Conclusion of the Credit Card Arbitrage Experiment

In September last year, I started an experiment in credit card arbitrage. Yesterday I received my last statement for the credit card I used to run the experiment.

In early August, as soon as the GIC came to an end, I used the money to pay back the credit card. I didn't wait for them to send me that last statement, because I was worried that they would begin accruing interest as soon as the interest-free period ended.

So here I am, with the credit card paid back in full. I got $160 in interest from the experiment, and invested about 2-3 hours total. Not bad.

Only thing that will be left to do is cancel the credit card I used for the experiment.

Would I do this again? Probably not. As I mentioned before, credit card arbitrage can have an impact on your credit score. Not a big impact, but I think that running this repeatedly could have a cumulative effect, and I'm not willing to run this risk since my mortgage is due to be renewed next year.

To really make it worth my while, I would need to raise the amount borrowed over $10-20K. Which is too risky for me. Still, that was a good learning experience.

Replaced the Water Heater

Last weekend, we had a bad surprise as we found out that the water heater was leaking. It looked like it had been leaking for a couple of days, for a fairly large area of the unfinished part of the basement's floor was wet. Fortunately, the leak wasn't lagre or there would have been damage. As it is, I only had to clean up and throw away a couple of cardboard boxes.

But we had to replace the water heater. So we went shopping. We decided to go with a top-quality water heater from GE, because of the better insulation (which means better energy concumption) and longer warranty (12 years). The difference in price between top-quality and entry-level quality for a 60-gallon water heater is only about $200-300. Installation fees are the same. They last twice as long, minimum, so the difference in price was worth it, on our opinion.

On top of that, we used the seller's installation service. It was similar in price to another quote we got on the service, and by taking it we automatically extended the warranty to lifetime.

One bad surprise I got was that we had to replace the cabling for the water heater, because the old electrical cabling was not adequate (no ground). That meant calling an electrician, which proved to be tough for a short-notice call. I had to make quite a few calls to get that done on the same day.

Cost of the water heater (including installation): $900.
Cost of the electrician: unknown (they will send me a bill by mail). I estimate this will be about $150-200.

The water heater was paid using my credit card. If necessary, I will draw from the home line of credit to pay this when my credit card statement comes in next month, but I will try to avoid doing this if possible.

Net Worth Update

As of August 1st, my net worth is $74 315 (up 3.1% from $72 069). If I exclude house-related assets and liabilities, my net worth is $50 791 (up 4.3% from $48 713). This is another good month, although to be honest a good part of the increase was due to the fact that this was a month with three pay-days. The car repairs are still to come, as are the home renovations. Those expenses will probably show up only in September's update.

Assets ($145 874, up 1.6% from $143 608)

• Bank Accounts $5 114 (up 2.5% from $4 989)
• Emergency Funds $2 810 (up 8% from $2 600)
• RRSP Accounts $36 140 (down slightly from $36 149)
• Non-Registered Investments $9 825 (up 15% from $8 553)
• Home $86 100 (stable)
• Arbitrage $5 000 (stable)

Liabilities ($71 539, stable)

• Credit Cards $3 974 (up 14% from $3 474)
• Student Loan $635 (down 29% from $894)
• Mortgage $55 824 (down 0.2% from $55 941)
• Heat Pump Loan $6 751 (down 0.7% from $6 803)
• Arbitrage $4 131 (down 2.1% from $4 219)

Increase in credit card debt completely balanced other debt payments this month, which resulted in stable liabilities. However, since I don't carry any interest-bearing balance, this will go down next month. My cash reserve was again higher, in advance of the expenses for the car repairs and home renovations. On the other hand, my RRSPs were stable despite adding money to them, but my non-registered investments performed well, so that's a wash!

Net Worth Update

As of July 1st, my net worth is $72 069 (up 3.9% from $69 366). If I exclude house-related assets and liabilities, my net worth is $48 713 (up 5.5% from $46 155). Another good month in the Frog's pond! But there are some clouds coming, for more car repairs are on the way, as well as some house renovations. Princess and I set up a line of credit to do this, so I am adding a line in the liabilities section, even though we haven't tapped it yet.

Assets ($143 608, up 1% from $142 117)

• Bank Accounts $4989 (up 80% from $2 762)
• Emergency Funds $2 600 (down 3.7% from $2 700)
• RRSP Accounts $36 149 (down 0.2% from $36 214)
• Non-Registered Investments $8 553 (up 2.9% from $8 309)
• Home $86 100 (stable)
• Arbitrage $5 000 (stable)

Liabilities ($71 539, down 1.7% from $72 751)

• Credit Cards $3 474 (down 17.4% from $4 204)
• Student Loan $894 (down 22% from $1 152)
• Mortgage $55 941 (down 0.2% from $56 036)
• Heat Pump Loan $6 803( down 0.7% from $6 853)
• Arbitrage $4 219 (down 2.1% from $4 310)

My cash reserve were much higher this month, as I prepare for the coming expenses for the summer (car repairs and house renovations). The emergency fund was slightly lower because of the turnover in one of my GICs. Credit card debt (mostly 0% financing) keeps going down fast, but I expect them to go up before the end of summer.

My RRSP accounts went down in value, even though I kept adding more money in. As I have said before, this is not a problem as I am in for the long term. The recent changes that I made (the purchases of shares in Pepsi and General Electric) were partially responsible for this, due to the comissions paid for the purchases, and the fact that the shares of those companies went lower after my purchases. Am I worried by this? Of course not! I knew I wouldn't be able to pick the bottom, and in 10 years the difference will be meaningless. I even received the first dividend payment from my Pepsi shares (not included in the above numbers). If the shares keep going lower, I will buy more of those (or other similar companies) as more money gets added to my RRSP accounts.

RRSP Purchase - General Electric

I just made a purchase of some shares of General Electric (GE) in my RRSP. Here are some of my reasons for buying GE.

The shares are currently selling at a multi-year low -- that last time its shares were that cheap was 5 years ago! As a results, it sports a dividend yield of 4%, it's highest in recent history. Better yet, the company is bringing in plenty of cash to pay for those dividends, and will keep increasing that dividend in the future (although the next increase may be modest).

This spring's surprise miss send the price of its shares into a tailspin. Many consider GE to be a proxy for the US stock market. People are talking of recession, which scares investors. That is usually the time to go looking for bargains. As Warren Buffet says, "Be greedy when others are fearful."

The company has a good position in green products. They are very much present in the alternative energy businesses, such as wind and nuclear power. Electronics, financial services, infrastructure. You name it, they are everywhere.

Many analysts complain that this company is too complex and too big to be easily analyzed. Me, I simply look at the results -- they make money for their (share)owners, and they keep increasing how much money they make. Maybe the company will restructure, sell parts of the business, or spin off some of it. As a shareowner, any of these will probably be positive. If nothing happens, I will keep collecting that 4% dividend. And the market will recover.

The position I initiated is modest -- I don't know if the price is the lowest it will go. If it goes down some more, I may decide to increase my stake in the company.