spoonman's Journal

Where are you and where are you going?
spoonman
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#114 05/08/2015 -- First Week in Montreal

So we've been here a week now. The experience has been so rich that it actually feels like we've been here three weeks. We quickly recovered from our tough flight and have been enjoying the city quite a bit. This whole week has been unseasonably warm, with temperatures reaching above 80 degrees. Since we didn't expect it to be this warm right so soon, we have been spending a lot of time outside exploring the city. We've been in party mode the majority of the time; eating out, drinking beer, enjoying coffee shops (I think people in Montreal enjoy their coffee even more than those in Seattle, coffee shops are everywhere), and just generally enjoying the palpable atmosphere of non-U.S.-ness. Our place is so well located that it feels like we're in the middle of the action, but then again it's difficult to go wrong anywhere you are in Montreal. Lots of brick, lots of cool places to eat, and lots of bikes.

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Speaking of bikes, the other day we had a great time trying out Montreal's BIXI (bike+taxi). It's a system of rentable bikes scattered throughout the city designed for short hops between pickup locations. That's perfect for transients like ourselves because we don't have to worry about buying a bike, storing it, locking it up, and losing it. We're thinking of getting a half season pass for 55$ CAD each. We'll probably do that next month after we finish using our subway passes, which are good until the end of this month.

The subway itself has been really easy and fun to use, it's fast and not insanely crowded like the ones in other cities (Rome comes to mind). The stations are relatively clean and some are even connected to underground shopping areas, which is understandable when you think about Montreal's brutal winters. We're gonna continue to use the subway to make the most out of this month's pass.

Today we visited the McGill school campus (got there via subway, of course). I visited the campus and the physics department 15 yers ago. The architecture of the university is just as I remembered it; more stone than brick, like a conglomeration of cool castles. We strolled through the ground floor of the physics building and saw some exhibitions about Ernest Rutherford (the discoverer of the atomic nucleus). Since it's a weekday, I saw students and staff milling about. I was amused to see that my beloved physics brethren haven't changed one bit: they all have that unmistakable, nerdy look. I felt at home. One of these days I think I'll sit in on a colloquium, it's been a while.

The day was hot so we limited our stroll around campus. Afterward we decided to go to The Peel Pub, one of the places suggested to me by a forum member. We enjoyed a couple of beers for only 3$ a pop, definitely the lowest price we've seen in Montreal so far. Although the vibe there felt quite American, I can totally go back for cheap beers and to catch a football game.

A few days ago we spent a couple of hours at the Plateau and had an afternoon snack at a place called Le Melbourne Cafe. When we first walked by it, the word Melbourne caught my eye and made me think of all my Australian forum friends. The grilled cheese sandwich we had was friggin delicious.

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Here's a photo of the outside, the picture of Moe from The Simpsons struck me as comical, I don't really know why they're using it.

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So all in all, it's been a fantastic first week, we couldn't have asked for better weather!

spoonman
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#115 05/15/2015 -- April Expenses Blurb

OK, so this update is coming super late. The lights and space of Montreal totally made me forget about it. But hey, better late than never. April was another "vanilla" month, we stayed within budget.

For the month of April our net spending was $1384, well under our budget of $1860. We underspent across all categories, that's why expenses came in ridiculously low this month. We clamped up a little bit in anticipation of Montreal, which will put us through a challenging month of May.

In the months ahead we will channel much of our discretionary dollars towards eating out. Yes, it's not the most frugal thing to do, but we are in the honeymoon phase of our stay in Montreal and we are very excited about exploring the city's culinary and alcoholic delights.

George the original one
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Post by George the original one »

In addition to your wallet, watch your waistline, LOL!

spoonman
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Post by spoonman »

@GTOO: Hahah! That's precisely Spoongirl's concern because we no longer have our scale!

spoonman
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#116 05/17/2015 -- Summer Festivals Galore!

When we lived in the PNW, you could have said that the theme of our adventures was the great outdoors; volcanoes, forests, beaches, etc. Now that we are in Montreal, the theme will be best described as artsy and driven by a number of cultural activities, namely festivals.

The city of Montreal offers a plethora of festivals in the summer with many of the programs being free to attend. We are lucky enough to have gotten here at the start of Elektra, a festival of digital arts and audio. We discovered Elektra by accident when we visited the Montreal Museum of Contemporary Art (MAC). There we saw an exhibition called Nyloid, a futuristic looking tripod that contorted in all sorts of ways and emitted cool sounds. I was blown away by Nyloid and was pleased to learn that it was part of the Elektra festival, which was launching that very day. Since then, we've been attending all of the free Elektra exhibitions. I will just say right now that I totally love the so-called "kinetic sculptures" that have been shown, they speak to me far more than a typical painting. I love audiovisual presentations that show rich sound and imagery. Many of my favorite audiovisual presentations seem like a creative mash up between Mamoru Oshii and Stanley Kubrick.

There's a bunch of other festivals we plan to attend in the next few months. There's MUTEK, the international festival of digital creativity and electronic music, coming up at the end of the month. And, of course, there's the awesome Montreal Jazz Festival at the end of June. We're really excited for that one because we've been listening to jazz on a daily basis for months now.

We look forward to exploring many of the museums the city has to offer. The 24th of May is Museum day in Montreal, so we will capitalize on the free admission to 34 museums. At one point in the future we will graduate to the smaller art galleries, namely those in the Plateau.

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message
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Post by message »

Hi Spoonman,

I have been to Montreal too a lont time ago, loved it very much too!
The best thing I have seen there was the anual fireworks championship... At the themepark "La ronde".
It is truly amazing, I was blown away!

This year it will start on July 1st untill somewhere in august.
If you are still there in July, it might be great to look at it.

I remember us standing on a very high bridge, overlooking the theme park (though outside!!). No entrance, just amazing fireworks.

Might be something to check out when/if you are still there

spoonman
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Post by spoonman »

@message: That's a great idea! Spoongirl is gonna love it. We'll be here through July and August, so we're definitely gonna try to see the fireworks.

message
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Post by message »

Ah, great! You will be in for a treat....
Just to give you an idea...
Fireworks from 2014...
https://www.youtube.com/watch?v=riAus8WeHG8

Wished I could go again...

spoonman
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#117 05/22/2015 -- Complexe de Gaspe and Cinematheque Quebequoise

I mentioned in the previous post that we've been hitting up all of the free exhibitions in the Elektra Festival. Earlier this week we went to the Complexe de Gaspe in the Plateau to have a look at Frequencies, by Nicolas Bernier. The Complexe is a large repurposed industrial warehouse, part of several such buildings in the area, which now house creative firms, startups, and art galleries. Inside a tiny gallery space Frequencies consisted of a setup that looked very much like a physics experiment in which a tunning fork is struck by a solenoid and generated a beat frequency by mixing with the sound of a nearby electronic speaker. It was neat, but as a physicist it was difficult for me to "suspend disbelief" and regard it as a work of art, to me it looked very much like an undergraduate lab setup, see the photo below.

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Lucky for us there were other open galleries featuring some neat exhibitions. In fact, most of the ground floor of the building is devoted to these spaces. One of them was Dazibao, which was showing A Lecture in Art by Nelson Henricks. The piece is a four channel video installation displayed on four separate walls. There were several aspects of A Lecture in Art that I liked, but the thing that really hooked me in was the fact that it was centered on a speech given by Oscar Wilde in 1882 about his opinion on interior decoration. Basically, Oscar Wilde was ranting about how much he disliked machine-made furniture and other offensive decorative elements of a house (I was gonna post an excerpt of the speech, but for the life of me I can't find it on the internet). The speech, shown in one of the video channels, was performed by a man that was instructed to change his intonation this way and that. Overall, it was a really engaging piece of video art. You can find more about it here: http://nelsonhenricks.com/?projects=a-l ... n-art-2015 .

Another notable exhibition was one by Au bonheur des galets, by Renee Lavaillante. It was very simple but very pleasureable to look at (image below). I kept wanting to pull out my own pattern from his drawings.

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The following day we made our way to the Cinematheque Quebequoise to view Topologies, by Quayola. It was another multi-channel video installation. Basically, what the artist did was take two iconic paintings, downsampled the imagery to fit coarse, two-dimensional polygons, and then created a video where the vertices of the polygons moved vertically in accordance to some sound track. It was very interesting to look at, quite hypnotic. The Cinematheque had other free treats in store for us. There was an exhibition on the history of special effects in movies. I was delighted to see the Game Pod from the movie Existenz. They also had a little side display of the evolution of television sets. There were all sorts of models, some of which had a lot more wood paneling than screen size. One of the 1980's models really took me back in time.

So far, our strategy of going to free art displays has really paid off. I've developed a bit of an obsession over A Lecture in Art. Not bad for something we got to see for free.

As a bonus, here's a photo of one of the neighborhoods we walked by in the Plateau. I am a total sucker for brick, and cool totally-unamerican architecture.

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We also ran into this really cute community garden. There isn't that much real estate in the urban part of Montreal for backyard gardens, so it's really cool that the community can have access to these spaces.

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thrifty++
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Post by thrifty++ »

Hey spoonman!

I am really enjoying your journal. Very inspiring!

Its funny that you are now in Montreal. It has been my dream for a few years to move to Montreal to become fluent in French and being living there. And now you are there! I am originally from Montreal but have lived in New Zealand since I have been 13 years old and am longing to go back. Have dual passports.

I have been tossing up whether to just move to Montreal with my current financial position. However I have nothing like the same economic security as you, despite being almost the same age. I would basically just have to eat into my savings and have no passive income. I envisage that I could potentially be in the same position or nearish to you within three years. Possibly I could wait until then. Alternatively I could just move to Montreal now. But I am professionally qualified as a lawyer in NZ and Quebec is totally different. My income would disappear! But the cost of living is ridiculously cheap compared to Auckland. Definitely half the cost, maybe even a third. So I could still be better off. Who knows.

I totally understand what you are saying about buying a house being drama. The average house cost in Auckland is now around $820k! I am so inspired to hear you have made it through the stockmarket rather than through housing. Housing seems impossible in NZ now. NZ house prices never collapsed like the US. Prices are out of control.

I get so confused trying to work out how to invest properly. My money just sits uselessly in savings accounts which is basically a poverty trap. I really dont know where to start. This is despite having a degree in economics and finance! So much for academic usefulness!

I have a few questions for you I hope you don't mind me asking. In NZ there is no capital gains tax. So share price increases are not taxable but dividends are. What is the situation in US? Are dividends taxed? How do you deal with that trade off of the earnings being taxable?

It seemed like you talked about your dividends increasing due to you fuelling more savings into investments. Will the dividends grow on their own? Have they since you retired?

Im sorry to be a doomsayer and I am not trying to freak you out but I must ask this just to hear your thoughts for me. I am wondering if you get concerned about the diversification of your assets. I know you have about 20 companies or so. But lets say that US share prices collapse altogether (eg1987), are you concerned about loosing your ability for a sustainable income? Would the dividends not also drop ultimately?

cheers and please keep posting your stories! :)

spoonman
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Post by spoonman »

@thrifty++: Thanks for following our journey. I'll write a more thorough response tonight after we come back from Museum Day. I'll address all your questions =).

spoonman
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Post by spoonman »

@thrifty++: You are fortunate to have been acquainted with Montreal at such an early age. You probably know how to deal with the brutal winters here, I don't know if I ever could. But it's certainly a paradise here in the summer.

About dividend and capital gains taxation in the US, it primarily depends on your tax bracket. For those in the 10% and 15% tax brackets, they do not have to pay taxes on capital gains and qualified dividends (e.g. REITs do not qualify). Since we currently fall in a low tax bracket, we don't have to worry about paying federal taxes. Even in the accumulation stage of our journey, when we were in a very high tax bracket, we were only paying something like 15% on qualified dividends. So to answer your question, we are currently enjoying a preferential tax treatment, it's one of the great perks of using dividends to fund retirement.

Since we are no longer making contributions from earned income to our portfolio, the dividend income is increasing via organic growth. For the year 2015 I expect to get a raise of about 6%, which should have been a bit higher had it not been for the crash in oil prices (which, btw, isn't the end of the world because the oil companies we own are still paying dividends right through this crisis).

We actually own around 40 companies across 10 different sectors. I don't allow each company to go over 5% of the total portfolio in terms of principal and income. Since ours is an income based strategy, we are not concerned with the daily or even cyclical gyrations of the market. As long as our robust companies pay and increase their dividends we'll be fine. Even if a 2008-type meltdown were to strike again, it would not be a catastrophe for us because we are not funding our retirement by selling shares. The dividend income might stagnate or even go down a bit, but it would not collapse.

As I alluded to earlier, a good example of a crisis is the price of oil, which has recently taken a precipitous drop. Our dividend income from our oil companies won't increase that much this year, but that's alright because the energy component of our portfolio is only 15%, so the other sectors pick up the slack.

As a dividend growth investor I don't have to worry about the state of the market because the dividends keep rolling in regardless of what it's doing. In other words, there isn't a timing component to our strategy, and that makes me sleep well at night.

cmonkey
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Post by cmonkey »

spoonman wrote:We actually own around 40 companies across 10 different sectors.
I like your explanation of why dividend growth is working for you and I am glad I am incorporating DGI into my strategy as well.

I am curious what 10 sectors you are invested in?

thrifty++
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Post by thrifty++ »

Thanks for the detailed response Spoonman.

I really like the sound of this dividend growth investing strategy. I think I will give some pursuit to it. I have $70k sitting around in bank accounts almost totally useless. Mind you interest is higher in NZ it seems. Partly that is because there is no government guarantee on any bank deposits like in the US. currently my bank deposits are at around 4%.

Problem with buying shares in NZ atm is that the share prices are apparently at an all time high. We apparently have a "rock star" economy. So bad time to buy. But I guess with dividend focussed shares it does not matter too much. I need to buy in an economy which is not doing so well. I wonder how hard it is to buy on overseas stock exchanges. The only ones it seems easy for us to buy on from here is the Australian one. At least their economy is starting to go downhill so that might be a good bet.

BTW I don't think I would find Montreal winters that easy. Which is why I probably should wait until leaving right at the beginning of May next year like you have done. SO that I get a full 5 months. I have gotten used to Auckland winters where temperatures do not go below 8 degrees Celsius. If I went to Montreal close to winter I imagine I would come running back to NZ. Need to be well settled first.

spoonman
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Post by spoonman »

@cmonkey: Actually, make that 11 sectors. It's the S&P 500 sectors, plus REITs, which are normally rolled up as part of financials but I keep them separate because their business models are totally different. Here they are:

Technology
Telecom
Health Care
Energy
Consumer Staples
Consumer Discretionary
Industrials
Utilities
Financials
Materials
REIT

@thrifty++: Indeed, spring is probably the best time to come here and get acclimated. I would argue that spring is probably the best time for anyone to pull the trigger and leave work. It just makes things easier because the weather is cooperative and a bunch of activities are available. If I had to do it all over again, I would have left work at the start of spring.

About buying into an overvalued market, you still have to tread carefully. One of the cardinal rules of DGI is to never overpay for shares of a company. You want to buy shares that are less than fully valued in order to give yourself a margin of safety. Now, just because the market as a whole is overvalued, it doesn't mean that there aren't individual companies that are still well priced. One good example of such a company in our well valued market is Emerson Electric (ticker:EMR).

In addition to buying criteria, there is still a set of selling criteria for a company. But at this point, let me point you to an article by David van Knapp from Seeking Alpha. He has a gift for articulating DGI in a very easy to absorb format. Here's a good article:

http://seekingalpha.com/article/2936106 ... ness-model

Anything he writes is very instructional. So are articles by Chuck Carnevale.

thrifty++
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Post by thrifty++ »

Thanks heaps for the links on Dividend Growth Investment Spoonman! Am reading now!

cmonkey
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Post by cmonkey »

spoonman wrote:One of the cardinal rules of DGI is to never overpay for shares of a company.
Do you use P/E ratio mainly for determine if a company is fairly valued? What value do you try to stay under?

spoonman
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Post by spoonman »

@cmonkey: Over the years, I've used a number of techniques for estimating a company's intrinsic value. About two years ago I settled on using Chuck Carnevale's FAST Graphs tool. For a fee of $9.99 a month I get all the number crunching done for me across hundreds of companies. I decided to go the FAST Graphs route because when I was working I didn't have the time to sit down and dig up all the input numbers on my own. Additionally, and more importantly, I saw the amazing correlation between a company's stock price and the valuation estimates of the tool. So for two years now I've been able to look up a company's intrinsic value with total confidence.

spoonman
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Post by spoonman »

#118 05/26/2015 -- Marché Jean-Talon

This weekend we went to Montreal's charming Jean-Talon Market. We've been meaning to find a cool market like this since we moved here. The place is conveniently located just two blocks from the Jean-Talon metro station, so it was easy for us to get there with our subway passes. It's mostly an open-air farmers market, but it does have an iconic central hub that looks like an aircraft hangar. The market is quite large with lots of things going on. We were like kids at a candy store.

The first thing we got was some fresh produce. Three huge mangos for 5$ and two packs of blackberries for 5$. Then we got something to snack on, vegetarian samosas and one Argentine beef empanada for about 7$. Finally, after running around the complex trying free samples and taking note of prices, we had delicious sorbet for $4.

On our way back to the metro station we discovered a busy Asian market where we bought some condiments that we've been meaning to buy for a while. We have many grocery stores and "deps" near our place, but we haven't found a quality ethnic store for particular items, like curry sauce cubes.

We also stumbled upon a discount luggage shop where we picked up a little trolley that we plan to use for hauling back groceries. We've been carrying our groceries with our backpacks, which isn't always comfortable, so the trolley will make it a lot easier to carry stuff back to our apartment. They're used by many locals in the city. Yes, it's another item that we won't be able to take with us, but we'll just sell it when we leave Montreal.

The afternoon at the Jean-Talon Market was a complete success and we definitely plan to go back soon.

cmonkey
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Re: spoonman's Journal

Post by cmonkey »

spoonman wrote:About two years ago I settled on using Chuck Carnevale's FAST Graphs tool.

That looks like a really nifty service. My inner tightwad is thankfully being overpowered by my inner investor as I sit watch the demo videos. The truth is I don't know a tremendous amount about investing other than the basics of DGI and am not so proud that I can't admit it. I think I'll give the trial a shot.

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