In today’s edition:
- I get grumpy with Money Gripes
- We head to Market Guy Mailbag and talk about stock analysis
I don’t get mad very often. In fact, the Market Gal jokes that it happens only once a year. However, there are a number of things that leave me shaking my head. Annoyances, pet peeves, really. Some are minor and relate to the use of certain words. For example, I’m not happy with the overuse of the word extreme. Why does everything have to be extreme, or “X”? Even my anti-perspirant is labeled extreme. Incidentally, my uncle Bert really dislikes the phrase pet peeves, so I’m using the word gripes as a substitute. He also dislikes the words, folks and George Bush. Some of my gripes are more substantial, like when my neighbour power-washes her driveway at 6:45am. Other annoyances include lawn grubs, Celine Dion, and the Toronto Blue Jays bullpen.
But nothing gets me more excited, more riled, more peeved, than fees and unnecessary charges. And so with that, I now present a modest list of theMarket Guy’s Money Gripes.
1. White label cash machines
Let me formally introduce you to a buddy of mine, Bouch in Embrun. We went to high school together. We share a fascination for power tools and the financial markets. Naturally, he was one of the best men at my wedding. We’ve been going for lunch together at least once a week for about 10 years. And yet, last week our friendship teetered on the brink of disaster. For Bouch in Embrun was about to commit a transgression of the lowest order. This involved an action so vile, so objectionable that I’m still trying to recover.
The other day Bouch and I were at a fast food restaurant. We were in different lines and about to place our orders. He was out of cash and the restaurant didn’t take Interac. The clerk motioned him over to a white label cash machine. You know, those ATM’s that aren’t affiliated with any particular financial institution? These pests have sprung up in a variety of locations: restaurants, convenience stores, food courts, airports.
Let’s get back to Bouch. He started moving toward the ATM. You know those situations when a friend is about to do something that you know he’ll regret, so you have to take matters into your own hands to save the guy from himself? It reminds me of those action movies when everything heads into slow motion and the action hero is flying through the air, yelling “Nooooooooo!” as the bullets are heading toward his friend? That’s kind of how it went down, only I was lunging from the KFC line, my arm extended full out with a $10 bill, flying through the air to stop him from using a white label ATM.
Why am I so upset about this? Fees. When using these machines, get ready to pay three levels of fees. First off, the owners of the machine charge a convenience fee. There is nothing convenient about a fee. Then you get the Interac network fee. Oh, and don’t forget to include the fee your bank will charge when you don’t use one of their ATM’s. Add it all up and you get a nasty three-fee financial burrito.
So what can we do about it? One option is to take your business elsewhere. Just make sure to tell the establishment why they are losing out on your business. Next, try to limit yourself to using the ATM’s run by your own bank. Why take on the extra fees if you don’t have to? Besides, you’re already being hit with…
2. Bank service fees
I have no problem with the banks making money. In fact, I want the Canadian banks to be strong and competitive on the global scene. I just don’t want to pay for it. Given that most banking packages pay virtually no interest, you are losing money after inflation.
Let’s deal with some of the common excuses people use for not looking for and/or switching to a lower (or no) fee bank account.
a) It would be too much trouble. I’d have to change my bill payments and direct deposits around.
A friend of mine currently pays $20 a month in bank charges. He could easily switch to a no fee account because his banking needs are fairly modest. “It’s a hassle to change things around,” he says. How long does it take to setup new bill payments and direct deposits? An hour? He’s content to pay $240 a year for many years to avoid spending one hour once. Does this describe you? If so, repent now and cleanse your soul.
b) I make too many transactions a month, so there are no packages that fit my circumstances.
Wrong, Pedro! Have a look at President’s Choice Financial’s no fee account (http://www.pcfinancial.ca/). You can bank on the web, by phone, or at any of the over 4000 PC Financial or CIBC bank machines. Did I mention there is also free chequing and you earn points towards free groceries and other items? Let’s review…there are no fees. Go ahead, make 40 transactions a month. Hope you enjoy free.
PC Financial is one of many options. If you maintain a minimum balance of as low as $1000, many of the other financial institutions have a package that can minimize fees. It’s worth spending a few minutes every year to make sure you have the right package for your needs and that you’re not paying any unnecessary fees. If they don’t have a reasonable package, switch and make sure you tell them why.
c) I like having all of my accounts (personal banking, mutual funds, brokerage, etc.) at one financial institution.
I can understand the need to simplify. But is 2 or 3 extra pieces of paper every month (or quarter) really that big a deal if you are saving hundreds of dollars? How much are you willing to pay for less paper?
The thing is, you know I’m right. Just admit it and we can all move on to…
3. Credit cards that offer nothing special
Open up your wallet and have a look at your credit cards. Are you paying an annual fee? Is your credit card offering any perks or points that can be used to get free stuff? With interest rates at historic lows and most cards charging you 19% interest per annum, you better be getting something special. If not, as Elaine on Seinfeld used to say, that really sticks in my craw. But what to do?
A few weeks back I was having lunch with a fellow faculty member, Tim at Carleton (as you can see, so much of my life revolves around lunch). The food was enjoyable enough and the conversation was good. When the bill arrived, Tim decided to make it his treat. Then he pulled out his Canadian Tire Options Mastercard (http://www.ctfs.com/english/optionsmastercard/). That’s when the conversation shifted from good to great. “I put everything on it: Airfares, conference expenses, groceries,” he said. It was like I’d found my twin. Here’s how the card works:
You use the card just like you would any other credit card. But here’s where it gets really fun: Canadian Tire money is added to your card, every time you use it…anywhere you use it. For purchases at Canadian Tire, you get 20% more Canadian Tire money than if you’d paid in cash. Points can be redeemed at the cash for any item in the store, including auto work. That’s right…you don’t have to select items from a catalogue and wait 2 years to save up for a crappy set of binoculars. Just going to Canadian Tire is a wonderful thing, but getting free stuff is more than the pleasure centre of my brain can handle.
The most exciting moment of our lunch occurred when one of us said, “I don’t think I’ve ever actually paid for anything at Canadian Tire.” Maybe it was me, maybe it was him. I’m tearing up right now. Did I mention there is no annual fee? There is also no downside.
If you aren’t very excited about Canadian Tire money (although I find that hard to believe), there are plenty of other options. CIBC has an HBC Rewards card, AMEX has Air Miles, CIBC has Aeroplan, etc, etc.
How many credit card applications arrived in your mailbox this past year? Ten? Twenty? More? This suggests that there is plenty of competition for your business, so take full advantage. There is no excuse for credit cards that offer nothing special. I’ll tell you one thing, though. I’m not placing any of my savings into…
4. Back-end load mutual funds
Also known as deferred sales charge funds. In fact, let’s extend this to all mutual fund fees. I’ll deal with this in another column. I’m already getting too upset and I need to pace myself for talking about…
5. Dramatically rising insurance rates
In the past 5 years, our home rates have increased 86%. In the past 3 years our auto rates are up 67%.
The insurance companies have offered a variety of different reasons for these increasing premiums. These reasons have included, but are not limited to, September 11th, our litigious neighbours to the south, stress, the dollar, the weather, and the law. It’s only a matter of time before we get an explanation based on chaos theory. “Well, you have to pay more to insure your Ford Focus because a butterfly flapped it’s wings in Guam, which changed the tides, which led to a drought, which screwed the farmers, which….” Wait for it, because it’s going to happen. Reminds me of the time Heinz blamed poor ketchup sales on terrorism.
When we first moved into the Market Shack, I wanted to make sure we had adequate home coverage. OK, I’ll be honest. I wanted to make sure we had better than average coverage. OK, I’ll come totally clean. I wanted to have the best coverage possible, the Cadillac package, a coverage that would leave us laughing at fire, water, ice, oil spills, pestilence, swarms of angry bees, and a possible invasion from Quebec. Because you never know, right? Upon learning of my conservative approach, Market Dad remarked, “How many houses in your neighbourhood have actually burned down?” Besides, he knew the cost of being so conservative is way too high.
In fact, the Bank of Canada recently raised interest rates in order to control a surprisingly high level of inflation. Shortly thereafter, they lowered rates because the spike in inflation was based mainly on increasing energy prices and, you guessed it, rising insurance premiums. No doubt you’ve read about the politicians trying to score some points by addressing these issues. So long as I pay less, I don’t really care what they do.
Earlier this year I decided to shop around and found a fair amount of variance between carriers. Even though I switched policies, all that I accomplished was a reduction in the increase, rather than any absolute savings.
Well, that’s what gets me going. What about your money gripes? What really gets you upset? How are you coping? I’d love to compile a list of your peeves. Grumpiness is good at firstname.lastname@example.org
Market Guy Mailbag
Let’s shift gears and get back to talking about stocks. More specifically, stock analysis. A loyal reader in Toronto wanted to mention an Internet site that provides free charting software:
I lost the use of my low cost charting software when formats changed in 2000 and have been looking for a good simple to use program ever since. I discovered one recently – Wall Street Analyzer – with good charting capabilities, easy downloads of current and historical Yahoo price data for free or a donation at www.lathuy.com . It has some bugs but these will likely be fixed in later release… it does not run too well in Windows XP. However XP has a compatibility option which allows you to run a program in an earlier version of Windows. I find Windows 98 works fine.
Thanks for the tip! Whenever we are talking about stock charts, we are moving into the domain of technical analysis. This approach to investing uses historical stock price data to predict future movements. In other words, if you know where the stock has been, you can figure out where it’s likely to go. It’s believed that patterns can be identified and clear entry and exit signals provided.
This can be directly contrasted with fundamental analysis, which is primarily concerned with the financial health of the company. This covers things like the balance sheet and the income statement. Want to know more about a company’s debt levels or cash flow? Curious about how well their products are selling? Want to make sure the dividend is sustainable? You need to look at the fundamentals. Fundamental analysis may also consider the dynamics of the industry and the performance of the overall economy. This is the brand of analysis that I focus on.
However, if you have a Scotia McLeod discount brokerage account, they have some nifty technical analysis calculators. All you have to do is type in a ticker symbol and a variety of different technical analyses are performed. You can also search for stocks that exhibit certain technical patterns. The interface is very easy to use and the results appear on a single page. It’s relatively basic, but a good starting point. TD Waterhouse and CIBC Investor’s Edge don’t seem to have these services. In any event, the full service arm of any brokerage should be able to provide this type of information.
I asked the reader if he has any favourite technical indicators and how he uses them in making investment decisions:
Although I stick to fundamentals, I like to time entry and exits with the help of charts…First I look at p/e, yield, growth and then evaluate the prospect using a procedure similar to that found at www.quicken.com, stock evaluator, which has a future cash flow discounter and allot of other good stuff. Then I check the trend shown by the bar charts of price and volume. I have found the simple moving average very useful as it can identify changes in trend. There are a couple of other indicators which I may look at – MACD and SAR – (which I won’t try to explain). Oh yes, also some where in the back of the head there is an awareness of current economic conditions, interest rates, politics etc. In reality I may take the some or all of the foregoing steps in any order and hope for the best. If things work out I thank lady luck. If they don’t I review to see where I went wrong.
Thanks for the great e-mail. Your last two sentences have given me an idea for an upcoming column. Thanks. For now, I should mention that your approach to the fundamentals virtually mirrors that of my own. The Quicken site is very fun and the stock evaluator is a wonderful tool. The site managers have done a commendable job of organizing the output, as it’s very easy to read. The site also generates a one-click scorecard for each stock you specify and the evaluations can be based on either established growth or discount to intrinsic value criteria (i.e., the Warren Buffett approach). I only wish a site like this existed for Canadian equities so that I could reduce some of my legwork.
Only recently have I become intrigued with technical analysis. I like that each indicator provides a very clear-cut decision rule on whether to buy or sell. I think it can be a very useful tool to complement looking at the fundamentals. I really like your strategy of using technicals to help with entry and exit points. Unfortunately, different indicators may suggest different things. I punched Riocan’s ticker symbol into the Scotia technical page and the results were all over the map. However, I suppose the same thing can be said of results based on fundamental analysis. In any event, that’s what makes a market. Remember one thing about this column…the clichés are absolutely free.
For those of you wanting more information on technical analysis, here are three websites that you might enjoy. The first site offers information on a variety of investment topics, while the last two pertain mainly to the technicals.
All this griping and technical talk has left me in need of a vacation. I’m going to Vegas.
The Market Guy is an Instructor with the Department of Psychology at Carleton University. He’s not a professional advisor. He’s just a guy who loves investing and talking about the markets. While in Vegas, the Market Guy and Gal will be staying at the self-proclaimed City of Entertainment, the MGM Grand. Proclaim yourself to email@example.com