Monday, March 23, 2009

foster & a frugal bachelor

I haven't had much of a chance to blow through my Google Reader lately, until today. Here's what I found:

I wanted to point out a blog that I've been reading that I find quite interesting: Frugal Bachelor 's writing is actually offensive at times, but it certainly makes you stop and think. I have thoroughly enjoyed several of young Texan's posts. He bills his blog as 'personal finance without family values'.

Normally sane Canadian personal finance icon, Canadian Capitalist has gone Derek Foster mad. The "Stop Working, Here's How You Can" author has recently sold all of his dividend paying stocks and he has personal finance circles chatting once again. At the danger of heaping more publicity on top of all the current froth, Canadian Capitalist has been all over Foster in a series of posts lately. One of the posts contains a link to a Foster interview on CBC's The Hour in the comments section.

I read Foster's fist book and I did enjoy it. I especially liked his comparison of dividend income to employment income. I always wondered why he would attempt to live off of dividends from stocks that were the exact opposite of recession resistant. He talks about Colgate Palmolive and Enbridge on The Hour, however I believe a large part of his income was actually coming from trusts that were much more economically sensitive. Trusts like Canadian Oil Sands just didn't make sense with his strategy to me. Living solely off of pay outs from 100% of the riskiest asset class was asking for failure. The man has a talent for marketing and seems to be quite proficient at selling books and getting time with the Canadian press. Currently, it is not clear whether as an investor he suffers from severe over confidence or extreme fear.


LC David said...

Great, an excellent blog post....I like it
Mortgages Home Loans

Canadian Capitalist said...

Thanks for the link MG. I just think that it is wrong for Derek to peddle books based on half-baked ideas.

Anonymous said...

I do like the basic idea of the book -- deriving income from dividend paying investments. However the premise that the strategy of putting a few hundred bucks aside a month will let you retire at 30 is horsesh*t. If you do the basic arithmetic, it just doesn't add up. He made some big bets that paid off which are completely antithetical to the strategy, and which were influential on the early retirement outcome than the dividend strategy. Derek got ground pretty good about this on the Moneysense chat board some time ago.

It's dishonest and offers unrealistic expectations, which is shameful.

As a retire at 30 scheme it makes no sense. But as a get-modestly-affluent-slowly scheme, it's pretty good.

optionsnut said...

I wonder how many books Foster would sell with the title 'get modestly affluent at around 30'?

diplodocus83 said...

Foster is both the profiteer and victim of his time. for someone to have taken a 4 to 1 loan on US blue chips and be able to completely reinvest from 1999-2007, was a matter of being young, intuitive and bold. well, foster admits that the times were in fact too good to be true. Now that reality has set in, it won't be possible for others to take advantage of the skyrocketing earnings that were being reported throughout the first 8 years of the 21st century. that is not the fault of Derek Foster. If you really read his books, he does discuss risk and focuses mostly on the idea that dividends are a tax-advantaged way to secure income when properly invested. this is of great service to people with no or self-directed pensions because mutual funds rarely perform better and investing directly in blue chip canadian dividend payers will eliminate the excessive fees. the excessive risk can never be elimintated. personally, i love Mr. Foster's work and consider him honest and decent, but I remain a bond man.