You know you're in trouble when those guys are the voice of reason.

Under the latest measures, developers are required to charge down payments of at least 30 percent, up from the previous minimum of 20 percent, according to the announcement.

Finally! A sensible policy to cool the heated housing market a little, coming from the mouth of a government official.

Too bad it's not anybody at the CMHC, but rather a member of the Chinese cabinet speaking.

My tongue is firmly in my cheek on this one, but I offer it up to elicit a chuckle out of anyone my age who's wondering how they're ever supposed to afford a house in this market.

Pop quiz: who's the biggest credit card company?

It's rare that I'm shocked by anything in the newspaper these days, but I really was struck dumb by something I read in a sidebar in one of the stories on Mastercard's recent IPO.

I'd always laboured under the impression that there wasn't really much of a difference between any of the major credit card companies. I sort of assumed that Visa, Mastercard and American Express trucked along in a blissful oligopoly with each other, never really cannibalizing each other's business.

But this sidebar, which was picked up in most of the dailies, suggests they're not even in the same league as each other. It seems that Amex is far and away the biggest player, with more than $25-billion in revenues last year. Mastercard's 10-K filing shows the company only had a piddling $2.9-billion worth of revenueslast year. And Visa? Don't make me laugh. It's a private company, but reuters claims they only made a little over $1-billion last year. And their other numbers were right on, so I have no reason to doubt this one.

I find that amazing.

Would you have guessed that Amex is more that 25 times bigger than Visa? Because I certainly wouldn't have.

You wouldn't think the world would hinge on a .25% change in either direction...

It was hard not to notice today's news that the Bank of Canada has hiked interest rates yet again, to 4.25%, but seems to be leaning towards slowing the frequency of hikes for the next little while.

The rates themselves, I can just about get my noggin around. It's what their effect on things like employment, inflation, and (by extension) the stock market is that's a little more muddled.

As far as I can tell, the basic rule is that when rates go up, it encourages people to save to take advantage of the low rates. It also means people are less willing to spend money they don't have on consumer goods and big ticket items. That slows inflation because less money is available in the national pool, which makes every dollar worth more. So, in a nutshell if rates are up, inflation goes down.

I suspect that the people who fret the most about rising rates are the ones who probably couldn't afford to buy that house/car/vacation to begin with, but were sucked in by the low lending rates, and are now worried about having to pay the piper. And as a general rule, high rates are great if you've got money, but not so hot if you owe large quantities of it.

Since I have no major long term debt and some cash in savings, my simplistic analysis suggests that the higher interest rates go, the better it is for me. But as with most things like this, I doubt it's that simple. Yet another hit to the manufacturing sector can't be good for the stock market, but if the rate hike makes it harder to keep up mortgage payments, maybe starter home prices will come down so I can jump in.

As usual when I sit down to write one of these posts, my head hurts.

Now that you mention it

I noticed it myself, at first, but didn't think there was anything fishy going on. So I bit my tongue and assumed the wrong would be righted shortly. But now that people like The Market Guy and the Toronto Star's Ellen Roseman have both brought it up, I can keep quiet no longer.

What gives, ING? When I opened my account, I love the simplistic philosophy of a basic, fluid, high-interest savings account. But the savings rate ING offers is stagnating at 3% in a time when the central bank has raised its rates about a half a dozen times in the past year or so. Heck, even some of those big, bad, mainstream banks are offering rates that compete with ING.

What's all the more galling is that ING appears to have the hammer down when it comes to raising lending rates, as mortgage rates have inched higher at the same time as the savings rate stagnates.

The jig is up, ING. Get with the program and reclaim your throne as the bank with the best rates. And I'll go back to telling my friends how great you are.

Excel(lent) post

It should be painfully obvious at this point that I'm no numbers whiz. Which is why I love programs like Microsoft Excel, because it enables me to actually track how my investments are doing without having my head explode.

I know my way around the program, but I'm eternally grateful to The Dividend Guy for this link where he provides a handy formula for precisely calculating what the future value of your investments might be if you stay on your current track - provided you can hit your performance assumptions, that is.

UPDATE: I had originally credited Canadian Capitalist for the above, before CC graciously pointed out I had mis-linked to a Dividend Guy post. Apologies all round. Don't let the fact that I read them both (and am apparently inept) take away from the fact that they're both great. :)

In theory...

When it comes to actively managed mutual funds, I'm a little like that emotionally crippled girl you broke up with in college: don't tell me to trust you, and don't you dare tell me it's all going to be OK, because I've been down that road before and I got burned. Burned bad.

As such, I've developed something of an [un]healthy hatred for management fees and expenses being skimmed off the top of my investments. I mean, I don't really need to pay somebody else to lose money for me - I can do that quite easily myself. That predilection for lower fees goes a long way towards explaining my man-crush for ETF's. Ever since I found out about the little beauties, I've been a fan of them not only as a way to easily diversify, but limit my expenses along the way.

Since a few people in my life have gotten the mistaken impression that I somehow know what I'm doing with money, they've started to come to me for advice, and when they do, I generally stick with the tried-and-true "buy low, sell high" or some such platitude.

Still, if they keep me talking, it doesn't take much before I inevitably start extolling the virtues of ETFs. My girlfriend and my sister are two people I often find myself having investing-related conversations with, as both of them have company-sponsored mutual funds through their work, and neither of them has the faintest idea about what they're invested in.

While I love ETFs in general, it's really hard to extol the virtues of how they pay off over the long run when the mutual funds those two have accidentally invested in keep setting the world on fire. The one has 12% growth year-to-date, and the other's not far off that impressive clip. Oh, and neither has anything to do with oil and gas.

I know Moneysense's oft-repeated stat that 80% of all mutual funds don't match the index they track over the long run. But with returns like that in the short term, it's like I'm talking to a wall.

Two very rich walls, actually.

See you in Omaha in 2007

Well, I did it. I took the plunge and bought one of Warren Buffett's Berkshire Hathaway Class B shares yesterday. Technically, my tax return hasn't come in yet, but I just got tired of waiting so I dipped into my savings to buy one. I promise to replace the cash when the rebate comes in, mom. :)

So I'm the proud owner of a single BRB.B. Truth be told, I don't really expect it to gain that much in the near or mid term, but it should serve as a nice reminder of the Buffett investing philosophy I'm trying to emulate - not to mention being a neat conversation starter the next time I'm out with fellow stock market nerds.

Just keeping you posted. Full disclosure, and all that jazz.

Grasping at straws

Any time a hedge fund goes sniffing around a company, I've learned to take notice. So my Spidey sens was tingling today, when I read that San Francisco-based hedge fund ValueAct Capital Partners LP has doubled its stake in health sciences company MDS Inc.

This is only of note because we have a tattered history, MDS and I. During my long, circuitous route towards gainful employment in journalism, I've had a variety of gigs which could passably claim to be writing related, and in roughly 2002, I actually worked at MDS Sciex for a time, doing technical writing. (Editor's note: Incidentally, if you're currently trying to calibrate the nebulizer on a MDS-built mass spectrometer by reading the instruction manual, and you're left with the distinct impression that the writer doesn't have the foggiest idea what he's talking about, my apologies. He didn't still doesn't.)

Given that my job could literally have been done by a monkey with a typewriter (if he had any sort of predilection for technology) and since I was just getting my feet wet as an investor, the downtime on that job gave me a lot of resources to do some independent research on my employer.

My rating? Buy, buy, buy. I remember gleefully coming home and telling my dad why he should buy stocks in the company, since my expert analysis had deduced that at a little over $20 (where it was trading at at the time) it was undervalued. Wisely, my dad ignored the suggestion. The stock, of course, proceeded to do basically nothing for the next four years, and the rest, as they say, is history.

By doubling their stake in MDS now, through, it appears that ValueAct is hoping to squeeze a little more shareholder value from the company, just as I had misguidedly hoped to do all them years ago. A few analysts have suggested good on them for trying, but the low-hanging fruit has already been plucked.

That's beside the point, I say. The real important thing to remember here, is that I was right. Just, four years early.

At least, that's what I'm telling myself.

Unreal estate

My hopes of one day actually owning a piece of Canadian land took yet another turn into pipe-dream territory today, with news that the Canadian Real Estate Association is now predicting the real estate party is going to continue for at least another year.

The CREA has originally forecast that the party would slow a little in 2006 as interest rates rising modestly might scare new home buyers away. But their revised 2006 forecast is now calling for a 1% increase in resale homes. The agency suggests activity might ebb a little in 2007, but even then I have my doubts. In addition to the increase in demand, they're predicting an increase in values. The CMHC had similar projections in January, I recall.

Not surprisingly, the West is leading the way again, with Central Canada lagging behind.

Back to the stock market for me, I guess. Gotta build up the nest egg to be able to pounce with a down payment when the market eventually corrects itself. I hate to hope for other people to lose money, but from where I'm sitting, it's about the only way I'm ever going to get myself a stable place to live.

Budget briefs

Some scattered thoughts on the first conservative government federal budget in 13 years:

All in all, I think I'm generally satisfied. Promised tax relief came through, without any major slashing of spending in programs near and dear to my heart.

I don't really have an opinion on whether Canada needs more or less of a military presence, but regardless, I was pleased to see defense get a $5.3-billion injection. No matter what our armed forces are doing, I want them well paid, and more than adequately-supplied. That money should help.

On the highly-publicized GST credit, I must say I'm not overly impressed. Abolishing it altogether would have made a statement, but reducing it by 1% doesn't seem like it will have any impact on Canadians' wallets. There's a bunch of different estimates floating around about how much it will mean to the average Canadian, but no matter what the number ends up being, it'll come in too incrementally to have a major impact on most people. As much as I'd love to believe those hard-working single mothers are going to take the penny they'll now save on every disposable dollar they spend and put it into a GIC the minute they get home, I somehow doubt it. I suspect this move was more about optics than really putting money in Canadians' pockets.

I don't like the $1.3-billion Ottawa has pledged to spend to build a subway extension only uppity York students are going to use, but transit funding did provide me with one nice little surprise. High marks for the public transit tax rebate proposal. By 2007, people who buy a Metropass every month (like me) can claim up to 15.5% of that as tax deductible. In my case, it'll add up to a nice little credit of $185 a year. Well done. It's a fiscally sound policy and it'll go further towards helping the environment than most of the half-baked proposals I've heard bandied about. There might just be hope for these Tories yet.

I'll have more to say once I've digested the contents a little.

A little perspective

An excerpt from a recent conversation I had with a friend completing her MBA:

I know I'm supposed to be buying into the theory that the party can just keep on going forever, but sometimes I think the entire global economy is on the verge of collapse. The stock market is full of speculators, we're in debt up to our eyeballs, and white collar crime is at an all time high. I'm tempted to buy a few acres of land up north, bury gold bullion in it and camp out while I wait for the system to crumble around me.

Ordinarily I'd dismiss the above as the nonsensical ramblings of a stressed out student at exam time, but the thing is, if she'd put her plan into action about two years ago, she's be sitting on a tidy return right now, as precious metals and real estate have been very hot in Canada for the last little while.

Your plan is to head for the hills, and the herd follows you up there? Now that's irony.