Investing In Canada

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September 2009

Wednesday, September 30, 2009

Westshore Terminals Income Fund (WTE.UN) Profits to Soar over the next 3 years

Westshore Terminals Income Fund (TSE:WTE.UN) is the premier shipping terminal for metallurgical coal for the North American Market to the Pacific Rim. An announcement by Western Coal Corp. (TSE:WTN), a major coal mining company, on Tuesday will turn into a windfall bonus for shipments from the Roberts Bank Coal Terminal. Westshore Terminals Income Fund earns revenue from volume of shipments so the announcement of a major expansion by one of the major producers in North America is a big deal.

Western Coal Corp. (WTN.TO) announced Tuesday it is “aggressively” seeking to expand capacity to 10 million tonnes a year by 2013. According to the Globe and Mail article Western Coal keen to bulk up the company is selling off non-core assets while expanding coal production through acquisitions.

 Although the above statement sounds like a wash, selling one asset while buying another, it’s not. John Byrne, chairman of Western Coal Corp., stated that there are buying opportunities in British Columbia and West Virginia. Due to the large barriers to enter the coal mining industry Western Coal should be able to pick up some new mines with the $60 million the company raised with a bought deal in August and get them operational.

 Currently, Western Coal is operating just above 50 percent capacity extracting 7 million tonnes of metallurgical coal annually. Last November as coal prices plunged, Western Coal Corp slashed production, cut jobs and expenses at its operations.

   The company will now become a pure coal play and plans to export much of the coal to China, India, and others. According to Mr. Hogg, Western Coal CEO, “the company is now ramping up production as demand returns, particularly in countries such as China and India.”

 Much of the increased production will occur by expanding British Columbian operations including Brule Mine, Wolverine mine, and Willow Creek Mine.  This will have a significant impact on the shipments through Westshore Terminals Port since the majority of coal exported from North America makes its way through this terminal. It’s a good thing Westshore Terminals has been adding capacity and improving efficiency through new equipment and systems. Look for an upcoming announcement about the benefits of Western Coals expansion in Westshore Terminals Income Fund third quarter discussion in the coming months.

  It won’t be long before the market puts two and two together to figure out the positive impact this will have on Westshore Terminals. This is a great income trust to hold in a TFSA or RRSP so if you are investing in Canada as a Canadian Citizen makes sure you take advantage of your tax sheltering accounts. I am buying more WTE.UN to hold in my RRSP now because the stock has pulled back over the past 2 weeks so the entrance price is looking very nice. Even if the market pulls before the end of this year this looks like a great long term play.

 For previous articles about Westshore Terminals Income Fund take a look at the following:

Tuesday, September 29, 2009

Canadian Diamond Stocks: Diamonds from Canada Not Just a Girl’s Best Friend.

Whenever someone mentions the word diamond there are two immediate images projected: the bright eyed look of a woman opening an engagement ring box, or the negative connotations of the infamous blood diamond.  There is however a new image beginning to gain ground and it is due in part to some of the recent discoveries in the north of Canada.
It is no secret that there are diamonds in Canada. Over the past number of years if you went to a jeweller and asked for a certified Canadian diamond there is no question, you would be paying a premium.  Canada has become a preferred destination for diamond mines due to the stable political and social environment, excellent transportation systems, and highly developed mining technologies and infrastructure.  It’s no wonder that Diamond Investing News recently reported Canada is “the next diamond Mecca.”

Diamonds are not just for her anymore; ever think about investing in Diamonds? Ever think about investing in Diamonds in Canada? Well, if you haven’t maybe you should. There are loads of diamond mines in Canada and the overwhelming majority are located in the North. Over the past few weeks there have been some major new diamond finds made, most notably the 2 cores drilled by Peregrine Diamonds Ltd (TSX:PGD). Since the find was announced, Peregrine Diamonds stock price has gone from under $1 to $4.65 within a week.

Diamond stocks can be explosive when a find is made. Some of the other better know diamond stock names include the following:

Mountain Province Diamonds Inc. (TSE:MPV)

Stornoway Diamond Corp. (TSE:SWY)

Diamond Fields International Ltd. (TSE:DFI)

There is also a maze of diamond stocks on the Canadian Venture Exchange, but in a high risk asset field you may want to stick to something with better coverage.

At lease with most stocks listed on the TSX you will find some analysts providing insight into many of these companies. From the brief analysis that I did, I found that Mountain Province Diamonds (TSE:MPV) has the highest ranking and reputation with analysts. Also, don’t be surprised to find that some of the major investors in any of the above companies are other major mining companies. If a discovery is made they may try to buy up a significant portion of the company before you have a chance to blink. I suppose it pays to be an insider.

For more information about Diamond Stock Investing I suggest searching for free newsletters on the subject where you can get your feet wet with the latest information on the topic.

Friday, September 25, 2009

How to Protect Yourself from a Red October in the Stock Market

A basic definition of a Red October in the stock market is one of carnage. Red October is synonymous with panic selling followed by a wave of bearish behaviour in the markets.

The Hunt for Another Red October could be occurning in the stock market this October as well.

Since this may not be fresh in everyone’s minds here is a Chart Displaying a Red October Last year in 2008.

This chart displays the S&P 500 as well as the TSX based on percentage changes. The steepest drop off in the chart occurred in October of 2008, which most people can remember as the mortgage meltdown.

During this time frame, most people lost a significant amount of money while a few bearish investors made fortunes. I was not lucky enough to be one of the bearish investors that made money in the stock market during the latter half of 2008, but I did learn a few lessons.

Fast-forward to late September 2009. I would like to highlight the bull V shaped rebound we have experience and then discuss the current implications. This next chart is the TSX alone so that a sense of the numbers can be displayed.

This chart displays the TSX over the past year from Mid September 2008 to the current time in September 2009. I have drawn in the mid-term up-trend line and a horizontal line at the most recent resistance level.

The current trend line has been chugging along nicely and has only really been tested 2 times throughout this cycle. As you can also see, the latest resistance level has sent the market on a collision course with the trend line, which it will likely test sometime next week.

There are many reasons that one might assume we are in for a Red October again this year, but that is not the point of this article. For reasons there is potential for a pull back in the market, take a look at the previous article titled Double Dip Recovery W or V shaped.

My main concern is discussing how one may protect their portfolio from such an occurrence. From my perspective, I am looking for efficiency and still want the ability to participate in further gains in case a Red October does not occur. This calls for the use of options, but don’t worry it is really very simple.

There are 2 methods that can be employed depending on your level of portfolio diversification.

1) You are well diversified

• Simply buy put options for the market index. You will want the options to be based on the stock market your main portfolio holdings are based. For me this would involve buying puts on the TSX. A couple of things you will need to remember is that the longer the time to expiration on the options the more they will cost and the higher the degree of protection you opt for the more it will cost.

• Personally, I will likely buy puts on the TSX. SXO – S&P/TSX 60 Index Options are my best bet since they track the TSX market. Since I want a large amount of protection and only believe I will need this protection for 1 month I will look at the SXO Nov 690, which currently has a bid ask of $35.50 to $38.15. Yes there is a big spread, but that is because there is not as much volume in Canada. If you are investing in Canada you may opt of S&P options on the NYSE for a better spread and similar market movement.

2) You are not diversified

• Under this scenario you may want to focus specifically on the stocks that you hold in your portfolio. For example is you on Suncor (SU.TO), you could just buy Suncor puts. The amount of protection you want will again be based on how long you think a correction could last and the degree of risk you are willing to take. If you want to protect all of your gains you will pick a strike price at or near the current market price of the stock.

Figuring out exactly how many options you need to buy is much easier with the second option strategy since you only need to match the amount of shares you have with the amount of contracts. For the first scenario you need to work out the dollar value of your portfolio in relation to the SXO index. If you have $200,000 then divided by the SXO index price ($200,000/670 = 298). Here you would buy 300 contracts or 3 lots since they trade in lots 100 contracts.

For more detailed information about buying options please review the bearish options strategies articles.

Wednesday, September 23, 2009

Bakken Oilfields to Out Perform Canadian Oil Sands

Bakken Oilfield Producers likely to be much more profitable than Oil Sands

The Bakken Oilfields make up a gigantic oil formation with over 4.3 billion barrels of recoverable oil. This oil fields stretch across southeaster Saskatchewan, North Dakota, and Montana and was not technically or economically accessible in the past; however, new technologies have made this massive oil field accessible in a much more environmentally friendly way than the oil sands of Alberta.

The Oil Sands in Alberta require energy intensive extraction methods, but not the Bakken Oil fields. The Oil in the Bakken’s can be extracted without this energy intensive process making it much more economical and ethical compared to oil sands extraction and refinement.

The new technology is called ‘horizontal multistage drilling’ and it does exactly what it sounds like: breaks rock along the length of a well to enable the oil to flow. This technology is expected to produce some of the highest returns in the oil and gas sector throughout not only Canada, but the world.

Does anyone remember President Obama’s statements about the negative side of the Canadian Oil Sands? He was very quick to highlight the negative environmental consequences to this type of oil extraction. Did you also know that President Obama believes the Bakken Oil Fields are a much better alternative?

On Wednesday, August 25, 2009 President Obama stated he“believes that drilling in the Bakken Shale is an important development...” because of the substantial amount of oil that is estimated to be recoverable.

This may be hearsay at this point, but rumblings can be heard that President Obama plans to pass legislation that would put a premium on Bakken Oil versus oil sands oil. The implications of such hearsay could result in explosive stock performance in any of the Bakken Oil Field producers. Just remember; where there’s smoke, there is normally fire.

Here's a look at where the Bakken Oil Fields are:

So who are the big Bakken Oil Producers in Canada?

Number one is Crescent Point (TSE:CPG), which first acquired Bakken lands in 2006.

Number two is Petrobakken, a newly formed company through the merger of Petrobank (TSE:PBG) and Tristar (TSE:TOG). Petrobakken has become one of the largest pure-play unconventional oil producers in Canada.

So what do these stocks look like?

Crescent Point (TSE:CPG) is currently trading just off its 52 week high around $37. The 52 week high was $38.23 and the 52 week low was $18.13. The current dividend yield is a healthy 7.2% and the average analyst rating is a buy.

Petrobank (TSE:PBG) is currently trading at $42.51. The 52 week high was $47.20 and the 52 week low was $16.26. There is no current dividend, but the average analyst rating is a strong buy. The merger with Tristar is coming soon.

Tristar (TSE:TOG) is currently trading just at $14.47. The 52 week high was $17.76 and the 52 week low was $6.90. The average analyst rating was a buy and the merger is coming down the pipe.

Look for these stocks to outperform their counter parts in the oil sands, especially if the rumours turn out true.

Monday, September 21, 2009

ETFs are Glorified Mutual Funds

Did you every here of a time when history repeated itself?
It happens all the time. Does anyone remember the many transfers of hegemonies in history? This basically means the dominant world power at a point in history and the transition periods from one dominant society to another have similar circumstances throughout time, War. Let’s make a quick side trip before we get into Mutual Funds vs. ETFs.

If you recall some of the greatest wars have occurred during a state of changing dominant nations. For example, the USSR and the USA fought the Cold War (1945-91) for global hegemony. Other hegemonic transitions occurred with Wars as well: Egypt and the Roman Empire, The United Kingdom and France, etc. A new battle is brewing for world control between China and the USA.

Now, back to mutual funds and ETFs:

Mutual Funds, according to, are investment vehicles made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market funds, and similar assets. Mutual Funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the investors.

It has been stated by many in the media that the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of assets which would be next to impossible to do with a small amount of capital. The main downside has been displayed by the overwhelming lack of performance that mutual funds have achieved compared to the general return of the market they are benchmarked against: NYSE, TSX, Nasdaq, Russell, etc. Further, it is common knowledge that mutual funds charge management expenses ratios (MER) against the total asset value in the fund; if the fund does well or poorly the fund manger still takes a percentage.

Over more recent history, the biggest complaint from investors about mutual funds has been their divergence in performance versus the index they are benched marked against. The second complaint has been the front or rear loaded fees charged for selling out the position.

Just a few short years of bad press and wala…ETFs are born.

Exchange Traded Funds (ETF), according to, are securities that track an index, a commodity or a basket of assets like an index fund, but trade like a stock on an exchange. ETFs experience price changes throughout the days as they are bought and sold.

According to Investopedia, because ETFs trade like a stock the Net Asset Value (NAV) is not calculated every day like a mutual fund.

By owning an ETF, you get the diversification just like a mutual fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is lower expense ratios compared to mutual funds because they are not as actively managed.

Let’s get real now though. Under those fancy window dressing definitions is the same investment vehicle. There were many mutual funds that tried to just mirror an index the same way ETFs do. Thanks to the many lazy mutual fund managers out there or maybe we could call them geniuses, many mutual funds bought baskets of stocks/assets that would provided the exact same return as the market index. Some of them even lowered their expense ratios because these funds took a lot less time and energy to maintain.

It’s not rocket science. It’s just like going to the ice cream parlour and ordering Chocolate-Chocolate ice cream instead of just plain old Chocolate. It’s all smoke and mirrors and the financial community is famous for implementing the same things over and over and never learning from mistakes of the past.

Just because you can short an ETF doesn’t mean it’s any different. You could have bought a mutual fund that shorts the market.

Just because you ETFs are designed to track an index dosn't mean it's any different.  Anyone remember Index funds?  Index funds are mutual funds designed to track different indexes.
Just because you can short an ETF that shorts the market doesn’t mean it’s any different. That’s a double negative that gives you the same return as buying the ETF or mutual fund that is not shorting the market.

The only real difference is that you buy and sell throughout the day, but that doesn’t make it a different flavour.

Thursday, September 17, 2009

Is now the time to be investing in Canadian Dollars?

This question should probably be rephrased, ‘is now the time to invest in assets that the world demands more and more, whether there is or is not a recession?
According to the Canadian Press, “Canada has the potential to attract billions of dollars in investment from Chinese companies.” It is no surprise that one of the top priorities of Export Development Canada has been on the emerging windfall trade relationship between the two countries. Let’s think about this…hmmm…who wants to gain exposure to an over 1 billion person consumer base? Also, a Country expanding at as rapid a pace as China needs commodities to grow, so where is a stable source of such commodities as Oil, Coal, Metals, Wood Products, etc.?

In a recent report, The Asia Pacific Foundation of Canada concluded that while the scale is relatively small, the outward investment by Chinese companies is still “in its infancy.” There have been many recent announcements of major Chinese companies looking to invest in Canada, especially in oil and key metals.

According to the University of Alberta, a vital piece of China’s plan for energy security is dependent on Canada’s oil sands. Petro China recently agreed to buy a 60% stake in two Canadian oil sands projects owned by Athabasca Oil Sands for $1.9 billion. This is not the first major Chinese investment in Canada nor will it be the last.

If you would like to here this bullish sentiment on the Canada Dollar from a recognized expert, look no further than Dennis Gartman, Virginia based investment author of the highly subscribed Gartman Letter. He finds many more reasons to remain bullish on the Loonie than the current United States / China Trade disputes. Mr. Gartman believes Canada stands to benefit immensely because the economy in Canada is in better shape than most economies in the world, the exports are viable, the propensity of foreign nations to buy Canadian seems to be rising at the expense of American goods, and relations between Beijing and Ottawa are good.

Word for word from the Gartman Letter, “The world needs energy; Canada has energy to go. The world needs food; Canada's got food; The world needs base metals; they can been found in Canada …and Canada has the ports to ship those needs; it has the laws to protect contracts signed, and it has favourable and friendly relations with everyone.”

So, now you are thinking I should buy Canadian dollars, but then what, or I am Canadian so I already have Canadian dollars, so then what?

Well, if you are going to be earning more money than others just based on the appreciating value of the Canadian Dollar maybe you should by Government of Canada Bonds that are guaranteed and pay next to nothing in interest right? Forget that…if you are investing in Canada, then you need to be putting your dollars to work. You are trying to reach a state of financial independence aren’t you?

Just take a quick minute and think about what the Chinese companies will be investing in and couple that with the fact that the Canadian dollar is likely to appreciate over the coming years against the Greenback. The only problem I have is narrowing the field down. There are so many companies that produce products that will be in great demand. Start by picking which commodities make the most sense to you: oil, natural gas, coal, uranium, gold, copper, etc. From there you can narrow your search for the right companies to invest in. I prefer to pick companies that have lots of coverage so that you can always find out what is happening, what others think, and for the most part the volume will be high enough to make large trades.

For some great ideas about investment advice, take a look at any of the great investment blogs from Canada. If you like what one of the authors has to say, but you want to know what they think about something they have not covered yet, send them an email. Most, including myself are happy to do the research and provide an opinion in a new blog posting.

Tuesday, September 15, 2009

Black Gold Income Trust

Westshore Terminals Income Fund (WTE.UN)
I have been following Westshore Terminals Income Fund for more than a year now and even recommended it in a previous article on this blog: Income Trust Picks for my TFSA.

The fund is based out of my home town Delta, BC and it has a very real and easy to understand business. Westshore operates a coal-storage and loading facility at Roberts Banks, British Columbia. It is an essential link in the coal chain between mines, rail, shipping, and the end user. Shipments are regular and go to around 24 counties and bring in $2 billion or more of wealth a year to Canada.

Currently and over the past couple of years Westshore Terminals has been upgrading its coal handling capacity and improving efficiency in handling the coal from the railcars to storage and onto ships. Westshore is now the leading export coal facility in North America. Coal exported through the terminal is mainly metallurgical coal that is used in making steel; it’s no wonder that China, one of the largest Steel makers, is a major customer.

One of the nice things about this company is the stability of cash flows leading to stable quarterly dividend payments. This is due to the fact that the fund derives its income from the volume of coal that passes through the port, not the price of coal and there are many long term contracts that have been signed with some of the largest coal miners in Canada. For example, Westshore’s major customer is Elk Valley Coal which is the second largest coal exporter of metallurgical coal in the world and is increasing mine capacity by 3 million tonnes to 28 million tonnes within a few years. Another interesting note is that coal shipments from Montana and Wyoming in the United States are also being railed 2000 kilometres to access Westshores Terminal.

Sounds like a great story, but what are analysts saying?

Looking at a consolidation of all known analysts that are currently following this stock, Westshore Terminals has received a 10/10 for the past month. I do like to use Thomson Reuters for this type of information since they consolidate all analysts’ opinions for a stock that follow the stock. The 10/10 rating is based on a collective analysis of 5 factors: Earnings, Fundamentals, Relative Valuation, Risk, and Price Momentum. The average for the Industrial Transport Sector is currently 8.5.

The current price of Westshore is around $13.55. The 52 week high is $16.50 and 52 week low is $7.02. The market cap is around $1 Billion and the current dividend yield is around 11.6% with quarterly distributions. Of the 6 analysts that follow the stock, the 12 month Price target ranges from a high of $15 to a low of $12.

I believe this type of investment is very well suited for a TFSA or an RRSP account due to the new tax rules coming in 2010 that will affect distributions. These new tax laws will only make Income Trusts that much more suited for tax sheltered accounts.

This is the most recent chart of WTE.UN from Google Finance.  As you can see the uptrend has been sustained for the past 6 months and WTE.UN is now pulling away from the trend line.  This may result in a steeper uptrend to into the future, but I think WTE.UN will likely pull back to the trend line in the coming weeks.

There is no time like the present to buy this for the long term.

Friday, September 11, 2009

Double Dip Recovery W or V Shaped Recovery?

The match is set. It’s GDP versus Unemployment and we are currently only in the mid-rounds of this heavy weight match.
Up until our current round we have seen some back and forth between the two fighters. GDP has taken some pretty heavy punches on the ropes and even received a KO count in the initial rounds. Unemployment on the other hand has been growing stronger through the match, but in the most recent rounds this growth in strength has been increasing at diminishing increments while the visual impairment, from the heavy hits GDP has taken, seems to be on the mend.

All the while, the stock market crowd has moved from a state of despair and frenzy to one of optimism.  The state of despair came as the economy tanked and the amount of unemployed grew at a staggering pace.  The reversal to a state of optimism has grown at just as staggering a pace; however, this optimism has brewed as a result of analysts dire forecasts not being substantiated for the most part, not because the economy has been seriously improving.

So, where is this match going in the final rounds and whose forecasts can we trust?

This is where things get interesting. Do you want to believe the majority, the general consensus of all the Analysts that didn’t predict this recession, or do you want to believe the minority, a small group of analysts that were credited with predicting the current recession?

Let’s face it, most analysts simply wait for someone else to make a prediction and then they try to pull together the evidence to support that claim and call it their own. This is obviously not the way to accurate forecasts. On the other side though, the naysayer minority forecasts that diverge from the crowd sometime just make their predictions different than the consensus to receive attention.

Here’s what we know now:

General Consensus

• We are in recovery mode

• Unemployment in America should top out around 10%

• Jobs will continue to be lost in the coming months but at a slowed pace

• Company Balance Sheets are improving and expansion is around the corner

Naysayer Analyst (predictors of the recession)

• We are in a short term up cycle in the market with a further down turn to occur in the coming months

• Unemployment will pass 10% and likely reach levels nearer to 13%

• Job losses have slowed, but are still being lost and will keep being lost for longer than the majority think

• Companies will not begin hiring again for some time

• A total meltdown of the financial system is still a real potential

I personally want to be an optimist, I really do; however, there are so many factors pointing me to a more pessimistic view of the stock market and economy in general.

1. Consumer mentality has shifted. People are not buying like they used to; they are becoming savers instead of spenders

2. Debt levels of the average consumer are still at unprecedented levels and bankruptcies are still high.

3. Banks have not been required to disclose losses on their balance sheets.

4. The Bank Stress Test was based on 10% unemployment. Anything above that would make the test faulty in predicting defaults of the remaining banks.

5. Commercial Real Estate Vacancies are on the rise and these properties are highly levered with similar NINJA mortgages to what was written for Residential Real Estate. These mortgages are beginning to default and could lead to a second mortgage crisis in America. Look at General Growth Properties Inc (GGWPQ), used to be the largest REIT in the US. (this has the potential to be the knockout punch.)

6. The American Dollar is still collapsing. As the dollar decreases Americans are able to afford to less and less imports leading to even less global trade.

7. There is a stock market bubble forming in China due to lack lending standards. Chinese citizens are can easily borrow with no collateral and have been throwing everything they have into the stock market there. A short drop could cause a snowball here that would be felt throughout the world.

8. Oil prices continue to rise and this will make goods more expensive due to higher transport costs.

9. The stock market has rebounded far too quickly from this recession and this rebound has been based on purely speculation with lower and lower volume as prices increase.

10. Most fund manager have been taking profits and getting ready for the next shock wave in the stock market.

11. Gold Prices are still increasing as more and more money is diverted from the stock market into gold because of many fund managers concerns about the current market environment.

12. The US has thrown a ton of money at fighting this recession and that is leading to a lack of confidence in the US$ around the rest of the world. This could lead to a drastic drop in the value of the US Dollar.

13. The recession stimulus spending needs to be paid for and this will happen through increased taxes, which will detract from future growth.

These are just of a few of my concerns on the horizon that make me feel a bit pessimistic about the current stock market environment. There is also a list of positives, but I am still swayed this way for now.

If you are interested in what the analysts that predicted the recession are forecasting, take a look at Thomas Watson’s article “Economic forecast: Double Trouble“

Wednesday, September 9, 2009

General Growth Properties Inc - Takeover Target

General Growth Properties Inc (Public, OTC:GGWPQ)

Potential Take Over Target!

General Growth Properties Inc used to be know as GGP; after filing for bankruptcy protection back in April 2009 the stock has been relisted OTC as a pink under the new ticker GGWPQ.

If you read any of the discussion boards about this stock then you should already be familiar with the large group of lovers and haters of the stock. All I have been able to piece together from the message boards so far is that people who love this stock provide no evidence to suggest it should be valued higher and people who hate the stock just yammer on about the range that it has traded since filing for chapter 11.

After digging a little deeper, not that you need to dig much, you can find a few interesting facts.

• GGP has been in the shopping center business for over 50 years

• One of the Largest REITs in the USA

• Involved in buying, selling, developing, and managing real estate

Bankruptcy Restructuring

• To restructure finances and de-leverage balance sheet because collapse of credit markets made it impossible for GGP to refinance maturing debt.

• Bankruptcy Judge (Gropper) has been making beneficial decisions to allow GGWPQ to restructure providing lots of time to refinance the dept the way the company wants.

• Financial performance of the company has been very positive since filing for chapter 11.

I have been reading a number of blogs that post frequently about General Growth Properties Inc. including and  Both are well versed in the company’s affairs, but there just seems to be something missing that no one has really been discussing...

Alright, you caught me…I’m talking about potential takeovers whether hostile or voluntary. Who you might ask, would be interested in purchasing some of the best income producing properties the United States of America has to offer?

I’m sure a large list of companies and personal investors immediately pop into your head like they did mine. Let’s be somewhat realistic here and think of some real potential Takeover Tightens.

Potential buyers will all have a number of required attributes:

• Deep pockets! Cash is King after all

• Highly Informed about Commercial Real Estate

When you think of companies or individuals that possess these attributes think again and then remember this: Real Estate Prices have tanked, especially in the USA and there is potential for another major drop in commercial real estate on the horizon.

So who’s got the goods?

Look no further than some of the many Cash Flush REITs

According to CNN Money in June 2009 REITs have been raising cash to go on the offence to acquired distressed properties and distressed REITs are also targeted.

Some of the well know names that are on the office include the following:

Boston Properties (BXP), Regency Centers (REG), Simon Property Group (SPG), and Vornado Realty Trust (VNO).

David Simon, CEO of Simon Property Group, was even quoted in a recent CNN Money article stating that “One big opportunity the gang at Simon is keeping an eye on is the portfolio of General Growth Properties.”

American REITs are not the only ones on the offensive though. Look to some of the larger Canadian Players, who have experience a tempered downturn compared to American rivals, to make some major acquisitions in the coming months.

The most notable cash raising I can find is that of Brookfield Properties Corporation and Brookfield Asset Management Inc (a Canadian Group) who on August 20, 2009 announced a $4 Billion Real Estate Turnaround Consortium. Bling Bling, according to the article this Mountain of Cash is dedicated to investing in under-performing real estate with a minimum of $500 million to be allocated to global purchases and the remainder, $3.5 Billion, available for North American Purchases!

Look out General Growth Properties, the vultures are here and ready to scoop up some of your assets.

There are two scenarios I can see for General Growth, a fire sale of individual properties to the highest bidders, or a share buyout. I wouldn’t be at all surprised if a total buyout is on the way, but there will likely be more than one bidder so I buy today.  Bought at $2.82.

This is a high risk trade so only make the trade if you are willing to lose it all!

Tuesday, September 8, 2009

Best Canadian Credit Card Part 2

Now that you can see why a Dividend Dollar Credit Card provides the most benefit to a consumer it’s time to decide which Dividend Dollar Credit Card is Best in Canada. I will provide a brief list of the features of some popular cards and then highlight the dominant winner of best cash back credit card in Canada.
The following is a list of cards that I am familiar with and will now analyze: MBNA Premier Rewards, CIBC Dividend Card, Scotia Momentum Visa.

Many other bloggers have discussed these cards in the past. For example,  discussed the first 3 on the list plus a few more and provided a brief analysis.

MBNA PremierRewards Platinum Plus (Milliondollarjouney pick)

• 1% cash back on all purchases.

• No maximum rebate.

• Car Rental Insurance.

CIBC 1% Dividend Visa

• 0.25% cash back on annual purchases up to $1,500.

• 0.50% cash back on annual purchases from $1,500.01 to $3,000.

• 1% cash back for net annual purchases over $3,000.

• No maximum rebate.

Scotia Momentum Visa

• 2% Cash Back on all eligible purchases at gas stations, grocery stores, drug stores, recurring bill payments

• 1% Cash Back on all other eligible purchases

• $39 annual fee

Based on my Scenario, I spend around $30k / year on my credit card with 70% of that on everyday purchases and the remainder on everything else. This would equate to a cash back rebate of:

• MBNA PremierRewards: $300 (no maximum)

• CIBC Dividend $281.25

• Scotia Momentum Visa: 2% Cash = $420, 1% Cash =$90, Total $510

This looks like an overwhelming victory for the Scotia Momentum Visa Card even with the $39 annual fee. If you go to a Scotia Bank to sign up they are also likely to waive the 1st year’s fee.

Sunday, September 6, 2009

Best Canadian Credit Card: Personal Credit Card Preference

In the end, Credit Cards are one of two things for an individual consumer:

A) A Benefit

B) A Nightmare

There are 3 main companies offering Credit Cards in Canada: Visa Inc. (Public, NYSE:V), MasterCard Incorporated (Public, NYSE:MA), and American Express Company (Public, NYSE:AXP).  Each has benefits and costs; however, they are all competing fiercely and all offer similar plans.

For any consumer that pays their card off in full every month the card is definetly a Benefit. Even if you do not pay off the card in full every month, as long as you have a line of credit you can leverage to pay off that Credit Card then you be still consider the Card a Benefit.

If you answered “(A) Benefit “ to the above question than you have some great opportunities.  Do you want Airmiles, a low interest rate, Dividend Dollars, points towards purchase discounts at a particular store, etc. There are so many options, but which one is best and why?

If you think you know the answer to this question you might be surprised by what my answer is.  Anyone with even a basic understanding of Economics could likely predict what my answer is here and likely hold the same opinion.

My answer is based on answering this basic question: Which Credit Card Benefit provides an individual with the highest Utility?

Utility? I hope I didn’t just initiate flash backs to Econ 101 Nightmares.

Utility is basically the satisfaction derived from the consumption or use of a good or service.

What provides the highest Utility to an individual? Let me answer now and then provide an explanation: Cash in Hand!

Assumption 1: To keep things simple let’s assume that there are 3 possible credit card benefits offered: Airmiles, Points for discounts at a department store, Cash in Hand (Dividend Dollars).

Assumption 2: You currently consume can spend $100.  For example, $100 on airlines and $0 on Department stores or $0 on airlines and $100 on Department stores, or some mix of the two.

Assumption 3: Let’s make a lot sided assumption just to highlight the best benefit, If you use the Airmiles Card you get a $50 bounus in travel or if you use the Department Store Card you get $50 in purchases.

Let’s make a nice picture because economist appreciated drawings.

Nice Picture, but what the heck does that mean.
I1: You Budget Line.  This is the Total amount that you can afford to spend on Airlines and Department stores.  On the Y axis I have placed Airlines; assuming you spend all your $100 on Airlines and $0 on Department Stores.  The other connector for the Budget line is Department stores, here we assume we spent all $100 on Department Stores.  This is our budget line; anyting along this line represents a mix of spending on Airlines an Department Stores.
Now let's spice it up and see what happens when we get the Airmiles Credit Card
This is one confusing picture, but if you analyze step by step it's pretty clear.

1) Because we get the Airmiles Credit Card we now get a $50 bonus to use on Air Travel so our Budget Line (I1) rotates because we can now afford $150 in Air Travel or $100 still in Department Store purchases.  The new budget line is I2 and is shown in Blue.

2) We get a new higher Utility from useing the Airmiles Credit Card seen at U2 (in red)

3) If instead of getting $50 for Air Travel only we got $50 Cash to spend on what ever we want then our budget line would Shift instead or Rotate; the new budget line would then be I3 (the Brown line).  This is because we could now Buy a maximium of $150 in Airmiles or $150 in Department stores.

4) With the Cash you can see that we are better off because our Utility is at U3 (in red), which has a higher value than U2.
Let's see how this works if we get the Discount Store Credit Card instead:
1) Because we get the Department Store Credit Card we now get a $50 bonus to use on Department Store purchases so our Budget Line (I1) rotates because we can now afford $150 in Department Store purchases or $100 still in Airmiles purchases. The new budget line is I2 and is shown in Blue.

2) We get a new higher Utility from useing the Department Store Credit Card seen at U2 (in red)
3) If instead of getting $50 for Department Stores only we got $50 Cash to spend on what ever we want then our budget line would Shift instead or Rotate; the new budget line would then be I3 (the Brown line). This is because we could now Buy a maximium of $150 in Airmiles or $150 in Department stores.

4) With the Cash you can see that we are better off because our Utility is at U3 (in red), which has a higher value than U2.

This proves that the Dividend Credit Card is the best to use because it allows you to have the highest Utility since you can purchase more goods than without a credit card and it also provides a higher utility than the Airmiles or Department Store Credit Card since we can choose how much of each good to consume.

The next step would be to do this anlysis with slight differences in the amount of benefits made available with each card.  If the Airmiles of Department Store credit cards provided more of a benefit for the same amount of purchases then the Dividend Credit Card than you may have an alternate out come.

For me, I have used a number of different credit cards over the years including a number of divident cards.  I have finally settled on the new Scotia Bank Momentum card because you get 2% cash back on everyday purchases and 1% cash back on everything else.  These dividend dollars add up very quickly. 

My previous Credit Card only paid 1% dividends and had a step function.  For the first $5,000 you would get 0.25% and the next $2,000 at 0.5% and then fianlly above that amount I would get 1%.

My new card dosn't have a step function so it's 2% from the beginning.

I hope this article helps you find the best credit card for you.

Thursday, September 3, 2009

Investing in Uranium: World’s Second Largest Uranium Producer Cameco is Heating Up

Cameco (CCO.TO) was blasted thru the recession just like so many of the resource related stocks in Canada. The stock hit a high back in 2007 during the last uranium bull market of nearly $60 a share and has since dropped to a low of $14.33 during the last down leg of the recession and now currently rests around $29.

All you hear about in the news these days is Oil This and Gold That, Real Estate This and Financials That. Who remembers the great demand for Uranium by China and other rapidly growing economies around the world?

August 12, 2009 - Cameco Says Utilities in China Stockpiling Uranium. There are 13 new nuclear reactors under construction in China and they have been buying an astonishing amount of the nuclear-reactor fuel on the spot market this year. Further, they will need to keep this demand rolling forward like a freight train to keep powering the new power plants for that hungry economy.

This demand has caught Cameco execs all starry eyed as they Completed a bought deal for $500 million worth of senior notes with a rate of 5.67%. Don’t think this cash is just for the sake of cash. This company is hopping and will be expanding with the new funds.

Only 3 weeks ago Thomson Reuters rated Cameco (CCO) a 6 out of 10 based on 18 analysts expectations for the company. Now the rating has jumped to a wopping 9 out of 10 and it seems like the Uranium train has left the stop crossing $60. Currently the lowest price target set by one of the 18 analysts is $26, not bad if the stock now hovers just below $29.

If you look to a Google finance chart you will see the medium term trend has been broken to the down side, but don’t be fooled. The hammer is not down yet on this stock; the long term up trend is still holding and it looks like a great opportunity to jump in before the rest of the crowd realizes China craves Uranium like the US craves Gold. If you think Gold is your hedge to inflation and the recession think again; why not give Uranium a try.  I'm mean it's not like we have a DeLorean flux capacitor with adaptor to extract the protrons from garbage or do we Marty?

Tuesday, September 1, 2009

Top Canadian Oil Investments for the Long Term

Top 6 Oil and Gas Investments in Canada

   The best way to invest in the oil sands of Alberta is to buy one of the many Canadian Oil Sands companies. There are so many oil and gas companies to choose from, so an investor needs to find a way to distinguish the stars from the dogs.

   Unless you have exceptionally deep pockets like PetroChina you are not going to be able to limit your risk in the oil sands by simply throwing money at it. For example, on August 31, 2009 PetroChina spent $1.9 billion to acquire a working interest in two of Athabasca Oil Sands Corp’s projects.

   The Oilsands are extremely capital intensive long term projects and are difficult to finance, especially with the restrictive amount of capital currently available in the stock market and bonds market. So, given that I currently have a portfolio size somewhere within the range of Joe Bum and Warren Buffet I will be focused on safety first and Black Gold Home Runs second.

   Before provide the top 6 oil and gas investments that I would consider personally, here is a list of 49 oil and gas related investments traded in Canada:

Addax Petroleum - [AXC.TO]
Alter NRG - [NRG.TO]
ARC Energy Trust - [AET-UN.TO]
Bankers Petroleum Ltd. - [BNK.TO]
Baytex Energy Trust - [BTE.TO-UN]
Birchcliff Energy Ltd - [BIR.TO]
Black Diamond Income Fund - [BDI-UN.TO]
Bonavista Energy Trust - [BNP-UN.TO]
Breaker Energy - [WAV.V]
Calfrac Well Services - [CFW.TO]
Canadian Natural Resources Ltd - [CNQ]
Canadian Oil Sands Trust - [COS-UN.TO]
Cinch Energy Corp - [CNH.V]
Cirrus Energy - [CYR.V]
Compton Petroleum - [CMT.TO]
Connacher Oil and Gas - [CLL.TO]
Cresent Point Energy - [CPG.TO]
Crew Energy Inc. - [CR.TO]
Crocotta Energy Inc. - [CTA.TO]
Daylight Resources Trust - [DAY-UN.TO]
Ember Resources Inc - [EBR.TO]
EnCana Corporation - [ECA.TO]
Enerplus Resources Fund - [ERF.TO]
Ensign Energy Services - [ESI.TO]
Essential Energy Services Trust - [ESN-UN.TO]
Fairborne Energy Inc. - [FEL.TO]
Harvest Energy Trust - [HTE.TO-UN]
Ivanhoe Energy Inc - [IE.TO]
Mullen Group Ltd. - [MTL.TO]
NAL Oil & Gas Trust - [NAE-UN.TO]
Nexen Energy - [NXY.TO]
Niko Resources Ltd. - [NKO.TO]
North Peace Energy Inc - [NPE.V]
Open Range Energy - [ONR.TO]
OPTI Canada - [OPC.TO]
Orleans Energy - [OEX.TO]
Pacific Rubiales Energy Corp. - [PRE.TO]
Paramount Energy Trust - [PMT-UN.TO]
Penn West Energy Trust - [PWT.TO-UN]
Petro Andina Resources - [PAR.TO]
Petro Bank Energy and Resources [PBG]
Petrobank Energy and Resources Ltd. - [PBG.TO]
Petrolifera Petroleum Ltd. - [PDP.TO]
Petrominerales Ltd. - [PMG.TO]
Progress Energy Resources Corp. - [PRQ.TO]
Savanna Energy Services - [SVY.TO]
Stoneham Drilling Trust - [SDG-UN.TO]
Suncor Energy Inc. - [SU.TO]
Talisman Energy Inc. - [TLM.TO]

   From this list my top 6 Oil and Gas Investments in Canada are the following:

1. Black Diamond Income Fund – [BDI-UN.TO]

2. Connacher Oil and Gas – [CLL.TO]

3. EnCana Corporation – [ECA.TO]

4. Paramount Energy Trust – [PMT-UN.TO]

5. Petro Andina Resources – [PAR.TO]

6. Talisman Energy Inc. – [TLM.TO]

   While the recession may be coming to an end according to the Bank of Canada, there is still likely to be a lot of volatility in the stock market. If you do consider investing in one of these companies do not do so blindly. Do some research! I usually at least take a look at news updates in Google finance, skim through a few analysts updates, and plot the long term, medium term and short term trend lines to get an idea of where I may want to enter and exit in the future.