Blessed by the Potato

The heater control in my car broke last week. I was turning the heat up, and there was a loud “thunk” and then the heater knob didn’t have any resistance to it any more. Fortunately it was stuck on just a few notches up from full cold — cold enough that with the A/C on the car is livable in the sun, but warm enough that it’s not a completely ice box for these spring nights (though it is a little too chilly for good defogging). I hoped at first that the plastic knob just broke; this has happened twice before, and is a $5 part to replace. Unfortunately, that was not the case this time, and a mechanic told me that the cable that connects the control knob to the actual baffle/damper thing that controls the airflow broke. It’s a cheap part to replace, but would require 3 hours of labour to take apart the dashboard to actually get at it. He actually sent me away because he didn’t have the time to fix it, which is a bad sign.

My dad said to think about whether I want to keep the car before going out and spending more money on repairing it. (He also joked — I think it was a joke — about how convenient it was that my heater was broken, so I’d need a new car as soon as the weather started getting cooler around, say, October)

So Wayfare and I did exactly that yesterday, going through the pros and cons of replacing the car. Our target replacement vehicle would almost certainly be a new Prius for a number of reasons (including that I want one, that I want a new car at least once in my life and that my next car might be the last car I ever get as I anticipate the revival of public transit and the end of cheap oil, and finally that used Priuses are just not depreciated enough to bother with anything that isn’t new).

On the one hand, after this heater repair I’ll be closing in on $2000 of repairs done or planned for this year, and the car is only worth about $2000 — and that’s one rule-of-thumb about when to replace a car. Of course, after these repairs we hope that we’ll get another year or two of trouble-free operations. Plus all the repairs have been for relatively minor things: heater, muffler, new tires, brakes, radiator; the engine looks to still be in great shape and the transmission is holding in there. For all the issues and trouble lights, the car has never stranded us somewhere, so it still meets the bare definition of “reliable transportation” — and my fuel consumption average is around 8.5 L/100 km which is not too shabby.

Factors that would also lead us to buy sooner rather than later include the $2000 federal rebate that is, sadly (damn you, Flaherty/Harper!) going away after the 2008 model year. Two grand is nothing to sneeze at, and in fact provides a very good reason for buying now rather than trying to squeeze the last bit of value out of a $2000 car with unknown repair bills or summer roasting in store (air conditioning don’t fail me now!). We’d also save about $600/year in gas due to the lower fuel consumption of the hybrid. Interest rates are low right now, but should go lower in the next month or two as the bank/Toyota rates catch up with the Bank of Canada rates — this is still a factor that favours early switching, just for next month rather than next week. If the plan is to buy a house in 2-3 years, then it might also be beneficial to have 2-3 years of good payment history on a car (though the extra loan may work against us there… credit ratings can be so confusing).

Wayfare and I actually took a quick trip down to Competition Toyota today to have a look at one in the flesh as it were. We didn’t take one out on a test drive, and they didn’t offer, though there were a half dozen on the lot (putting to lie the reports about the supply problems right now due to the gas price spike). The salesman said just yesterday he had someone turn in my exact car as a trade-in, and that the wholesale price was $500 if I was lucky, which was a little disappointing (I know that if it comes to it we’d have to negotiate, but I thought it would start higher than that). He spent a while telling us about the difference between buying and leasing (I wanted to stop him, but just found I was too polite to butt in, and it was a slow day over there anyway), and then finished off by saying that he’d “love to sell [us] a car today, but honestly the interest rates will probably be better later in the summer.”

While we could afford it, it would not be a completely painless purchase — cars are expensive. And of course the fiscally prudent thing would be to just buy a quality used car that’s already had most of its depreciation taken off, kind of like I did 8 years ago. While that’s not quite what I desire, it is a better idea. And if we go that route, there really is no time pressure on when to do it except for when operating the current Accord becomes uneconomical. So we decided to hold off for now, which is probably the right decision. Especially since we don’t really know what the future holds: if my PhD goes poorly and I lose my scholarship funding and have to live off next-to-nothing starting 2 years from now, or if I graduate and then can’t find work then the burden of a new (or newer) car could be even more painful. Plus the Rogers contest isn’t over yet, so I might win one anyway :)

The Canadian Capitalist just ran two posts on the hidden costs of “currency neutral” mutual funds.

There are of course, the non-hidden costs of currency hedging. For the TD e-series funds that track the S&P 500 in the US, the currency neutral version has a MER that is 0.15% higher than that of the single currency (USD or CAD) version (0.48% vs 0.33%). To me that seemed like a very small cost for protection from any further rises in the Canadian dollar (or weakness in the American one). I didn’t know about or consider that tracking error might be worse with the currency neutral version, so now I’m going to have to re-think how likely I think more increases in the Canadian dollar are likely, and maybe make my asset allocation more complicated by having some of my US exposure in currency neutral, and some straight-up depending on that likelihood…

Another thing that I hadn’t considered is that some of my US buying has been in USD (e.g., the Dow Jones index from TD). I thought at first that it wouldn’t matter which currency I bought the index in, and that possibly the USD version would track better. However, after checking more closely, it looks as though I may be losing out to the tune of 1-2% in the currency exchange rate by buying the USD version. Since this will only affect me when I buy and sell, and since I plan to hold it for many years, this should wash out as being pretty negligible and I won’t get upset about what I’ve already bought, but perhaps in the future I’ll buy the version of the fund that’s in Canadian dollars to make the most of my money (though I don’t know if that exchange fee is then lost within the fund as a tracking error).

I got Metroid Prime (actually Metroid Prime 3: Corruption, though I don’t recall hearing about a Prime 1 or 2) for the Wii way back at Christmas, but just got around to giving it a whirl this week.

I recall playing the original Metroid at a friend’s house on the NES as a kid, getting better and better until one night we played through the whole thing in one crazy marathon that took us until past midnight (which, at the time, was obscenely late) to finish. I recall liking the combination puzzle/action shooter aspect of it, so I was looking forward to playing the current one for the Wii. So far, the game itself seems to be quite good for the Wii, however I find the control setup rather painful.

Let me go back a step: the Wii is an awesome, unique game system with a totally revolutionary set of control inputs that has already allowed a number of games to really push the boundaries of what and how we play. However, it is not, most decidedly not designed for marathon weekend gaming sessions. The nunchuck/wiimote setup I’m finding is rather painful to use since so many finely controlled wrist movements (or in the case of Mario Galaxies, spastic wrist movements) are needed to control games. This is an interesting, fun way to interact with a virtual environment, don’t get me wrong — in fact, one thing I’m really impressed with in Metroid is the way to open doors by pulling out a control lever, twisting it, and pushing it back in. It’s just a nifty movement to make with the motion-sensitive device. However, it is not a kind control scheme for my wrists. The worst thing I find is having to hold the Wiimote at the screen to control an on-screen cursor since it offers the fewest ways of repositioning myself for relief and variety, and also requires the most “rigid” and controlled wrist movements. For some games, such as Zelda and Mario, only occasional screen pointing is required, so this doesn’t become much of a problem. Metroid, however, is a first person shooter where your turning is controlled by moving the pointer left/right, as you would with a mouse on a computer. This means that the pointer has to be kept on the screen constantly, and I’m finding it can be a real cramp on my poor atrophied wrist. The nunchuck stick defaults to strafing, which I see can be useful for combat, but means that I can’t do most of the exploration with the joystick alone as I can in other games to give my right wrist a break…

That wouldn’t be so bad if I could save and take a break whenever I wanted, but Metroid is a spread-out save point type game. I’m a grown-ass man, and I want to be able to save and quit whenever I please. I’m just getting too old to game through the pain and Nintendo hands, and moreover, I’ve got responsibilities and an early bed time and stuff, so I want to be able to quit on say 5 minutes notice. On the level I was playing last night, I found the map, and it indicated that the save point was another 40 minutes of gameplay away, based on the speed I was going through the other portions (fortunately, there was an unannounced save another 5 minutes in, but that was still a 20 minute break between save possibilities). Of course, I can’t really blame the game designers, since when you save and quit you get your health and ammo restored… wait, I can blame the designers for that, since they could have put in a “quicksave” as well, or save points that just save but don’t restore…

Nintendo doesn’t seem to have been hitting very many ergonomic hits lately, as I’ve also got a DS which I find is an absolute killer for me. It just doesn’t fit quite right in my hands, like I want to hold it completely differently to just hold it so I can see the screen, maybe with my thumbs in towards the centre a bit more for a heftier grip, but then the controls are out near the edges for people with tiny hands…

I haven’t had a chance to play MarioKart for the Wii, but the reviews I’ve seen for it so far indicate that it (like many other games for the Wii) might be just as fun if not better if played with a game cube controller (and I’m ready to believe that if the motion-sensitive cart controls are prone to oversteer like the cow racing and manta-ray surfing minigames). Does anyone have a spare gamecube controller kicking around?

There is a saying that hindsight is 20/20, but when it comes to the stock market I don’t think that’s necessarily true: even after seeing a stock’s price move, you might never square away why in your head. Plus, of course, there are so very many ways to drive yourself stark raving mad by constantly looking back at all the coulda-woulda-shoulda moments the market provides. Don’t beat yourself up about past mistakes is one of my dad’s pieces of advice, don’t worry about what happened in the past since you can’t change it, and the market will be offering up another opportunity if you look for it. There are many times when I wish I had a time machine to go back and do something differently, and I try not to dwell and obsess since it is far too easy to do both. However, I can’t help but feel that since I still have so much to learn, that it couldn’t hurt to look back and see where I went wrong. I already had one brief retrospective back in January, so let’s start by following up from there.

Then, I talked about falling knives, and boy, did the bank stocks fall in March when Bear Sterns went under. I came seriously within one mouse click of buying some TD that day, but was afraid (stupid emotions!) of repeating my knife-catching mistake, so I called my dad for some sober second thought. He said to just steer clear of the whole sector since there was so much uncertainty, and that there was no real way to know how liquid or profitable any of the banks really were in these times. Even though I thought TD was a quality bank that was being sold off due to fear, I wasn’t sure, and started to fear myself that such a big downswing must be for a reason, and that maybe somewhere out there was a group of investors who knew more than me, so I steered clear, and still haven’t bought in, as much as I’ve been kicking myself for it the last few days as the whole banking sector seems to be recovering. Taking advantage of other people’s emotional selling is supposed to be what I was all about, and I missed what might have been the biggest deal (that I was actually close to making) of my investing career. Of course, my dad was not completely wrong either: there was risk there, and if TD had come out the next day saying that it was the next Bear Sterns, I could have lost it all.

Russel Metals, the falling knife I mentioned in that previous post, has come back nicely. Quite nicely, in fact. While my timing was not great, I did buy what I considered a quality company at a value price. From the broker reports I read on it and my own crude attempt to value the company, I figured that in a year or two, it would be up to $30 — 25% gain on top of a 7% dividend in a year or two would be very decent indeed. It turned out to be much better than that, hitting $30 this week, so I decided to sell. I might be making yet another mistake in shooting the running horse, but I think, today, that I’ve gotten my full value out of RUS and it might just stagnate for the next year or two from this point (or, correct to a point where I can get back on and ride the pony again). While I could have made almost twice as much by having better timing back in January, that buy doesn’t look to be such a big mistake any more.

The big thing I wish I could go back in time to buy is oil. I’ve been talking about peak oil for years yet somehow, that never translated into thinking about actually investing in oil. Even just a few months ago when I was looking at possibly investing in Petro-Canada, I was thinking more about the looming recession in the states and a possible short-term downturn in the price of oil than the 10-year gain peak oil thinking would lead me to. Of course, now oil (and PCA) has had a huge run-up in just the last few months, and again I’m waffling about whether or not to invest in it (and, again, what form an investment in oil should take: I don’t know how to just buy a few barrels at the mercantile exchange, and am not sure if I should look at an ETF like TSE:XEG or a single company like Petro-Canada). I think there’s a good chance of a correction in the next few months, especially if Nigeria and the middle east settle down for a little bit. However, I think in the long term that’s not necessarily going to matter so much, and even buying at these record prices might be a real bargain 10 years down the road. A third option is to try to avoid the necessity of timing the market (whether I want to or not) with a lump-sum investment in one company or ETF by instead buying into the TD mutual fund for energy, which has a low minimum investment (~$100), so I can just keep buying as oil goes up or down, and don’t risk either missing what good times are left, or any bargains to come. Unfortunately, that mutual fund is not an “e-series” one, and the 2% MER is not very appealing.

In a similar vein, my dad and I were talking a few months ago about “big concept” investments for the long term. One “theme” that we both agreed would be very big in the years to come was the development of China and India. Specifically, in terms of their diets. As the people of those countries found themselves feeling wealthier, they would want to expand their diets to include more high-quality, fertilizer-intensive food, including meat. So we looked for companies to invest in that would be in a good position to make money off of the demand for fertilizers to come. The big name in the business is of course Potash Corp. of Saskatchewan, which we quickly determined was not “value priced” at $100/share and a P/E of something over 25 at the time. Instead, we looked at a smaller “potash producer” in China (but listed on the TSE) called Migao. Not 6 months later, and my dad looks like a freaking genius as potash prices hit incredible new records due to demand in China, and Potash Corp. of Saskatchewan has just about doubled in price. Of course, getting the idea, the “investment theme” right doesn’t always lead to riches as we found out: Migao is down 15% in that time, and neither of us own Potash. There were two things working against Migao, and one of them we should have forseen if we had done our due diligence properly. You see, Migao is in the fertilizer business, and it does sell potash products. However, unlike Potash Corp. of Saskatchewan, Migao doesn’t actually dig the potassium-based chemical out of the ground and sell it to put on crops. That digging it and selling it business is a sweet deal when prices rise this quickly due to demand, because the cost to dig it up is basically fixed, so the unprecedented increase is pretty much all profit. No, Migao buys potash fertilizer (from a company in Russia mostly) and chemically refines it further for specialty applications. When prices go up like this, it has the potential to hurt their bottom line. Somehow, I didn’t catch that little detail when looking at the company, which I’m sure either demonstrates a valuable lesson about how important really doing your homework in the stock market is, or about how you can never really predict how well a company can do (I think probably more the former). As it turns out, Migao has basically a fixed percentage mark-up on its potash products, so it is managing to pass along the increased cost of potash to its customers and is making more money off the potash craze (though not to the degree POT is). That still makes one wonder why the stock price is down then, when they’re making more money. I don’t have a good answer to that, though it may be due to rumours that the Chinese government may, in light of the emerging food crisis, put a cap on Migao’s profiteering. That could be worrying, but I couldn’t even find a source for those rumours. So anyway, be sure to add POT to my basket of stocks to buy with that time machine.

Priszm, which I mentioned as looking decent near $6 in February has had a bit of a roller-coaster ride. Right after that post, QSR moved up to above $7, and then slid back down to $5 where it sits now. I honestly can’t figure that one out. The company is really not doing all that great, admittedly, but it was paying out 20% at $6. That was of course due to the risk premium investors would demand since, as the company is not doing great, there is a good chance that distribution will be trimmed down. However, at $5/share the current distribution is more like 24% — even if the future payout is cut in half, that’s still a 12% return, and I think it’s more likely that the distribution will only be trimmed by about a quarter (to 18% for someone buying in at $5). As much as I have trouble understanding why it might be so low, I’m not tempted to buy any more since I already have quite a bit. I might wish I had sold at $7 (to buy back at $5) with that time machine, but I think holding it for longer has not been a terrible move… yet. I’ll be sure to revisit this one in my next time machine retrospective post in the months to come.

Finally, the index funds are doing quite well for the most part, because, well, the stock markets in Toronto and New York are recovering. At least they don’t require this much work and second-guessing!

The summer blockbuster movie season has started, and started off well with IronMan. Note that Netbug’s site is down for the moment, so it falls to me to sing its praises. In particular, I really enjoyed the steampunky goodness of the “mark 1” IronMan suit made in the cave. Plus, the camera/CG work seemed to have been done with somewhat of a stable mentality: at no point in watching it did I feel the need to turn my head and puke from motion sickness. The tone was light throughout, and pretty much all the humour worked, even the little throw away bits (“this is the FUN-VEE”). Yes, there were plot holes you could drive a mech through (why, once you returned to civilization, would you decide to put a better power generator in your chest instead of, say, removing the shrapnel?), but it’s a super hero movie, and aside from that plot-central one, the fight (more after the spoiler warning) and Miss Pot’s ridiculous shoes, none of them bugged me while I was watching.

Spoiler warning

So during the final fight with the bigger, cooler, better-armed mech/power armor, there were a few things that got to me. First off, this suit was supposed to be tougher, but not as technologically advanced: it didn’t look to have that repulsor technology, but instead had some sort of rocket-based jumpjet in the feet. In that case, it shouldn’t have been able to get to those kind of stratospheric heights in the first place… but then when it did come crashing back down to earth, I didn’t catch it re-light its boosters to help with the fall. It should have smashed up there and that been the end of it. That wouldn’t have made for as big of a drawn-out fight scene though, so I suppose I’ll let it slide.

The ending should make any sequels interesting, as it does away with all that secret-identity stuff.