Summer and Year 5 In Alberta: Strategic Implications
A new piece of real estate every year. Ferrari by 30. My decision to pack my bags and drive here with only my belongings in the trunk and back seats on my own accord in the Summer of 2013 has been the most significant strategic gamble to-date.
Even at sub-$50/barrel oil, the abundance of higher-paying blue-collar work here (relative to most of Canada) is providing me a breathing chance to make up for lost time. It’s an opportunity to recover the time lost to my battles against the competition back home, and reverse the financial and emotional devastation. BC had very little in comparison. It took me 3 years to go from nothing but student loan and credit card debt to homeowner, then another for the second home.
Over my years here, I gradually learned that using one source of income is futile in today’s rapidly shifting economic conditions. Today I rely on a combination of the following to maximize my earning power and remain moderately diversified:
(1) Oilfield trucking income.
(2) Road Construction income.
(3) Self-employment (contractor) income of the above plus that of various city work.
(4) Investment income.
(5) Rental income.
Where at least 4/6 are all working together at the same time to maintain adequate cashflow. If I am performing road construction one moment, but the work suddenly dries up, I pick up the phone and immediately jump to either oilfield trucking work, and/or self-employment income (#3) to (attempt to) prevent a fall into the red.
From a financial perspective, diversification hurts returns, but lessens risk- following the no risk, no return principle. In theory, potential earning power is maximized with sole oilfield self-employment income, such as starting an oilfield trucking company – and/or investing in one of the masses of exploration companies listed on the TSX Venture – the very ones that we oilfield hands often perform work for, as they hope to make economically-sound producing wells after years of expenditures admist no or little income. On the contrary, like what most white collar families (especially that of foreign ones), public sector hands, old people risk averse due to a short time horizon, and bankers will say:
– going to school, working as the employee, and just throwing the spare pocket change into a Savings Account is to be safe. Potential earning power, along with risk, are minimized, welfare aside. But, at least you’ll have somewhat of a paycheque most of the time and won’t worry as much about losing everything.
(Though indirectly, you are still buying into part of a business as an employee, like purchasing the shares of one. Your blood, sweat, and tears hold monetary value. The business anticipates your monetary value to produce additional marginal revenue... and it passes this onto you in the form of increasing paycheques. If it doesn't, then like your stock, you'll eventually be out of money too. There is no free lunch.)
Even don’t date outside your race some of them will say, as upon marriage, your expected lifelong earnings will be reduced by >=40% upon divorce – and somehow, they still view love outside your race as riskier.
However, the industry holds almost no consistency. Even though the income is highest per unit of labour, the slow times reduce it to 0 and hence reduces overall average income. The oilfield is generally busiest during winter when the ground is frozen, but very hit-and-miss otherwise. You may work a couple weeks, but sit at home for a couple weeks. So that’s what road construction and city work are for- to patch the holes, even if less-paying.
Investment and rental income are continuous and on-going- with regular additions of undervalued company stock and yearly real estate additions to the portfolio. However, the ever-stiffening mortgage rules and hate of financial institutions for those trying to exceed the general indebted–employee-forever social fabric, to punish risk takers, are making this increasingly difficult. Lack of adequate cashflow this year also makes raising cash difficult.
Economic slowdowns in the oilfield and road construction industries due to increased competition are lowering yearly income for financing purposes for real estate and stocks. Our road construction company has been losing a lot of work from other competing companies undercutting us. We have too many crews trying to share a smaller amount of work. Trucking contractors and fresh bodies wanting to be electricians are pouring in by the masses to drop rates and work opportunities. In the oilfield, we complete with workers all over the country willing to do more for less. All this has resulted in lower than expected income. It also threatens to derail my one property per year objective. In fact, at the time of writing, I am lucky to see my third property even 2 years later if things do not improve- and that is no recipe for a Ferrari by 30.
Even with 6 earning strategies, on some days everything does feel hopeless. The downward pressure on wages and work make it especially difficult to remain in positive-cashflow territory. Without more cash, I cannot acquire more investments, and thus further grow my net worth. My financial security is threatened with dwindling cash reserves. The threat of forever being trapped as an enslaved, indebted employee looms closer. It seems like my dreams are slipping away by the day- like my old days in Vancouver as I watched myself fall behind further by the day against the competition. There the more academically-inclined and harder working usually had one homogeneous strategy if we didn’t come from a privileged background- have a very high level of in-demand, specialized, hyper-competitive education- like that to be a lawyer, doctor, medical practitioner, etc. Otherwise, it’s to be a golden performer molding perfectly into some ideal clique to get into the thin likes of investment banking or consulting. Vancouver has mostly a service industry and little else; the financial sector has always been more prominent in Toronto, though even then it is saturated there. Thus, many would love to cut your throat for a seat in something like law school. Graduate programs have been viewed as actual post-secondary, and Bachelor’s Degrees mostly the new High School Diploma.
Here in Alberta the upper limits of prestige and opportunity are somewhat reserved for those who know a somebody, but a hustler still has a chance, as connections and money can only shield one so much from the climate, terrain, and ruggedness of its blue-collar-dominated economy. There are also enough undervalued assets and job opportunities with low barriers of entry floating around for a risk taker and a hustler- which coincidently connections and family money cannot always get to, due to public scrutiny. For instance, the Bank of Mom and Dad usually can’t buy one the ability to work 16 hours a day in -40C weather, or fund high-leverage condo lowballs and undervalued stock bids if its shareholders doesn’t agree with the decisions, as the average shareholder is relatively risk-averse and short-sighted. Like they say,
one more fool makes one more richer, and hardships keep the competition out.