December 19, 2011 | In: Opinion

Apple: The Beginning of the End

I consider myself to be contrarian when it comes to stock trading, but I’m not contrarian just for the sake of it, I do my own research before evaluating a company, and, in most cases, my evaluation is the complete opposite of the market valuation of a company.

I do my due diligence on every company I wish to invest in, and Apple is one of them… But, while doing my own research on Apple, I have discovered that Apple’s end has already begun, here’s why:

  • Apple’s creator and visionary, Steve Jobs, has passed away a couple of months ago. Not only it’s sad news for the whole word, it’s devastating news for Apple. Mind you, media everywhere has been very proactive in pointing out that Apple was doing very well during Steve’s medical leave a couple of years ago. That media campaign started even before Jobs passed away. Now, let’s look at my perspective, AAPL was literally a penny stock when Steve Jobs was outside Apple. Apple’s market capitalization back then was a mere $2 billion. Fast forward to when Jobs started re-modernizing Apple, by introducing new products that appealed to everyone (not just designers), and you can clearly see the difference. Fast forward to a few months ago, when AAPL reached an all time high of $426.70. Apple is now the #1 company when it comes to market capitalization (the stats in the linked article are slightly outdated, but it was number 2 back then). Will Apple remain the company with the largest market capitalization end of next year? Will it be able to survive without Jobs? Or will it face RIM’s fate?
  • Apple’s main products are the iPhone and the iPad, both are facing stiff competition from Android products. Samsung, Sony, and others are producing phones and tablets that are way better than Apple’s. Not only that, Android is open source, and anyone who’s anyone can develop on Android (it uses Java) and you don’t have to download iTunes or cut your SIM card in order to make your phone or tablet work (and, you’re not forced to pay by credit card to buy an Android phone or tablet). Additionally, Android has now a huge market, and there are many Android applications that are a hit, and, Samsung or Sony will not send you to jail if, God forbids, you decided to play with the insides of your phone. Now, don’t take my word of it, let’s look at Google trends of, for example, Apple’s iPad and Samsung’s Galaxy Tab:

    Figure 1: Apple’s iPad Trends for 2011 (Courtesy of Google trends)

    Samsung's Galaxy Pad Trends for 2011 (Courtesy of Google Trends)

    You can clearly see from the above that while the Galaxy is gaining steam, the iPad is losing steam. The same goes for the iPhone versus the Samsung Galaxy SII, for example (By the way, the SII is probably one of the most beautiful smartphones out there – I don’t own one myself but I saw the thing in action).

  • Apple is no longer able to meet expectations. Apple, in the Jobs era, has raised the expectations bar so high that it’s now difficult, very difficult, to meet them. People were literally expecting miracles in the iPhone 5, and because Apple knew that, they renamed the iPhone 5 to iPhone 4S (is it because Samsung has a phone called Galaxy S, I mean why the S?). I remember that I saw a video, apparently made by a fan, where he’s claiming that the iPhone 5 will feature holograms and a laser keyboard. These things are not commercialized yet, and he’s expecting them in the new iPhone 5, and most people actually believed this. Apple is no longer good at managing expectations, and that mis-management will cost it dearly by the stock market in 2012.

  • Apple will no longer have those great profit margins. Apple was first selling the iPhone for something like a $1,000. Back then I thought that whoever bought this phone at this price was insane. It’s a phone for God’s sake! You shouldn’t pay $1,000 for a phone. Not only that, you had to wait in a queue for hours and hours in the cold (or the heat) just to see if you can get one or not (let alone buying it!). So, not only Apple had great margins, it was also able to get away with treating its customers as beggars. They were able to do that because there was no competition, but now there is. The iPad will probably be priced in the $200 range next year, and the iPhone will be capped at $500.

  • Apple is no longer innovative. OK, the first version of the iPhone was innovative, when I first saw it, I said “Wow…”. The second version was just a copycat of the first version, with just some new (but hidden) features. The one after featured a better design, but nothing innovative. Nowadays, it’s the competitors that are creating Wow products. Just take a look at those new Smartphones by Samsung or by Sony Ericsson.

The market will punish Apple next year, and Apple will try make it right with the market by doing the wrong things (such as starting to copy the competitors). Apple’s peak is now, and its end is neigh. 2012 might be the last year that Apple, as we know it, exists. After that, it’ll be just another RIM or Palm. You heard it here first!

PS: Apple’s stock will be halved as soon as large investors realize they can no longer hide the truth about the imminent fall of this giant, which might be (and should be) next year!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

December 12, 2011 | In: General

When to Dump a Stock?

You’ve been resilient, you were not afraid and were not greedy, and you’ve been patient, but a particular stock that you own is making you lose a lot of money. You are now entertaining the thought of selling it, but how do you know for sure that it’s now time to dump this stock?

Below are some factors that should help you make this decision. If most of these factors hold true, then you should definitely dump the stock:

  • You need the money: This factor alone should be a reason to dump the stock, even if you have already lost a lot of money on it, and even if there are many reports about an imminent rebound for the stock. After all, a bird in the hand is worth two (or is it 10) in the bush. Yes, the stock may go up in the next few weeks, but at least if you sell it now, you are guaranteed that you will have an x amount of (very needed) money in return.
  • The stock was overvalued when you bought it: This mostly happens to new investors. New investors don’t do the proper due diligence prior to buying a stock and quite often they are stuck with a stock (yes “suck with a stock” does rhyme!) that was overpriced when they originally bought it. It’s recommended for these investors to surrender their position in the stock as soon as they discover this fact, even if they have lost quite a bit of money on this stock.

  • The stock is currently overpriced: The investor may have bought the stock at a decent price, but the stock now is trading at a level that is technically unsustainable. It’s better to get out of the stock while the investor is actually making money on it.

  • The company’s main product is slowly, but surely, becoming obsolete: If the investor has shares in a company whose main product will most likely no longer be used within a few years, then he should dump all of his shares. There is no way for this company to ever recover. I can think of many companies whose main product is becoming obsolete, RIM is the first one on top of my head (why do people need these ugly BlackBerry phones and why do people need the primitive and restrictive BlackBerry messenger when they can have a better deal with WhatsApp of Viber?).

  • The company is no longer innovative: This is especially true in technology companies. If the company stops innovating, then expect its stock to drop substantially as soon as large investors notice (and they tend to notice pretty fast). Better to jump ship in this case.

  • The company’s competitors are getting stronger: Sometimes, the value of a company (and its stock) is high because it has no serious competitors, but once this company has real competitors, then these competitors will start stealing customers from the company and, consequently, the company’s churn rate will increase.

  • The company is mistreating its customers: Some executives sometimes forget that they are very well paid because their company is making money, and their company is making money because of its loyal customers. The #1 rule in sound business is to never mistreat your customers, yet some companies still do that, and think that they can get away with it like the good old times. Netflix is an excellent example, it treated its customers as cash cows and the whole thing backlashed on it because of the power of the social media. Netflix has lost many of its customers forever, and its stock, NFLX, that reached an all time high to just over $300 a few months ago, has now retreated to less than 25% of that price.

  • The company’s main industry is generally bearish: An investor should not hold to a stock whose main industry is bearish. Currently, the banking industry/sector is very bearish and smart investors have already dumped their shares in this industry.

  • Every report coming out of the company can be classified under “bad news”: If the company consistently delivers bad news to its investors, then the investors should sell their shares asap.

You should really, really, dump the stock if all of the above points hold true.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

I usually only write about stocks on my blog, but I received a phone call yesterday and I think this phone call is worth talking about to warn others about this scam. Here’s what happened:

  • I was sleeping and the phone rang.
  • I picked up the phone and I heard the voice of a machine that had a terrible (I mean terrible) English accent. The only word I was able to make out from this machine was Microsoft.

  • Usually I hang up at this point, but then I thought, it’s the first time that a machine with an accent calls me, it might be a real person, and since the word Microsoft was mentioned, I figured that it must be something serious.

  • So, I told the machine to repeat what it said, and it turned out that a real person was actually speaking, so he repeated what he said, and I was able, this time, to make out most of his conversation: Apparently, he’s from Microsoft, and my PC is infected with some sort of virus and it is sending them reports. And, I need to turn on my PC so that he can tell me how to fix it.

  • Now I’m very educated when it comes to PC stuff (I have a BS in computer science), so I asked him “Where are you calling from?” He told me “Microsoft”, and then I asked him “How did you know my phone number?” He told me “Could you please turn on your PC so that we can help you solve the problem?” I then said “What’s your name?” He gave me a name that I can never ever remember. I then asked him, what is my IP? He then repeated the same sentence (this time sounding like he was annoyed) “Could you please turn on your PC so that we can help you solve the problem?” I then asked him “Where are you calling from?” “Toronto” he said. I then told him that I cannot do this until he tells me what is the IP of my PC, or at least the name of the PC. Again, he repeated the same sentence. So I told him, you’re not going to let me go to a link where I get a virus on my PC, are you? Again, he told me (while sounding very annoyed this time) to turn on my PC for them to fix my problem. So I hung up.

  • I then checked the time, it was 12:30 AM my time (30 minutes past midnight). I then thought that there are 2 options:

    • Microsoft now is too caring for its users to the point of insanity (calling them at midnight)
    • It’s a fake call

    I think it’s easy to notice that the latter option is the more realistic. But then the phone rang again…

  • I picked up and it was the same person, so here’s what I said: “Are you guys insane? Calling me in the middle of the night telling me that there’s a problem on my PC? I don’t care which company you’re calling from, but never ever call this number again!” Click!

  • He never called back!

This morning when I woke up I researched this and it was definitely a scam and Microsoft is aware of it. Apparently, this scam has been going for at least a year now (they call you and tell you to turn on your PC and then go to a website where you can download something to “fix” your computer, which his really a malaware, and then they make you pay for this malaware – yes, you are a gigantic sucker if you fall for it).

Just remember, Microsoft, Apple, and the likes will never call you to tell you anything about your PC! They couldn’t care less!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

December 9, 2011 | In: General

How Long Can a Stock Be Short?

My simple introduction to shorting stocks has generated some considerable readership since I have published it. It seems that there are more shorter-wannabes than I had initially thought. Now, one of the most common questions that a new investor asks: “How long can a stock be short?”, or in other (more technical) words, “How long can I leave my short position open?”, or, in even more technical words “How long until I have to cover my position?”.

Let me answer this question first and then explain my answers later: Theoretically, a short position can be left open for as long as you want (this means that you can short a stock forever). Realistically, there is a limit set by the borrower (the entity that you have borrowed the shares from and then sold immediately – usually the bank).

Let me now explain… Let’s say you have shorted 1,000 shares of AAPL. Here’s what happens:

  • The borrower (usually the bank/company that your investor account is open with) lends you the shares.
  • You sell the shares immediately in the market.
  • At the current price of $393.35, your account will be credited with about $393,350 (minus the fees). Note that you can never use this money to buy other stocks. This money is locked, as it’s not yours in the first place.
  • And now you wait…

A few weeks later, the stock goes down to $383.35 (which is very unlikely by the way, do not short Apple, at least not right now), which means that you can now cover your position and buy back the AAPL shares that you have borrowed, and then return them to your bank, for a profit of roughly $10,000.

Now, let’s look at another (more likely) scenario. The stock goes up to $433.35 in a month because of the excellent sales that Apple products experienced during the holiday season. Now before you know it, someone from the bank will call you and tell you to “cover your position”, which means that you should buy back the 1,000 AAPL shares that you have borrowed and return them to the bank. This is a loss of $50,000 for you.

When you’re shorting stocks the bank keeps a close eye on your account, if it sees that you are losing a lot of money and that you are nearing a point where you’ll not be able to buy back the stocks, then someone (from the bank) will give you that dreaded call. Oh, and banks are not compassionate at all when it comes to these things (e.g. don’t even think that you can convince them that the stock will fall sooner or later, they won’t buy it).

As I said before, shorting stocks is a very dangerous game and should be avoided if you don’t have confidence that the stock will fall in price soon.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

December 7, 2011 | In: Technology

Is BIDU a Good Stock to Buy?

Those who are regular readers on my website probably know by now that I’m not a big fan of Chinese stocks, and that they scare me. Now BIDU is a Chinese stock, am I afraid of it? And is BIDU a good stock to buy?

To answer this question, let us first understand what is BIDU. BIDU is the stock of Baidu, which is China’s answer to Google. Whitg the exception of the logo and the Chinese language, Baidu is a copycat of Google’s 2006 interface. Baidu is the most visited website in China and is the 5th most visited website in the whole world (according to Alexa).

Baidu’s main visitors are Chinese, and the absolute majority of visits originate from China. Baidu makes money by serving ads (same as Google).

So, technically, Baidu should be evaluated the same way as Google is evaluated by the market, which means that Baidu should be trading at a P/E ratio similar to that of Google, which is 21.12. In order to give Baidu some leeway, let us assume that Google should be trading at a P/E ratio of 25. But Baidu is currently trading at an unsustainable P/E ratio of 50, so this means that it should be valued at half its current price, which in its turn means that Baidu’s market capitalization should be $22 billion, which means that technically, BIDU should be worth no more than $65.

So, $65 is what BIDU is really worth during good times. But what about bad times? We all know that China will face a slowdown in the economy next year, and most likely will face a credit crunch (because of the current housing bubble) and subsequently a recession next year as well (or, at most, in 2013). So, how much will BIDU be worth in bad times?

Well, let’s look at how Google did in bad times in order to understand what will happen to BIDU next year. GOOG is currently trading at $620, but it reached a low of around $250 and it was hovering around the $500 level for almost a year after the recession. So, when taking that into consideration, we can deduce that BIDU will be trading at a minimum of $26 in the beginning of the recession, and around $52 a year after the recession.

Now, as you can see from the above, BIDU is overpriced by almost 100% during the good times, and has the potential of dropping just a bit more than $100 (or almost 80% of its current value) if a recession hits China. So, what do you think? Is BIDU a good stock to buy? My answer is obviously no (and yes, it does scare me), it’s actually one of the worst stocks to buy at the moment.

BIDU, by the way, reminds of NFLX a lot: overvalued for no reason other than the investors really love it. Take a look at NFLX now. Sooner or later the business model and the financials of the company will prevail (over sentiments) when it comes to its assessment by the market and the investors.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

December 6, 2011 | In: General

Investment Strategies for 2012

It’s that time of the year again, where many investors start evaluating their lessons learned in the stock market in 2011 and start start planning their investment strategies for 2012.

Well, I have made the job of these investors easier, by recommending the following investment strategies:

  • Buy stocks in early January and sell in mid February: This holds true especially for stocks that lost quite a bit of their value back in 2011. Here’s the logic: when small investors lose money on their stocks, they tend to sell them in December (causing the stocks to retreat), and then they tend to buy them back in January (causing an increase in the stocks’ prices). The buying spree will continue until mid February. This phenomenon is called the January Effect, and is well know in the stock market for decades now.
  • Avoid real estate worldwide throughout the year: Real estate is heading nowhere but down, and that’s worldwide (before it was only a US problem). A lot of credit crunches will happen in many developing and developed countries (that weren’t affected by the first credit crunch). Buying real estate as an investment in 2012 would be madness.

  • Avoid banks stocks: I’ve mentioned several times before that what’s happening in Europe is only the tip of the iceberg. Look at what happened so far and this is all because one of the smallest economies in the EU (Greece). The other PIIGS are still hiding the fact that no matter what they do, their economy is toast. Banks, due to their nature, have international exposure, and they will be affected by what’s going on there. Not to mention that US banks also have problems of their own, including a mounting pressure from the public and the congress.

  • Avoid the Euro like the plague: The Euro is not a permanent currency. It will fall. Every single person living in Europe now hates the Euro. What did it bring other than pain and sorrow to Europeans (on all fences)? Sure it brought joy the first few years, but when the jig was up, all that joy turned into pain. The Euro will collapse in a couple of years, and every country will go back to its own national currency (I think the Euro was a perfect example on how unified currencies are more of a problem than a solution). The Euro is back now to its 2007 price vs the US Dollar. See the chart below:

    Figure 1 Euro vs the US Dollar: 5 year chart (from 2007 to 2011)

    Where do you think the Euro will be next year by looking at the above chart? Figured so!

  • Put your trust in the USD: The USD, the currency that everyone (with the exception of me) was badmouthing for years now, has proven itself as the currency that everyone should trust. Everyone is now buying the USD, and will continue buying it in the next year as well.

  • Avoid gold: Gold may still go up for the first few months in 2012, but will definitely go down afterwards. What people are forgetting is that most of the currencies worldwide are pegged, in one way or another, to the USD, and not to gold. I should probably write a separate post explaining this! Gold is dangerous and the price of the gold ounce may be halved next year.

  • Avoid Chinese stocks: Not only because most Chinese stocks are dangerous (read scammy), but because the whole Chinese economy will slowdown (and that’s according to the Chinese themselves). This will have a catastrophic effect on Chinese stocks. BIDU should be particularly avoided (it’s highly overpriced at the current price of $131.17 – P/E ratio is over 50 – compare that to Google that has a more reasonable P/E ratio of 21).

  • Avoid the Facebook IPO: Don’t think that you’ll be doing the smart thing by buying Facebook shares at IPO. In fact, that you would be the stupid thing to do. What if people don’t like Facebook anymore? Have you ever thought of that? Note that I evaluated Facebook at almost $100 billion myself (well $85 billion to be exact) long before it was officially evaluated at a $100 billion.

  • Stay away from companies that don’t care about their customers: A perfect example of these companies is Netflix. These people increased their prices (for no reason at all other than they felt they can get away with it). Look at their stock right now. It’s less than 25% of what it used to be back in July 2011. I have warned many times about Netflix and I have said that the real value of NFLX is $40.

  • Do not follow the big guys: Warren Buffet probably made the worst investment of his life this year, and that probably translated into the worst investment in the life of many other investors as they followed suit by buying BAC (at probably double the current price). Yes, he’s rarely wrong, but he was wrong.

  • Use contrarian investing: When all the analysts are telling you to sell, sell, sell, then buy, buy, buy (and vice versa). Have you ever thought that these analysts are probably telling you to buy when they (or the big guys) want to sell and they want you to sell when they want to buy?

  • Trade indexes: There’s nothing safer and more fun than trading indexes. They’re very predictable and you can make a lot of money with them. Doomsayers will tell you that it’s the wrong thing to do, but take a look the S&P, was it up for the year or not? Just don’t buy when everyone is buying and don’t sell when everyone is selling and you’ll be OK.

  • Ensure that your portfolio is diversified: Invest in many industries and many stocks. This will protect your investment and will ensure a balanced ROI by the end of 2012.

  • Don’t look back: What was lost in 2011 is lost forever. It’s no use crying over spilled milk. You will wear down your nerves and that will have a deteriorating effect on your health. Oh, and by the way, don’t forget to exercise.

  • Trust companies that have performed well in bad times: There are many companies that have performed very well in bad times, and that were little affected by what happened. These companies include McDonald’s, IBM, and Oracle.

  • Don’t believe the doomsayers: Doomsayers keep on saying that there will be a double dip. Don’t believe that, the worst has already passed and the days to come are definitely better. Except for banks, of course.

  • Focus on pharmaceuticals: 2011 was supposedly the year of the pharmaceuticals, but for some reason, it wasn’t. 2012 will be, because people in developing nations are nowadays spending more money on their health. Pfizer and other pharmaceuticals are definitely a buy.

If you have more investment strategies for 2012, then please share them here!

The year 2011 is almost over: a lot of money has been made, and a lot of money has been lost in this year, and, more importantly, a lot of lessons were learned by the stock traders during this year. So what are these lessons?In order of no importance, here are the top 20 lessons that stock traders learned in 2011:

  1. They learned that investing in bank stocks was the worst thing that happened to them in 2011.
  2. They learned that buying shares in social networks, such as LinkedIn and Groupon, is the second worst investment.
  3. They learned that stocks with a very high P/E ratio such as AMZN, NFLX, and the likes are really overvalued.
  4. They learned that when oil goes up, it will go down, and a magical hand is ensuring that oil doesn’t go below $80, and doesn’t go above $110.
  5. They learned that investing in companies with no future, such as Canadian RIM, is a terrible idea.
  6. They learned that the USD remains the world’s reserve (and best) currency, and they learned that any other currency should not be trusted (all of the other currencies are valued in USD after all), and that the end of the Euro is nigh
  7. They learned that what happened to the US will now happen to Europe, but probably in a messier way.
  8. They learned that they should trust traditional companies that have real value and that can sustain their presence for many decades to come. One good example of these companies is McDonald’s (just check MCD’s graph below).

    Figure 1: MCD Year to Date: Mc Donald’s stock has gone up 25% since the beginning of the year (Image courtesy of Google Finance)
  9. They learned that IPOs are there to sucker them. GM is a great example!
  10. They learned that bank interest rates nowadays are only a fraction of the inflation rate, which means that putting money in the banks is synonymous to losing money.
  11. They learned that real estate investment was only good while it lasted, and that they now need to move to something else.
  12. They learned to stay away from Chinese stocks and to fear them. There is a lot of question marks when it comes to each and every Chinese stock (remember DANG and YOKU?).
  13. They learned that gold can be treacherous. Gold can go up $50 one day and then go down $70 the next day.
  14. They learned not to trust most of the economies in Europe, and not to trust the leaders of European countries when it comes to economical reforms (it should be obvious for any investor that all these economical reforms (read austerity measures) will backfire on each and every country that has adopted them, as these countries seem that they have forgotten one important factor: their people).
  15. They learned not to put all their eggs in one basket (that’s a lesson learned the hard way especially for those who solely invested in bank stocks).
  16. They learned that patience is a virtue, especially when it comes to investing in solid companies with very large cash reserves such as Apple, Google, and CSCO.
  17. They learned that contrarian investing is alive and kicking! The moment everyone is pessimistic and the whole mood is gloomy and everyone is recommending to sell, stocks start to suddenly go up.
  18. They learned to put their ego aside and accept loss as part of the game, because if you don’t lose from time to time, you can’t win in the stock market.
  19. They learned that trading with indexes (such as SPY) is much more predictable than trading with stocks.
  20. They learned that trading with commodities is much more predictable (and safer) than trading with stocks and indexes.

Are you a stock trader? Do you have any lessons learned that you would like to share? If yes, then please feel free to comment below!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

Everytime I want to activate a new credit card with TD Bank, they tell me the same nonsense story:

“Mr. El-Eter, card activation may take up to 5 minutes (which I’m sure is a lie, card activation takes less than a second – other banks do it on the spot), and while we’re activating your card, we would like to tell you about one of our products, which is the credit card insurance (or something like that, they say it costs $1/day if I’m not mistaken), which ensures that your credit card statement is fully paid when you lose your work, in case of dismemberment, or in case of death.”

My usual reaction to this is the following: “You are going to pay my credit card for me when I die? Thanks a lot! I was really worried that if I die, I won’t be able to pay my credit card, and thus I might accrue more interests.” And then I continue “You know what, I think the least of my worries when I die would be to pay off my credit card.”

Everytime I say this the person on the other end of the line laughs (usually it’s a woman’s voice), and she tells me that this is the first time she notices this in the script. This time, when I activated my credit card earlier this week (I think it was on Monday), the woman on the other end of the line was really, really rude (by the way, TD Canada Trust claim that they are the #1 in Canada when it comes to customer support – yeah, right!).

Here’s what she said: “Well sir, you are still liable for your credit card statement when you die.”

And here’s what I said: “Why would I want to pay my credit card statement when I die? I don’t think my credit will be any issue for me then, right?”

And here’s what she said back: “Well sir, if you have an accident… What if you get hit by a bus tomorrow” (Never in my wildest dreams have I ever imagined that a bank representative will wish me to have an accident).

So I said: “Well let’s hope not!

In any case, I feel bad and sorry because I wasn’t equally rude with that person, but in any case, I did my research, and apparently you are liable for credit card debt when you die. Here’s what the bank will do:

  • If you have a bank account with them: They will seize the money directly from the account when they know that you’re dead. They usually know before someone else withdraws the money from the account, unless it’s a shared account or if you have authorized someone to withdraw money from your account (such as your wife) before you die.
  • If you have a bank account with them but not enough money to cover for your debt: Then they will seize any property you have until someone pays off your debts. If not, then they will sell the property themselves, get their money + their fees, and then give your inheritors the remaining money.

Here’s some more information (that I gathered when doing my research on the subject):

  • Bank fees (such as yearly fees) can no longer be charged on the credit card once you die. Interest, however, can still be charged.
  • The bank may be able to seize money from the inheritance money/assets, but this is not always the case.
  • If there is no inheritance money/assets, then the bank deals with this as bad debt and writes it off, and the spouse/close family member won’t be charged anything.

To conclude, if you really hate your bank, you need to accrue as much debt as you can and ensure that you don’t own anything at all, and then, and only then, you can die a happy man – but beware, these people do try to follow you to the grave!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

The Canadian stock market is, according to Wikipedia, the 8th largest in the world by market capitalization (around $2 trillion), which is saying something. In this post, I will try to examine what will happen to the major Canadian stocks in 2012.

Gold stocks: Gold, believe it or not, has reached a peak in 2011, and may reach a small peak in 2012 before retreating. The USD is getting stronger, and people are realizing that Gold is worth nothing without the USD, and that the USD is here to stay and will survive, and will come out from this mess stronger than ever. Gold stocks will be affected by this, they will experience a small bump beginning of 2012, only to retreat for the rest of the year. The retreat may be substantial.

Oil stocks: Oil has tried very hard to reach a record this year, but it couldn’t. It failed to sustain the $100 level for a decent time. This means that large investors and lobbies did all they can to bump oil beyond its normal price, but they couldn’t, which in its turn means that they will try the same game in 2012 (but with less effort). This means that oil, similarly to gold, will go up slightly beginning of the year and then will retreat greatly. Oil has no reason to go up nowadays: Libyan oil is now flowing, economies cannot recover with high oil prices, and the effects of what’s happening in the Middle East are not as the oil lobbyists hoped for. I would stay out of the oil game until at least March.

Mining stocks: The main world importer of metals in the world is China, and China has already signaled that its economy is slowing. I think that the Chinese economy will slow down even further, this is because China isn’t as cheap as before (labor costs have increased there), which makes it less attractive for companies wishing to produce their products there.

Bank stocks: Bank stocks, in my opinion, are currently the worst stocks to hold. They are very dangerous, it’s better to completely avoid them in 2012. Here’s why:

– The debt ratio per capita in Canada is 150%, meaning that each Canadian resident carries a debt of 150% of his salary. Not that good! This means that a slight disturbance in the Canadian economy will wreak havoc upon the lenders (the banks) who will then start experiencing the sour taste of foreclosures. US banks are currently tasting it, and they said it’s not only sour, it tastes really, really, bad. Look at both BAC and C if you don’t believe me.

– Although Canadian banks have little exposure to anywhere but the US, they will still be affected by what’s happening in Europe. Let’s take a look at the Royal Bank chart for this year:

Figure 1: Royal Bank – Year to Date (courtesy of Google Finance)

And if you think RY is an isolated case, let’s check BMO:

Figure 2: BMO – Year to Date (courtesy of Google Finance)

And if you still have any doubts, let’s check TD:

Figure 3: TD – Year to Date (courtesy of Google Finance)

You can easily see from the above charts that RY, BMO, and TD (as well as all other Canadian banks) have been affected greatly by what’s happening in Europe, even though the exposure of Canadian banks to Europe is minimal. Now what’s happening in Europe is really the tip of the iceberg, the worst is yet to come, we are only talking about Greece, and we are hoping that the rest of Europe doesn’t follow suit, but we know that the fall of the whole of Europe is imminent, and we can’t hide behind our finger forever. I still believe though that bank stocks are undervalued and that Canadian banks are always a buy when they go down (of course, for the long term).

Technology stocks: The most important technology stocks (for the moment) in Canada are IMAX and RIM. In short IMAX is overvalued with a P/E ratio of 20 for a technology that may be obsolete in a few years (that is, if IMAX doesn’t create a better technology), while RIM is going bankrupt. In short, both stocks must be avoided.

Services and consumer cyclical stocks: Since there will be a slowdown in the economy in general, then services and consumer cyclical stocks will go down next year. For an example on how bad service stocks can be next year, check MFC’s performance for 2011.

Figure 4: MFC – Year to Date (courtesy of Google Finance)

As you can see, I think that 2012, with the exception of the first 3 – 4 months, will be very gloomy for the Canadian stock market. Unless the US recovers in 2012, which will not happen, the Canadian stock market outlook for 2012 is bad, really, really bad! Of course, some stocks will go up, and it is these stocks that you should buy because a stock that goes up in bad times, will pop in good times.

Diversify your portfolio, buy low – sell high, don’t trade with risk money, have patience, don’t be afraid and don’t be greedy, and you should be OK!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on

December 1, 2011 | In: General

Minimum Amount to Trade Stocks

Many of those who wish to enter the sock market are reluctant to do so because they don’t know what the minimum amount to trade stocks is, and they think that the total amount of money that they have is less than the minimum allowable. Also, and for some reason, many of those think that the minimum amount for stock trading is $100,000 (yes, that’s a hundred thousand dollars).

Let me first start by saying that in general, there is no minimum amount imposed by the broker (your bank) to trade stocks. You can start trading with as little as a $100. But, the question is, can you really trade stocks with a $100? I don’t think so, and here’s why:

  • Commissions will kill you: With this little amount, you will surely be charged the maximum commission fee per trade. So, let’s assume you want to buy some SIRI shares at the current price of $1.80. The amount of shares that you’ll be able to buy with your $100 is: ($100 – $29.99) / $1.80 = 70 / 1.80 = 38 shares (more or less). Now you might be wondering, where did the $29.99 come from? Well, believe it or not, that’s the commission fee per trade! Now, let’s say that SIRI jumped to $3 (which is a substantial jump and will never ever happen overnight), and now you think that you made money and you want to sell. Here’s how much money you will get: 38 x $3 – $29.99 = $84. So now you have less money that you initially had, even after the huge jump in SIRI.
  • Maintenance fees will make your balance in the negative: Most banks charge maintenance fees for stock trading accounts that are worth less than a certain amount (usually $5,000 or $10,000). The maintenance fee can be as high as $150/quarter. Imagine what will happen to your $100 when the bank hits you with this fee come the end of the 3rd month…

  • You will have to wait forever in order to just break even: As you can see from the above, even when the stock went up to $3, you still lost money. You probably had to wait for SIRI to reach $4. But when will that happen? In two years? In five years? You would be lucky if that ever happens…

  • Stock trading won’t be fun: The very long wait means that you’ll be able to only do one trade every few years, not fun!

  • You won’t be able to be become a frequent (or active) trader and take advantage of special pricing: Active traders enjoy lower flat fees. Most banks will lower the fees by 2/3 (67%) for active traders. For example, at the Bank of Montreal, active traders (traders who make 30 trades per quarter) enjoy a low flat commission rate of $9.95/trade (for equities).

  • You are stuck with only one stock. How many different stocks can you buy with just $100 if your commission rate is almost $30?

Now, let’s ask the question differently, what is the minimum amount that one needs in order to trade stocks?

In my opinion the absolute minimum amount that one needs to trade stocks and make money is $5,000. Here’s why:

  • You will be able to afford your broker’s commissions: Imagine that you want to buy SIRI shares. You choose to buy 1,500 of these shares at the current price of $1.80. Your total cost would be: 1,500 x $1.80 + 29.99 = $2,739. Now if SIRI goes up just 10 cents (or just a bit over 5%) to $1.90 in 2 weeks (which is very possible), then your gross profit will be $150. Now if you sell the shares at this price, then you will get: 1500 x $1.90 – $29.99 = $2,820. Your initial investment in SIRI was $2,739. So your net profit will be $81. Not too bad for this small investment and for this timeframe.
  • You will be able to diversify your portfolio: After you buy SIRI, you still have $2,261 left that you can invest in another stock. This way you will diversify your portfolio, and if you’re losing (temporarily) money with SIRI, you will be most likely making money with your other stock. The rule is to have at least 2 different stocks that are in different industries, this way when one goes up you sell it and you make money on it and you purchase a different stock, and when one goes down, you wait until it goes up!

  • You will become an active trader: Since you’ll be able to buy and sell stocks more easily (because you’re making money on them), you’ll make more trades per quarter, and you may very well become an active trader, and trust me, there is nothing more joyful than becoming an active trader when you’re a small investor. You will be able to save at least $40 in each back and forth trade. So, if you were an active trader, you would have made a net profit of $121 on the SIRI trade above.

  • Stock trading will be fun: When you buy and sell frequently, and you see yourself waiting for a stock to go up to make money, or waiting for a stock to go down to buy it (and then sell it when it goes up again), then you will feel that you are really having fun!

Of course, if you have more money you can invest it all in the stock market, but it’s wiser, in my opinion, to invest just $5,000 when you first start trading. It’s safer, and you get to learn the game with no stress, and most importantly, you will have fun!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on