The Kent Chin Report
Kent Chin is a highly educated professional with an MBA in Retail and Commercial Development from Ryerson University, a Master of Finance from Queen's University, and a Bachelor of Science in Environmental Health with a minor in Health Promotion from Toronto Metropolitan University. With extensive experience in public health, finance, retail, and commercial development, Kent is known for his strategic thinking, analytical skills, and leadership abilities.
May 23, 2023
Highest-denomination bill in Argentina is now the 2,000-peso note, worth $4
We've experienced almost 10% official inflation recently. The real number was almost 2x that, tapering down now to 4-5%, but real inflation is likely ~10%.
You've felt the pain at the grocery, restaurant and gas pump. At the same time, did your salary protect you from inflation? Have your investments?
Imagine living in Argentina where inflation is 130%. You get paid in pesos which lose over half their value every year. It's an extreme example, and lesson, as to why paper/fiat money cannot be trusted.
CAD/USD are already considered safe haven reserve currencies. Even so, our cash is an ice cube that is melting at 5-10% per year in real terms. Once upon a time, people would say "I wish I had $1M in the bank"...It would be foolish to hold anything in the bank now.
The solution? Hold assets that appreciate greater than inflation. Just be aware that the higher the appreciation, the more volatile and risky it will be...
A CAD Government Savings Bond pays ~3.5% because it's the safest investment; the return is also less than inflation.
Real estate has a historical average return of 6-8%, but may correct 20% and take a decade to recover. That being said, time heals mistakes with this one.
Next up is stocks with a historical return between 8-12% depending on whether it's the S&P or the more tech heavy, volatile and risky Nasdaq. Markets may correct 20-30% and individual stocks can go to $0. Time might fix your mistake, and only if it's a decent company with reasonable future prospects. Stocks segue nicely into buying yourself a paycheck. On that front, a pillar of my investments comprise stocks that show some decent growth profile while spitting out a handsome, reliable dividend that grows faster than inflation. I'm hoping that I can achieve ~$25-30k/yr in dividend income to supplement CPP/OAS when I hit 65, with some rental income to further keep from going on the Kraft Dinner Diet.
Finally, Bitcoin is the new emerging asset class that 10-20% of Canadians hold, sometimes without their knowledge (!). In its 15 year history it has grown from fractions of a penny to ~$27,000/coin. This is a 50%+ year over year growth, and an incredibly violent and nauseating ride to get there and not for the faint of heart.
Regulation is just beginning. On the plus side, the US considers it a commodity, thus tax treatment on capital gain is more favourable than for a security. On the downside, the accounting treatment is such that it's classified as an intangible asset. What that means is that if price goes down, it must be reported as such, but if Bitcoin increases in value, you can't show the upside on the financial statements. It's overly punitive at present and explains why only 25 US publicly traded companies hold it on their balance sheet (as an inflation hedge).
Ignoring the above, I've found the easiest, most reliable inflation fighter to be: simple living and eschewing an overly consumeristic lifestyle. I read a book years ago called "The Millionaire Next Door" and its observations and lessons are even more valid today.
May 4, 2023
"When people cry, BUY. When people yell, SELL...
BUT hold good quality assets that: 1) appreciate faster than inflation, 2) pay you a reliable passive income to hold the asset and 3) have a passive income stream that also grow faster than inflation. - This is the safest, but somewhat boring investment play that almost guarantees that you will get rich...slowly.
If you're lucky to work for a company that has a pension plan, count yourself lucky. I'm not one of those people. As such, I have to create my own pension to top up my CPP/OAS. I don't want to be forced to eat Kraft Dinner. And if I do, at least I can afford to buy Dijon ketchup (Gen X reference alert).
If someone were to ask me the safest investment that has decent capital appreciation with a safe, growing dividend, my generic answer would be any of the Canadian banks. Not one has missed a dividend since Confederation, not even during the Great Depression or 2008. Moreover, during 2008, the federal government gave them a hush hush bailout. They are too big to fail.
NOT a reco, but National Bank is my favourite bank. It's under the radar, as the #6 bank, but they're everywhere in Quebec. It's a solid, slow and steady stock. If you bought in 2018, you would have seen a 63% return and be enjoying ~6% dividend that grows about 5% per year. You're beating inflation. How much did your salary grow since 2018?
In March 2020, when the world felt like it was about to end, many stocks fell. Canadian banks actually probably fell the least. Nevertheless, I took a meaningful position in National Bank at about $48. It has since doubled and it now pays me to hold it to the tune of almost 10% per year.
But guess what? I broke my own rule. I sold half when I did a 2x as it meant I got my remaining 50% shares for free and get a lifetime of dividend income for free. But now I also have sellers remorse. I cashed out, but I didn't have anything BETTER to invest in. Key lesson? Sell if you need the cash. And if you don't, sell only if you have something better to redeploy the capital to.
Using simple math on NB, assuming you bought $10k of NB in 2020 when everyone thought stocks would go to $0. What does that investment look like now?
- Value of shares have done a 2x and are worth $20k+. On average, Canadian banks appreciate in value ~10%/yr over the long term.
- You are earning almost 10%/yr as a safe passive income, ~$2k/yr in dividends. Assuming 5%/yr growth, that will be ~$3,200/yr in 10 years.
You are earning money in your sleep. While sleeping soundly...
Q: How safe would they be from a major banking crisis that seems to be brewing in America?
A: The top 6 Canadian banks have withstood everything since inception for well over 100++ years without ever missing a dividend payment. I can think of only one minor Canadian bank that failed, back in the 80s. It's a highly protected industry immune to many external threats. They can acquire but can't be acquired. I also believe their capital reserve requirements are higher than in the US. In Canada, lenders also must apply a stress test on borrowers, which further mitigates against bad loans. It's a very conservative industry here.
Look at the charts for RBC - Royal Bank; TD - Toronto Dominion; BMO - Bank of Montreal; CIBC, BNS - Scotiabank
All or most of the above should be on NYSE.
https://www.dividend.com/how-to-invest/over-100-years-of-dividends-for-5-canadian-companies/
May 2, 2023
"I missed it."
In 2010...
Tesla was $10. Now $165.
Amazon was $8. Now $103.
Google was $13. Now $105.
Apple was $9. Now $169
Bitcoin was...$0.08. Now $28,500 (!)
If you invested $10k in each of the 4 stocks, the $40,000 spent would be over $600,000.
And if you bought $10 of Bitcoin in 2010, that small pizza would now be worth $3,500,000+. And yes, someone did buy a pizza with Bitcoin around that time! But if you were a gambler and threw $10k at Bitcoin back in 2010, you'd be rewarded for hodling (yes hodling) with $3.5 billion. Yes that's a billion with a B and too many zeros to comprehend.
2010 wasn't that long ago. Your salary may be half of what you're now making. At the same time, much of those salary gains got wiped out since our currency keeps getting devalued due to inflation. I see cash as an ice cube that melts away at 3-5% per year. You should too.
"I missed it", you might say. Based on my example, what you missed are the past 13 years. You still have the next 13 or 33 years. Or if you want to think intergenerationally, the next 130 years.
You didn't miss anything!
Edit: My comment holds true across asset classes. As a longstanding real estate guy, I'm often asked when the best time to get into real estate is, in order to time the market. My answer always?..."5 years ago."
April 11, 2023
Behavioural economics is fascinating...
When Bitcoin was $69k USD at the last top, a common sentiment was that it was way overpriced. Not a good investment because it was a bubble waiting to pop.
The bubble popped and it bottomed at $16k USD. At that price, a general sentiment was that it was going down somewhere between $3k and $0. A terrible investment and validation that Bitcoin was the greatest Ponzi scam of all time.
Since Jan 1st, Bitcoin value has increased by 80%. And due to its software programming, there should be a continued incremental tear until next halving in April 2024. From there, there may be an exponential increase for about one year thereafter. Note the words 'should" and "may". Macroeconomic and black swan events may impact the price trajectory significantly.
You can replace the actual numbers but the above sentiments have been on a cyclical rinse and repeat for, oh, about 15 years. It's not just still here, but following the disruptive technology adoption rate S-curve similar to cell phone and internet adoption.
In 1995, I had heard of the internet and email but didn't actually use it.
In 1997, I used the internet for the first time to download an apple pie recipe and had a few email friends.
In 1998, I started to use Google. People thought Amazon was a dumb idea. Who would want to buy books over the internet? Even worse, many internet users swore that they would NEVER enter their credit card info over the internet. NE-VER.
Notice how close the above dates are. In the span of 3 years, I'm guessing internet adoption did a 10x or more. Bitcoin is following this. You just don't know about it because we live in the developed half of the world that doesn't need it.
It's now 2023 and I''ve finally discovered why cat videos are so amazing. But I've also saved thousands by learning how to fix my hot water heater and car, on occasion.
Finally, lest anyone thinks I'm trying to paint a rose coloured portrait of Bitcoin, be painfully aware that on the path up, there are frequent and sudden 30-50% price drawdowns. On the bear cycle, it'll be an 80% price drawdown from the top. In short, volatility is the price that must be paid for performance.
April 10, 2023
We are pretty much at Year 0 of artificial intelligence. People are getting their minds blown by Chat GPT. It has helped people ask for a raise, write application letters and create business plans. It also creates ridiculous artwork. Two years ago, the plethora of AI applications available to regular citizens was still science fiction. At Year 0, AI has become an advisor and consultant. Despite convincing illusions, AI is not sentient or self aware.
Moore's Law posits that the number of transistors in a chip doubles every two years. Extrapolating this toward AI capabilities at Year 10, will it achieve sentience and be fitted out with a robotic body? At this stage of advancement, will humans transition and outsource leadership roles to AI? Will the COO or CEO or Mayor be AI? Will AI be responsible for the nuclear arsenals of the world, using the logic that AI, well, will be perfectly logical?
At Year 100, what are we to make of AI? Will its exponential advancement over the course of just 100 years surpass 200,000 years of human evolution? At that point, is AI a benevolent deity? Or are we slaves?
April 9, 2023
You may have been experiencing a disconnect and wondering why. The official inflation rate is about 6%, which is high enough as it is. At the same time, your mental mathematician can't reconcile the official figure from what you've been experiencing in the real world.
The jug of canola oil was $6-7 not long ago and now it's double. Same goes for butter. Same goes for meat, etc. What's going on?
What's going on is how the government measures inflation. Many of us have stopped buying a particular product if it can be substituted with something else. When enough people do that, due to inflation, that product will drop off the basket of good being measured. This results in inflation perpetually being grossly understated.
For me, I've stopped buying corn starch. It used to be $2/box and now it's $3-4. Flour is now ~8x cheaper than corn starch and so I use that instead. If enough people were to do the same, corn starch would be kicked out the basket of goods used to measure inflation. And even though it went up 2x in price, it wouldn't be captured in inflation.
My take on real world inflation is that it's 2x whatever is being reported.
March 19, 2023
NOT financial advice. As I was researching and bottom feeding for stocks in March, 2020, when markets collapsed, I started to bump up against Bitcoin articles. At that moment, Bitcoin was $3,000 USD. I went down the cryptocurrency rabbit hole and learned about Bitcoin, altcoins, Blockchain technology, global adoption rate, its price history and programmed repeating pattern. Most importantly, I learned about its use cases and who the users might be (ie the half of the world that struggles to use traditional banking, needs frequent and cheap money transfers and who live in countries with currency hyperdevaluation).
I finished my research in late summer of 2020 and was comfortable in this investment. I bought my first Bitcoin at $10,000 USD and first Ethereum at $450, right around the time of the "halving event". Total oversimplification, but this programmed event creates output scarcity and drives a parabolic increase. At the time, experts believed Bitcoin would top out at $100,000. It didn't reach that amount because macroeconomic events caused governments to suck liquidity out of markets and investors went risk off, hence your stock portfolio has been dropping steadily. Bitcoin did still reach $69,000 USD as a parabolic top.
From bubble top to valley, Bitcoin historically loses 85% and so Bitcoin did fall to $15k a few months ago. The media was saying it was going to zero. So what did I do? I bought a bit, of course... Many people who bought at $50k+ who didn't do their research sold and lost a lot of money. I feel sorry for them, and yet all the information is out there.
As the media starts to cover Bitcoin again in the next year, here's my take and friendly message to you:
- Don't invest in anything you don't understand.
- Look at price history and find an entry point.
- If it's a fundamentally good asset, buy it when it's being hammered and not when it's being hyped. When people cry, buy and when people yell, sell.
- You and I may never actually use Bitcoin. That's because it wasn't designed for us. But half the world can use such a tool and there's a lonnng way to go in adoption. That means there's also a biggg upside in front, punctuated by periods of getting slammed. I'm talking 30-50% drawdowns during normalized market and 85% drawdown post cycle top.
- Unless you are ok to hold Bitcoin for 4+ years, do NOT buy any Bitcoin.
In short, when the masses invest in Bitcoin, it won't be a good investment anymore. Do you wish you owned Apple stock 20 years ago? It was very unstable but made millionaires. I know people who bought Tesla early enough and rode through 80% drops to now become millionaires also.
If you want to buy some Bitcoin how much should you allocate? This is actually easy math. If my 15yr old boy loses $1,000, that's catastrophic to him. If he loses $200 he'll be upset but can earn it back and not be damaged...
Bitcoin is $27,000 USD today. If you believe it can hit $100,000, that's ~4x. Let's say Bitcoin can go to $0 (near nil chance at this point) OR hit $100,000 in either the next halving in 2024 or the one thereafter in 2028. If you invest $25k, your maximum loss is $25k and your upside is $75k. What does losing $25k mean to you vs gaining $75k? That's the math you have to do.
In the next year, you will hear a lot about Bitcoin. Most of the info will be crap. I'm not telling you to buy or not to buy. I'm just sharing my story and the Coles Notes with you to be informed.
