the Wealthy Canadian

Are you taking the Canadian Securities Course and need a way to practice and ‘assess your readiness to take the CSC exams’?  The Canadian Securities Institute has study aid to do just that.  This aid comes in the form of an online course called CSC Check that you sign up for like any other CSI course.  I’ve made use of this course, here is my review.

The Good

The CSC is a large course filled with enough material to learn and memorize to make an elephant run in fear.  The way that I like to learn is by actually practicing the concepts.  CSC Check is great for that.  Every chapter in the CSC has a corresponding domain module in the CSC Check with several practice questions.  These are great to run through as you struggle to understand the concepts presented in the CSC.  This is the place where you can identify what you truly do understand and areas that you likely should re-read.  If you’re already taking the CSC, then these quizzes will look familiar – they are the built the same as the CSC quizzes.  They are timed, but there is no time limit.  The way that I studied was to take each domain quiz as I completed each chapter, I didn’t worry about the timer, and I used the CSC textbook as a reference.  So, in my case they really weren’t quizzes but more assignments for practice.

The next level of testing is the Knowledge Assessment Tool.  The CSC is divided into sections and further subdivided into chapters.  Where the Domain Quizzes test individual chapters, the Knowledge Assessment Tool tests an entire section.  Again, they are timed, but there is no time limit.  Again, I did not concern myself too much with the timer and it was still open book, but this time any question that required me to open the CSC was marked as something that I needed more practice on.

The third and final level is the Exam mode.  This time you get 100 questions covering one book of the entire course and two hours to complete it.  This is to simulate the exam and get you prepared – an excellent preparation for T day.  The CSC Check test bank contains a few hundred questions that are inserted pseudo-randomly, based upon the weighting of the CSC.  That is, the exam mode knows how many questions of each topic to include based upon how many will be on the real CSC exam, and then randomly selects enough of each domain.

The large test bank is what I valued the most as it allowed me far more practice than answering the exact same questions over and over.  It means that you don’t have a limited number of exams to practice on.  This is where I got the most practice and built my confidence.

The Bad

The questions generally provide you with some level of explanation of the answer and where references to where it can be found in the CSC.  However, I found that the explanations should be more in depth.  Pointing me to a chapter in the CSC is not good enough… I know what chapter the question is from and likely didn’t understand it well there.  I got the question wrong and I want to know why.  There is no discussion board (although, one might assume that you are likely enrolled in the CSC, so you could use that discussion board).

Although the test bank has several hundred questions they are randomly placed in the exam mode.  Therefore, after your first trial run you will run into questions that you have already completed.  That means the only real exam simulation is the first one that you write.  After that you will run into questions that you’ve just answered, which will allow you to go quicker than you would on the exam.

Another downside is that I’m quite sure that they reuse questions between the quizzes in the CSC and CSC Check.  They may change names or numbers but use the exact same wording.  While the practice is still valuable, the real exam is going to ask questions in a completely different way.

If you are writing the CSC using the paper and pencil method (they now offer computer-based testing) then the CSC Check will not be a completely realistic simulation.  Not a biggie, but something to keep in mind.

The biggest detraction is the price.  Looking it up now it appears to be $120!  Come on folks at CSI, you can buy massive GMAT test prep books with thousands of questions for $20-30, and each exam is completely different.

The Bottom Line

If you are shelling out to take the CSC then you want all the practice you can get.  The CSC Check is a great way to do that, and it is cheaper than the cost of an additional attempt at writing the real exam.  I think that it helped me out.  I’ll never know what I would have scored if I didn’t use the CSC Check, but I do know that I passed with honours by using it.

The CSI may occasionally offer some sort of a discount on the CSC Check, at least that’s why I bought it at the time.  Since my biggest objection with the course is the price, the discount certainly helped sway me to buy it.

Not sure about the Canadian Securities Course?  Check out my review on it, here

It looks like the Canadian budget has passed with the support of the Liberals (not surprising, it did appear to be a Liberal budget) and with it the current government will get to keep their seats for a while longer.  Politics aside, how does this budget affect me?

First are tax cuts.  The basic personal amount has gone up to $10320 and the thresholds for the 15% and and 22% tax brackets are now $40,726 and $81,452.  Note that the basic personal amount was already scheduled to have gone up to $10,100 this year (from $9,600 in 2008).  Whatever, it’s still less taxes that I have pay this year, right?  Yup.  By my calculation someone earning $81,452 or more will save $391.  According to data from StatsCan http://www40.statcan.ca/l01/cst01/media01-eng.htm the average person earns 41839.2 (the median is probably lower as the income of Canadians does not follow a normal distribution) so the average Gordon will save about $284.  Yay.  Can you hear the excitement in my voice?  Well, at least taxes didn’t go up.

Payroll taxes – I mean “EI premiums” – are going to be frozen this year.  Usually they go up every year, so this year I won’t have to pay more towards Employment Insurance.

“Action to Stimulate Housing” – haven’t we just exited the longest and most pronounced housing boom in decades?  In any case the big news here is a temporary Home Renovation Tax Credit.  This credit is only good for 2009, for projects between $1000 and $10,000.  Remember that credits are for the lowest bracket, or 15%.  So this means a savings of up to $1350.  And it means that I bought my new windows a few months too soon.   There are a few catches to consider:
* the credit is for costs above the $1000 threshold.  So if you install carpet for $1001 your credit is (1001 – 1000) x 15% = 15 cents.
* this credit is only for improvements that are deemed to be “enduring in nature” i.e., not appliances nor maintenance.

There are many other initiatives that are aimed at helping Canadians as whole, like infrastructure, etc.  But these appear to me to be the only things that individuals can take advantage of.

How to Make 7 Million in 7 Years has an interesting poll going on about what decision you would make if you were on Deal or No Deal, which gave me an idea for a post about expected value.  

Expected value is statistical tool that economists may use to determine what outcome to expect.  It is sum of the probabilities multiplied by the outcomes – note that this is not the same thing as the probable outcome.  This concept can best be described with the use of an example.

Suppose that you and nine friends get together for a game of chance.  Each person bets one dollar and puts their name into a hat.  You draw one name out of the hat and the winner gets to keep all the proceeds.

10 people betting $1 apiece, only one winner. Your odds of winning 1 in 10 or 10% (conversely, your chance of losing is 90%).

Therefore, the probable outcome is that you will not win the draw and thus lose one dollar.

Your expected value is -$1*90% + 10*10% = $0.10 (90% chance of losing your $1 bet, 10% chance of winning $10).

This means that if you kept playing all night you could expect that, on average, you would earn ten cents for every dollar bet.  If you played ten times in a row, statistically speaking, every person should come out even.

When playing at the casino the house generally has the games set up so that the expected outcome results in proceeds to themselves.  For example, according to wikipedia, the game of roulette is set up so that the odds of winning is 1 in 38 and the payout is 35 to 1.

Expected Outcome = (-1$*37/38) + ($35*1/38) = -$0.0526.  Therefore, if I play once then the probability is that I will lose.  If I play all night then I can expect to lose, on average, five cents on every bet.  Thus the house earns five cents on every dollar bet.

Which is a better ‘investment’?  With the draw you expect to earn something every bet whereas with roulette you lose with every bet.

Modern Portfolio Theory uses this same idea to identify the expected value for the return your portfolio will see.

There is an interesting article in the Globe today titled, “Oil patch cuts claim Alberta’s high-paying jobs.”  For those who don’t know, Alberta is Canada’s hub of the energy sector.  Alberta, has (some may say had) huge reserves of oil and gas, has the infamous heavy oil projects and Calgary (the largest city) is home to numerous energy/exploration head offices.  During this most recent bull market in commodities, Alberta has been in the forefront of the Canadian economy.  As energy prices rose, so too did wages, inflation, and in combination with a fantastic housing boom (bubble) – real estate.

All of the jobs numbers from around the world are showing the same things, people are losing jobs.  Since Alberta was really driving Canada’s economy seeing that people are losing jobs and taking pay cuts there is the confirmation that we’ve been expecting.  None of this really comes as a surprise of course with oil worth less than a third of what it was a year or two ago.  My point is simply that the good times are over.  Canada’s manufacturing sector was lagging for a long time and the US housing market started to collapse a few years ago already.  But now that Alberta has finally succumbed the peak in the Canadian economy is over as well.

The other side of this is related to real estate.  Calgary real estate peaked about a year about already.  The absorption rate (the time is would take, statistically, to sell a house) is around 10 months, but prices have not fallen very much.  The key was that there were still low unemployment and many high-paying jobs.  In fact, one reason for the dramatic rise in real estate prices was the high income earners were looking to jump aboard the express train of high yielding real estate.  When prices stopping rocketing to the sky it didn’t matter because speculators were able to hold multiple properties, either by renting out the excess or being comfortable allowing their high wages to carry them through the rough patch.  Now that people are losing jobs it will be the time to really pay attention to house prices.

Mark Evans, on his blog All About Nortel, reprints an excellent report by NT analyst, Tom Astle.

Mr Astle reflects on the lessons that he has learned from his coverage of NT over the span of 15 years.

Capital structure is key, he says, knowing how to generate cash and raise money.  He mentions that many successful competitors raised equity money when equity prices were high, not when they needed it (after equity prices dropped).  I would add in that knowing how not to squander cash is also important.  The example that comes to mind is the announcement to buy Clarify for US$2.1 Billion and the eventual sale for US$200 Million