Weekend Business – Feb 8th

Highest Debt Level Ever
Credit bureau TransUnion released their quarterly report recently on the credit history of 25 million Canadians. They’ve found that excluding mortgages, we each owe on average $27,485 of debt, which is up $1,500 from last year and a record high. The average balance owing on a Line of Credit (LOC) grew by 2.6%, installment loans (such as my farm loan) grew by 6.7%, and car loans were up by 8.9%. I don’t think it’s a big deal though. It’s true that our debts are $1,500 more than last year, but according to StatCan our earnings year-over-year has also increased by 3.2%, or roughly $1,500 so everything balances out 😀 No surprise then to also note that delinquency rates are declining, meaning less people are defaulting on their payments :0)

Photo by Ryan Remiorz , THE CANADIAN PRESS

What does this mean for you? It depends on how you’re using your debt. I’m borrowing over $15K more from my LOC and margin account than last year. Not counting my mortgage I have over $150,000 of debt today. Most people are scared to take on debt, but using the right kind of debt at the right time can be a very useful tool. I couldn’t have increased my net worth by $12K last month if I didn’t have all this debt to leverage my investments. But on the other hand, if I had bought a new car and taken on a car loan then that would actually negatively affect my net worth. So again, it all depends on what constitutes your debt and what you’re using it for.

iWantMoreCash
With the success of their iPads and iPhones, Apple have been making billions of dollars in profit every month. Currently they have about $137 billion of cash sitting in the bank, including short term investments. This is the biggest cash pile of any company in the United States. And it’s not doing anything productive or profitable for the company. They currently have a dividend of roughly 2.2% but an activist investor, David Einhorn, who manages a hedge fund and holds a lot of Apple stocks, is encouraging Apple to give more money back to shareholders. This can be done by either increasing the dividend, or offering preferred shares with a higher yield, but don’t allow for company voting rights. I’m in favor of more dividends, so we’ll wait and see what Apple decides to do 🙂 Many investors are chasing after yield, if Apple gives in to these demands then I might just buy some more Apple shares. Who knows, maybe one day I’ll even accumulate enough for them to DRIP haha (＾▽＾) half joking there.

The Oily Bottleneck
We pump out a lot of oil and gas in Canada but we lack the infrastructure to get these products to the proper markets. This isn’t a new problem but a research paper out of Calgary suggests there is a 2 to 5 year window for us to get our resources to the Asian markets, otherwise we’ll be at a huge disadvantage. Countries in southeast Asia want our oil and will pay us the proper market price for it. But currently we sell close to 100% of our crude to the US at a 45% discount. You’re welcome America 😛 Canadians are losing out on $100 million of oil sales every day 🙁  Think about the tax revenue generated from that alone, and all the healthcare, education, or paying down the national debt we could do with all that money if only…

Frenemies everywhere
A new season of The Real Housewives of Vancouver started airing this week. It’s a bit ironic because the individuals portrayed in the show are often more fake than real. It’s pretty entertaining though, especially if you happen to live in Vancouver and recognize a lot of the shooting locations 😀 You can learn a lot about personal finance from the show, like how being excessively rich can come with excessive drama and consequences.

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