TTC tokens as a strip bond investment?
Friday, November 6th, 2009If the TTC goes through with the proposed 25 cent fare increase for tokens, $2.25 to $2.50 - an 11% increase. A 50 token roll costs $112.50 at current pre-hike prices. Post-hike prices, the token roll will cost $125.00 (par value) . From Nov. 6 to Jan. 3, are approximately 2 months. That means that your return is 5.5% per month. Buying 10 rolls for $1125 in November, means that you’ll gain $1250-$1125=$125 in 2 months.
Advantages - For a family of 4, 500 tokens can get used up quite quickly. Likelyhood of TTC tokens to become obsolete is pretty low, and there’s always some sort of 1:1 conversion service offered at the time the currency changes. The likelyhood of an increase in fare price is pretty close to 100%, and there’s very little chance that the token value can go down below current face value, or even more unlikely to zero. The gains are not taxable.
Cons - TTC tokens are not a very liquid investment. It’s not easy to convert TTC tokens back to cash, in fact, it’s probably illegal to resell tokens. Tokens are not interest bearing. There’s only the one time increase every 2 or so years. You can’t resell the tokens back to the TTC for cash.
An average commuter probably uses the TTC 45 times per month, meaning 588 times in a year, or $1323 in tokens.
Is the ttc metropass worth the money? Before the hike, a metropass costs $109. An average commuter needs to use the TTC at least 45 times in a month. So 109/45=$2.42 . That’s below the cash price of $2.75, but above the token price of $2.25 . You’ll need to use the metropass at least 49 times in a month in order to break even ($109/49=$2.22) compared to a token. At the hiked price of $126, you’ll need to use the ttc at least 51 times in order to break even with a token price of $2.50 ($126/51=$2.47). So for an average commuter, you’ll need to use the TTC 6 more times than usual in order to make the metropass worthwhile.
