BMO's Marshall & Ilsley has 10th Straight Loss... Home Turf is Much Safer.

According to a recent Dow Jones newswire, Marshall & Ilsley Corp., (MI) the American bank that was recently bought by Canada's Bank of Montreal, (BMO, BMO.T) has now had its 10th straight quarterly loss. The bank, however, based in Wisconsin, has been improving in recent months as the amount of money that it must put aside for defaulting loans has been declining. Nonetheless, the bank is struggling desperately to make a profit and it still owes the U.S. government 1.72 trillion dollars in bailout money. BMO has agreed to cover the loan once their deal to buy the troubled bank closes. 


In the last three months, Marshall & Ilsley lost 116.6 million dollars. Which is why the fact that BMO paid 4.1 billion dollars for the bank is so disturbing for many shareholders, like myself. Net charge-offs, loans lenders don't think are collectible, rose to 4.8% of average loans from 3.9% a year earlier, and Non-performing loans, those near default, fell to 4.5% from 4.6%. 


Merging their U.S. Harris banking unit with under performing Marshall & Ilsley may not bode well for investors. But economies of scale are very important in the U.S. banking industry and BMO hopes that more branches and more assets down south will help them finally generate a reasonable return on their American investments... which as of yet, account for less than 10 percent of the bank's income... well behind the Canadian leader in the U.S., TD Bank.  

The Intelligent Investor Top 10: Growth and Income.

The Intelligent Investor Top 10:

As a new addition to the Intelligent Investor Blog, I am adding a top ten stock holdings list. Updates and news on the top ten companies to own for the longer-term will be regularly and continually updated. As a measure of personal conviction, and for full-disclosure, I will personally have a position in each and every company on the list. 


The list will be for growth and income oriented investors who wish to generate above-average total returns through both capital appreciation and rising dividends. Questions and comments on the businesses, or the list as a whole, are both invited and appreciated as it forces investors, including myself, to defend and reinforce their ownership. As an intelligent investor, if you cannot present a rational and prudent reason for owning a business, SELL IT! 


Some positions in the list are for there for defensive reasons, while others are for growth. It is always important to possess a little bit of both. No matter how right we think we are, it is important to remember that even the Intelligent Investors can never be right 100 percent of the time.


THE INTELLIGENT INVESTOR PORTFOLIO:

1. I SHARES SHORT-TERM BOND ETF XSB
2. RIOCAN REAL ESTATE REI.UN
3. I SHARES S&P 500 ETF - CDN CURRENCY XSP
4. SUNCOR ENERGY SU
5. SHOPPERS DRUG MART SC
6. BANK OF MONTREAL BMO
7. GENERAL ELECTRIC GE
8. IMPERIAL OIL IMO
9. TMX GROUP X
10. JOHNSON AND JOHNSON JNJ

Other personal positions will be added to the list when, and if, they replace one of the Top 10 holdings.


Happy Investing : ) 

BMO Sneaking into the Annuity Business: Guaranteed Payments for Life.

Competitors in the banking and insurance industries are crying foul as the Bank of Montreal is releasing a new product promising mutual fund customers over the age of 55 the opportunity to deposit a lump-sum and receive 6 percent annual payments for life after 10 years. 


The Globe and Mail described the product today as follows:


"In the case of a BMO (TSE: BMO) product, a customer makes a deposit that is invested in the bank’s line of mutual funds and after 10 years receives guaranteed cash payments equal to 6 per cent a year, paid monthly. Those payments continue for 15 years. After that, the customer continues to receive 6-per-cent interest income (based on the original deposit) on an annual basis for the rest of her life or as long as they hold the product."


Of course, the product sounds quite simple, reasonable, and popular... so what is the problem? While, in Canada, banks are prohibited from selling insurance products in their branches, and BMO's competitors are declaring that this product is basically an annuity sold under the guise of a savings product. On the surface, I would have to agree with them. An annuity is essentially a regular income until death or for a fixed period of time purchased from a life insurance company for a lump sum. And that is eactly what the BMO is providing.


Other banks sell insurance products, but they have to do this outside the confines of their branches. Most have skirted around this requirement by simply building insurance businesses attached to their branches, but BMO has not done this yet. If their competitors get their way, perhaps they will have to. Either way, however, for the intelligent investor, BMO's new product sounds like an interesting and fairly sound choice.   

Tim Horton's Raising Prices: Others Might Follow.

In an attempt to curb the effects of price inflation on its key inputs, Tim Horton's (TSE:THI) is increasing the prices that consumers will pay for its basic products. The company has begun displaying signs at most of its stores declaring that the price increases will be effective April 11th.

Interestingly, the company has yet to state how large the price increases will be, but they have assured their customers that they will be reasonable, and that their products will still represent a good value for customers. To be sure, considering most chains charge more for their cups of java, the company does have some room to increase prices. In addition, like any good business with a valuable brand name, Tim Horton's will surely be able to increase prices while not significantly altering the loyalty of their customer base. 

The primary reason for the price increase has been the spike in arabica coffee, the main bean that Tim Horton's uses to brew its iconic cup. To be sure, it is up more than 80 percent since June of 2010! And even Starbucks (NASDAQ:SBUX), already known for selling an expensive cup, has stated that it has not ruled out raising prices to recoup the increase in coffee bean prices.

For Tim Horton's, it is not at risk of losing significant market share from this move, so it is a wise choice for their intelligent investors. Starbucks, on the other hand, has said that it will not raise prices at the moment in fear of losing customers... Tim Horton's shareholders should be proud of their entrenched brand value that allows such prices increases.

Happy Investing!

For more information, check:

(http://www.cbc.ca/news/business/story/2011/01/27/starbucks-coffee-prices.html).

Best Places to Live in Canada: Kingston Among the Leaders.

MoneySense Magazine has announced its annual ranking of the best places to live in Canada. It uses a number of interesting metrics to rank the cities according to what it believes as key factors that would influence someone's municipal satisfaction. So, what are they and where is the best place to live?

The factors that they used are: weather, affordable housing, household income, discretionary income, new cars on road, job prospects, population growth, access to health care, walk/bike to work, and low crime rates. 


Of course, whether these are the same factors that you would use is arguable, but nonetheless it is a nice exercise in attempting to think about some municipal options that we have as Canadians.


According to the factors listed above, the best places to live in Canada are:

1. Ottawa
2. Victoria
3. Burlington
4. Kingston
5. St. Albert
6. Fredericton
7. Brandon
8. Edmonton
9. Repentigny
10. Winnipeg

Personally, one category that I was interested in, considering the spike in housing prices over the last decade, was "affordable housing." So where was the most affordable place to live in Canada?

1. Cape Breton, NS
2. Timmins, ON
3. Bathurst, NB
4. Portage la Prairie, MB
5. Chatham-Kent, ON

Of course, there is more to finding the best place to live besides whether or not it is affordable. Jobs, cultural climate, etc. are all very important factors. And though it is not perfect, the MoneySense article does a fantastic job of getting the Intelligent Investor to start thinking about where might be the best place to live, work, retire, and spend some of their hard-earned dollars.

I highly suggest that you give more of the rankings a quick look at:

http://list.moneysense.ca/rankings/best-places-to-live/2011/Default.aspx?sp2=1&d1=a&sc1=0

Happy Investing!

New No-Fee Chequing Account: ING Direct THRiVE Chequing a Great Choice.

ING Bank of Holland is expanding its presence in Canadian retail banking. Taking a leaf from CIBC and Loblaws' PC Financial, ING has begun offering no-fee chequing accounts in addition to its line of savings, investment, and mortgage products. 

Known as ING Direct in Canada, the brand has become a well-known name in many Canadian households through its "save your money" slogan and orange colour scheme. The chequing accounts are a direct attempt to take market share away from Canada's major banks and occupy a larger share of the average Canadians' wallets. 

ING will undoubtedly meet with much initial success as they already have over 1.8 million customers in Canada, of which many have accounts at other banks. In the first year, ING hopes to attract about 100,000 customers, but they are probably low-balling that number in anticipation of a pleasant year-end announcement that they shattered their expectations. 

Some of the features of the new accounts include an initial batch of free cheques, free debit, free ATM transactions at Credit Unions and HSBC Bank, and, my personal favourite, FREE overdraft protection as long as you pay back the amount within 30 days! No more NSF charges if you forget about a certain bill that is coming due or a cheque that you wrote awhile back. 

To be sure, ING is making deeper and deeper inroads into the Canadian market. Their StreetWise series of mutual funds are simple and reasonable, their savings rates are respectable, and now their chequing account is quite superior to anything offered by Canada's five traditional banking enterprises. Of course, PC Financial offers largely the same thing, but it is nice to see even more choice for Canadians in the banking sector. 

All in all, an excellent choice for the intelligent investor. Why pay fees when you don't have to. Take the money you save on your banking fees and buy shares in your old bank with it.

For information on ING's new product, go to:

http://www.ingdirect.ca/en/chequing/index.html

Happy Investing : )

Investors Should Buy What They Know and Steer Clear of What They do not Understand.

It is important for the intelligent investor to "buy what they know." Or only stick to owning businesses for which they would be able to notice opportunities, changes, or threats in their respective sectors. When competing with millions of other people around the world for the buying and selling of stocks, one must possess a reasonable expectation of spotting competitive, strategic, or systemic threats to the businesses that they own. It is, therefore, important to diversify, but only within reason.

For instance, many investors have an appetite and desire to own technology and renewable energy stocks. On the whole, the rapid and inherent nature of change in the technology sector makes threats and difficulties very difficult to notice with regards to many technology stocks on the market today. Many great technology names have come and gone over the years, and few have managed to withstand the constant pressure to innovate and re-invest themselves.

IBM (NYSE: IBM) has done so for decades, and continues to do so with much success, but many others are in constant fear of being overtaken by the next great technological fad or change. Even the great Microsoft (Nasdaq: MSFT) is beginning to come under siege by Google (NYSE: Goog), Apple (Nasdaq: AAPL) and others... especially in the cloud computing arena, which might be the next great shift in the technology space.

Other individuals might be very astute at spotting key developments in the fashion or retail space. Personally, many clothing stocks such as Aeropostale (NYSE: ARO), American Eagle (NYSE: AEO), Gap (NYSE: GPS) etc. carry a lot of uncertainty as I may be unaware of important trends taking place in the fashion space. On the other hand, trends in the energy, banking, or consumer staples arena are much easier for me to wrap my head around. A knowledge of current oil inventories and reserves for Suncor (TSE: SU), in combination with a prediction of energy prices over the next year, could give me a reasonable valuation for the company, but a variety of key factors concerning current clothing trends would leave me at a disadvantage compared to other investors in this sector of the economy. In the Art of War, Sun Tsu said to evade your enemy if unequally matched. In investing, the same is true.

Warren Buffet, the Oracle of Omaha and guru for many value investors, always said to steer clear of something that you do not understand. It is nearly impossible to tell if a company has a "durable competitive advantage," or good defence against competition, if you do not understand how its business operates, who its primary competitors are, and what threats or changes are on the horizon. Without this knowledge, the intelligent investor is exposing themselves to far too much risk. Investing should never be a guessing game, but a calculated and well played match between you and other investors to acquire businesses for a reasonable and well rationalized price.

If you cannot assign a true dollar value to the company, independent of the current stock price, than you should not own it. You would not buy a rental property without first understanding the neighbourhood it is in and how much rent it generates, so do not buy a stock without first knowing how it actually makes its money, who its customers are, and what the competition is like.

If most industries are unfamiliar to you, a quality, low-fee mutual fund or exchange traded fund are probably best.

Happy Investing : )

"Fox News North" Blocked, Despite Harper's Intentions.

Last week Canadian regulators blocked the advent of Fox News into Canada, and with it, Sun TV News, or "Fox News North" as it has been called. In an article written by Robert F Kennedy Jr. in the Huffington Post, it is stated that "fans of enlightenment, democracy, and justice can take comfort from a significant victory."


The Radio Act in Canada declares that "a licenser may not broadcast....any false or misleading news." This ensures that Canadians enjoy much less biased and rational news coverage than our brothers and sisters to the south. In Canada many see Fox News as notoriously biased and dishonest in its coverage. Of course, many Canadians see much of our coverage as biased and somewhat misleading as well... but indeed it stays much truer to the facts than does much of the coverage in the United States.  


According to Mr. Kennedy: 


"When Stephen Harper moved to abolish the anti-lying provision of the Radio Act, Canadians rose up to oppose him fearing that their tradition of honest non partisan news would be replaced by the toxic, overtly partisan, biased and dishonest news coverage familiar to American citizens who listen to Fox News and talk radio."


Now, as a Canadian citizen, I did not notice this public outcry referred to by Mr. Kennedy, but surely it warrants some attention given that he seems to regard Canadian broadcasting with some esteem. For Rogers (TSE: RCI.B) , Bell (TSE: BCE), and our nation's other media conglomerates, the blockage of any northward expansion of media is a helpful way to maintain a near monopoly on the airwaves. 


To read Robert Kennedy's article, go to:


http://www.huffingtonpost.com/robert-f-kennedy-jr/fox-news-will-not-be-moving-into-canada-after-all_b_829473.html

Government Cutting Environmental and Regional Programs to Save Money.

Canada's federal government has announced that expenses next year will actually FALL by 6.2%, or $16.5 billion. Having become accustomed to the ever expanding and bloated size of government, a decrease in expenditures came as a bit of a shock. Where will the savings come from?... Mostly slashes to regional development and environmental programs, which surely will not be popular or favoured by many segments of the Canadian population.

Total expenses for the year will be $250 billion. The majority of this will consist of transfer payments to the provinces, of which Quebec will receive a large chunk, the operating costs of governmental departments, and interest on Canada's growing national debt... or generational mortgage.

The largest increases in expenses will come from security and law enforcement (+ 21 %) to boost jails and prisons. The savings are coming from massive cuts to Environment Canada, Agriculture Canada, and Natural Resources Canada, with cuts of 20%! These, in addition to cuts to science and regional development initiatives are where the government is gaining the money to expand security efforts. 

In order, however, for the government to achieve its target of a balanced budget by 2015, there will either have to be more cuts, or an increase in tax revenues from economic growth. Of course, partially what the government is banking on is reduced payments to the unemployed and work programs as the economy improves and unemployment declines. There was, of course... no mention of cancelling the purchase of billions of dollars worth of military hardware, which surely is using valuable government resources during a time of financial and economic austerity for many Canadians. 

For many, this announcement will be seen as good news as spending cuts are often a sign of prudent and reasonable financial administration. Canadian currency holders, and holders of Canadian debt, should be pleased to see a decline in the massive spending of the recession, as governments spending way beyond their means is bad for future business, and investors in the future of the Canadian marketplace. Nonetheless, slashes to environmental and agricultural programs in favour of jails and prisons may not necessarily be a move in the right direction. But for now, be happy to know that the Canadian government is beginning to reign in some of its cavalier spending habits. 

Happy Investing : ) And for more information, go to:

http://www.theglobeandmail.com/news/politics/ottawa-boosts-law-and-order-spending-as-stimulus-winds-down/article1924899/

Know Your Score: Check Your Credit Report Regularly and Save Money.

It is important for Canadians to check their credit scores on a regular and periodic basis. The credit score is a numerical expression of a person's credit worthiness, or their reliability with regards to liability payments. This is determined by a number of factors, but most importantly, a borrower's propensity to pay their bills on time, and with regularity, increases their score over time. Likewise, a failure to pay one's creditors on time, results in the score declining. Other factors, such as how much credit you have outstanding, how many requests or inquiries one makes for loans, and how many times they have been declined, can also have an effect on their score.

Below is a a great illustration of how your score might be determined:

The reason the credit score is such an important piece of information for Canadians is because the higher the score, the better deal you will get from lenders. Loans are not merely made on a yes or no basis, there are other elements of a loan that banks use your credit score to help determine, such as the interest rate and other terms that might be attached to your loan. For instance, two individuals might be requesting a loan from the same bank. Individual A has a credit score of 650. This is a good score and he might get approved for the loan depending on other factors such as his income, employment, etc. Individual B has a credit score of 790, (750+ would be a likely approval and a best terms loan) and the same income etc. as individual A. Due to their differing credit scores, Individual B might get a loan at prime, or perhaps 3 %, and individual B might get the loan at prime + 2, or 5 %. Both have the same job and income, but the one with the better credit score gets the better deal. Thus, your credit score can save or cost you thousands of dollars over the course of a loan.

It is, therefore, very important for you to check your credit report and score on a regular basis to ensure you are managing it properly. Personally, I like to check it every six months to make sure that everything is in good standing and that there are no anomalies with my account. This can be done by contacting either TransUnion or Equifax in Canada. Both legally have to provide a paper copy of your report for free, so there is no reason why this should not be done by everyone at least on an annual basis.

• To get your credit report, and read more information on this topic, I highly recommend that you check out the websites below:

http://www.transunion.ca/ca/personal/personal_en.page
http://www.consumer.equifax.ca/home/en_ca

Happy Investing : )