One last tax question — I promise

I live with my girlfriend. After as little as six months in some jurisdictions, that makes us common-law spouses in the eyes of the law. I'm already covered under her company's generous benefits plan, but for my own purposes at the moment, I'm trying to get a clearer picture of the tax implications of our arrangement.

I've been under the impression that marriage (or at least, common-law living) had its fair share of financial advantages. We're a long way away from things like spousal RRSPs, but there's a part of the Ontario tax credits section which allows for pooled income. I'm no tax expert - that much should be obvious by now - but I think, since we've decided to file as common-law this year, that it's going to end up costing us (me, at least) money.

Essentially, what seems to have happened is that instead of being taxed as one low-income earner (me, as I was a student for part of last year) and one middle-income earner (her) we're taxed as a single middle-income unit. It makes no difference on her return, but on mine, it seems as though I'm punished for having a well-off "spouse" to the tune of a rebate that's $200 less.

Does that seem plausible? I've always laboured under the assumption that the governement "wants" you to get hitched, buy a house, fill it with stuff and buy insurance to protect it. But unless I've crunched the numbers wrong, it seems I'm going to get back $200 less than I'd otherwise be entitled to because I' decided to shack up with a woman who makes more than me.

If that's the case, would it be "illegal" for us to file as individuals? Something doesn't add up here.

Two things

On the subject of this week's news that an analyst has slapped a "sell" rating on Dell computers for the first time in a decade, two things strike me.

Number 1, kudos to Citigroup analyst Richard Gardner. People say main street investors act like lemmings, but having monitored the buy and sell ratings from investment houses, I sometimes think it's the analysts who have the herd mentality. The cynic in me says it's their job, essentially, to encourage people to buy shares. Sometimes, I suspect that impulse trumps a lot of the fundamental analysis. At the end of the day, the amount of flak an analyst might take for taking a contrarian view on a stock just isn't worth the hassle to them. I have no idea if what Gardner is saying is correct. But I respect him for not drinking the corporate Kool-Aid and going against the flow. He's backed up his opinion with honest research, so right or wrong, I can admire his efforts.

Secondly, if this does pan out, and Dell shares drop to the low $20s, I for one would consider buying in. It's a market leader, an established company, it's got modest earnings growth and decent cash flow. I'd have to dig a little deeper into the numbers before taking the plunge, but on the surface, at $20 Dell sounds like a solid prospect for a budding value investor.

Net worth

I'm excited to report that I've been given a lucrative job offer, which I'm going to take. It's a short-term contract (aren't they all?) but it means I won't have to move away, for the time being. Since I'll be staying where I am now at least until September and the money's good, my frugal lifestyle should make my expenses stay pretty low, so I really want to start rocket-powering my net worth. I want to build an umbrella for when it starts to rain. And in my industry - print journalism - when it rains it pours.

I haven't completely crunched the numbers just yet, but I suspect that my net worth at the moment is something around $11K or $12K. The summer is coming, fun times with friends will be had, but I'm determined not to blow all my money. So my goal (and I want you guys to hold me to it, come September) is to have $20,000 saved or invested by the end of September, 2006.

In personal finance as in life, I've found the best way to get where you want to be is to take baby steps in the right direction, not giant leaps to the finish line. So while you're holding me to account, set yourselves some goals as well, and try to take positive steps in your life this summer. You don't have to swing for the fences. A couple of singles one after the other will do.

$20K. $8,000 saved in four months. That's peanuts to some people, but I'll be impressed if I can get there. Heck, I'll probably be impressed with myself if I can even get halfway there.

"Dr. Flowlove" or "How I learned to stop caring about EPS and love the cash"

Ask most journalists, and they will tell you that what they like most about their jobs is that they get paid to talk to interesting people all day long. On that front, I'm certainly no exception. I didn't get into journalism with any woolly-headed notions of being a "writer" — my dream job was basically having somebody pay me to read different newspapers all day long, and I figured working for one of them would be the closest thing to that.

Mirroring my own interests, my journalism jobs thus far have run the gamut of diversity — I've done everything from news and editorial to sports and business. It's my work in the business press, however, that makes me privy to some truly fascinating people who can not only help me professionally, but give me some insights into the world of investing also.

Case in point? Jay Taparia. I recently had the privilege to attend a CFA Institute sponsored seminar led by Mr. Taparia. The lecture's aim was to be a sort of crash course in financial accounting for journalists, walking us through some of the more common accounting malapropisms that unscrupulous companies try to put in their quarterly reports, so that we can catch them in the act and unearth the next Enron before it happens.

I'd guess that a good 80% of the general population is woefully uneducated about finance, and I'm loath to admit it, but I doubt that members of the financial press fare too much better. Crappy companies depend on the fact that most deadlined-frenzied reporters couldn't define amortization if their lives depend on it, and the herd mentality dictates that all too often we get caught up in blindly reporting whatever the company's press release deems the "most important" number to be.

It shouldn't be that way, and according to Mr. Taparia, it doesn't have to be. While his seminar is already paying off in my day-to-day work of sussing out corporate bullshit, from a personal investing standpoint Mr. Taparia proved similarly invaluable.

I won't bore you with the details, but the Taparia mantra, in a nutshell, goes as follows: Cash flow is king.

Net income is the easiest trap to fall into, Taparia says, and small investors' obsession with charting earnings-per-share is foolish, because earnings are one of the easiest numbers to manipulate. Though a lot of the specifics are rather obtuse to synthesize, Taparia's main point is that in his role as a money manager he disregards conventional matrices like revenue and net income because they are too easy to muddle.

How? You can sell merchandise on credit and book it as revenue before you see a dime. You can pay suppliers on credit to avoid having to list it as an expense. You can hide inventory (he relates the anecdote of a well-known bottling company that famously used to load up trucks with merchandise on December 31 every year in order to hide inventory and beat estimates by a penny) in any number of ways, and you can hide long-term debt levels by eschewing property mortgages in favour of much more costly, yet balance-sheet friendly, leases. And at the end of the day, you post a scintillating net income, and watch your stock tick up accordingly.

But cash flow - literally, how much cash is coming in and out of the business at any given time - paints a much clearer picture of how solid the company's financial ground is. There's obviously much more to it than that, and all investors should of course do their due diligence before even thinking of buying a stock. But from where I'm sitting, cash flow is one factor that just got bumped to the top of my list.

Oil ETF

Interesting news for all ETF investors and those who believe that oil prices still have a ways to go.

The American Stock Exchange launched the first ETF that tracks the price of U.S. oil yesterday. Under the ticker symbol USO, the fund will track the price of U.S. oil futures.

After its first day of trading, the fund closed at $68.02 — or a little more than $2 off the record high of US$70.85 that barrels of oil hit after Katrina last year.

An etf that opens at a few dollars below the all-time high of the asset it tracks? Considering these things are supposed to be long-term investments, I'm not convinced.

Car trouble

Given the chronic-temporary-employment nature of my chosen profession, I'm preparing for yet another move, as I've been offered a job in a different city from May until September. While the money is good, after bouncing around so much already in my short career, I've learned that the peripheral costs of moving to different cities can quickly add up.

My next locale is close enough that its only a few hours' drive to get back home, so I plan on doing that every other weekend. I've crunched the numbers, and have roughly calculated that it'll be cheaper for me to rent a bare-bones car than it is to go by Greyhound bus or Via rail. (A friend of mine who works at Enterprise Rent-a-Car has graciously offered to find me deals on compact cars, which I'm going to take him up on — despite his employer's legendary failures in the customer relations milieu)

As much as I'm dreading it, renting cars a dozen times over the next few months will give me the chance to test out a money-saving theory I've always had. The rare times I've rented cars in the past, I always signed up for the $25 insurance, just to be safe. But reading the fine print on my RBC Visa Platinum Avion card I'm thinking maybe I've been wasting my money:

For coverage to be in effect, You must:
1. Use Your RBC Royal Bank Visa Platinum Avion card to pay for the entire rental from a Rental Agency;
2. Decline the Rental Agency's Collision Damage Waiver option or similar coverage offered by the Rental Agency on the rental
contract. If there is no space on the vehicle rental contract for You to indicate that You have declined the
coverage, then indicate in writing on the contract “I decline CDW provided by this merchant”

The policy specifically goes on to say that panel and cube vans are not covered by the policy, nor does it include third party liability or personal injury insurance. Every time I've asked anyone at rental agencies if I'm covered by my credit card, they always told me I'm not. But it's an industry which is notorious for their high-pressure, commission-based wage structures. At the very least, it seems as though fender-benders to the car itself would be covered. But if I got into any serious accidents where the car is totaled and or people are injured, I could be up the proverbial creek without a paddle.

Can anyone shed light on this? Should I keep buying the rental car insurance or am I just flushing money down the drain?

Too rich for my blood

Every day, a new record high for the TSX. Revenues at oil and mining companies seem to slow a little, but soon enough, business continues to boom. Even the alleged "no-brainers" (Canadian bank stocks) have P/E ratios much higher than those in the US, Japan and Europe...

Is it me, or is the TSX looking a little overvalued right now?

What's a budding value investor to do?