SharperDingaan

Just to throw out a different approach ;) Contribute the first dollars to the RESP limit, then every other $ to your mortgage as additional principal repayment. Every 20K or so, increase the mortgage, buy a Sched-A bank in the kids accounts, margin to 50%, and repay 10K of mortgage. Repeat every 3-4 years or so. There's little risk to holding a Sched-A bank, dividends typically increase over time (raising CF and value), it is tax efficient, and CF will more than cover interest. Your mortgage will also be paid off years early, leaving free CF just as the kids are going to school. After the kids graduate, remortgage to the amount received over the years, and contribute the cash to their RRSP. Which they can then re-lend to themselves as a discretionary repayment zero-interest mortgage (ie: down payment equity). Different value-add. SD

China is just trying to put its best face forward. But like lipstick on a pig - it looks way better from far away, than it does up close. Comes Monday the quarantine period is supposedly up for the 33M+ quarantined over Luna New Year. Yet ... https://ca.reuters.com/article/topNews/idCAKBN2020SN "China’s cabinet said on Sunday it would coordinate with transport authorities to ensure the smooth return to work of employees in key industries such as food and medicines. The State Council’s special coronavirus group also said workers should return in “batches”, rather than all at once, in order to reduce infection risks." "Authorities had told businesses to tack up to 10 extra days on to holidays that had been due to finish at the end of January and some restrictions continued. We all know we can’t purchase masks anywhere, why are we still going back to work?” said a second. "Hebei province, which surrounds Beijing, will keep schools shut until March 1, the People’s Daily newspaper said. Several provinces have shut schools until the end of February." Universities are doing something similar. To most people, it would appear that the mass quarantine is being extended until the end of february. The short supply of masks also very likely being rationed to just those returning batches of workers in food and medicines (or essential services), as added incentive to return to work. Most would also recognize that these are essentially war-time measures, and that they would not have been implemented were the fallout not serious. To China's credit it is a one-party state, and the party has acted both rapidly, effectively, and forcefully. This level of intervention, and message control, could not have been executed as rapidly in a Western democracy. Ultimately, the final body count may well be a lot lower than it otherwise might have been, because the epi-center was in China. Credit, where it is due. SD

The Shanghai market opens on monday, after being closed six business days for Chinese New Year. Since the exchange closed on Jan-23, the viral impact on China has materially worsened. Friday last week; the S&P fell 2%, and the Dow 600 points, on fears of contagion. Wuhan is where things get made in China. Inventories were deliberately elevated going into New Year, they aren't any more; and a great many workers will still be under 'quarantine' for about another week. Universities have begun shutting down the last half of their Winter semesters, in favour of resuming over the Spring/Summer. Container shipping time from Wuhan to the US West Coast is about 6-10 weeks from factory gate to inland warehouse - net of rail, trans-shipping, and customs clearing. Starting in April, today's 'quarantine' impacts in Wuhan, show up in the US. Offshore 'outsourcing' is already being affected. SD

You might want to keep in mind that location and investment horizon matters. If you're US based, and just trading, it's hard to see past the pending shale BKs, falling nat gas prices, and the various reporting 'spins'. To you, the whole industry is sh1te, and getting worse - because you're trading headlines, not fundamentals. And you do so as you've no intent in holding long enough for changing fundamentals to matter. Nothing wrong in that. But you're the gambler in the casino, and addicted to 'the trade'. Not a good combination. SD

3 main drivers ... 1) We're in a great depression, and have been for the last decade. The only reason we don't see dust-bowls is because of continuous QE, and ongoing TBTF bailouts. 2) We're aging, we don't buy as much anymore, and we increasingly buy experience vs stuff. Less demand, and more of it on things we don't make. 3) AI/automation/robotics. When we don't hire labor, how are they supposed to buy anything, or service their debt? When everyone has capital, capital is worth squat, and interest rates (cost of capital) go to zero. When nobody has labor, labor should be worth a lot. Except when nobody needs labor, because we're using automation instead. Just a different POV SD

You're hired to get the work done, and it comes down to you the worker, to manage your own productivity and 'brand'. A foreign concept to many of the middle-aged and older; but as basic as breathing to a millennial or younger. On those days you need an isolation box to get the work done, stay at home. On those days when it is less critical, go to the office and both work and socialize (with or without headphones). Face time and socialization, is both part of your brand, and your 'future' insurance. When the cuts come, the first guy/gal we fire is the one we don't see very often - as few will notice. It's only old people who whine about the commute (time, cost, etc.), young people just do. No car, take the much cheaper and greener bus instead. Max 1 hour transit time to a community hive versus the downtown 'office', and cheaper street eats. Minimal investment in office attire; and travel to the 'office' as a typically once/week investment in face-time and socialization (ie: dress down Friday). Much easier to weave in kids/school demands, and just much smarter overall. Office layout is much less a physical thing, and much more a generational gap. Old 'geezers' insisting on 'tweaks' to yesterdays office design, who just don't get it. Obviously we don't wrap today's fish and chips, in yesterdays chip paper; but apparently some folks didn't get the message. SD

Office layout follows the 80/20 rule; 80% of your staff really don't need a permanent office, only 20% do. There are very practical reasons why the C suite doesn't work in an open space, or an open conference room. We also don't have 'one' office in a major city, we have many; that 80% of staff work from home &/or shared 'hives' in their local neighbourhood, not one central location. Staff turns over quickly, they are hungry for experience, and there's constant fresh blood hired at the lower end of the payscale. You're not there for a career, you're there for the gig - both you, AND the company. Obviously, there's an opportunity cost to this - the HR side of the business; but it's not an accounting cost, and therefore does not show up on the P&L. We may have mocked WeWork, but their office space was going into shared 'hives', and they were SUCCESSFULLY renting a lot of it out. Derision doesn't trump results. SD

Some things to keep in mind: This is China. Asian culture. We may think it out of place in this situation, but 'face saving' will be a material factor. Building a 1,000 bed hospital in a week, really means a big cluster of multiple tents and MASH units, in one place. Behind closed tent, isolation wards and morgues in one big city. Where are the rest of them? and where are the pictures of the 'cured' people walking out of them? Canceling new year, clamping down on chunyun, quaranteing 30M people in major cities, is not a minor response. It is what was typically done in Europe, during plague and cholera outbreaks. Medicine, and our response to outbreaks is a lot better today, but there are still a lot of bodies. Limits ability to contain panic. A published, and fully decoded viral gene sequence within days is unusual. Could be just serendipity and hard work, but it could also be something already known, that escaped a lab somewhere. We will never know, but assume the worst. The Asian Development Bank looked at the economic impact of SARS in a number of East and Southeast Asian economies, and explored the short-term economic impact of SARS as well as the channels through which the Impact of SARS was felt. Page 2 of the report; The impact of SARS critically depends on (i) the seriousness of SARS, (ii) the duration of SARS, and (iii) the structure of an economy, particularly the importance of service industries in GDP. https://www.adb.org/publications/sars-economic-impacts-and-implications In 2020, we are probably looking at LESS of an economic impact. Nervousness spread by internet, just makes it look scarier. Yet according to some markets ... the Chinese economy is about to fall apart because of this? Opportunity is knocking? SD

Margin is just a tool. The result depends on how good/bad the workman is. When we use it, we're typically doing something similar to LC. Temporarily mortgaging in pounds sterling and reinvesting in CAD, in anticipation of a pound sterling devaluation. Temporarily stumping up to cover a short sale, prior to covering the short with a convertible debenture. SD

You might want to re-familiarise yourself with how the Greek Government Debt Crisis was resolved. The EU already has a template, and Italy is little different to Greece. https://en.wikipedia.org/wiki/Greek_government-debt_crisis Like it or not, the EU experiment is breaking up. The UK exit will be followed by others, and there is little the EU can do beyond jawbone loudly. Re outstanding debt, all a sovereign need do is declare a debt moratorium, and announce the new repayment terms. Iceland and Greece are just the more recent examples. SD

Your train station example evidences that even Detroit recognizes that the future is electric, not ICE. And the Jefferson plant evidences what you do over transition. Build huge & new; then transfer work from all the less efficient, higher cost and smaller plants, to pay for it. OK for maintaining profit, not so hot for the laid off workforce. SD

Vehicle manufacturing, and workforce re-training. What we are starting to see in vehicle making, resembles what occurred when cars displaced the horse and buggy; today's auto-manufacturer being yesterday's buggy maker. Bet against NA auto, and its ability to adapt rapidly enough. An electric vs an ICE vehicle requires materially fewer parts, and they are easily replaceable modules; you don't fix, you swap out the module. What do you think happens when 40-50% of the NA vehicle-making workforce becomes obsolete? And do you really think that today's GM or Ford will look anything like it might look like, under an 'all electric' line-up? - even if a GM or Ford still exist? Workforce retraining becomes a growth opportunity. SD

I noticed the same thing. It shows how people are starting think about it, even though it obviously has no value because it isn't printed on green paper with pictures of good (i.e. dead) politicians on it. It’s gold for millennials. It’s also a solution if you need to launder money, live in Country with Capital controls and a crappy currency (which typically go hand in hand) and want to transfer you wealth. It might have its limitations, but if you need to move money under the nose from a government, than its the way to go. It's just hype. The price change is not unusual, and just happened to coincide with the ME news this time around. Hard to make the case that ME tension was the cause. SD

Given that you're a value investor - and cheaper than sin! Might I recommend a humble bicycle ..... with a detachable motor on the back, for the hills !! Buy vintage, buy quality, and it could well even appreciate over time. No gas or insurance, maintenance is already paid for. And all that exercise is going to ensure that you live a lot longer - and cashing many more pension cheques. ... making the whole thing a positive cash flow, positive NPV choice ;D SD

Merry Xmas, and the best of the season to all. SD

PPP is a long term measure, and ASSUMES no further changes. Brexit is a continuous application with extreme change. A more practical independent measure is the 'Big Mac' Index, which is often closer to current FX values. https://www.bigmacindexconverter.com/ Plug in the numbers for GBP and Euro. GBP is at a premium to the Euro of ((100/91.26)-1)x100, or 9.6% About the same as the current GBP/Euro FX rate. SD

One month after Brexit, would you expect GBP to continue trading at a premium to the Euro?, as it does now, Or is it more likely that GBP trades at a discount to the Euro? - to promote badly needed trade, and the jobs that go with them. The current premium is approximately 9%. If it swings to an equal but opposite discount, it implies an 18% devaluation in GBP Devaluations typically occur over time, the populace often doesn't realize the significance, and 18% is relatively mild. If you have the ability, they should be taken advantage of. About once/decade the CAD/US FX rate becomes < 1.0000, versus the more 'normal' 1.3200 -1.3500 range; routine periodic trade based appreciation/devaluation of roughly 32-35%. Just a different POV. SD

You might want to temporarily just sell the GBP, for US/CAD - and have the currency sent out of the UK. Park the proceeds in US/CAD treasuries, Canada's, GIC's, etc for a year. On maturity, convert back into GBP - and send the currency back into the UK. The expectation being that Brexit devalues GBP, and that the disruption lowers the market values of most UK companies. You get more GBP upon repatriation, and the opportunity to buy the targets for less. And while you are waiting, the funds are not at risk in the UK - and not temporarily subject to any kind of capital control. SD

https://possector.com/management/restaurant-failure https://possector.com/management/restaurant-failure "Watch the video to hear the hosts of “Restaurant Startup” discuss why restaurants fail." If someone suggested a 'buy and hold' investment to you that could make a lot of money, but which also might well result in a capital wipe-out within a 3 year holding period, they would be scoffed at. An example being OBE ... ;) But 'package' that same risk of capital loss as 'owning a restaurant' - and suddenly it's a great idea! There is nothing wrong in taking a risk - but be very clear on if/how you are going to mitigate that risk, and whether the expected return is ultimately worth the effort. One can swing-trade a stock; with the objectives of either recovering capital, or averaging down the cost base. Sometimes it works, sometimes not so much, but you have the ability. Don't have that with a restaurant. Every publicly listed equity comes with a professional board of directors and management, that know their business. You may think them idiots, but they are paid to 'run' the business, and they do it professionally all day, every day of the week - so that you don't have to. You can own the business, and at the same time - make as much as you wish, someplace else. Can't do that with a restaurant. Just a different POV. SD

You might want to consider a different approach. In all these businesses, YOU'RE the guy who does everything. You absorb all the business risk, contract out as needs be, and make all the decisions. The reality of course is that you do NOT 'know' everything, and cannot be everywhere, ALL the time. When do you go on vacation? what happens when you're sick? how are you handling the 'control' thing? Most of us will bring specific skill-sets to the application (time, expertise, IT, $, etc.) but know little about the 'nuts and bolts' of actually running the business in question. We all 'know' they we can run a restaurant/hire the right guy, buy/rent/sell real-estate; yet the business statistics tell us otherwise. So DON'T try to do everything. Who's makes most of the return in RE?, and when? I would suggest that on a risk-adjusted basis, over the short-medium term it is the broker - taking a cut, up front, on every buy/sell. So if the rental business is your game, why are you NOT the RE agent on your OWN transactions? If your contribution is just equity - would you not be better off syndicating with a broker who 'buys what he cant sell'; & being in the house flipping business, with a team of related contractors; that don't get paid unless the upgraded house resells for a profit? Long time ago I used to do rolling 5-month partnerships with local cheese vendors in Toronto's prominent 'foodie' markets. Inject '70K' into the purchase and import of specialty cheese for sale over the christmas period, through 2-3 market vendors. At the end of the period; get your capital back + borrow costs + 1/3 of the collective profit. Never lost a dime, made a great many friends, and the total profit was almost always material. Typically, we collectively just donated it to our local sick kids hospital. Point is, do what you do best - and do not try to do everything. It's often a lot happier experience. SD

Agreed, re the Scottish Nationals, but it's early days yet - and not a lot dissimilar to our own Quebec. Until the Brexit details are settled, they can make a lot of noise with little threat of actually having to deliver - so assume they will. Per the investment POV; headline driven and persistent downward pressure on the pound. Opportunity. SD

Most would expect a Scottish referendum at some point, that results in something similar to Northern Ireland (EU) and the Republic of Ireland (Non EU). Re Northern Ireland, the EU 'divorce' already has a negotiated 'back-stop' arrangement, and this would just be an addition. Given that Scotland is already in the EU, the scots have to either leave voluntarily or get kicked out. The EU also has to front the costs of the required new 'borders' and customs apparatus (new money's), and the scotland/england border has always been notoriously 'porous'. Trust the scots to recognize an opportunity when they see it ;) SD

There's a difference between the night after the election - and a month after the election. It will take a while to execute hedge strategies - especially over Xmas. The nature of the win will emerge over the next few weeks, but to us - it looks pretty good. An obvious EU trade solution is Scotland/Ireland remaining in the EU, and the rest of England leaving. Most EU/England trade 'arbitrage' (& benefits thereof) taking place on UK soil, and the 'UK' retaining Scotland, Ireland, Wales, and England in a version of federalism. Edinburgh and Aberdeen rising in prominence, at the expense of London. They've made a big decision, good on them Now it is the time to grab the bull by the horns, and push the opportunities. SD

Are you sure that you've captured all the damages the world would suffer if temperatures rose, say 3 degrees Celsius? Or are even in the ballpark? Doesn't include the cost of flood protecting some of the worlds major cities. Screws up the numbers too much ;) Miami, New Orleans, New York, Boston, Mumbai, Guangzhao, Shenzhen https://www.thoughtco.com/global-warming-most-vulnerable-cities-1203883 Venice is already sunk .. so not on the list! SD

The reality is that the climate is slowly warming. Why, really doesn't matter; it is the consequences that do, and who it occurs to. Damage in rich areas gets the grease ... damage in poor areas, is just nature doing her thing. Is climate change enough of a disrupter, and now far enough along (tipping point) - that it has become investable? Most would say yes - look at each industry, determine the winning/losing directions, and invest accordingly. Arguably, it is the opportunity of the century - IF you can accommodate CHANGE. And there's the rub. Work in the Tar Sands, and you have to explain to your young kids every day - 'why you are killing the environment'. A difficult, and very resented conversation; that most often cannot be answered satisfactorily. The solution of course - is to COLLECTIVELY change the framing. And that is why your mom/dad are working very hard everyday, to change that - and make Tar Sands one of the cleanest energy sources in the world, that children everywhere can enjoy. That means we don't create garbage, we recycle and reuse, etc, etc. It is the things done to CHANGE THE COLLECTIVE FRAMING that are 'investable'. Nothing 'profound' here .. but it means that going forward, we're not doing things the same old way anymore. And isn't 'resistance to change' what the climate change debate is really about? SD