Keeping it

guardian1

Where’s money safe?

A worthy question to ask on the day when General Motors goes into bankruptcy and Canada’s officially declared in recession. If nothing else, we’re one confused nation.

This past weekend media stories of bidding wars and escalating home prices mixed with dire predictions of where a $50 billion deficit will lead us. Government tax credits and cheap rates encourage people to spend, while household debt soars to a new $1.3 trillion high. A thousand people apply for an entry-level office job in just two days, while the geniuses who lost billions running the public pension plan get chunky bonuses.

Abnormal times. The country’s largest bank bleeds money, while the stock market soars. Most people expect life to return to what it was a year or two ago, but fail to understand that cannot happen. It’s now evident we could have $100 oil, rising interest rates, inflation and higher taxes at the same time as chronic unemployment and industrial collapse.

And how can things end fairly, when terrified politicians lavish $1.4 million on each and every autoworker job – with no guarantee any will exist in a year? Governments are more involved in the running of the economy than at any time since the 1930s. And that turned out well.

Meanwhile, our population’s aging fast, with incredibly predictable results. Climate change is upon us – anything but predictable. We’re adding more debt in a year than an entire generation accumulated. And families have done next to nothing to mend their ways since the world almost ended at Thanksgiving.

We’ve had a housing bubble, an equity bubble and a commodity bubble. And after Bernie Madoff, can anybody trust anyone anymore?

Where’s money safe?

Here are seven suggestions.

1. Cash. Those who warn of a currency collapse, hyperinflation or people buying houses with pieces of money are financial posers. None of these things will happen, certainly not in the next decade. Cash money will be the only form of wealth you can be sure of, so have as much of it as possible. Banks are fine, but do not exceed your insurance limit. Online banks are a leap of faith. A safe in the cold air return is not.

2. TFSA. The government, in a move it will regret, now allows you to completely avoid paying tax on investments, so long as they are in a TFSA. Just created this year, these accounts allow you to transfer in $10,000 a year per couple, and invest the money in any asset, free of tax on any amount earned. If you don’t have one, you don’t deserve to have money.

3. Bank preferreds. Moan all you want about the banks and their vulnerability, but the fact is no government on earth is going to let another major bank go down. That makes these among the safest places to invest – but not in the volatile common stock. Instead, bank preferred shares are more stable and come with an income stream, currently paying around 6%, or five times the rate of inflation.

4. Tax-deductible mortgage. If you have investments, and a mortgage you service out of after-tax dollars, you’re not paying attention. Sell the investments, pay off the mortgage, re-mortgage the house and buy back your investments. Now you have a tax-deductible mortgage, with the distinct advantage of being able to write off all interest charges from your income. Also consider an RRSP mortgage, which I have referenced here previously.

5. Oil. This is the energy economy, and the oil age. We can pave the country with windmills and crank out hybrids, but we’ll never diminish the appetite for gasoline, diesel, NG, propane, heating oil or electricity – at least not until there is a crisis. Between now and then, oil will soar, taking many other commodities with it. Demand from Chindia alone is enough to double crude in the near future. Integrated oil companies, energy mutuals or trailers in Fort Mac are considerations.

6. RRSP. Much in disfavour now, this last great tax shelter is a gift. A contribution in kind allows you to invest without money. The RRSP homebuyer’s plan allows you to leverage up a downpayment in just 60 days using government money. An RRSP loan at today’s rates is a no-brainer, using the refund to pay down the borrowing. And a leveraged meltdown strategy lets you get cash out of an RRSP or a RRIF without paying tax.

7. Universal life. Now that over 70% don’t have any pension plan, it makes sense to over-fund a UL policy. You can invest this money in a sheltered growth account, then structure payments to last the rest of your life – all tax-free, since they come from the proceeds of a life insurance policy. Or, you can wait for the wonks who run the CPP to lose it all.

8. An advisor. If you think bonds are safe or buying two condos is diversifying, you need an advisor. If you fear getting Madoffed, you need to know this: Almost all advisors in Canada just buy stuff for you, which remains in your name. This is totally different from BM’s clients, who handed over cash which disappeared into a fund the guy ran himself. Reality is, most people who fail financially are do-it-yourself investors who even think reading a blog is worthwhile.

I mean, imagine.

106 comments ↓

#1 Insurance Companies? on 05.31.09 at 11:26 pm

Garth, if things continue to deteriorate severly (commercial loan failures, etc etc), do you think the insurance companies will be protected from failure?

I would hate to see the cash value of my Universal Life policy be reduced severly.

#2 Nostradamus Jr's Analyst on 05.31.09 at 11:26 pm

Garth,

You forgot gold as a hedge against all these blow ups and a store of value in uncertain times – but that’s not surprising.

Where does your freakish and unnatural hatred of gold come from? Were you beaten by miners as a child?

#3 CTM on 06.01.09 at 12:16 am

Keep telling it like it is Garth.

I’m headed out to Costco to buy a casket and then down to the bank for a mortgage!

I figure I’ll probably die before I pay the house off, so why not?!

Keep up the great work!

CM

#4 Dave on 06.01.09 at 12:26 am

Tax-deductible mortgage. If you have investments, and a mortgage you service out of after-tax dollars, you’re not paying attention. Sell the investments, pay off the mortgage, re-mortgage the house and buy back your investments. Now you have a tax-deductible mortgage, with the distinct advantage of being able to write off all interest charges from your income. Also consider an RRSP mortgage, which I have referenced here previously.

—————————————

Garth, can you tell me where we can get more information on this? Even rrsp meltdowns, I’ve heard people talk about them but have yet to meet someone who knows how to do them..It’s like a secret society.

Hopefully there’s a book or something related to the above topics.

#5 rory on 06.01.09 at 12:41 am

Good grief and I have not even read the post as of yet …that has got to be the sorriest ass excuse for a cowboy yet …is he an Eastern Cowboy …is that a shotgun and what’s up with those cowboy boots …NOT …must be dress up night somewhere in TO …lmao here in BC …ok now I will go and read…jeez.

#6 . . . fried eggs and spam . . . on 06.01.09 at 1:00 am

Nos. 1, 3 and 5 would be great for us, except the spare cash (our ship of dreams) has not yet arrived.

With gas and oil rising, a basket of commodities are looking mighty pretty right now, especially with China driving the prices up.

Cash (if we had any) would go straight into our non-registered plan, made up mostly from Cdn. equities.

Bank preferreds sound quite good, especially at a 6% income stream.

When our ship does come in — IMMEDIATELY — we won’t need the UL policy!
——
Goes slightly against Garth’s POV re: hyperinflation. Nevertheless — http://tinyurl.com/mtyqjj

“The Fed can of course print money to buy up every Treasury bond in existence, but the inflationary ramifications would be Zimbabwe like, and crush the dollar on international currency markets. Are we near the phase where all hell breaks loose? I have never even answered, maybe, to this question before. It’s always been, ‘no.’ Now it’s maybe.”
——
In Germany, credit insurance premiums for companies that may / may not survive increasing? If no one can afford to pay those rates, then it duzzent make much sense to have them in the first place. — http://tinyurl.com/pkk6wd
——
Aaahhhh . . . Climate Change. Speaking of which — http://tinyurl.com/9ov2gu — Followed by videos showing the changing face of the planet, or how quickly the karmic speed of time is moving. — http://tinyurl.com/km657o

#7 Davinci on 06.01.09 at 1:04 am

Silver and gold are finally soaring as the CRIMEX er-COMEX is about to go bust at the end of this month. Hedge funds and mutual funds are sick of the manipulation game.

http://www.youtube.com/watch?v=pItsaMSmcPQ

Financial reality is about to hit all the banks in the USA, don’t get knocked over holding paper.

I know you don’t get it Garth, but ignorance is no excuse for not seeing that paper is paper and money is something with automatic value and anti-counterfeiting properties. Value for value not value for someone’s promise to pay (dollars are created when someone goes into debt). In affect modernizing slavery.

I get the feeling that economic reality is coming fast. Even if the truth is not revealed like gravity to an apple falling on your stubborn head in a month or 2. Knowing what I know now I will still fight for monetary freedom until the day I die.

I don’t care if I never reach my goal, the effort will yield it’s own rewards.

#8 The Coming Depression on 06.01.09 at 1:04 am

Totally ridiculous statements. Anyone who believes cash is safe needs their head examined as the dollar drops into oblivion, as China sells the dollar as GOLD and SILVER rocket… listen to Ron Paul:
http://thecomingdepression.blogspot.com/2009/05/end-of-financial-system-may-be-iminent.html
Garth Get your head out of the sand!

#9 rory on 06.01.09 at 1:41 am

“She lost her pension after investments went awry and says that talking about the problems of unemployment and how to best find work in a dismal economy gives her hope when she is depressed” …from TAE post.

Is this why you give us these basic suggestion because people are overly leveraged and overly “risked out”.

#10 Mithridates on 06.01.09 at 2:52 am

That bit about the banks reminds me a bit of this comic:

http://img4.imageshack.us/img4/3169/ww00048.jpg

Thanks for point #4. I have a Canadian friend here in Korea who is moving back to Canada next year (has a family now) so I’ll definitely be forwarding this link to him.

#11 Munch on 06.01.09 at 3:01 am

Cool!

Garth is being abrasive again!

Yes, we can!

#12 Da HK Kid on 06.01.09 at 4:00 am

Good List Garth. OIL is the new GOLD! Cash is KING!

The USD is getting hammered right now but this is all the money on the sidelines coming out to play only. I will buy more USD on the way down then get ready for the reverse once again when Equities burst! Flight to safety!

Remember the same thing happened mid December last year and we are going to repeat this again and again until people understand the long haul perspective.

QE is alive and well all over the globe so this will hammer other currencies who follow the US actions.

I agree with the Bank Preferred Shares as long as they are USD denominated or if you subscribe to commodities gaining then go CAD or AUD!

I prefer AUD as the Aussies already have China in place!

Canadians have a sputtering US to export too!

#13 David Bakody on 06.01.09 at 6:55 am

Good sound advice Garth, most will know that you have said this all before both here and your books. My first thought of course is why is the Media not echoing your words to help Canadians?

Another point, Garth do not ever again feel bad about having been tossed from the CPC ….. just remember it is and always will be the Reform Party ….. all Canadians and others from around the world who stop by this web site are the winners due in part and whole because of that move in these troubled waters of Global Finance. …. Thank you.

#14 OttawaMike on 06.01.09 at 7:53 am

I’m aware of peak oil and all the ramifications of Asian demand for it as they buy new motorcycles and cars and crank up their factories.
In the short term (1-2 yrs) we have:
1) fully loaded floating supertanker storage vessels bobbing around ports worldwide,
2) N.Americans and Euros scaling back driving & car purchases
3) flat demand and
4)OPEC countries not heeding quotas.
Can somebody explain what will cause 100$ oil besides rampant speculation?

#15 pbrasseur on 06.01.09 at 8:12 am

Can’t really argue with common sense. You’re also quite right to advise people to get investment help from professionals.

That being say you will get serve much better by learning as much as you can about investments yourself. Get help to choose were to put you money but at least do your homework to understand were your money is and how much fees you get to pay to put it there. That’s especially true in Canada were mutual funds typically charge way too much. That means a lot of bucks, 2% compounded over many years is a lot of money, yet many people with RRSPs don’t even realize they are paying it…

Speaking of common sense, if you want a well balanced and good performance approach while paying minimum fees, you may want to consider the couch potato strategy:

http://www.canadianbusiness.com/my_money/investing/article.jsp?content=20060405_152254_1452&ref=related

http://www.canadianbusiness.com/my_money/investing/article.jsp?content=20060405_150734_3924

#16 Mike (Authentic) on 06.01.09 at 8:22 am

Great post Garth!

As Da HK Kid said “OIL is the new GOLD! Cash is KING!”

We are investing in both, Cash and Oil. Been purchasing oil stocks in Calgary O&G since Feb.

Not a cent in gold. Even when it was around $750oz we didn’t see the value in it*. As you have to buy it in USD (-exhange rate, fees), sell it in USD (-exhange rate, fees) and then worry about the USD to CDN (-exhange rate, fees). But if I was American, paid in USD, I’d buy a small bit of gold as it’s priced in my home currency then.

But remember about the price of oil. And I’ll quote from Michael over the Alberta Bubble Blog:

“Mike_o_rama raised an interesting issue re. the relationship between oil prices and the Cdn dollar. A falling US dollar is reflected in the increase in oil prices. It does not result in increased profitability. It is simply an adjustment to reflect prices. As Mike stated “If the US dollar was worth 10 cents Canadian than oil would be $600 a bbl, but it wouldn’t make any difference to Canada. It’s the SAME price for us, for the companies and for profit”

Oil is priced in US dollars. Now, the consensus is that the oilsands needs $80 per barrel oil to make a profit. However, the consensus is also that the $80 per barrel price must occur when the exchange rate is 75 Cdn cents for 1 greenback. This brings around $106 Canadian dollars. back to Canada. At maximum, $80 per barrel oilsand crude is profitable at .80 Cdn cents to the US dollar. This is the equivalent of $100 Cdn per barrel.

Thus, it appears that oilsands will need oil at or around $100 Cdn per barrel to break even on older projects and make a profit on newer projects. With the Cdn dollar nearing par, the oilsands will require oil to rise near to $100 to move towards profitability. At $66 per barrel while the Cdn and US dollars are fast approaching par and oversupply as evident as poor demand, the return of the heydays of galloping oil prices into the stratosphere is now really a pipeline dream for the bulls of Alberta. Demand and supply is what will fundamentally dictate price and we all know where demand and supply are at this time. Even if oil gets to $100 and the Cdn dollar goes above par versus the US, oilsand companies will remain tightfisted particularly if demand and supply remain at these levels. In fact, demand and supply do not correlate to oil getting close to $100 per barrel.”

Mike

#17 dd on 06.01.09 at 8:36 am

9: Ag stocks … Potash, Agrium and the like. If oil is expenense agr prices will be pushed up too.

#18 Toronto C9 Renter on 06.01.09 at 8:43 am

#14 Mike said… “Can somebody explain what will cause 100$ oil besides rampant speculation?”

Answer – USD depreciation. (Note if you are measuring Oil price in Canadian $, Austrailian $, NZ $, Euros etc, the recent price rise has been much less spectacular)

#19 dd on 06.01.09 at 8:45 am

#14 OttawaMike
“Can somebody explain what will cause 100$ oil besides rampant speculation?”

The market thinks that demand will pickup like the good old day. Long term yes. But there is so much oil on the market today that prices could take a hit shortly.

#20 wjp on 06.01.09 at 8:55 am

# 16 Mike….
Imagine what the price of gasoline would be in Canada however, that would get most cars off the raod…

#21 Kris on 06.01.09 at 8:55 am

Picking stock winners, predicting the price movements of gold and oil and guessing interest rate movements are all complete folly. It is as impossible for the experts to do this as it is for regular people so DON’T WASTE YOUR TIME TRYING!

Keep your money in cash, then move on to asset allocation in step with your own personal financial knowledge and comfort with investing. The advisor will tell you in which accounts (rsp, non-registered, resp, tfsa) to hold various categories of investments (cash, stocks, bonds, GICs, trusts, mortgages, preferred shares, rental real estate) for the best tax efficiencies.

#22 wolf in the barn on 06.01.09 at 9:05 am

Dear Garth:

Would you please explain why an internet bank is a leap of faith when its deposits are covered by CDIC. After all, there has not been any claims to the CDIC insurance program yet. If it starts, one can get it out of there quicker than making a transfer out of our largest bank.

About the subject of the financial system being on life support, very helpful and easy to grasp stuff here on Atlantic monthly web site:

http://www.theatlantic.com/slideshows/feds/

Covered previously. If there is an economic emergency, terrorist incident, climatic event, the goassmer threads of the net will be among the first to fracture. No access to your money just when you need it. How smart is that? — Garth

#23 ts harpoon on 06.01.09 at 9:23 am

Depressed oil prices in the short term, summer 2009 according to Canadian National Energy Board:

http://www.neb-one.gc.ca/clf-nsi/rthnb/nwsrls/2009/nwsrls13-eng.html

How to substantiate higher oil prices:

Consumer anger at higher energy prices. Oil companies furious with high service costs. Oil and gas companies livid as equipment shortages worsened. Prices collapsed. Drilling collapsed. Firings began. Oil and gas industry now tightly balanced between soaring decline rates.

Fully loaded oil tankers waiting off-shore is a myth.

#24 Real Estate Deal or No Deal on 06.01.09 at 9:31 am

Hey Garth,

You mention:

The RRSP homebuyer’s plan allows you to leverage up a downpayment in just 60 days using government money.

I don’t think this is the 1st Time Home Buyers plan … could you expand on this?

Thanks.

Yes it is. Make a contribution, get the rebate, withdraw funds after 60 days tax-free, add in the government money and you have just leveraged your down. — Garth

#25 Vindi on 06.01.09 at 9:32 am

During one of the realtor-bashings on here, Kevin said on this blog on Jan 24, 2009

“I suppose that’s why they also keep talking about all this mythical pent up demand that’s apparently bubbling just under the surface.”

Too funny. Turns out there was a huge pent-up demand.

Greater fools always manage to pick the moment of maximum self-destruction. — Garth

#26 $fromA$ia on 06.01.09 at 9:34 am

“It’s now evident we could have $100 oil, rising interest rates, inflation and higher taxes at the same time as chronic unemployment and industrial collapse.”

Now you can tell us where your ” we are in a deflationary enviroment comments went?”

Gold is the real deal/

Yes, this is a deflationary economy which, as I have forecast for months, will become mildly inflationary, with higher interest rates and energy prices stagnating economic growth. Gold is a dud in this environment. — Garth

#27 lgre on 06.01.09 at 9:38 am

“Garth, can you tell me where we can get more information on this? Even rrsp meltdowns, I’ve heard people talk about them but have yet to meet someone who knows how to do them..It’s like a secret society”

you will need at readvanceable mortgage, BMO and RBC have these as well as Manulife…you will need at least 20% equity in your home to get it..as you pay down the mortgage the HELOC amount increases, with the HELOC, you can purchase stocks, bonds or other investments..keep this out of an RRSP..must be in a non registered account or you will lose the interest write off..at the end of the year you will get a statement claiming what the interest paid on the HELOC..then you write that off with income tax.

#28 Alex on 06.01.09 at 9:38 am

All these fiat paper investments mentioned above are money losers as REAL inflation is around 8-10%.
Even oils stocks are too risky – as any paper they are manipulated by bankers.
Keeping most of your wealth in CAD or USD is a dangerous approach as there is a huge possibility of their devaluation…

I will stick to silver bullion – gained 60% since November and no risk as silver has been true money for 5000 years and is also widely used as an industrial metal.

Actually, gold has gained 10% on a yearly basis – much better performance than energy.
Why buy oil if gold and silver historically outperform it?

No dividends. No interest. No income. For most Canadians, a large position in PM is sheer capital gains speculation. Might as well buy a condo, and pray. — Garth

#29 WestCoastGirl on 06.01.09 at 9:59 am

@ #4 Dave on 06.01.09 at 12:26 am

also known as The Smith Maneouvre

http://www.smithman.net/home.html

No it is not. I do not endorse or recommend that strategy. — Garth

#30 $fromA$ia on 06.01.09 at 10:02 am

Thanks for your reply Garth, made $16k on gold stocks this week :)/

Only if you converted them into cash, which is money. — Garth

#31 pjwlk on 06.01.09 at 10:07 am

“terrified politicians lavish $1.4 million on each and every autoworker job”…

There you go again blaming the worker. WTF? There’s a lot more to any bailout fella than just jobs, and guess what? The everyday worker’s are not the people who created the problems to begin with.

I think I blamed the politicians. — Garth

#32 hagbard on 06.01.09 at 10:19 am

It isn’t gold that soaring, its the US dollar that’s tanking. I can buy the same amount of gold for the same cdn dollars today I could a month ago (actually, a tiny bit more).

#33 Toronto C9 Renter on 06.01.09 at 10:24 am

#21 Kris said: “…Picking stock winners, predicting the price movements of gold and oil and guessing interest rate movements are all complete folly….impossible …so DON’T WASTE YOUR TIME TRYING!”

Kris, I won’t say you’re wrong, but I’d say it depends where one is on the risk tolerance curve. The approach you’re advocating will no doubt keep you solvent, but will hold you back from spectacular returns.

For those of us on an unending quest for easy riches without doing any real or meaningful work, its always going to be about picking winners and market timing!

#34 LS on 06.01.09 at 10:29 am

For the people confused about Garth’s stance on Gold.. In “After the crash” there are plenty of stories and quotes suggesting that Garth likes gold, and you should load up, such as:

“If you have confidence in the status quo, don’t bother with gold”

Of course, the whole book is about how times are different and changing fast, so obviously this is not the preferred option.

“If you simply believe that we’re in rapidly changing times and the future won’t look like the past, then join lots of other people who (…) have become brand new gold owners”

In other words, sensible people have some investment in gold, according to Garth.

In fact, the lowest percentage Garth mentions is 10% for the mildly concerned, 20% for the scared, and lots more for the ones that believe the apocalypse is upon us.

“So how much gold should you have? As much as you want. In the happy event the world does not end, and we merely enter a new age of government-induced inflation, you can unload it for a profit”

Then Garth goes on to go into detail about how to buy, sell, and store gold.

Then on this blog, Garth takes every chance to poke fun at the gold bugs. However, what he does mention rarely is that he does believe in Gold as an inflation hedge. From a few posts ago: “As for the reason I am not a believer in gold (other than having a max of 10%, purely as an inflation hedge)”.
So don’t get all bent out of shape if you have some reasonable stash of gold. Father Garth doesn’t hate you after all. (this isn’t me, I have no gold).

#35 squidly77 on 06.01.09 at 10:39 am

http://inflationdata.com/Inflation/images/charts/Gold/Gold_inflation.gif

lame weak and impostering mini me
if it went to where it was 28 long years ago you still have to trade back into CND

#36 pbrasseur on 06.01.09 at 10:40 am

Alex

“Keeping most of your wealth in CAD or USD is a dangerous approach as there is a huge possibility of their devaluation…”

Dream on…

Devaluation against what?

The value of a currency is always relative to others, for a currency to loose value some other currency needs to gain value.

Now what other currency could rise so much against the USD and more importantly sustain that value over time?

Imagine for a moment it would be the Euro (which is hard to believe given the economic mess Europe is in at the moment), a substantial USD devaluation would surely kill German exports and stall the economic engine of that continent even more so than it is stalled now!!! The economic disaster that would follow would hardly justify a highly priced currency.

This is even more true of emerging economies whose health depends squarely on the purchasing power of the USD.

Sure the USD may devaluate some over time (probably intentionally done by the Fed) and it will actually help the American economy to pick itself up. But a collapse of the USD is nonsense.

There is another was to look at this:

Clearly the European central bank (ECB) has not been as active as the FED, therefore interest rates are a still bit higher in Europe and this helps the Euro to stay strong. The obvious reason is that Europe needs to pay more interests to attract investors to buy its bonds, IF the ECB would lower its interest rates and dilute their money like the FED there is a good chance some Euro countries could not roll-over their huge debt. The US however can afford to lower rates. They do it not because they’re weak, they do it because they can. Europe can’t.

#37 Stephen Smith on 06.01.09 at 10:41 am

OTTAWA (Reuters) – Canada’s economy shrank in the first quarter at the fastest pace since 1991, pushing the country into its sharpest two-quarter downturn on record, Statistics Canada data showed on Monday.

Hey not to worry everythings fine, in fact this is the perfect time to go out and buy a car from one of two bankrupt car companies, get a great deal while the gettings good. Or perhaps a house to park that car in front of. We have many excellent models on sale and super low interest rates, heck almost anyone can qualify.

But remeber these are time limited offers! As soon as interest rates and oil rocket upward these special deals will be gone forever. So come on down folks, heck we even have abandoned factories for the kids to play in right next to your new home, we call the reality grounds, not playgrounds in these here parts of Ontario.
Happy days are here again!!!

#38 smw on 06.01.09 at 11:04 am

#26 $fromA$ia, #28 Alex

Gold is a dud in this environment. — Garth

Yes, and no, thats too broad to say Garth, because if you were exchanging your American dollars for it over the past couple months, your doing alright.
If your buying in Canadian, your just trading $ for metal as the Canadian dollar(and gold) have both moved in relation to the depriciation of the US dollar.

I bought SILVER bullion back in mid February with Canadian dollars, and only now, with its rise over $15USD has their been a net gain when you consider the cost to purchase, ship and store and the conversion between CAN and USD. I’m up 5%. However, physical is only a 5% stake in my wife and I’s portfolio.

However, anyone buying into “Emerging Market” or “China Funds”, has seen their wealth go up 25% – 33%(As well as get paid a 5% dividend.)

Resources and Precious Metals have gained nicely as well, but not as sharp as the ermerging markets.

If oil goes up, its because of the demand from these soon to be mature, and leading global markets.

Also, if you look at the DOW and see where it is today versus the value of its dollar, and where it was when it hit the low in the fall, its done nothing.

I think we’re due for some more profit taking.

Physical metals are good buy if your currency is being devalued. As Garth says, its a store of wealth, not a creator(For Canadians, as our currency is already a gold/oil store).

Garth, I’ve heard the term “Competitive Currency Devalution“, and the thought is we are already in the midst of it.

What is the consequence of this if its addapted as world wide monetary policy? Would this not increase inflation?

I know the polititians want inflation, they’d love to inflate instead of having to tax…

#39 Republic_of_Western_Canada on 06.01.09 at 11:08 am

#14 OttawaMike –

The USD is belatedly tanking. It’s breaking up like an Air France jet over the Atlantic.

That’s the biggest part of the so-called ‘increase’. It’s high time to now report oil prices/futures in terms of currency baskets, and grams of gold. Present ‘pricing’ is meaningless.

#40 Soylent Green is People on 06.01.09 at 11:08 am

That there is a fashion runway cowboy, metro sexual pssttt

#41 squidly77 on 06.01.09 at 11:14 am

today
gold @ 980 USD = 1,066 CAD

mar 2009
gold @ 980 USD = 1,333 CAD

july 2008
gold @ 980 USD = 980 CAD

its a currency trade plain and simple
may as well play with FOREX and save the fees

CAD to USD

FOREX replacement

#42 WestCoastGirl on 06.01.09 at 11:45 am

No it is not. I do not endorse or recommend that strategy. — Garth

??!

Can you highlight the differences btwn Smith and your own? Didn’t realize this wasn’t what you were referring to throughout these posts when you mention Tax-Deduct. Mortgages…and this is why I keep coming back to this blog (albeit somewhat over-religiously), the education gleaned from Garth and others posters is invaluable.

#43 Two-thirds on 06.01.09 at 11:50 am

#29 WestCoastGirl re: The Smith Maneouvre

http://www.smithman.net/home.html

No it is not. I do not endorse or recommend that strategy. — Garth

————————————–

So, what is the difference between Garth’s RRSP mortgage and the Smith maneouvre? They sure sound similar…

Is it that Garth’s approach requires an almost paid-in-full mortgage and a complementary amount of existing investments whereas the SM can be implemented via a HELOC even when the mortgage is still unpaid?

Am I right Garth? Leverage vs. no leverage?

Is it possible to use the RRSP mortgage or Tax-deductible mortgage at all if one has less than 100% equity on a property?

If not, the RRSP mortgage is of no use to us prospective first-time vultures, err… first-time buyers.

#44 Jeff Smith on 06.01.09 at 11:58 am

Hey man, are you trying to bully Garth??? I am surprise that he hasn’t kicked you off the forum by now.

#2 Nostradamus Jr’s Analyst on 05.31.09 at 11:26 pm Garth,

You forgot gold as a hedge against all these blow ups and a store of value in uncertain times – but that’s not surprising.

Where does your freakish and unnatural hatred of gold come from? Were you beaten by miners as a child?

#45 Jeff Smith on 06.01.09 at 12:01 pm

Probably a shot from a 2008 Halloween party in Toronto.

#5 rory on 06.01.09 at 12:41 am Good grief and I have not even read the post as of yet …that has got to be the sorriest ass excuse for a cowboy yet …is he an Eastern Cowboy …is that a shotgun and what’s up with those cowboy boots …NOT …must be dress up night somewhere in TO …lmao here in BC …ok now I will go and read…jeez.

#46 Future Expatriate on 06.01.09 at 12:12 pm

This gold fear is really unreasonable and highly suspect. Gold was accepted currency in the west throughout the late 19th century. There was plenty of lawlessness, but there were also towns and cities that had law and order with strong sheriffs and able posses. I see no reason whatsoever that a complete collapse of Ponzi Paper and Wall Street automatically plunges the world into Mad Max. I just don’t buy it.

What it sounds like is the desperate pleadings of people riding a gravy train right over a cliff begging people to build a bridge underneath them in time.

Something that, according to the laws of physics, is absolutely impossible.

The only thing lost when all paper collapses is going to be central control of the monetary system by a group of rich mostly foreign stockholders in our central banks.

Good riddance. Suck the lifeblood out of your own.

This is only a bad thing for them; not for the rest of us, who will grow our own food, pump our own water, and so what if we get knocked back technologically a hundred years? There are worse things that could happen. Like living north of a glowing nation of nuclear black glass. That WOULD be in a Mad Max scenario.

The upside is the US will stop trying to take over the oil-bearing areas of the world.

And our families will be stronger.

So there’s always an upside folks. Do not play into the fear and lies of the central bankers.

Nor the hucksters trying to sucker you in for the final crash.

#47 OttawaMike on 06.01.09 at 12:38 pm

Ok so investors are seeking safe haven in Black Gold instead of the US greenback.
What happens when/if this bear rally tanks big time like I’m expecting?
Will the Loonie return to it’s Jan 09 level and oil go back to the 40-50$ range or was that a so called black swan event?

On the 1.4 million$/auto job saved, what about the sucker working for 45k$/yr. minimal benefits, no company pension. He is supplementing those jobs.
I’m a union member and a former auto industry employee but still have difficulty justifying my govts. actions to save these jobs. It is a very complex debate.

#48 Mish on 06.01.09 at 12:53 pm

Listen to Richard Russell on Gold.

http://www.321gold.com/editorials/russell/russell060109.html

Listen to Garth for political gossip and the odd macro event.

#49 john m on 06.01.09 at 1:20 pm

Why I Don’t Want to Own General Motors
02:08 PM Monday June 01, 2009

By Rosabeth Moss Kanter

If I had wanted to buy General Motors stock, I would have talked to my financial manager. Now I am forced to own it, along with other American taxpayers, because of the federal government’s bankruptcy deal.

It is hard to see what good will come of this, and it sets a dangerous precedent. If the U.S. needs a major auto company, we have one already in Ford. Ford has proven to be nimbler, more innovative, more globally-integrated, and more competitive than GM. It saw the need to change earlier, changed faster, and did not need a government bailout. Ford’s advertising is trying to make the most out of its accomplishments, but I fear that Ford will be dragged down by the GM situation and be forced to cut too deeply into its own flesh as GM is cut to the bone.

The government’s rationale for its involvement with GM falls in the “too big to fail” department. I know that the current administration is dedicated to ending the recession with as few human costs as possible in lost jobs and lost wages. Yes, the auto industry’s woes coincided with the financial meltdown creating a liquidity crisis which left the federal government with the only pockets deep enough to invest in the bail-out and buy-out. But the macro-management of the economy at the federal level begins to look like micro-management when they get into the details of owning (or running) specific companies.

Is this a productive new use of assets? No. Is this a move toward transforming transportation? No. Is there a significant national security interest? No. Will this save more jobs than it kills? No. Will this promote innovation and industries of the future? No.

Okay, maybe there is some prospect of a leaner, more competitive company being created in the restructuring that will make me proud to own it and maybe to consider buying a GM car – if the name GM even survives. But the indicators make this look unlikely, for example: GM’s lag in producing energy-efficient models; falling auto sales in general plaguing even world-leader Toyota; new business models such as Zipcar encouraging people to see cars as shared utilities rather than must-have personal possessions; and low-cost innovations such as the Tata Nano coming from the developing world. So I stick with my string of No’s.

Where others see merely bankruptcy, I see a bankruptcy of ideas. The issue for GM is not just financial failure, it is a failure of imagination. Even Ford has a long way to go to be the Company of the Future.

The signs of GM’s imminent failure were there well before the weak plan presented to Congress in November, which I criticized in detail in a Wall Street Journal interview. It would have been better to let the company fail on its own and then assist affected workers, dealers, and communities directly with transition support to start new businesses and create new jobs. We will have to assist them anyway, because the GM that emerges from bankruptcy will be a shrunken, hollow version of its former self, perhaps competitive but not viable in the long term without even greater change. This move smacks of preservation more than innovation.

I would advise the Obama administration to to help innovative new companies emerge from the ashes of GM. The entrepreneurial spirit will restore the American economy more effectively than propping up falling giants.

And if the administration wants to make bold moves, I suggest that what America needs is a big national innovation initiative, equivalent to the space program, to reinvent transportation. Not just to make it greener and more energy-efficient, but to make it radically different. “” ———————oh yes its a good time to hoard some cash..the people (our governments) made these decisions and the billions are not through flowing out the windows yet….. perhaps some political gains were made but they sure as hell are destroying our future.

#50 Jan on 06.01.09 at 1:26 pm

Well, one thing that needs to be pointed out is the soaring costs of our property taxes. Yup just got mine yesterday and it is up another $100. In order for the Federal gov’t to pay down our now $50 Billion debt it will continue to download onto the Provincial gov’t – fewer cash paymts. That means the provincial gov’t in order to make up its budget deficits- will have to increase property taxes. Not only is buying more real estate right now a bit iffy but I am thinking that the property taxes are really going to start to skyrocket- big time! Oh yeah, also in my goofy community they are going to hold a referendum on a new swimming pool. Like we don’t have enough laid off people who are worried about their next job. Who do these bozos thnk will pay for this extravanganza?? Property Taxpayers of course! OUCH !!!
I remember reading in a old book about a Saskatchewan community who also voted for and tried to build a swimming pool in the 1930′s – of course it was never completed – duh…

#51 Alex on 06.01.09 at 1:46 pm

to #36 pbrasseur

“Devaluation against what?
The value of a currency is always relative to others, for a currency to loose value some other currency needs to gain value…”

That is where you don don’t realize it – all the fiat currencies tank as they are printed out of thin air.
It is devaluation against commodities, food and tangible assets I am talking about.

Can you explain to me why CAD and other currencies lost 98% of their purchasing power since 1973???
That is actually 8% compounded annually – which equals to REAL rate of inflation.

But do you know why before 1973 CAD and USD were stable like a rock and inflation was unknown? Because they were linked to silver and gold bullion which were and are REAL money and are stored at ALL central banks of the world representing true wealth.

No wonder China is stocking up on metals – they know that USD is doomed…

#52 Garth Vader on 06.01.09 at 1:54 pm

Wise men speak because they have something to say, fools because they have to say something –Plato

#53 Jimmy Fluter on 06.01.09 at 1:59 pm

When the economy collapses, it sure must feel good sitting on mountains of loot.

Its pretty lonely at the top of a mountain .

#54 Barb the proof reader on 06.01.09 at 2:02 pm

Cudos. Great free advice.

And thanks for the gag, I got a giggle over that. Was your joke missed or caught and enjoyed.. the set-up even planted twice, yesterday and today.

:)

A noted investment author who can’t count to “seven”. Very cute self-deprecating humour.

#55 Nostradamus jr. on 06.01.09 at 2:10 pm

…Garth’s vs Nostradamus jr.’s seven suggestions…

1/
Cash vs. a South Sea Island
(no brainer here)

2/
TFSA vs. Vancouver Real Estate
(unfair comparison, TFSA covers only $5K)

3/
Bank Preferred’s 6% vs. Portland/Seattle
(even, slight advtge, P & S)

4/
Tax-deductible mortgage vs. Investing in European and U.S. Pitchfork manufacturers.
(Apples and Oranges)

5/
Oil vs. Contacting your friends/relatives back in Ontario,wish them well and ask them to save a spot for you in Heaven.
(Oil will be worthless to Ontarians in any scenario)

6/

RRSP vs. Preparing your will, remembering to eliminate any Ontarian residents.
(N A, as BC will soon have it’s own BCRRSP)

7/
Universal life vs. Buying lots of VHS tapes or Dvd’s…Tape the Olympics. While viewing them raise your right hand and tell yourself…”I was such a dummie for not listening to Nostradamus jr.”
(Right, buy life insurance so the wife can live high off the hog after your gone.)

#56 ally ally oxycontin free on 06.01.09 at 2:50 pm

“Abnormal times. The country’s largest bank bleeds money, while the stock market soars. Most people expect life to return to what it was a year or two ago, but fail to understand that cannot happen. It’s now evident we could have $100 oil, rising interest rates, inflation and higher taxes at the same time as chronic unemployment and industrial collapse.”

And, it gets worse[r] and worse[r] …

Where’s our major trading partner, with whom we shared 80-85% of our trade? … Lost in the delirium of a haemorrhagic fever.

http://www.moneyandmarkets.com/seeking-shelter-from-the-next-financial-storm-34044

#57 squidly77 on 06.01.09 at 2:57 pm

jeff smith said

Where does your freakish and unnatural hatred of gold come from? Were you beaten by miners as a child?
what ?..i showed gold with no opinion no advice and without any emotional attachment
whats yours jeff smith ?

i hold a small amount of gold coins not because i believe prices are going to the moon but because it just make sense to me….what you do is up to you

if one holds gold as an ETF or gold paper how do you ever plan of retrieving your money in a time of extreme crisis ?
are you planning on going to china and demanding it ?

try googling and find out just how much paper gold is out there compared to the real thing….an ETF or paper gold is nothing more than a promissory note

http://www.usagold.com/cpmforum/?p=171897

#58 Jonathan on 06.01.09 at 3:12 pm

We are all going to feel like financially responsible idiots one day. Looks at us all here, talking and stressing about what realistic investments there are out there; what to buy, what not to buy. We’re idiots. If anything goes amuck in this economy, everyone else is going to be getting a bailout thanks to the taxes you pay on your investments. If the last six months are a lesson, then let us all remember that irrational exuberance is truly rational; that if your going to screw up, screw up royally; make sure your too large to fail; innovation and financial prudence don’t pay, taxpayers do. Garth it’s time to tell them the truth. That our lathargic government thinks it, of all organizations, knows the answer. In its own arrogance, the government will be the reason for all the stagnation and inproductivity in our society for decades to come. Get out of the free market – let it adjust, let it fail. We need risk, we need rewards, we need punishment. That’s how free markets work.

#59 squidly77 on 06.01.09 at 3:13 pm

“The term paper gold means you have a piece of paper acting as a substitute for the physical gold. With paper gold, you don’t own the gold; you own a promise to receive physical gold. In plain English, it means you are a creditor of the corporation issuing the paper gold certificate, thus subject to counterparty risks. Owning the physical gold has no counterparty risk and is fully under your control.

Examples of paper gold are gold certificates issued by banks and mints, pool accounts, futures accounts and the NYSE listed exchange-traded fund. With these products you own a piece of paper rather than physical gold. These paper products give you exposure to the gold price; you can make a profit by selling them to someone wishing to own paper gold, however when the music stops and nobody wants to purchase paper anymore, it becomes worthless since you may not able to redeem your metal”

http://www.financialsense.com/editorials/turk/2007/0305.html

bacon and eggs
mac and cheese
pepperoni and pizza
realtors and goldbugs

#60 Barb the proof reader on 06.01.09 at 3:28 pm

Just happened to be surfing re: old employer during U. o’ G. days — Alton Mill restaurant when it 1st opened — I think you’d enjoy this black & white c1962 of a great area relic, ruins of mill at Cataracts http://tinyurl.com/knseh6 (by Harold Burgess)
Spent lots of good times in the 70s touring with family, spoom types, in pursuit of old mills, hiking, driving, touring.
Sure glad I had the chance to explore the area many years before the boomer tourist crowds caught on.

#61 Glenn on 06.01.09 at 3:45 pm

Whew, at least Garth didnt mention gold or silver. God knows, those precious metals have dropped so far in value over the last few years, and they have a very short history of retaining value in liquid form.

Gotta run, time to take my medication!

#62 john m on 06.01.09 at 3:54 pm

Karen Howlett

TORONTO — Globe and Mail Update, Monday, Jun. 01, 2009 04:05PM EDT

The federal and Ontario governments do not expect General Motors Corp. (GM-N0.830.0810.67%) to repay the bulk of the $9.5-billion (U.S.) in Canadian loans the auto maker is receiving as part of Monday’s bankruptcy filing, Prime Minister Stephen Harper said.

He added that he does not see taxpayers being long-term owners of the failed car maker.———————in fact they only have to pay back 1.3 billion (what a crock of sh-t) ……..Wow are we headed for disaster with “deceitful dalton” and “slippery steve” at the helm………..i think the best that can happen is they are no longer able to borrow any more money :-)

#63 john m on 06.01.09 at 4:10 pm

GDP data shows Canada over worst of crisis – PM
Reuters – ‎1 hour ago‎
OTTAWA, June 1 (Reuters) – Although Canada’s latest gross domestic product figures are bad, they were better than expected and show the economy is over the worst of the crisis, Prime Minister Stephen Harper said on Monday.——————??? what planet are you on steve?.. it is the worst in 18 years!

#64 squidly77 on 06.01.09 at 4:11 pm

the TSX is priced in USD
the DJIA is priced in USD
commodities are priced in USD

so when the USD gets pasted guess what goes up ?

#65 pbrasseur on 06.01.09 at 4:17 pm

Alex (51)

“Can you explain to me why CAD and other currencies lost 98% of their purchasing power since 1973???
That is actually 8% compounded annually – which equals to REAL rate of inflation.”

98% is about 7% compounded over 10 years….

(if you want to see real growth just check what the Dow did over that period…)

But anyway so what if a can of Coke doubles in price if your salary doubles too?

You should understand the downside of a gold standard: It does not prevent crisis (as shown by the great depression) not only that but it can make things much worse by forcing restrictions on the money supply at the worse possible moment.

Now if you want to buy gold or any other commodity go for it, but understand it is mere speculation.

#66 the Coming Depression on 06.01.09 at 4:28 pm

Garth are these people all insane? They have to be.

June 1 (Bloomberg) — Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in 152 years to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped 30 cents to $980 at 11:47 a.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder owned Northwestern Mutual, based in Milwaukee, ranks thirds by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

To contact the reporter on this story: Andrew Frye in New York at [email protected]

#67 timbo on 06.01.09 at 4:36 pm

you missed the marble connection to keep your money safe :)

http://www.calculatedriskblog.com/2009/05/jim-realtor-check-out-this-backyard.html

#68 Rick on 06.01.09 at 5:18 pm

Jonathan “We are all going to feel like financially responsible idiots one day. Looks at us all here, talking and stressing about what realistic investments there are out there; what to buy, what not to buy. We’re idiots.”

Don’t know what world we are living in? Bizarro World or 1984? GM goes bankrupt and the stockmarket takes off? Bad econoomic news after bad economic news and the market cheer.

Garth are you sticking to your 10% down plus another 10% down by winter 2009 for RE?

#69 Jon B on 06.01.09 at 5:19 pm

Cash is number one on your list. Any opinions on what type of cash to save? Is the weakening $USD worthy of storage even though it’s not covered by the Fed’s insurance plan on cash savings?

#70 Bobby on 06.01.09 at 5:26 pm

#64

DUH The TSX is priced in Canadian Dollars. You must be a realtor, full of misleading information.

#71 lgre on 06.01.09 at 5:42 pm

Things to come, maybe?

http://ca.news.finance.yahoo.com/s/01062009/30/link-f-cnw-rbc-royal-bank-increases-residential-mortgage-rates.html

#72 squidly77 on 06.01.09 at 6:01 pm

DUH The TSX is priced in Canadian Dollars. You must be a realtor, full of misleading information

cross reference any stock you like to the DJIA and you will find that its priced in USD…cnq su cos.un whatever you choose

http://finance.yahoo.com/

#73 Au&Ag on 06.01.09 at 6:04 pm

Has anyone on this board commented on 2X or 3X leveraged commodity ETF’s???

For example if one is bullish on oil, why just buy oil stocks when you can buy 3X leveraged oil index of stocks e.g. ERX , up 10% today or HEU.TO up 7% today
or if your bearish on oil ERY , down 10% today or HED.TO downup 7% today

This goes for gold , agiculture or even the TSX itself.

So for those who feel that gold that gold will fall, why not just buy HGD.TO ?????

Anyone.

#74 . . . fried eggs and spam . . . on 06.01.09 at 6:18 pm

#7 Davinci on 06.01.09 at 1:04 am — “. . . Hedge funds and mutual funds are sick of the manipulation game. . . . Financial reality is about to hit all the banks in the USA, don’t get knocked over holding paper.”

#8 The Coming Depression on 06.01.09 at 1:04 am — “. . . Anyone who believes cash is safe needs their head examined as the dollar drops into oblivion, as China sells the dollar as GOLD and SILVER rocket . . .”

#68 Rick at 5:18 pm — “. . . Bizarro World . . . bad economic news and the market cheer.”

Conspiracy Forecasts: Today will be sunny with cloudy periods. Tomorrow will be cloudy with sunny periods. Temps. whatever you want. One and the same, just mixed-up words, so please refer to my latest Conspiracy Theory at the end (good posts, ‘tho!).
——
Who’s running the Feds? That’s right! Bernanke, Greenspan, Mickey Mouse, Geithner, Mrs. Frankenstein, Paulson, Carney (up here) and others of the same mindset (Dumb and Dumber), and that is why the US Fed (and us) are complete . . . — http://tinyurl.com/mp9qxq

It is possible that the author of this article missed Mish’s post yesterday on the second- and third-wave of home and commercial foreclosures. — http://tinyurl.com/n7dkve

Of course, once GM is declared bankrupt in North America, it will be free to move forward . . . to other, cheaper-cost, slave-labor countries. And we’re paying them to go, so how stupid are we? — http://tinyurl.com/n82pms
——
Angels and Demons. “. . . there are many here among us, who feel that life is but a joke . . .” (All Along The Watchtower, Bob Dylan, c. 1965). Joined with The Cycle Of Nines, these refer to the Chinese saying, “May you live in interesting times”.

There are numerous demons, but not too many angels. It is June ’09 now. June, being the sixth month is 9 upside down. Right now and onward is when things fall quicker than most can comprehend, mortgage rates skyrocket (thanx to #71 lgre at 5:42 pm for the link), so y’all want a conspiracy theory to play around with? Okay! This may run with the first link.

‘Owzabout the Rockefellers, Bilderberg Group, the Rothschilds and their allies (NWO) totalling the greenback over the next remainder of this year, which in turn brings down the loonie and a host of other currencies to zilch? Paper money or paper napkins?

Thereafter, the Yuan and Ruble take centre stage, as the politics of the world are moving in a left-leaning direction. Meanwhile, back at the ranch not a million miles from here, sheeple are in a dumbed-down and dumbfounded state, ‘coz things are happening with such speed now, almost no one knows which way to turn anymore!

Include The Crusades — #4 I think — WW3 sooner or later, along with plenty of smaller wars, natural disasters, all sorts of unexplained phenomena and now is one helluva ride — we’re all in the driver’s seat!

A line by Simba, from the film The Lion King: “. . . I laugh in the face of danger!”

#75 Toronto C9 Renter on 06.01.09 at 6:31 pm

to #73 re 2X commodity ETFs…

Yes, they are an excellent tool, I personally invest in HOU/HOD (oil) on a daily basis.

The key to these investments is volatility and short term gains. They are not for buy and hold for several reasons — the 2X factor causes decay over time if the target commodity holds in a range; the fund never takes delivery of the commodity so they roll to the next month’s contract between the 7th & 9th of each month

So be careful, but otherwise great tools to benefit from commodity rallys such as we’ve seen recently in oil and gold!

#76 Mark on 06.01.09 at 6:38 pm

okay – i’m thick.. what’s a “leveraged meltdown strategy”?

#77 squidly77 on 06.01.09 at 6:48 pm

where have all the gold bugs gone ?

http://www.weeklyreader.com/readandwriting/content/binary/happy%20and%20excited.jpeg

perhaps we can get back to canadian real estate now
these twits just hijack the discussion

#78 Mark on 06.01.09 at 6:51 pm

Can someone explain to me please (garth himself) what a “leveraged meltdown strategy” is with regards to RRSPs?

Im 28, single and I’ve got around 25k in rrsp, and 5k in TFSA. (Dont yet own a home – not intending to even look at that until i have citizenship).

so just wondering.

#79 JO on 06.01.09 at 6:57 pm

Oil: Short term, should hit 70 / brl +- 5, longer term, Much more likely to hit under 25 / brl in summer 2010, before exploding higher 2012-2020.

Gold: correction to about 900 in next 2-4 weeks, then explosive move to 1100…then major correction into 2010. Look for 1300-1500 gold by 2012. Buy up junior/mid capr high quality gold producers on major weakness..if oil/commodities come down hard for one last major sell off into 2010, could see huge gains4-5 times your $

UL: These are disastrous products. Fees and insurance rates are going up sharply. Brokers love them because they pay fantastic commissions. These are lousy. Only people that should look at them are: maxed out RRSP / entrepeneurs and professionals.

TFSA: If the gov’t really wanted to help savers, it would simply eliminate all taxes on investment income. These silly accounts are governed under the income tax act – in the upcoming major bond market bear (intensifies in fall 2009) market, no one can rule out a sudden change in the eligible investments forcing all of us to keep our rrsp and tfsa invested in federal and provincial bonds with early widthrawal penalties …congrats, CAD government would have effectively confiscated your RRSP.

Bank preferreds: May be a good deal in Canada, but stay away from a bank that might not be seeing beyond tommorrow..big shiny red trademark if you know what i mean.

JO

#80 Dan in Victoria on 06.01.09 at 6:57 pm

I could just see that guy showing up at the Williams Lake Stampede.It would be worth the price of admission.

#81 the Coming Depression on 06.01.09 at 7:29 pm

Garth thinks we have to pay capital gains tax on GOLD and SILVER! You’re joking aren’t you Garth?

For most Canadians, a large position in PM is sheer capital gains speculation.

#82 the Coming Depression on 06.01.09 at 7:59 pm

Here is Canada’s debt clock. We should get out of this debt ,oh, in about 100 years or NEVER. Push the Reset button please.
http://debtclock.ca/index.php?option=com_wrapper&view=wrapper&Itemid=1

#83 Luca on 06.01.09 at 9:07 pm

Au&Ag on 06.01.09 at 6:04 pm said:
“Has anyone on this board commented on 2X or 3X leveraged commodity ETF’s???”.

Great point. I was going to suggest those products. However, I believe that this forum is for investment ideas. Those products are for traders. In fact for day traders because you need to keep an eye on the market direction. In addition, they are very volatile and I’m not sure everybody is confortable with moves as 10% up or down. Take for instance today, who would have known that the market will move that high given the amount of bad news.

Another example is oil that, according to some, is off the fundementals. See what Mike(Ottawa) even Mike(reality) said on tanker full of oil storage in ports everywhere. This is not the first time I hear this but, at the same time you get people that say it is not true. So these EFTs are huge gambles. If you need more,

SDS (ultrashort S&P 500 in US), SRS(Ultra short, US real estate), SKF(Ultrashort financial in US)

URE(Ultra Real estate US) QQQQ and QLD(Nasdaq). ect….

Again thx.

#84 Eduardo on 06.01.09 at 9:08 pm

Garth, Got any comments on the better than expected GDP number?

#85 MenWithHats on 06.01.09 at 9:20 pm

Multiple bids come roaring back :

http://www.thestar.com/article/643200

Tighten your chin straps . It is going to get bumpy .

#86 rogerscableman on 06.01.09 at 9:22 pm

you are not telling the truth. Cash,? RRSP? and finance advise? are you kidding?

my finance advise is madoff, haha..

i don’t know what u are trying to do here…

#8 is correct.

#87 taxpayer like you on 06.01.09 at 9:46 pm

78 Mark – best explanation Ive seen for RRSP meltdown was Feb 2002 issue of ie money magazine. Cannot locate online, have hard copy but not with me.

The idea was to draw money out of your RRSP to avoid big tax bite on withdrawals or on estate. It entails:

1) Borrow money to buy investments. Interest is tax deductible.

2) Withdraw money from RRSP to pay interest on borrowed money.

Tax deduction basically cancels tax payable on RRSP
income. Now I havent run any numbers, but it seems to
me with the ultra-low interest rates you cant draw too
much out of your RRSP. You also have to be comfortable with borrowing to invest.

How wuz that Garth?

Squidly – you talk DJIA – it is American – Bobby is talking
Toronto Stock Exchange – last I heard Toronto was still in Canada.

65 Brasseur – compound my man, compound…….take 0.92 to the 35th power or 1/(1.08 to the 35th)….

#88 Dan in Victoria on 06.01.09 at 9:47 pm

Post#78 C’mon Mark, just Google Leveraged rrsp meltdown……….

#89 cowgirl kiss on 06.01.09 at 10:11 pm

Not too many people are nibbling at your Universal Life suggestion. Probably because they are hard to understand. I have one which I bought as a sort of pension plan for me (got one for each of the kids, too) about 5 years ago when I divorced.

I think the best explanation of them is in the book “10 Things Revenue Canada Doesn’t Want You to Know About Your Taxes”. It is a long term thing for sure, but so are all pension plans.

I have a strategy of putting money into an RSP each year, getting the tax deduction and then pulling it out the next year (up to $5000 at 10%) and then putting it in the UL to grow tax free. Pull it out gradually in your retirement years and you still have something for your kids to inherit plus a never ending supply of money due to the magic of compounding. Also, when I die, my kids get every penny – not a cent to the government unlike an RSP.

I think that is how it works, but hey, get the book and work it out for yourself.

Kick ass product used correctly. The book I mentioned says it is a win, win, win. Don’t take my word for it and no I am not an insurance agent.

(I should also mention that not everyone qualifies for it – it is not available to people with preexisting medical conditions.)

#90 nonplused on 06.01.09 at 10:29 pm

Garth said:

“Covered previously. If there is an economic emergency, terrorist incident, climatic event, the goassmer threads of the net will be among the first to fracture. No access to your money just when you need it. How smart is that? — Garth”
I’m just wondering if anyone knows if the banks will be able to function without the net. Most of their transfers are all done electronically now but it may be a separate system so who knows maybe it’ll still be functional.

The other question I have regarding the bank network would be whether the branch I’m in would have access to my account info if the electronic system is down. Every branch in the country has full access to my account, so it must be centralized somewhere (Toronto, I imagine).

With an ING account, people can phone in to make transfers too I believe. But I suspect getting through would be a challenge in such circumstances.

I think if you have the means to need more than one insured account, ING or other online CDIC insured accounts might not be that bad. The system would have to be down until your brick and mortar accounts are depleted before it should be a problem. But I’d go with a real bank for lower amounts I think.

Garth is correct that gold will never replace other forms of currency for regular transactions. What the heck can you buy with a $969 dollar bill? Nobody can make change.

Even when we had a metal backed currency the circulating coins were silver and copper. Gold is for the rich and international payments between state banks, and was even in metallic currency times until 1973. There is a long history, dating millennia, that copper is the currency of the poor, silver the middle class, and gold only the aristocracy.

And I don’t mean the pennies we have today, which are copper plated zinc. Back when they made them out of copper. Back then 5 cents would get you a Coke, and 10 cents a McDonald’s hamburger.

#23 ts harpoon

I work in oil and gas trading support and my understanding is the oil tanker storage story is not a myth. The market is in contango, http://en.wikipedia.org/wiki/Contango which means it pays money to buy oil now and sell it later. But you need to store it in the interim. But the contango in the market also shows that most traders expect oil prices to rise as well.

Yes, this is a deflationary economy which, as I have forecast for months, will become mildly inflationary, with higher interest rates and energy prices stagnating economic growth. Gold is a dud in this environment. — Garth
In the 80’s stagflation gold went from $42 to over $800 before it crashed back down to $400 and then drifted to $270 in the 90’s. But every day is a new day so we might not see those fireworks again. However, so far in the 2000’s gold has been an outstanding performer. I agree, could end any day depending what happens but the past we know.

In the 30’s deflation, part of the solution was a revaluation of gold from $20 to I can’t remember exactly but I think $37 rings a bell. That was a pretty good return too but at that time private citizens weren’t allowed to own bullion so one had to buy the miners.

It’s a diversification. But I agree with Garth one would be crazy to think buying bullion can make you rich. If you have some wealth, a little gold can’t hurt, but keep it at insurance levels as Garth himself has advocated. Everyone has their own number but I say 10% for normal people and 30% for the really panicked would bound the range. If you have 100% of your wealth in gold you are asking to be eaten by the black swan.

#73 Au&Ag

Leverage is a fool’s game. It’s like borrowing money to buy lottery tickets.

#81 the Coming Depression

There may not be a capital gains tax on gold now, but you sure got to fill out a bunch of paper work to buy it at a bullion bank like Scotia. I am sure they fill out those forms for a reason. They know who originally bought every coin. And if you sell them on ebay, well, there is a record of that too. Tax codes change. If they can residential property and salaries and raise the rates when they like, well, they can tax anything.

#91 Da HK Kid on 06.01.09 at 10:57 pm

As for GOLD, they know where you live. Sure it could be taxed OR confiscated just like in the big D.

Only Gold Bugs driving up the price.

Only RE investors pushing property.

Only Investment Advisers buying stocks!

Only Hope for those committed to the above!

#92 Jeff Smith on 06.01.09 at 11:10 pm

Inflation? I thought it was repeated here many times on this blog that we are going through a deflationary period with 20% chance of depression. Inflation no way!!

#6 . . . fried eggs and spam . . . on 06.01.09 at 1:00 am
——
Goes slightly against Garth’s POV re: hyperinflation. Nevertheless — http://tinyurl.com/mtyqjj

#93 squidly77 on 06.01.09 at 11:46 pm

my new blog..help
http://thecalgarybubbleblog.blogspot.com/

#94 The Coming Depression on 06.02.09 at 12:11 am

Nonplused your not serious are you? Any fool that buys Bullion from a BANK needs to have their head examined. First you will never see it, you will get a piece of paper that means nothing and secondly your head needs to be examined..oops i think I said that already

#95 meggie on 06.02.09 at 12:18 am

#81- Garth is correct on the capital gains on gold and silver . I have purchased and sold bullion before through Scotia Bank and PMI. I did need to declare my capital gain (and in one case my capital loss) on these cash ins. Call your friendly local CRA for verification. By the way, your transactions through Scotia are automatically submitted to the CRA so don’t even think of not reporting.

#96 EcoInsurgent on 06.02.09 at 12:22 am

#12 Da HK Kid

http://business.theage.com.au/business/china-rejects-iron-ore-price-deal-20090601-bt1m.html

China rejects iron ore price deal

“The resources superpower is believed to be holding out for a price cut between 40 and 45 per cent.”

#97 Jay Currie on 06.02.09 at 12:31 am

Good suggestions Garth.

I suspect that rather than having money in gold it would make more sense to have ten to fifteen percent of one’s wealth in junior gold and oil producers and explorers. The right company with a discovery and you could make multiples. Plus, and this is not out of the question, if gold takes a run to 1200 or 2000 (which is to say the USD weakens or collapses) there are excellent juniors on the TSX-V whose shares you buy in CDN $.

I am not sure the CND is going up, rather I am sure the USD is going down and with that the USD gold price will soar.

It makes very little difference, oddly enough, if there is inflation or deflation in the US – the sheer level of the debt and the hollowing out of a good deal of the economy means that the USD is going down. Shares of Canadian gold explorers, particularly those whose production is in the US and whose costs are in soon to be US pesos, are going to do well.

#98 MenWithHats on 06.02.09 at 1:15 am

” Figures don’t lie but liars sure can figure ”

Anon Y. Mous

#99 Devil's Advocate on 06.02.09 at 7:40 am

#58 Jonathan on 06.01.09 at 3:12 pm “We are all going to feel like financially responsible idiots one day. Looks at us all here, talking and stressing about what realistic investments there are out there; what to buy, what not to buy. We’re idiots. If anything goes amuck in this economy, everyone else is going to be getting a bailout thanks to the taxes you pay on your investments. If the last six months are a lesson, then let us all remember that irrational exuberance is truly rational; that if your going to screw up, screw up royally; make sure your too large to fail; innovation and financial prudence don’t pay, taxpayers do. Garth it’s time to tell them the truth. That our lathargic government thinks it, of all organizations, knows the answer. In its own arrogance, the government will be the reason for all the stagnation and inproductivity in our society for decades to come. Get out of the free market – let it adjust, let it fail. We need risk, we need rewards, we need punishment. That’s how free markets work.”

BEST WORDS I’VE READ IN A LONG TIME.

#100 Alex on 06.02.09 at 8:24 am

to #65 pbrasseur

You are not calculating the 98% devaluation correctly.
2 cents in 1973 had the same power as 100 cents today – this is a 98% loss of purchasing power.
Now here is the formula to calculate an annual inflation for 36 years:
2cents*(Inflation)^36=100 cents
=> Inflation= 11.5%

Impressive right? Now imagine how manipulative StatsCanada is!

#101 Simon on 06.02.09 at 1:18 pm

Reportedly each “autoworker job ” helps maintain several other jobs so claiming $1.4 million each to maintain them is a little dodgy; it may be true in theory, however it is a pretty simplistic claim.

#102 james on 06.02.09 at 3:32 pm

Here’s the safest hedge ever. Land. Land that can produce food. Simple living. A return to basics. Very affordable. Cheap. Wholesome.

#103 Vancouver_bear on 06.02.09 at 5:37 pm

#79 JO on 06.01.09 at 6:57 pm

“Bank preferreds: May be a good deal in Canada, but stay away from a bank that might not be seeing beyond tommorrow..big shiny red trademark if you know what i mean.”

is it BMO or President’s choice?

#104 Toronto realtor on 06.03.09 at 2:12 pm

I believe that if you are near retirement age or are already in financial jeopardy, keeping your money safe is a problem. For the rest of us, though, I think the question is really more psychological: where do we keep our money safe for now while we wait for the market to rebound? Those who can buy real estate or other assets at low prices today will only benefit when the economy recovers.

#105 Johanne on 06.15.09 at 2:14 am

“If nothing else, we’re one confused nation.”

- My thoughts exactly. It’s so hard not to be paranoid during a very unpredictable economic downturn.

#106 Mississauga Real Estate Agent on 11.16.09 at 11:01 am

Excellent information keep it up this good work