CareVest Carecana Redemption - Tin Roof Rusted

Carecana Management Corp. is mailing interim CareVest statements.  To reduce costs, only online statements will be available as of January 1, 2014.

If you are part of a redemption for Class A Shares in Carevest Mortgage Investment Corporation, the statement will be helpful in tracking capital losses given the cut in redemption price.  Balances of un-redeemed shares are shown in a "Total Cash Account" line item (not really cash given it shows an amount of shares under the "Shares Held" column).

The Class A Shares price remains at $9.90 for its NAV / Redemption Price Per Share.

PS - driving up Highway 404 you can spot a fading "Financing by Carevest" sign off to the east.   Too many bad deals on speculative developments might have dragged down this MIC.  When you see a faded sign at the side of the road, its always better if it says 15 miles to the Looooooove Shack!  Love Shack Yeah.




Timbercreek MIC on Decline

Timbercreek Mortgage Investment Corp's steady steel wheels have run off the rails, with the price of TMC falling by over 12% in the last year.  Typically it has seen no price action and has had very low beta.  The whip came down in June, pushing the MIC's yield to a sweet as brown sugar 8%.  This is despite the steady 6.3 cent payout per month (equivalent to 0.68% this past September).

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Another MIC ready for a comeback!
In an interview with canadianmortgagetrends.com, Andrew Jones, Managing Director, Debt Investments at Timbercreek Asset Management, was asked about the impact of rising interest rates.  Jones noted that MICs have built-in protection as the loans are typically of short duration (e.g., Timbercreek average duration remaining is between 18-24 months).  The high portfolio turnover means about half of  loans could be repaid each year. So the MIC is able to pursue new loans at higher interest rates in a short time if rates rise.  Also loans can include floor rates based on prime so that the MIC benefits from an increase in prime but is protected by a minimum 'floor' interest rate. That should gimme shelter from the shattered price drop of late.

Timbercreek announced it has received shareholder approval for the Corporation's transition from the Canadian securities regulatory regime for investment funds to the regulatory regime for non-investment fund reporting issuers.  Pricing will hopefully correct after the transition.

It has been noted that while a public company is more expensive to operate than a fund, Timbercreek says shareholders will benefit because the funds will no longer pay trailer fees to investment advisers who sell their units.

Blackberry Crumbles - How to Fix

Ingredients

1/2 cup all-purpose flour
1/2 cup light brown sugar
$5 cash per share
1/4 cup granulated sugar
1/2 teaspoon ground cinnamon
1 pinch salt
1/2 cup oats
6 tablespoons cold butter, cut into small pieces
4 cups mixed berries
millions in unsold inventory
1/2 cup granulated sugar
2 tablespoons cornstarch
Equipment: 6 (6-ounce) ramekins

How to Fix

Preheat oven to 350 degrees F.

In a large bowl combine flour, brown sugar, 1/4 cup sugar, cinnamon, salt and oats. Using a pastry blender, a fork or your hands cut in butter. Remove nuts!!!! Keep cold until ready to use.

In a large bowl combine berries, 1/2 cup sugar, and cornstarch; toss to coat. Evenly divide the fruit mixture between the 6 ramekins .. see if any is leftover for shareholders. Top with crumble topping. Bake until top is golden and fruit is bubbly, about 35 minutes ..may take more than a few quarter says Prem. Serve warm.

At least you'll feel good eating this.  Ingredients probably costs a lot less than what you bought your shares for!!!

Canadian REITs Beat-up - Trading at Discount to NAV

First Asset kicks the REIT tires at the end of August in a commentary on their funds:

REITs = seem beat-up like some cheesy DIY super hero
"Real estate equities on aggregate are currently trading at a ~13% discount to NAV while they generally trade at a premium. Implied cap rates are ~375bps higher than the benchmark 10 Year Government of Canada bond yield, slightly tighter than the long term average. A 25bps change in cap rates affects NAV by an average of 8-9% for our universe under consideration; alternatively a 25bps increase in cap rates implies REITs must grow same-property NOI by 3-4% in order to maintain current valuations. Assuming REITs trade at NAV, we estimate that the market is pricing in a 50bps expansion in cap rates. Given that the private market has not yet seen any expansion in cap rates, we view this expectation as premature.

Cash flow for the next year looks poised to increase on the back of favorable financing terms, continued strength in property fundamentals, and little in the way of forecast new supply. Based on our mid to high single digit cash flow growth outlook, and 5-6% distribution yield, high single to low double digit total returns appear achievable on a twelve month view. We acknowledge that higher interest rates could result in multiple compression which would temper our total return view."

The REIT ETFs from BMO (ZRE) and iShares (XRE) were both down about 15% from May highs.  The following charts show that today you can buy into these REIT funds at late 2011 prices !

XRE

ZRE

Most REITs’ existing debt, which is renewing at 10% a year, is priced 1.5-2% above todays market rates for new debt.  So there is still an opportunity for REITs to to reduce interest costs when debt is refinanced.

Alien ETF Concept - No Fee Purchases at Questrade

For those with small investment portfolios, fees often forced investors into mutual funds in order to get diversification and to avoid erosion of returns from the fees of many small trades for many small holdings.

Free ETF purchases at Questrade now frees investors to purchase a few ETF shares at a time without that erosion.  Questrade says the following regarding limits on fee-free purchase:

"No limits. None. Nada. Zilch. You can buy one ETF or all of them, one share or as many as you’d like. There are no restrictions, no minimum investment amount, no maximum number of ETFs you can buy."

ETFonehome.. "Mom, I saved on trading fees!"
This is an alien concept that can open up new strategies for investors. Of course there is the hassle of making those small purchases.  If you holdings are large enough and provide a DRIP to purchase more shares with distributions then this is not an issue (DRIP purchases are free free already).   But if you are building a position in a different ETF, then free-free ETF purchases will help you get there.

This is an equation given under Portfolio Size for Choosing ETFs over Index Funds:

Size of portfolio for choosing ETFs = Trading commissions / (Higher MER – Lower MER)

An example Sleepy Mini Portfolio analysis showed that a $143,000 portfolio was needed to favour index ETFs over TD eSeries funds, considering $30 a trade.  With Trading Commissions = $0 on the right of the equation, the size of the portfolio on the left drops to $0 too, meaning index ETFs can be cost-effectively selected over index mutual funds for any size.

Best RESP GIC Rates .. The Bonds List

Despite other shortcomings (don't get me started), Questrade, does offer the best way to earn a guaranteed RESP GIC return in those years before redemption.  Perhaps you had some equity investment in the RESP in those early years and are looking to lock in the returns for the eventual redemption.  A self-directed Questrade RESP account may be the answer since you can sell your securities and buy GICs in the same account.
Top of the Bonds List

A big bank like RBC (Royal Bank) offers returns of 1.3% to 1.4% on 1 to 2 year non-redeemable GIC deposits in an RESP account.  Minimum deposit is $1000. Questrade does better.  Their returns are listed in this:

Questrade "Bonds" List

Scroll to the end of the list for the TERM DEPOSITS / GIC: 1 - 6 YEARS table where you'll find better rates from 2.0% to 2.25% for 1 to 2 year terms.  Rates are offered by several banks and trust companies.  Interestingly, Royal Bank offers 1.4% to 1.9% rates on 1 and 2 year deposits through Questrade - higher than what is shown on their web site: RBC GIC rates link
Bottom of Bonds List

Buying the GIC has no trading fee, even though its shown in your 'trading' account.  The GIC rates are competitive with the best non-RESP GIC rates you can get from someone like Achieva Financial, who we use for TFSA and RESP GICs.

The Questrade onds List also has a bunch of Bonds ... real Bonds, from Secondary Municipal, Government and Corporate Strips, High Yield, Corporate and Provincial products.  Scanning the corporate bonds list you'll find that you won't crack the 3.0% yield to maturity for most issues unless you lock up your money for 6 years.