting, but of limited value to me, was advocating getting to know senior management in the companies you invest in. Unfortunately, I think the chance of Rothman’s giving me a personal tour and answering my questions when I was debating putting $5K into their stock is pretty slim. I think if I was to do this every time I was thinking about purchasing stock it would become VERY hard for me to have any diversification at all. I think he could have put this into a another separate book targeting money managers.

I think he had some excellent thoughts on financial planners and mutual funds. I liked what he had to say about dividend paying, blue-chip stocks (it certainly reassured me about my strategy). I was also happy that he gave a nod to tobacco and explained why litigation worries were unfounded (his thinking is that any legal expense will be passed along to the consumer – since tobacco is an inelastic good).

Jarislowsky’s thinking about living below your means and intelligently giving money away were both interesting. I loved his idea of purchasing university chairs and getting matching funds from the university and the government as the best “bang for your buck” with charitable giving. One of the things that has kept me away from charitable giving is that I really feel the only “value for money” is that I’d feel good about myself for giving (and the non-profit would promptly squander whatever I’d given them on administrative costs). I’ve been VERY unimpressed with everyone I’ve ever met who works in the non-profit sector, they’re definitely not the type of people I want to give money too (bloody socialists). Education, however, is something I passionately believe in. A friend is hoping to go to Africa and set up a school in a few years time, and that seems like something I could get behind (and would be more affordable then a $1M university chair which is a little out of my budget right now).

I’m reading (and enjoying) “The Intelligent Investor” right now. Investment Zoo was a FAR easier and faster read. If you’re looking for light PF reading, I’d recommend it.

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Categories
Investing

Bubbles

No this is not about the Trailer Park Boys, but about a new article that William Bernstein of Four Pillars of Investing fame has written here on his website.

He talks about the possibility that we are in a bubble based on a number of factors including over valuation of worldwide stocks and the realization of Hyman Minsky’s criteria for a bubble – liquidity and displacement. By displacement he’s referring to a transformative technology (ie the web) or new financial ideas. Bernstein says that this displacement is occurring with the onslaught of new ETFs on which Larry McDonald wrote about. Personally I would have to respectfully disagree with Bernstein for the simple reason that ETFs have been around since 1990 so they really aren’t a new invention. Index funds which are pretty closely related to ETFs have been around since the mid-seventies. Admittedly there are some exotic flavours of ETFs coming out which leads one to believe that maybe we are in a bubble because apparently any type of investment will sell these days as Canadian Capitalist covers here.

In the end he concludes that the odds are not more 50/50 that we are in a bubble. One of his ideas in his book is that a major bubble only occurs once every generation or about every 30 years because everyone forgets about the last big bubble. In this case it has been too soon since the dot bomb for another bubble to occur.

On the other hand he also mentions in the article “the better you are at tuning out the opinions of others and making judgments for yourself, the wealthier you will be.” So perhaps we just have to make up our own minds on whether there might be a bubble occurring.

Categories
Personal Finance

Retire at Sea

Quite a while ago I came across what seemed to be a clever/strange idea. With the price of nursing homes constantly going up, a more cost-effective retirement would be to become a long-term “guest” of a cruise line.

Barbara Mikkelson gives an excellent overview of the pros and cons of this lifestyle, but to summarize:

Instead of being ignored in a corner and only having other deaf old people to socialize with, you’d get to travel through the world, have attentive staff helping you, enjoy a wider variety of special activities, eat better food and have access to all the necessities (doctor on board, etc).

The trade off is you couldn’t have a pet, visits from family and friends would be harder to arrange, and the social group around you would always be in flux (as customers and employees were added and left the ship you were on). Some people would view this as a negative, but some would view it as a positive.

Either way, its chilling to think about getting to a point in life where it’ll cost $200 a day to live ($73K / year would eat into most people’s savings in hurry).