CLAM coins are one of the oldest crypto currencies and were forked from bitcoin and created in 2014. What made CLAM coins unique is they were mined using a Proof of Stake method. This makes them different than bitcoin because mining rewards are determined based on the share of coins a miner is “staking” rather than the computing power they contribute to the blockchain as is the way bitcoins and other “proof of work” blockchains work.
Canadian GIC rates have decreased since my last update during December. Now at the end of February, the forward curve is sloping upward (no more higher kink in the 1-2 year rates) but the spread between 1 and 5 year rates has shallowed from 0.74% to 0.55%, which implies a very low premium for locking money up for 5 years compared to just 1 year. The 5 year ladder yield is currently, 2.67% compared to HISA rates of 1.60% on demand deposits.
Recently QuadrigaCX declared bankruptcy and filed for creditor protection. In the meantime their website is down and the exchange has ceased operating.
What are the odds that depositors will receive anything within a year’s time? I’ve posted a fixed odds betting market on this question at coinroster.com. Click here to view the odds of QuadrigaCX depositors getting anything within a year’s time.
Free bets on best picture for the 2019 Oscars are available at CoinRoster.com
Roma is the clear favorite to win best picture this year. With odds of 1.8, this implies Roma has a 55% chance of winning. Green Book and The Favorite are the two next most likely to win with odds of 4 and 9 respectively.
Click on this link to receive 0.0003 bitcoins for free (worth about $1 USD at the time of writing). The free bitcoins can be used to make a bet on the Oscars and can be withdrawn after a 3x playing requirement is met.
CPA Canada has released a number of resources that help us understand why our tax system needs updating and what should be done to improve it. Click here to view CPA Canada’s website.
Below is a list of common investment terms with basic explanations.
Accrued Interest – Interest due from issue date or from the last coupon date to the security settlement date. Interest that has accumulated on a bond since its most recent regular interest payment date. The buyer of the security pays the accrued interest to the seller and recoups a full payment on the next payment date.
Amortization – The process where, as time passes, your fixed income investment moves inexorably to its face value or maturing value.
Balloon – The maturing principal of a bond issue.
Bank rate – The Canadian equivalent of the discount rate. This is the minimum rate of interest that the Bank of Canada charges on one-day loans to financial institutions. In December 2000, the Bank began setting the level of the Bank Rate – and with it, the target for the overnight rate – on eight fixed dates per year.
Basis point – 1/100 of a percentage point. It is often used to explain changes in bond yields. A 12 basis points increase in yield would mean a yield increase of 0.12 percentage points (e.g. 6.24 percent to 6.36 per cent is an increase of 12 basis points).
Benchmark – This refers to bonds by which others are valued. The Bank of Canada issues bonds at strategic maturity points (typically two, three, five, 10 and 30 years). When issuers bring new bonds to market, the presence of the Bank of Canada issues makes pricing easier since accurate market yields are readily available as references or benchmarks.
Bid price – The highest price a prospective buyer or dealer is willing to pay.
Bid size – The quantity (face value) of a security the highest bidding buyer wants to purchase.
Bid yield – The yield at which the highest bidding buyer is willing to purchase a security.
Bond – Evidence of a debt that is owed by a borrower who has agreed to pay a specific rate of interest, usually for a defined time period. At the end of that period the debt is repaid. Legally, a bond has assets pledged against the loan. In practice, the word is applied to any kind of term debt, collateralized or not.
Buy order– An order to purchase a security.
Callable – A bond that can be redeemed by the issuer, prior to its maturity date. Certain conditions have to be met.
Call price – The price at which a callable bond can be bought back by the issuer.
Certificate of deposit – A fixed income security issued by a chartered bank. Minimum purchase amount is usually $1000 with terms of from one to seven years.
Commercial paper – Short-term debt instruments issued by non-financial corporations. They have maximum maturities of one year.
Convertible bond– A bond containing a provision that permits conversion to the issuer’s common stock at some fixed exchange ratio.
Coupon – The annual rate of interest on the bond’s face value that a bond’s issuer promises to pay the bondholder. That portion of a bond that provides the holder with an interest payment at a pre-specified rate. Quoted at an annual rate, but usually paid semi-annually. A certificate attached to a bond evidencing interest due on a payment date.
CUSIP number – The Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal, government and corporate securities.
Dealer – A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
Debenture – A debt that is secured solely by the general creditworthiness of the issuer and not by the collateralization or lien against specific assets.
Description – Short-form notation used to distinguish a particular issue. Typically follows the following protocol Issuer_Coupon_Maturity (i.e. CAN 8.75 12/05).
Detailed information– Information data set. Contains the CUSIP number, Description, Bid Price, Ask Price, Bid Yield, Ask Yield, Bid Size, Ask Size, Coupon, Maturity and Credit Ratings (CBRS, Moody’s and S&P).
Discount – The amount by which a bond sells below its par (or maturity) value.
Discount securities – Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value; e.g. Treasury bills.
Downward yield curve – This refers to an abnormal yield curve where the shorter the term to maturity, the higher the yield. It occurs typically when a central bank is determined to snuff out an inflationary cycle.
Duration – The average life of your fixed income investment. A ten-year bond is not exactly a ten-year bond. All the interest payments shorten the average term. The bigger the interest payments, the shorter the duration. For a zero coupon bond, maturity and duration are the same since there are no cash flows to worry about. This term is used in measuring risk.
Extendible bond – An issue with a stated maturity date that under specific conditions gives the holder the right to extend the maturity for a further period.
Face value – Underlying principal amount of a security. The value of a bond that appears on the face of the certificate. It is almost always the maturity value of the bond. It is not an indication of current market value.
Flat yield curve – This refers to a yield curve where yields are the same at all maturities. ‘Flat’ can also mean that a bond is trading with no accrued interest, either because the settlement date coincides with the coupon payment date or else the issuer is not able to make interest payments.
Humped yield curve – This refers to a yield curve where some anomaly pushes yields at one or more maturity dates out of line with surrounding maturities.
Issuer – The entity (government or corporation) that borrowed the capital and is responsible for repaying the bondholder.
Income bond – A bond that pays interest only when earned by the issuer.
Inventory – To facilitate the retail and institutional clients, investment dealers maintain inventory of ‘shelf products’ financed with their own capital and which are offered at competitive prices.
Jobbers – Approved money market dealers who must bid for each week’s treasury bill auction.
Limit order – An order that is restricted in price.
Long term bond – One that matures in more than 10 years.
Make a market – A dealer is said to make a market when he quotes bid and offered prices at which he stands ready to buy and sell.
Market order – An order that is priced to move with the current market price. It must be executed as soon as possible at the best possible price.
Maturity date – The date on which the security matures is the day that the issuer must repay the amount borrowed plus interest to the holder of the note.
Medium term bond – One that matures in from 3 to 10 years.
Money market – A wholesale, financial market specializing in low risk, highly liquid debt instruments (bills, commercial paper, bankers’ acceptances and corporate paper) with terms to maturity of less than 1 year.
Moody’s rating – Method of credit analysis. A guide of relative bond value.
Municipals – Securities issued by local governments and their agencies.
Municipals (MUNI) notes – Short term notes issued by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues.
Offer price – The price at which a dealer will sell the securities.
Offer size – The quantity (face value) of a security that is offered for sale.
Offer yield – The yield at which a security is offered for sale.
Off the run – This refers to a bond issue that is not a ‘benchmark issue’. It may have a very high or low coupon, it may be a small illiquid issue, its ownership may be concentrated in few hands or it may have a feature, which makes it unattractive to trade. The bid-ask spread will be wider for such an issue, because dealers either do not wish to hold them in inventory or if they do, find it difficult to sell them quickly.
Order – An order is an expression of interest to either buy or sell an instrument.
Over the counter – This essentially means ‘not centralized’. Unlike the equity market, which has a recognizable physical location to trade stocks, the bond market is decentralized, without one meeting place; transactions occur verbally or electronically between markets.
PAR – Price of 100%. The principal amount at which the issuer of a debt security contracts to redeem that security at maturity, face value.
PAR value – The stated face value of a bond. It has no connection with the same expression that sometimes relates to common stocks. Also referred to as Face Value or Par.
Positive yield curve – This refers to a ‘normal’ yield curve, one in which the longer the term to maturity, the higher the yield.
Price – The dollar amount one or more parties are willing to pay/receive to purchase/sell a security. Price is typically expressed per $100 of Par Value.
Principal – What you lend. This value is expected to be returned to you at the bond’s maturity date.
Provincials – Securities issued by provincial governments and their agencies.
Quote – An indication of interest to either buy or sell.
Redeemable – This is similar to callable bonds but with one huge difference. Normally issued by corporations, a redeemable bond may be ‘called’ by the issuer but not for financial advantage; in other words, the issue may not be redone at a lower coupon rate. Rather, should a company have surplus cash or in the event of a corporate development the bond issue may be retired prematurely.
Reinvestment risk – There are two basic risks. The first is that the yield to maturity quoted on a bond may not be realized, since all interest payments never get reinvested at the same rate. Second, you will experience this risk if you have your entire portfolio maturing at the same time, and rates have fallen dramatically.
Residuals – The principal portion left over after all the interest payments have been stripped away.
Retractable – An issue that gives the holder the option, under certain circumstances, to redeem his holdings at their face value, prior to the final maturity date.
Sell order – An order to sell a security.
Settlement date – The month, day, and year the transaction will settle. As per industry standards, settlement usually occurs 3 business days after trade date (“T+3”) for Equities.
Fixed Income securities settle as follows:
Canadian, US T-Bills and Commercial Paper: T+1
GOC Bonds with an unexpired term of 3 years or less to maturity: T+2
All other Fixed Income instruments, including all Strip Bonds: T+3
Short sale – The sale of securities not owned by the seller in the expectation that the price of these securities will fall or as part of an arbitrage. A short sale must eventually be covered by a purchase of the securities sold.
Sinking fund – Indentures governing corporate issues often require that the issuer make annual payments to a sinking fund, the proceeds of which are used to retire randomly selected bonds in the issue.
Spread – Difference between bid and offered prices on a security.
Difference between yields on (or prices of) two securities of differing sorts or differing maturities.
In underwriting, difference between price realized by the issuer and price paid by the investor.
Difference between two prices or two rates. What a commodities trader would refer to as the basis.
Stripped bonds A bond that has had all its coupons removed, thus creating a series of zero coupon issues, the maturity dates of which are the interest payment dates of the coupon, as well as the originally established maturity date. Generally sold at a discount.
Summary information – Information data set. Contains the CUSIP number, Description, Bid Price, Offer Price, Bid Yield, Offer Yield, Bid Size, Offer Size.
Trade – A trade is a transaction. A trade has a buyer and a seller as well as a price and quantity.
Trade date – The date on which a transaction is initiated. The settlement day may be the trade date or a later date.
Treasury bill – Discount instruments issued by the federal government at a weekly auction. The T-bills generally have original maturities of 13 weeks (3 months), 26 weeks (6 months) and 52 weeks (1 year).
Two-sided market – Market in which both a bid and an offered price, good for the standard unit of trading, are quoted.
Two-way market – Market in which both a bid and an offered price are quoted.
Volatility – How much the price of a bond changes for a given movement in yield.
Yield – The interest rate expressed as an annual percentage that the funds will earn or cost over the term of the security.
Yield curve – The relationship between the various maturities of same credit quality issues. The curve for Government of Canada bonds sets the base of relationships for the Canadian market. For a description of the various forms of yield curves, please see Downward yield curve, Flat yield curve, Humped yield curve and Positive yield curve.
Yield to maturity – The rate of return yielded by a debt security held to maturity when both interest payments and the investor’s capital gain or loss on the security are taken into account. The return that an investor will receive if an issue is held to its maturity date and all coupons, as they are received, are re-invested at that yield level.
Zero coupon bond – A bond that pays no interest throughout its life. Zero Coupon Bonds (Zeros) sell at a discount to maturity value. The discount represents the return on the original investment, if the bond is held to its maturity date. The bonds are usually created using interest payment dates of a regular issue.
Below is a reference page on how to use DBRS ratings.
The DBRS® long-term debt rating scale is meant to give an indication of the risk that a borrower will not fulfill its full obligations in a timely manner, with respect to both interest and principal commitments. Every DBRS rating is based on quantitative and qualitative considerations relevant to the borrowing entity. Each rating category is denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the “middle” of the category. The AAA and D categories do not utilize “high”, “middle”, and “low” as differential grades.
Long-term debt rated AAA is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favourable. There are few qualifying factors present that would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a credible track record of superior performance. Given the extremely high standard that DBRS has set for this category, few entities are able to achieve a AAA rating.
Long-term debt rated AA is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated AAA only to a small degree. Given the extremely restrictive definition DBRS has for the AAA category, entities rated AA are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.
Long-term debt rated “A” is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of AA rated entities. While “A” is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.
Long-term debt rated BBB is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.
Long-term debt rated BB is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.
Long-term debt rated B is considered highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.
CCC CC C
Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated B. Long-term debt rated below B often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with CC and C normally used for lower ranking debt of companies for which the senior debt is rated in the CCC to B range.
A security rated D implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.
Rating Scale: Commercial Paper and Short-Term Debt
The DBRS® short-term debt rating scale is meant to give an indication of the risk that a borrower will not fulfill its near-term debt obligations in a timely manner. Every DBRS rating is based on quantitative and qualitative considerations relevant to the borrowing entity.
Short-term debt rated R-1 (high) is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an R-1 (high) rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an R-1 (high), few entities are strong enough to achieve this rating.
Short-term debt rated R-1 (middle) is of superior credit quality and, in most cases, ratings in this category differ from R-1 (high) credits by only a small degree. Given the extremely tough definition DBRS has established for the R-1 (high) category, entities rated R-1 (middle) are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.
Short-term debt rated R-1 (low) is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt, and profitability ratios is not normally as favourable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.
Short-term debt rated R-2 (high) is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt and profitability ratios is not as strong as credits rated in the R-1 (low) category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.
Short-term debt rated R-2 (middle) is considered to be of adequate credit quality. Relative to the R-2 (high) category, entities rated R-2 (middle) typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or are negatively impacted by a weaker industry. Ratings in this category would be more vulnerable to adverse changes in financial and economic conditions.
Short-term debt rated R-2 (low) is considered to be at the lower end of adequate credit quality, typically having some combination of challenges that are not acceptable for an R-2 (middle) credit. However, R-2 (low) ratings still display a level of credit strength that allows for a higher rating than the R-3 category, with this distinction often reflecting the issuer’s liquidity profile.
Short-term debt rated R-3 is considered to be at the lowest end of adequate credit quality, one step up from being speculative. While not yet defined as speculative, the R-3 category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside of the issuer’s control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.
Short-term debt rated R-4 is speculative. R-4 credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with R-4 ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.
Short-term debt rated R-5 is highly speculative. There is a reasonably high level of uncertainty as to the ability of the entity to repay the obligations on a continuing basis in the future, especially in periods of economic recession or industry adversity. In some cases, short-term debt rated R-5 may have challenges that if not corrected, could lead to default.
A security rated D implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.
So you’ve worked your way out of your parent’s house in the suburbs, achieved your initial career goals by working as a downtown professional, and now you realize its time to step up your financial game by making better use of your investment portfolio. What should your next steps be?
The first thing any serious investor should do is create a basic plan. Most investors neglect to do any planning and this usually results in poor outcomes and added stress, since when investors don’t know what their goals are, it will be impossible to reach them. A financial plan comes in many forms, and should be suited to your personal taste. If you’re having a tough time getting your day-to-day expenses under control, the best place to start is by making a budget. There are a ton of online resources that can help you create a budget and evaluate your results including simple calculators that will help you get a handle on the big picture, all the way to custom bookkeeping solutions that will treat your personal finances like running a business.
A basic financial plan can be as simple as a one page point form document. List your main financial goals (i.e. buy a house, save for vacations, retirement, etc) and some of your constraints (i.e. low risk, high risk, sustainable investing, etc). On a periodic basis, (monthly, quarterly, annually depending on your time constraint) list a few near term financial goals (i.e. open a brokerage account, portfolio re-balancing) and tack your one page financial plan to your fridge or beside your desk. This will help remind you to keep your plan on track.
If all of this sounds like a lot of work, then you’re probably better suited to working with a team of professionals. If you’re uncomfortable filing your own taxes, work with an accountant or bookkeeper who can file your personal return each year. If making your own investments is too time consuming or scary, find an investment professional who can give you advice and do the paperwork for you.
If your account is under $1 million or so, you won’t be able to use a full service broker, but you’ll be able to go into any bank branch and find someone you gel with. Don’t settle for the first person you meet, because you’ll get the most out of your branch banker when you find someone who you get along with. Don’t be afraid to do an introductory interview before starting a relationship with someone.
At the bank branch, you’ll have access to GICs (Guaranteed Investment Certificates) and mutual funds. You won’t be able to hold individual stocks. But if you open a self directed “discount brokerage” account, you’ll be able to hold any security available to the public including stocks, bonds, and low cost ETFs. All the major discount brokerages are nearly identical, so its best to have your discount brokerage account at the same institution where you do your main banking. Here is a list of discount brokerages from the major Canadian banks:
To open an account at any of these discount brokerages, you have a few routes to choose from. You can use your current online banking profile to populate the account forms online. You’ll still need to submit signed documents (and depending on the account type prove your identity) to the brokerage, which can be done by printing and mailing your signed account application. You can also bring your signed application to any bank branch (customer service desk) of the same institution. If printing out your own forms seems annoying, you can also walk in (or make an appointment) with a branch banker who can open an account for you in the branch, print off your docs, confirm your identity, and send your signed docs to the back office for approval.
Once you submit your account opening docs for approval, it will take a few days to a few weeks for your account to be reviewed and approved. Mark your calendar for two weeks, and check your online profile by that time. If your new account does not show up on your online banking profile within 2 weeks, call the 1-800 number of your brokerage to confirm they have received your application.
Once your account has been approved, it should show up on your online banking profile. Transferring funds can be done using an online banking transfer, but you can also send a cheque payable to your brokerage (not your own name) in the mail. You can also process transfers from other brokerages and investment accounts using online forms available on your brokerage’s website.
Managing your discount brokerage account takes a bit of work to start, but the nice thing about a discount brokerage account is you can tailor your account to meet your own specific needs/goals. You can hold a portfolio of low cost ETFs, stocks, bonds, real estate investment trusts, GICs, etc and any mix of what’s available. Each transaction you make for shares (such as stocks and ETFs) traded on the TSX will cost a one time transaction fee. This fee ranges from $5 to $10 depending on your tier level (bigger accounts and more frequent trades are cheaper). If you’re an hands-off passive investor, its perfectly fine to hold low cost ETFs and make 1 trade a year. You can even program your brokerage account to automatically re-invest your dividends (saving you even more time and transaction fees).
If you have specific questions about managing your discount brokerage account, or you would like me to write more posts on investing with a discount brokerage account in Canada, please reply to this post or send me a DM.
Transferring money back and forth from crypto to fiat can be annoying and expensive, not to mention attempting to follow anti-money laundering (AML) rules. A lot of the headaches can be avoided by using online vouchers.
I recently tried using QCX vouchers on QuadrigaCX exchange to give cryptos to my friend and it was even easier than Flexepin. To make a withdrawal using QCX vouchers, login to your QuadrigaCX account and click the Canadian dollar drop down from the top menu, and choose “withdraw”. You will arrive at page with a list of withdrawal methods, one of which is QCX vouchers. Select this method, then key in the amount you’d like to withdraw. Hit submit and you’ll be presented with a unique code. You can give this code to anyone and it will allow them to lfund their QuadrigaCX account. The code itself is kinda like cash, anyone can use the code if they have it, so keep the code secure, if you loose it, your money is gone.
If you receive a QCX voucher code, you can deposit it to your QuadrigaCX account by logging in and clicking the Canadian dollar drop down from the top menu, and choose “fund account”. You will land on the account funding page, where one option will be to deposit using a QCX voucher code. Simply choose this option, type in your code, and submit. The funds associated with your QCX voucher will instantly be added to your account.