If life were fair

If I were running in this federal election, a few things would be different. F would be held accountable for the 0/40, 4/35 decisions that have helped render homes unaffordable. My party (whichever) would disown me. And I’d have to be nice to everyone. So forget that.

In yesterday’s post I wrote about investing, saving and tax shelters. The TFSA, I opined, is sweet. You should stuff that sucker full of money and aim to get good returns by buying assets like equity ETFs, real estate investment trusts or anything to do with China. The last thing any sane person would opt for would be to use it as an actual savings account or to house a pathetic, wimpy, inadequate, flaccid GIC.

In response, some social activist with a backpack and his organic lunch in Tupperware, breached this blog’s security, rode in on a girl’s bicycle and wrote this:

Mr. Turner’s advice is irrelevant for poor and middle class Canadians and shows how out of touch he is with reality. Most Canadians don’t have 5k a year of after tax income (let alone 10k) to gamble away on risky investments. That’s why most Canadians put GICs and HISAs in their TFSAs, not because they’re too stupid to invest in stocks, as Mr Turner seems to think. If your after tax income was 25k (median income in Canada), you too, Mr Turner, would do the same. TFSA lifetime contributions should be limited to 50k and growth should be limited to 150k tax-free.

Because I’m not running for anything, I told him to blow off.

That elicited a few comments such as:

C’mon Garth, give Terry a break. He makes a good point. Have you ever tried to live on $25K per year as a family like he points out? Have you ever tried to feed a family on less than $20K per year? I have. And it sucks.

Things changed for me, I am lucky now and make plenty of money. But buddy has a good point. Go ahead and rip me a new one. Or make some condescending remark. Cause that’s what you do. Garth, I have been a fan of yours for a long time and have bought your books, but seriously dude, you should show a little empathy sometimes. Goes a lot further than arrogance. Come to think of it, you remind me of Steve H. BTW that is not a good thing.

First, to address little Terry, most Canadians don’t come to this blog – which is about money, real estate, the economy and overweight but alluring people in underwear. Second, the fact most Canadians can’t scrape together $5,000 ain’t my fault. I refuse to take blame for it, feel no guilt about it, and have no plans for remorse.

In my world, taxes would be less, tax shelters big enough to live in, entrepreneurs unfettered and government shrunk. But this doesn’t mean we can’t be compassionate or helpful to everyone who wants a hand up. So this blog does fulfill a purpose. It shows all people – of modest means or not – that investing isn’t mysterious nor out of reach. That THL@TB may not be acting in your best interests. That nobody should be happy with a 1.5% ‘high-yield’ savings account. That fear of risk debilitates and leads to decisions creating more risk – like running out of money. Or that sometimes doing what the crowd’s obsessed with, like buying granite and stainless with no money, is financial suicide.

The best way to keep struggling people struggling is to deny them information. The next best way is to rid them of hope. So in any country where limits are placed on how much people can earn, so everyone’s a little more equal, everybody suffers as investment flows elsewhere. Just ask France.

Should I be more empathetic? Sure. I could be helping thirty homeless guys in a Winnipeg shelter tonight. That’s worthwhile work.

But I chose another path. It’s this pathetic blog. The message is simple.

There’s no restriction on knowledge or education. There’s no reason avoiding taxes, growing money, investing or gaming the system should be the preserve of the rich. No reason why anyone should get talked into a dead-end investment by a banker or a bike-riding messiah with a bad case of noblesse oblige.

So if you came here to patronize and lecture, Terry, get stuffed.

Vote for Gandhi.

219 comments ↓

#1 Crazy on 04.13.11 at 9:58 pm

Interest Rates to stay put for now:

http://www.cbc.ca/news/business/story/2011/04/13/bank-of-canada-monetary-policy-report.html

#2 aslan on 04.13.11 at 10:02 pm

first one

#3 tiedattutu on 04.13.11 at 10:09 pm

The Dirty Harry of the Great White North. I think I am in love. How come I never get to vote for a guy like you?

#4 Sean on 04.13.11 at 10:14 pm

Garth,

I agree that GICs are dead money. If Terry is so risk adverse why doesn’t he invest in preferred shares. I bought some of these which have a 5.3% yield and have a 16% upside if the insurance company decides to take them out of circulation, otherwise they will keep paying out. They are not volatile and I doubt that the insurance company, one of Canada’s largest, is going out of business. In short decent return at little risk. I have them in my TFSA because I might need the money in the short term.

#5 Greg on 04.13.11 at 10:14 pm

I agree with Garth. TFSAs are no place for GICs. In fact GICs are no place for saving or investing. They are a guaranteed investment loss. Yes, your principle is guaranteed and you’ll get a little interest, but the interest is lower than inflation, so in the short term you loose a little buying power, but in the long term you loose a lot of buying power. If you want to have a comfortable retirement, GICs are not going to get you there.

#6 Cellar Dwellar on 04.13.11 at 10:16 pm

Garth I’m gonna get accused of azz kissing here but I totally agree.
When I first moved to BC in the Fall of ’81(My God! It’s been 30 YEARS!) .I had no job, $1000 in the bank and no prospects. By Christmas I had no job, $300 in the bank and Januarys rent was coming up.
I didnt take the “easy” route and go to Welfare (which everyone told me to do). I got a menial job washing dishes and took every bit of OT they threw at me because the SFU students that worked in the restaurant were constantly calling in sick.
Long story short, I was very frugal with my money because it meant either I ate and bussed or ate and walked……
As the Wealthy Barber once said, ” What to you NEED and what do you WANT?”
These are two totally different ways of thinking about money.
Do you NEED a Hummer(sorry Garth) or do you just WANT that Hummer.
That made a HUGE difference in my savings strategy.
Im very happy today in my “cellar”. :)

#7 T.O. Bubble Boy on 04.13.11 at 10:18 pm

The fact that none of the political parties are calling out Flaherty and Harper on the disaster that is CMHC simply means that the bubble is going to pop all on its own.

Ask Obama how successful he’s been at controlling the housing market… he’s personally lost $1M in”home equity”:

http://www.zillow.com/homedetails/5046-S-Greenwood-Ave-Chicago-IL-60615/50904051_zpid/

($1.65M down to $685k)

#8 Flint on 04.13.11 at 10:18 pm

Garth: I am a poor bastard, so this is something I’m dealing with. No real estate (discovered what a bad idea it is right now), a crappy income, coming out of student debt, and have little investment knowledge.

I’m 26, but despite my circumstances, I’ve managed to max out the TSFA.

I wonder if there are others like me, itching to make a move with the money, but lacking the specific knowledge to make an educated investment, or the financial backing to properly diversify or shrug off a loss if we make a bad move.

What if that 15k represents half of your worth, and it ain’t coming back too fast if it’s gone?

People are house horny, sure, but another aspect muddling things is old-fashioned fear and a lack of financial security. I’m not saying GICs are the way to go … at all. I’m just saying that risks are riskier when you’re playing with fewer chips than your target audience.

#9 santiago on 04.13.11 at 10:19 pm

absolutely, garth. you can’t teach stupid, and you can’t shine a sneaker. spread the wealth, social engineering, lefty-leaning c.u.p.e. lovers will ruin this country. seriously, what kind of moron would actually think that paying more taxes, restricting investment and stifling growth is a solution. mr. bleeding heart, stfu. people make choices, live with them.

#10 Carp on 04.13.11 at 10:19 pm

“In my world, taxes would be less, tax shelters big enough to live in, entrepreneurs unfettered and government shrunk.”

Amem

#11 Joe on 04.13.11 at 10:24 pm

Saw that comment from Terry yesterday and thought it was a joke, the arbitrary lifetime cap on TFSA room (???). I thought this blog is about how to get ahead no matter how much you make. TFSAs are a tax shelter that’s available to everyone, no matter how much you earn, unlike RRSPs room that’s reflective of your income. Keep up the good work, Garth.

#12 Cash is King on 04.13.11 at 10:28 pm

Did I hear the Battle Hymn of the Republic playing in the background as I read this?

And what is this shrunk government you speak of?

#13 prairie gal on 04.13.11 at 10:28 pm

The compassionate capitalist.

I like that.

#14 K on 04.13.11 at 10:30 pm

Chill out.

#15 Mr. Lee on 04.13.11 at 10:30 pm

Or vote for one of the prophets……your information is for education , and thank you for sharing it.
Last week Ms. Lee and I signed a purchase agreement with a large builder in Calgary. We gave said builder (Cedarglen) a deposit with our cheque for the DP. To our surprise the builder reneged on the Purchase Agreement and wanted a larger down payment because,” they did not want to face the risk of a purchases backing our of the deal as happened in 2008.” Fair enough, my question was, “what do I get out of this breach of contract…..perhaps some price relief?”. I was laughed at, therefore I walked out and got my money back.
The moral of the story is this, if a major builder is worried about re-sale property values covering a down payment on a new home….perhaps all of us should take pause and evaluate our purchasing decisions.

Keep up the good work Mr. Turner

#16 OttawaMike on 04.13.11 at 10:31 pm

I tend to agree with Garth’s response but I also cannot dismiss Terry’s diatribe entirely either.

Many so called average working Canadians are one pay check away from poverty and that was before this house bubble really took off.

$5k/yr. to put away is a big deal for many people unfortunately.

#17 Yarj on 04.13.11 at 10:32 pm

It’s not a perfect world! All kinds of people in all kinds of circumstances make up the fabric of the tapestry we honor and cherish in Canada.

The rules are the same no matter who you are:

1. Save what you can
2. Invest wisely
3. Decrease your tax footprint

How each person chooses to live and save is individual and results are also individual. I choose to take advantage of the information and opinions on this site and others and have been and will continue to benefit.

Garth I have both my own and my wife’s TFSA allotment (15K each) in preferred bank shares TD and RBC. I am wondering about the benefits of shifting REITS or ETFs given that the remainder of my portfolio about 200k is in equity mutual funds. I have a modest home with no mortgage.

Thanks for your thoughts,

Yarj in Kelowna

#18 OttawaMike on 04.13.11 at 10:34 pm

Speaking of bike riding socialists, here’s the Green Book:

http://greenparty.ca/files/attachments/green-book-2011-en.pdf

A few good items in there but Lizzy really put me off with the last line item about a national strategy to discourage marijuana use. Heresy.

#19 Vancouver renter on 04.13.11 at 10:35 pm

I agree with Garth. We live in a free market economy where we still have the right to make something out of ourselves. I’m all for supporting and helping the injured, old, vulnerable and others who have physical afflictions which have happened through no fault, in the line of duty or accident.

For then rest of us, we have choices. To understand choices you need to have the will to and work to educate yourself. Then you can make decisions. I am a result not of luck, inheritance or other “blessings”. I had 3 jobs to pay for my education at university in a field which did not vocate me but one where I knew I would have a future.

I read and study all the time and that helped me identify, develop and capitalize on opportunities to get me where I have enough stashed to last me a long time after all the necessary investments are made to ensure my kids have some advantages.

Why in the world do those who have less insult my effort by calling me “fortunate” and blame me for my successes suggesting I should redistribute my wealth to cover their ignorance and mistakes? I’m not talking about lower paid teachers, nurses and other absolutely essential, completely worthy and absolutely honorable professions.

I am talking about those who watch crap TV, read mind dumbing magazines, absolve themselves from their responsibility to have to create themselves a future and refuse to put in the effort to educate themselves take responsibility and be accountable for their decisions?

Those who buy on 0/40’s with no cash and give less of a thought to make themselves liable for more money than they ever will earn just because they are dumb enough to believe other people’s marketing. Or those who spend more than they earn to fulfill a fleeting ego need, or those who are non competitive… For you I have sympathy, but your choices were yours, not mine, don’t suggest I need to be responsible for yours.

Garth is doing us all a fantastic favor, buy the books or not there is more in this blog than it costs you. Like a fashion blog, don’t be pissed if you are a size 18 and they only sell size 0 outfits.

Do your best at saving according to the models presented here. It still does not absolve you from doing your own due diligence, but if you don’t have it to invest in the first place, educate yourself for intellectual benefit, or type in another URL in the address bar and leave this for us who can.

Suggesting the content is inappropriate or that the loopholes need to be closed because you don’t eat to save on toilet paper, is nothing but bigoted jealousy…

I for one sa thanks Garth, I’m secure, I have a great pension foundation with 25 years of work ahead of myself, my kids both have maxed out RESPs, I’m income splitting with my wife and stuffed $30k in two TFSa’s, a varied investment portfolio and rending a $2m house for 2500 a month in Vancouver (denied before I moved in)…

I am now heading to do an MBA to maintain competitiveness for the next 20 years.

With Carney announcing the economy will take a sharp turn south in the second half of the year, Garth took me from being an immigrant about to buy a house, into someone who restructured his wealth into an enabled for the future.

Thanks my friend!

#20 Mikey the Realtor on 04.13.11 at 10:38 pm

Terry is right in part, but his Nazi final solution for the TFSA did deserve your get stuffed comment. GET STUFFED, Terry.

Next thing you know he is going to have a cap system for RE as well, what misery that would be for us realtors. Get stuffed, Terry.

#21 Silentblogger on 04.13.11 at 10:42 pm

This one rates me saying something:

“What Garth said.”

The largest factor shall always be a balanced education.

Home Economics – used to be mandatory by the way – used to teach how to balance a cheque book and the rule of thirds for income: 1/3 shelter, 1/3 living (food etc…), 1/3 saved…

the basics, yes, but added to with good knowledge and things might just start to roll in your favour…and there are ways to lift WAY above that mediocre…er…median

#22 Jon B on 04.13.11 at 10:47 pm

There is a lot of opportunity out there. My rule of thumb is that if I don’t understand it, I don’t invest in it. GICs are easy to understand, perhaps that’s one of the the prime reasons why they are so popular?

#23 Bill Gable on 04.13.11 at 10:49 pm

Oy – so this is the future?

Terry> GROW UP.

* This is the UK today:

A study for Age UK has found that 47% of over-60s class themselves as “just getting by”, with a further 11% finding it difficult or “really struggling” to cope financially.

The face-to-face survey of 1,258 people conducted last month shows nearly one in five pensioners, or 19%, cut back on heating this winter in order to make ends meet. The same percentage said they are going out less in order to save money and more than one in four, or 26%, said they are buying cheaper or less food.

Among poorer pensioners, the figures rose to more than a third, or 35%, buying cheaper or less food, and 21% going out less. A total of 11% said they are in debt through mortgage, credit cards or bank loans.

http://tinyurl.com/44spymu

#24 The American on 04.13.11 at 10:51 pm

Amen, Garth.

#25 Chaos on 04.13.11 at 10:53 pm

Go Canucks

#26 linguinee on 04.13.11 at 10:55 pm

Garth Turner: “So in any country where limits are placed on how much people can earn, so everyone’s a little more equal, everybody suffers as investment flows elsewhere. Just ask France.”

Or you could ask the Scandinavians. When Gallup does it consistently finds the suffering hordes of their welfare states among the happiest in the world.

Perhaps you should concentrate more on your strengths: more obesity in thongs please.

Yes, like the socialist paradise of Denmark, where the lowest tax rate is 42.6%. — Garth

#27 LJ on 04.13.11 at 10:58 pm

If you’re making $20k a year, why are you reading a housing blog for investment advice? Hoping that the 0/40 comes back at more affordable house prices?

And, everybody can scrounge a couple of cents to plunk into a money growing machine. Start small and add when you can. That is the key to getting ahead.

Warren Buffett started on wall street with only $600 in his pocket (then proceeded to lose it).

No risk, no reward.

#28 cool on 04.13.11 at 11:02 pm

What did Gandhi do?

#29 Pity The Fool on 04.13.11 at 11:06 pm

If Terry thinks it so impossible for most Canadians to earn, save and invest in then he is welcome to go live somewhere else… perhaps he would enjoy the Korean Workers Party (North Korea). Thanks Garth!

#30 Moneta on 04.13.11 at 11:07 pm

If everyone invested and bought equities then everyone would own the means of production … wait a minute, isn’t that the definition fo socialism?

#31 Iceman on 04.13.11 at 11:08 pm

#19 – Vancouver renter: …did you want to post your name so that I’ll know who to vote for on May 2nd? (Assuming, of course, that Garth doesn’t want his old job back).

#32 Hoof Hearted on 04.13.11 at 11:08 pm

In response, some social activist with a backpack and his organic lunch in Tupperware, breached this blog’s security, rode in on a girl’s bicycle and wrote this

——————-

Tupperware is made from evil fossil fuels…

To eco-paraphrase from ” The Graduate ”
Edible underwear, that’s the future !

#33 S.B. on 04.13.11 at 11:13 pm

I am reminded of John Lennon’s lyrics:
Everybody’s smoking and no one’s getting high. Strange Days indeed. Most peculiar.

Vancouver RE is just chooching now. Yeah!
Dave’s not here man!!

Interesting oil chart, it suggests the current up move is heavily driven by non-commercial speculators:

http://www.ritholtz.com/blog/wp-content/uploads/2011/04/0413chart.jpg

#34 DJH on 04.13.11 at 11:17 pm

“In my world, taxes would be less, tax shelters big enough to live in, entrepreneurs unfettered and government shrunk.” Garth

Hmm…good lord, do I detect the Canadian branch of the US Tea Party?

#35 HouseBuster on 04.13.11 at 11:23 pm

I’d rather live in Paris (France) than Vancouver.

#36 wes_coast on 04.13.11 at 11:23 pm

Oh Garth, you just gave a taste of what all Canadians need to here. Pitty is the biggest handcuff to human aspiration ever. We sit here in an election asking what are the politicians going to do for us. What are they going to hand us. The only thing they need to do is get out of the way and play the role of referee to ensure no one gets screwed. Don’t look for pitty from others. Don’t pitty yourself. Tell fear to piss off. Stand up fellow Canadians. Seek the mentality of success and you will be successful. Seek the mindset of poverty and you will be impoverished. Pitty is poverty. Tough love is what Garth offers. The kind of slap upside our collective heads that we need to wake up. The mentality and tools of success. This country was built by people with balls not bleeding hearts. People with balls can take hearing the truth no matter how ugly it is.

#37 Maxamillion on 04.13.11 at 11:27 pm

http://www.shitharperdid.ca/

Did he really poo his pants?

#38 Cato on 04.13.11 at 11:32 pm

Saver vs Spender is a character trait set during childhood, income is irrelevant – anyone can save if desire is there. Guess who outnumbers whom, and guess who is going to feel entitled to robbing the other.

Economic growth created by entrepreneurs has provided the standard of living we all take for granted, and view from frontline isn’t good – small to mid sized business is failing. We’ve allowed gov’t to put this very way of life at risk and its going to be a rough transition. With a little financial education maybe some can be saved.

Debt is simply a tax on the future – all political parties are guilty of being tax and spend economic killers. Think about that next time there is talk of economic stimulus. Worthwhile work will be what comes after current cohort of politicos scurries for the door and life starts getting hard. Forget the poor souls in the soup kitchen – save the country first.

#39 TaxHaven on 04.13.11 at 11:34 pm

What’s that he said, again?

“…seriously dude, you should show a little empathy sometimes. Goes a lot further than arrogance. Come to think of it, you remind me of Steve H.”

That’s slippery-speak for “tax & re-distribute from anyone who has any money to those who don’t.”

And Steve H. is no different in that regard from those other tax-and-spenders, Iggy and Jack L….

#40 TakingResponsibility on 04.13.11 at 11:39 pm

Whoaaa….chill, baby. Such a disappointing emotional reaction.

Personally, I don’t even know what socialism is…or it’s counterpart. Perhaps that ideal free market that has yet to be. And, Left, Right. Meh.

All I know from observation is that with the left nothing’s right and with the right nothing’s left.

#41 The InvestorsFriend (Shawn Allen) on 04.13.11 at 11:39 pm

No mercy for the poor here. We Ain’t your Mommy.

Long Live the Capitalist System and Free Enterprise.

Now, go out and grab some…

#42 Joethebruce on 04.13.11 at 11:41 pm

What’s up with the BoC? Are we becoming pre-tsunami Japan? Are we entering an era of low interest rates and low inflation.

#43 moloko on 04.13.11 at 11:43 pm

http://en.21cbh.com/HTML/2011-4-12/4NMjM0XzIwOTg4Ng.html

and there goes China

#44 Robert Dudek on 04.13.11 at 11:50 pm

More equal societies have better quality of life stats.

There is a middle ground between laissez-faire and totalitarianism.

That said, much of Garth’s advice is helpful for a wide range of Canadians.

If I were making 25k a year, I sure wouldn’t be stuffing what little I save into GICs. I would be stuffing junior mining stocks into a TFSA by the cartload. If I lose it all, hey I was nearly broke anyway. But if some of those babies pop, then I am looking at some decent income. Beats the OLG any day of the week.

#45 The InvestorsFriend (Shawn Allen) on 04.13.11 at 11:52 pm

PAY YOUR LINE OF CREDIT… WITH… YOUR LINE OF CREDIT??

As an experiment, last month I paid my little line of credit with… get this… my line of credit.

I walked up to the machine took out a bit of cash and immediately re-deposited that same cash into the machine.

My line of credit statement just arrived. Sure enough it shows I am paid up to date.

I’ll see if it keeps working…

This is the only debt I have and its low interest and so I am in no hurry to repay it… so I’ll just pay it with itself. There is lots of room left on it so I should be good for years doing this if I want.

Heck, it works for the United States of America (they constanly borrow new money to make any debt payments) so why not you and I too?

The USA takes it a bit further of course and has been effectively borrowing to buy groceries as well. I don’t recommend that one! But as long as they can keep borrowing, it all works.

#46 Dmitri on 04.13.11 at 11:52 pm

I completely agree with Garth but, would go even further:

1. No income tax on the investments into Canadian economy.
Reason: non speculative investments create businesses/jobs.
2. Tax only on consumption.
3. Consumption tax is proportional to the value of the consumable.
Reason: this way a rich investor would pay 60% tax on the 1mil$ yacht while an average citizen would pay under 1% on toilet paper.
4. Remove tax heavens for the corporations where by they can keep their revenue off shore with little or no tax (google Google’s and other corp. strategies), while being nickeled and dimed on revenues in Canada while, it should be the other way around to force the money back in.

Of course there will arguments that it is easy to avoid tax on #3 (through black/gray markets) but, good audits in place would discourage this avoidance. In fact there is a statistic (google it) – the higher the tax the greater the avoidance, in fact, the grey market is 5% greater in Canada (than in US) because of the higher tax rate.

The appeal to emotion that certain social levels can’t afford TFSA is a logical fallacy. It’s like saying “we can’t afford to invest into better businesses and economy”, then, let’s stop these kinds of investments all together and see how much better of our economy becomes.

P.S.
There is also a good set of studies linking lack of Testosterone and ability to reason…

#47 Robert Dudek on 04.13.11 at 11:53 pm

I’ve been to Denmark. Can confirm that people seem happy and looks like a really nice place to live. Shame about the cold summers.

#48 Edward on 04.13.11 at 11:55 pm

Cash in GIC’s 1.7% to 4.5% $ 734,000
Mutual Funds $14,000
Stocks $11,000
Real Estate $240,000
Debt 0

Chicken shit maybe…but comfort level is important to some people..

#49 Throwstone on 04.13.11 at 11:57 pm

Garth,

Well said!…Brillant actually!…

Your motives are raw. Appreciate all your hard work.

Btw..Gandhi’s drive was found in devotion to truth or “satyagraha”… hmm…neat.

So what’s the name of your Ashram garth?… will beards and leather chaps be necessary for membership?

#50 BigAl (Original) on 04.13.11 at 11:57 pm

If “entrepeneurs” were unfettered, you would have the third world. The successful ones inevitably become large corporations, who get into bed with politicians, and kill true entrepeneurship and competition. They end up writing laws bureacratizing their particular sector of the economy, intentionally, allowing their private sector ‘entrepeneur’ partners loot the treasury with bizarre contracts that are, in most cases, secret.

If ‘entrepeneurs’ were ‘unfettered’, they would never hire a single Canadian citizen again and import millions of ‘Temporary Foreign Workers’, again, turning Canada into the third world.

The pure form of so-called unfettered capitalism that so many conservatives pine for here already exists and shows, time and time and time again, in our day, right before our eyes, that it is a collossal failure. It is the third world, where business people do what they want, when they want, how they want. Business leaders in every third world country write the laws and enforce them. Every one of those countries is an alliance of business people with government. And in every case they gang up not only to kick workers in the teeth, but more importantly, the small and medium size businesses (if they let them operate at all). This is what ‘unfettered’ business always always always leads to.

The best economy is a mixed economy, which is what we have. Why people incessantly want to ruin it into third world status by moving it to either the right or left extreme is mind boggling.

#51 nonplused on 04.14.11 at 12:01 am

Well Garth, normally I try to find at least one thing to argue with you about, usually the future of tax rates, but since you didn’t mention them today, I am going to agree with you whole heartedly.

The TSFA is aimed directly at the poor and middle class. Nobody says you have to invest $5000 a year. If you have but $500, invest that. Feeling more middle class? $2500 will do. In fact, the TSFA is designed to exclude the rich. What does a vehicle that allows $5000 per year do for a guy like me, who has untold millions to invest and manage? I’ll be looking to defraud society in the usual, long established ways.

Ok, ok, I don’t have “untold millions”, but my point is the super rich aren’t going to benefit substantially from a TSFA. They already have their loopholes. This is a loophole for everyone else, and invest according to your means.

However one idiosyncrasy that recently came to my attention (I think I figured it out myself for once) is this: Gains in a TSFA are not taxable. But likewise, losses are not tax deductable. That said, your average poor or middle class person does not have a lot of qualified tax deductable losses, so this thing is still a big win for poor and middle class people who want to invest some amount of money in high risk, high yield investments, and enjoy the sort of tax treatment the rich receive on all their investments.

#30 Moneta,

No, the private ownership of the means of production, whether concentrated or distributed, is capitalism. Read a few books, and start with “The Wealth of Nations” by Adam Smith. By the way we don’t have capitalism as a general rule now in North America; we have Fascism, which is a corporate-state oligopoly. Socialism is a redistribution of private assets to the public, which we also have in spades. Communism is in theory public ownership of all productive assets by all the public, but in reality it is the total ownership of all productive assets by the state. Marx may have been an altruist, but Lenin and Stalin were not. The later saw the true power of Marx’s ideas, corrupted, because they could not work in principle (see the Fallacy of the Commons on Wikipedia).

It doesn’t matter whether you are talking about a carpenter who invests money in his own tools, a farmer who clears a section of land for planting wheat, or a corporation brought about to build an e-commerce venture, capitalism is about individuals either individually or in groups investing in the means of production to improve efficiency.

The banking oligopoly we have now dominating the economy is not capitalism, but Fascism.

The taxing of $30,000 per year carpenters who have to pay for their own means of production (tools) to pay teachers $75,000 per year is socialism.

And programs like the National Energy Program that seize some or all of the means of production to the state are communism.

#52 not 1st on 04.14.11 at 12:06 am

Geez, just skip your morning latte and a few sunday beer each week and you will easily have $5k to dump in a TFSA. I agree with Garth that this is the one wealth buidling vehicle the gov’t got right. I don’t beleive in RRSPs either because the future tax rate is an unknown, but likely to be much higher as we take care of an aging populace.

#53 Shoggy on 04.14.11 at 12:07 am

I agree with #8 Flint’s comments. On a side note Garth, where is the information you promised a couple of weeks ago about how one goes about buying bonds (not the Bond ETFs or Funds) without paying the high fees brokers charge, since as you mentioned, holding a bond to maturity guarantees the principle, but the cost of buying the bond can be upwards of 300 basis points. Buying the ETFs or mutual funds does not guarantee the principal
Cheers
Shoggy

#54 This is Wonderland on 04.14.11 at 12:11 am

Oh good more over reaction.

Seriously some of you need hormone replacement therapy.

#55 the bestest on 04.14.11 at 12:18 am

Actually I agree with some points.
How much money I needed to make buying etf’s preferred shares, etc… worthwhile.

I know CIBC charges about 350 a year to use there investors edge service. What about the other banks?
Can you buy ETF’s with in some sort of 200/ month auto withdrawal plan from your bank account? I didn’t think so.

Where are these services available for the average joe?

Right now, I have no empathy or real estate wealthy boomers looking to cash in because they didn’t save enough. My taxes will go up, real estate is too expensive, and man they can’t drive.

However I do have empathy for kids that need to work two jobs to put themselves through to get a higher education.

And yes, they will be losers because it’s impossible for most to save 100k before they are 30.

Instead of trashing them, provide advice for them that is real, accessible, and affordable.

Take it to the next step Garth. And forget about parents ponying up 5k into their kids tfsa when they turn 18.
We get that, people with money can do these things. Even is they don’t you’ve mentionned it enough on this blog.

We get it, stay out of real estate.

#56 the bestest on 04.14.11 at 12:21 am

Sorry for grammar
Typing on cell phone :)

#57 AxeHead on 04.14.11 at 12:21 am

Garth is to finance as Don Cherry is to Hockey. Awesome, I’d vote for either of you for PM. Dude – this post ROCKS and those yoga slinging, wimp assed, socialsts deserved to get dissed….just awesome.

#58 Joe on 04.14.11 at 12:25 am

This is the article that helped shape Terry’s opinion.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/the-economists/who-really-benefits-from-tfsa-the-wealthy-for-sure/article1976138/

It goes on and on about how TFSAs only help the affluent. It helps the middle class! That’s who it helps, period. We get few tax breaks. This is not another corporate tax break, it is an opportunity for the average Canadian to get ahead. I’m damn sick of getting letters from CRA telling me I don’t qualify for the carbon tax credit, GST rebates, child tax credits. My child tax benefit is clawed back at %50. It’s outrageous, all because we make an “average household income.” TFSAs are one of the few ways that middle income people can engage in income splitting because of Canada’s asinine tax code.

So just to recap, Terry, because I’m smart and I didn’t gorge on debt, I got a decent job and I married someone who got a decent job, we live within our means and have used the tax shelters available to us, that somehow this is unfair and the government should continue to stifle my attempts at securing my future while I pay taxes that give all the perks to people who make less than $45,000? Uh-huh.

#59 totalchaos on 04.14.11 at 12:30 am

I manage a small building filled with people with crap jobs. Most pay cash every month as they can never be sure the cheque won’t bounce. These are the the folks Terry is talking about.

These are also the folks who have a pile of empty beer cans out the front door and Timmy’s cups overflowing the garbage can. They all have nicer cell phones than me and TVs much larger than mine – some have 2! I don’t have cable, but the tenants have the full package or satelite dishes. I had one guy whose regular Telus bill was close to $400 every month!

Let’s not forget the food bill – God forbid anyone makes anything from scratch. I think most of the couples in the building have a monthly food bill pretty close to mine, except I’m feeding a family of 6.

While it may be hard for some to max out the TFSA for some, there is no reason most can’t scrape up 2-3K from what I have seen.

#60 Increasing that 1% on 04.14.11 at 12:31 am

The Robin, pigeon, bird situation in Dwntn TO is a reflection of what’s been happening in real estate –birdy real estate
then, there’s also the Raccoon survivors, stealth, bandit-like masks, in the night, thriving, despite all obstacles–haven’t decided who they reflect

Ok, Garth, did you get ‘Love this blog’ guy to pose in that picture? (oh-oh, opening up a can of –worms–)
No offence ‘Love this Blog’, mmm mmmm

#61 Aussie Roy on 04.14.11 at 12:37 am

Aussie Update – Asian Update

Prices of new homes in Beijing dropped 26.7% month-on-month in March, the first fall in 19 months, the Beijing News reported on Tuesday.

http://en.21cbh.com/HTML/2011-4-12/4NMjM0XzIwOTg4Ng.html

Apartment prices in the Sunshine Coast town of Noosa Heads have tumbled by a fifth since 2008 as more cracks emerge in a housing market that’s so far escaped the rout seen in the US, UK and Ireland.

The median apartment price in the tourism and retiree town 150 kilometers north of Brisbane has slumped 21 per cent in three years to $570,000, according to the Real Estate Institute of Queensland. Sales have more than halved across the Sunshine Coast and the Gold Coast.

http://www.smh.com.au/business/more-cracks-in-the-housing-market-20110413-1ddtj.html

STRUGGLING Victorian home owners are the target of almost five repossession writs lodged every day in the Supreme Court.

In the year to March 31, lenders filed 1727 repossession writs in the court after home owners defaulted on their loans.

Consumer experts warn Australians are over-reaching as they strive to achieve their dreams of home ownership.

http://www.heraldsun.com.au/news/more-news/supreme-court-issues-five-repossession-writs-every-day/story-fn7x8me2-1226036204818

Bank of Queensland (Australias 2nd largest mining state) struggles with BAD loans.

http://www.theage.com.au/business/bank-of-queensland-profit-stung-by-bad-debts-20110414-1dend.html

Things are getting interesting in the bullet proof housing sector in Australia, even those who never thought there was a bubble now realise what most people with atleast 1 working brain cell have known for years, the bubble days are over, hang onto your hat its going to be a long way down. Even the highly speculated (Asian dominated) Gold coast region of Queensland (Vancouver without the mould but lots of beach babes and sunshine) has seen prices fall.

#62 Shoggy on 04.14.11 at 12:38 am

“aim to get good returns by buying assets like equity ETFs, real estate investment trusts or anything to do with China”.

Hey isn’t that what the smart people in Vancouver are doing… taking advantage of the Chinese housing lust. Isn’t this what the the real bpeo has been saying all along?

And for those of you who don’t get it, that is is tongue in cheek comment.

That being said it looks like the housing ‘bubble’ in Canada is going to continue since I don’t see the bank of Canada raising interest rates more that 100-125 basis points over the next year if as Carney says, he sees the Canadian dollar averaging around 1.03 for the next couple of years. Of course high oil prices also act as a drag on the economy. SO while Carney might be concerned about the housing bubble in some areas of Canada, the wider economy is a bigger concern right now or for he next couple of years atleast. Sad part is this will make the day of reckoning even worse when the BOC see actually starts focusing on bursting the housing bubble.

Shoggy

#63 Nostradamus Le Mad Vlad on 04.14.11 at 12:45 am

-
If life were fair, there would be no need for politicos or crooked banxsters. But life is like cherry pits, and this is we’re we’ve all been spat out, ‘coz we’re the nuts that infest this planet.

Terry has a different POV, that’s all. To each their own.
*
#180 Timing is Everything — Good link. Just to try something different, I’m contemplating what the effect would be on humanity if I slathered myself in salted butter, then wrapped myself in bacon and nuked myself on high for 30 minutes or so, to see if I popped.

Would I like fries with that? You betcha, and supersize ‘em! But how would the masses react to my physical appearance? That answer lies in The Twilight Zone!
*
Japan downgrades their economy, while the IMF says the US should put a large downpayment on its debt. But if Japan decides to cash in their US debt holdings (along with China), where does that leave the US?

EU Tolls soar for truckers, which will push food prices higher and Youth Unemployment The Brit- and Euro-zone is getting to be a real hell-hole to live in.

Japan and the world economies. Cold weather destroying ozone in the Arctic. The BBC and MSNBC say otherwise, but the latter two are m$m and aren’t trustworthy, esp. after 9-11.

Wayne Madsen Guess he may be getting too close to the truth.

Giant Whirlpools in the Atlantic. Something’s stirring! Also here.

Is Thailand Next? Brzezinski and Soros say possibly.

Palestine Another one for Palestine.

Cancer from radiation, and GoM still has plenty of oil on top.

Bulls vs. Bears and Housing Denial in Oz.

HAARP Music Incl. Stephen HAARPer. Lotsa links.

#64 Shoggy on 04.14.11 at 12:52 am

Terry, even a person making 25k a year can save and the TFSA actually helps them by letting them keep more of their hard earned investment income. I came to this fine country in 92 during the height of the recession. I worked 20 hrs a day, 5 days a week for which I got paid $300 plus room and board (the joys of immigrant labour). Yet I was able to save, send money home to my parent and put myself through college. I now make a decent living and can take care of my wife, kid and family. The only thing the country and government owe the citizens are the ability to have the freedom to make choices, now the choices we make are our own to live with. Now the exception to this is those in our society who honestly need help due to a physical/emotional/mental handicap which is not of their own making. Those are the people who should get all the help they need. For the rest of society the less government interference the better.

Shoggy

#65 CalgaryRocks on 04.14.11 at 12:57 am

Wow, great post Garth.

Now, what are we going to do about Iggy? Watching the French debate I wasn’t sure if he was running for PM or for Jack Layton’s job.

Is it too late to bring Paul Martin back?

#66 Lance on 04.14.11 at 1:14 am

In my experience, no matter what most people earn, be it $40k/year, $80k/year or $150k/year, they find a way to spend it all (and often more, going further in to debt) and not save a penny. I stress “most” as there are a few intelligent people who have figured out that saving money is actually a smart thing to do.
Most people are not willing to sacrifice purchasing short term goodies in return for growing their savings.
I’ve earned $30k/year, $60k/year and much more and managed to save money at every income bracket. You just have to follow the golden rule: SPEND LESS THAN YOU EARN!

#67 BrianT on 04.14.11 at 1:14 am

#27LJ-I gotta say Buffett is the king of brainwashing sheeple. Yeah he really came from the gutter-a real rags to riches fable http://en.wikipedia.org/wiki/Howard_Buffett

#68 VanBear on 04.14.11 at 1:29 am

Garth, Why do you think it is a good investment for “anything China”? In a previous blog you posted about the ghost cities and malls in China, that seems to imply that the Chinese real estate market is in a bubble itself. Do you think that the rest of Chinese economy is also in a bubble state and would soon correct?

Here are ten reasons to short China:
http://www.alsosprachanalyst.com/economy/10-reasons-to-short-china.html

#69 Aussie Roy on 04.14.11 at 1:30 am

Aussie Update

Mish points out the obivious BS that was tried in the US and still gets quoted in Australia (and Canada ?).

Five IMPORTANT Facts

1.It’s Not Different in Australia
2.There is Not a Shortage of Housing
3.Australia is in a Bubble
4.Now is Not a good time to Buy
5.It’s Better to Sell Now than Next Year

In the US, countless sellers walked the market down, hoping to get prices they could have gotten “last month” as Realtors in every city gave reasons why “It Can’t Happen Here”.

Who in their right mind would listen to a realtor ?….

http://globaleconomicanalysis.blogspot.com/2011/04/housing-denial-in-australia-feeds-off.html

#70 Devore on 04.14.11 at 1:35 am

#30 Moneta

You just blew my mind.

Now, if there only was a way to pool our money and provide tier 1 capital, we could own private corporations too!

#71 bcc7 on 04.14.11 at 1:39 am

“If your after tax income was 25k (median income in Canada)…” The last time I check the median income is 65k after tax.

i don’t think people/family with $25k income falls into the tax bracket. So TFSA (or RRSP RESP) is pretty much irrelevant.

how to invest with the money in the TFSA or just ‘account’ is another issue, and people at the bank should be responsible to explain the risk and return.

#72 Dave in Victoria on 04.14.11 at 1:45 am

sounds like your panties got all knotted up Mr. Turner. maybe the g-string is cutting off too much blood to the boys?

#73 East Ender on 04.14.11 at 2:23 am

If only more people , Walked the Walk< While talking the talk.
Nice one Garth

#74 Andy In Vancouver on 04.14.11 at 2:38 am

My support for “progressive” measures ends when they try to punish the people who have worked hard and saved their money to live easier later on in life.

I’d advise the biggest whiners to ride transit, use pay phones, and reevaluate what size of home your family “needs”. There’s your 5 grand a year and more.

The radical right is scary, but the clowns on the other end of the spectrum scare me worse.

Sincerely,

A moderate Canadian

#75 Thetruth on 04.14.11 at 2:46 am

If the Vancouver Canucks win the Stanley Cup, then…

It will be different here! Everyone from Toronto will want to move here! Watch RE prices then!

#76 Mythbuster on 04.14.11 at 3:01 am

Greater fools and financial losers like company. “Misery likes company”. And as we discover in life, the collectivist Messiah’s like Nancy Pelosi want to see the end of excellence and outstanding achievers. And like Obama, they want the central government to control and plan everything to end individualism. The ‘war’ between collectivists and individualists is genetically predetermined. It will never end. Obviously Terry is a collectivist. This site is probably for individualists – not those of Terry’s class. Let Terry start his/her (male or female?) blog for Socialists-Communists-Marxists… and plan the next revolution to topple the competent and put the bullies in power. Terry is probably not a fan of Ayn Rand’s Atlas Shrugged.

#77 Burnt Norton on 04.14.11 at 3:07 am

When a genuinely helpful and constructive message backed by confidence and conviction is misinterpreted as elitist, prideful and/or arrogant, it reveals more about the insecurity of the plaintiff than the character of the accused.

#78 Y-e-e-e-e-e-sssssss on 04.14.11 at 3:07 am

“In my world, taxes would be less, tax shelters big enough to live in, entrepreneurs unfettered and government shrunk. ”

Amen to that, brother.

#79 Makaya on 04.14.11 at 5:42 am

“So in any country where limits are placed on how much people can earn, so everyone’s a little more equal, everybody suffers as investment flows elsewhere. Just ask France.”

Being French myself, I had to respond to this one. I know you often refer to France in your post Garth, but you seem to have an opinion based on cliches more than on actual facts. Would that be because you can’t speak French in bilingual Canada?

Let me remind you a few facts:

– the real estate market in France has not crashed (unlike other European countries). In fact, RE in Paris and other major cities has never been so expensive. We might be in a bubble as well…

– there’s no limit in how much people can earn in France. The fourth largest fortune in the World ($41b) is Bernard Arnault, a french guy… The 15th Liliane Bettencourt ($23.5b). Both of them made most of their fortune in France. (http://en.wikipedia.org/wiki/Forbes_list_of_billionaires)

– For a country that is supposed to spoil the riches, how would you explain that in 2010, France was second behind the US to receive Foreign Direct Investment? It has been that way for quite a few years…
(http://en.wikipedia.org/wiki/List_of_countries_by_received_FDI)

I always find funny when people in North America try to scare people about the tax rate in Europe in the way you did:
“Yes, like the socialist paradise of Denmark, where the lowest tax rate is 42.6%. — Garth”
That’s how the US Republicans consider Canada as well…

In fact, you get what you pay for, in terms of education, health care, retirement, public infrastructure, etc. It’s funny to see that Northern European Countries, despite such high tax rates, have very low poverty, among the best school system and health care system in the world and very dynamic economies… Wouldn’t that be a cause and effect thing?

There are other important values in life that money and accumulation of wealth… In Europe, you don’t get bankrupt in you get sick. You simply pay according to your means and you get according to your needs. Why is it such a problem? Greed and selfishness have never created happier society or more efficient economies.

You said: “There’s no restriction on knowledge or education.”
I would encourage you to apply the same thing to yourself when you talk about France or Europe.

#80 I pity the fool who drinks soy milk on 04.14.11 at 6:01 am

Thanks Mr. Turner for your blog, and your books. I’m a guy, like a lot of folks, who used to survive (and save) on <25K/a. 5 career moves, two degrees (one useless), a layoff, marriage, kids, blah, blah, etc., etc….
The future looks okay for us now, but I can’t afford any significant misteps, and we appreciate that you share your views and knowledge on your pathetic little blog. I’m hopelessly addicted. I even miss the kelownial prince. Okay, not really.

#81 Aussie Roy on 04.14.11 at 6:14 am

More China news

Moody’s downgrades China property sector to negative

“During the next 6-12 months, Chinese property developers will face challenges in securing debt financing, as the government enforces its strategy of slowing monetary growth to reduce the risk of accelerating inflation and to manage domestic banks’ exposure to the property sector,” the ratings agency said.

Some developers, including Evergrande , have already tapped the offshore debt market for funds.

Moody’s added that proceeds from contracted sales of residential properties would drop by an average of 15-30 percent in China’s first-tier, and most second-tier cities, although the impact on individual developers would vary.

http://www.reuters.com/article/2011/04/14/markets-ratings-chinapropertysector-idUSL3E7FE0T120110414

#82 Durbo on 04.14.11 at 7:05 am

Does Terry understand what causes most people to be poor in the first place? The government sucks a huge portion of everyone income, no matter what they earn. And the government’s portion just keeps increasing year after year.

If you are poor and in depth, you have to earn enough money to cover taxes and interest before you can pay for the things you need.

And what does the government do with the money? They pay pensions to government workers, bailout big corporations and banks and give contracts to their friends.

At the same time, the small businessman, who probably provides the majority of jobs in this country, cannot get the capital he needs to expand. And he has to struggle to comply with every regulation that is thrown at him by the government. Thus fewer jobs available.

Terry, if you want to help the poor, get government reduced to a much small size. Cut taxes to at least half of what they are now. The economy will boom on a sound footing and the little that the poor earn will stretch much farther.

#83 David B on 04.14.11 at 7:25 am

Suspect this clown who attack your advice work for a Credit Card Company, Finance Company, Pay Day Loan Company or some form of We do your taxes for a modest return ….. LOL there are none so pure ……

+++++++++++++++++++++++++++=

Having tuned in my ear to many who had turned their live around via sound creditable investments …. one thing has always been at the base … Keep an open mind and do your homework before you act … then y’all must keep doing your homework as times and markets change …. some people are able to save money @ 25K/yr and some can not $125K + …. dat’s called life!

#84 Cow Man on 04.14.11 at 7:29 am

Reading this blog is like watching the Dudes on CNBC bitch about Obama wanting to raise capital gains taxes, 2% on those earning over $250,000. Kind of sick at times.

I do have options though, don’t I?

#85 realist on 04.14.11 at 7:33 am

Just for the record, 35 and 40 year amortizations are still available.

Both ING and Laurentian Bank offer 35-year amortizations on their conventional mortgages (20% down payment). The big 5 Canadian banks will probably follow suit.

A company called Merix Financial offers a 40-year amortization for conventional mortgages and qualifies borrowers at the 3-year fixed rate.

Note: Thankfully none of the mortgages mentioned above qualify for insurance through CMHC.

#86 BZ on 04.14.11 at 8:08 am

There was a good article in the G&M about how no matter what the outcome of this election is, only you have the power to put money in your pocket.

#87 Kevin on 04.14.11 at 8:14 am

OK, Garth. I’ve twice mentioned that I hold my emergency fund in my TFSA, in a high-interest savings account, and you’ve twice derided me as foolish.

So let me ask you point blank: What SHOULD I do with my emergency fund? You keep suggesting that all my money should be in mutual funds and ETFs. But the point of an emergency fund is to be risk-free and liquid. So if the market tanks and I lose my job and I need my $10,000 emergency fund – which is now worth $5,000 because, as I mentioned, the market tanked – what do I do? Pat myself on the back for going for the Big Bucks, then start clipping coupons for ramen noodles?

Seriously, where do you suggest Joe Canadian hold his emergency fund, if not in low-risk assets in a TFSA?

Emergency fund = line of credit. — Garth

#88 JL on 04.14.11 at 8:26 am

i think terry, flint and shoggy’s comments cannot be completely discounted, and yet i agree with a lot of what garth says too. it’s not black or white in my view. yes, lots of folks live beyond their means and i do not think we should be encouraging them to continue to do so. but at the same time, some folks spend what money they have on getting by (try living on minimum wage!), not luxuries, making what ‘the right’ would hopefully call responsible decisions. it doesn’t mean some might not spend their time investing whatever little they have in something more than GICs, but at the same time, i don’t think it fair to blame them for ‘only’ saving in GICs. they ARE trying to save, aren’t they? maybe not the best choice, but better than on beer or the cable package!

#89 AxeHead on 04.14.11 at 8:30 am

What about this scenario….We all vote for the Bloc, Quebec separates, and we get to live without threat and undue influence by severe partisan separatists? Sorry for the non-housing/finance post Garth…but it is voting season and these guys influence housing and finance.

#90 Chris L. on 04.14.11 at 8:40 am

“Vote for Gandhi.”

Yeah or the NDP. Or pretty much anyone else right now.

Who you voting for Garth, or are you not this time around? Give us a hint. The only platform offering anything remotely around your values is the Conservatives. Ignatief is totally a lost soul.

#91 Carruthers on 04.14.11 at 8:52 am

“In my world, taxes would be less, tax shelters big enough to live in, entrepreneurs unfettered and government shrunk.”

Garth. Your Libertarian roots are showing!!

Love it.

#92 john m on 04.14.11 at 8:56 am

“If I were running in this federal election, a few things would be different. F would be held accountable for the 0/40, 4/35 decisions that have helped render homes unaffordable.”……………..I could not agree more!I have been following the election campaigns and am shocked that no party has mentioned this (perhaps because they all had a part in it ?). Ignoring the biggest threat to our economy and future generations is not leadership IMO. ………….Your honesty is sadly missed in our political arena Garth.

#93 Renting in Sherwood Park (Sold in Edmonton) on 04.14.11 at 8:56 am

Terry represents the typical North American culture of entitlement. When things go wrong, someone else is to blame and should fix it. If you can’t think for yourself and solve your own problems then that’s your problem. This of course doesn’t apply to the kid who’s parents do drugs on a daily basis but even when people get into ruts in this country it is amazing how many free programs there are to get you back on track.

Everyone can save some type of money. My immigrant mother (as am i) used to make $30,000 per year and most of the time saved more than her friends making $60,000 per year. We always joked when people making more asked her to borrow money. Instill good saving habits in yourself and in your kids and things will take care of themselves.

Don’t change anything you say Garth. I don’t agree with you 100% of the time (ok maybe 99.9%) but i respect your right to say what you believe in.

#94 Moneta on 04.14.11 at 8:58 am

If you study taxation and go through the hundreds of onion paper pages, you’ll quickly realize that it is lawyers, taxation experts and financial services pros guaranteeing themselves perpetual work when all we need is one line.

ALL INCOME IS TAXABLE. That’s the spirit of the law. Quite simple, no?

Yet all kinds of different interest groups start debating the semantics of income: cap gains, interest, dividends… LOL. For some reason (they have the power) the rentiers always win, yet they produce NOTHING.

Personally, I think that all these registered accounts contribute to all that’s wrong in the Western world.

We keep on structuring a world where more and more of our money goes to the bankers. If they actually managed risk properly, they’d contribute to the world but they have proven themselves to be extremelly incompetent. Yet more and more of our money flows through their hands.

I spend more time managing my money than trying to create something worthwhile for the economy. And IMO, this is part of what’s wrong with our economy.

The reality is that registered accounts or not, I would save for a rainy day and for retirement and many would not. Exactly as it is today.

If there were no registered plans, the credit bubble would not be as big as it is. There would be less debt and house prices would be lower. Why?

1. If you save 5K annually in or out of your RRSP and assume 6% returns or less, they’ll both give you close to the same at retirement if you benefit from dividends and capital gains that are taxed at better rates. Your RRSP account will be bigger but it,s not your money. On top of that, governement knowwhat you have and controls it.

The benefits of compound interest in registered accounts really make sense when you make 8%+ returns which is not the case for most investors. And many investors will probably pay more taxes at retirement than their current tax rate.

So for the same amount of savings, investors today are getting a tax refund that they are using to buy a more expensive house.

2. This increases the price of houses and investors use the equity to invest some more further boosting the value of assets.

It’s a self perpetuating system where all roads lead to to more money directed to the FIRE economy.

#95 S.B. on 04.14.11 at 9:00 am

#62 Nostradamus Le Mad Vlad on 04.14.11 at 12:45 am

Nice find. I say without a trace of hyperbole that the 4th Reich has swept over Europe accomplishing what they failed at a generation ago. Empire building takes time.
Air pollution and noise? What about those polluting jets dropping WMD onto people in Libya? The war must go on, and this time we are all targets.

Total control:

EU TOLLS SOAR FOR TRUCKERS

Wednesday April 13 2011 by Daily Express reporter

SHOP prices could be forced up in the UK due to a 30 per cent rise in EU tolls on lorries.

UK hauliers have to pay up to 20 euro cents (18p) for every kilometre they travel within EU countries.

Now eurocrats want to increase toll charges for road repairs by 30 per cent to help combat air pollution and noise.

Critics say this would put up the cost of food and other items as transport firms pass on costs.

Kate Gibbs of the Road Haulage Association said: “This will just be horrendous. We have to pay tolls when we go to Europe, but their lorry drivers don’t when they come here, as well as more in petrol and diesel tax.

“Hauliers are already operating at the very tightest possible margins. A 30 per cent rise in toll charges is too big to absorb. Consumers will see it passed on as the cost of all goods in all shops will rise.”

Last year, two and a half million goods lorries travelled from the UK to Europe.

#96 HouseBuster on 04.14.11 at 9:08 am

You shouldn’t have your ‘emergency fund’ in your TFSA.

#97 Nemesis on 04.14.11 at 9:17 am

Brilliant leader illustration, GT – right up there with GI Joe and his TrophySquirrel…

As for the rest?…

I suspect that beneath your carefully constructed ‘crusty veneer’ of ‘free-market’ social-Darwinism lurks an authentic softy (albeit, an ‘embarassed’/chary one)…

#98 Shane on 04.14.11 at 9:26 am

Garth, Do you recomend doing a vendor buy back on a piece of property?I was thinking down the road to buy a piece of land and get a house built on it and the land that i’m looking at the seller is saying he could do a vendor buy back?

Shane

#99 AKatz-Oaville on 04.14.11 at 9:27 am

Interest rate hikes are coming – and soon:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/stephen-gordon/interest-rate-hikes-are-coming-and-soon/article1985036/

#100 Kenny on 04.14.11 at 9:30 am

>>Most Canadians don’t have 5k a year of after tax income (let alone 10k) to gamble away on risky investments.

You would be surprised. Just visit any casino, lottery ticket counter, poker game, race track, etc. and you’ll see that people making less than 25K per year are well represented.

The problem isn’t that people are risk averse. The problem is that they’re ignorant and irrational when it comes to money.

#101 Nemesis on 04.14.11 at 9:32 am

Afterthought/addendum… For, when you’re gasping your last breath and the ‘showreel’ of terminal recollections cues, it won’t be your portfolio allocation or net position that occupies your thoughts – will it?

#102 45north on 04.14.11 at 9:37 am

Moneta: If you study taxation and go through the hundreds of onion paper pages, you’ll quickly realize that it is lawyers, taxation experts and financial services pros guaranteeing themselves perpetual work

that’s what they do. The separate forms for Ontario tax are just stupid, a practically identitical set of forms and calculations. The income tax rules are incomprehensible I think because they try to get around individual court rulings.

H & R Block has opened a new office near my bakery. Like you said, income tax is a growth industry.

#103 Lisa on 04.14.11 at 9:42 am

I love your attitude, Garth! You keep tellin’ it like it is – the truth hurts but it shall set you free! I have very little money left over at months’ end myself but I mange to squirrel away about $1200/yr in my TFSA. It’s not much but it’s better than a kick in the pants!

#104 avenirv on 04.14.11 at 9:43 am

“Most Canadians don’t have 5k a year of after tax income (let alone 10k) to gamble away on risky investments. That’s why most Canadians put GICs and HISAs in their TFSAs, not because they’re too stupid to invest in stocks, as Mr Turner seems to think.”

isn’t the logic a little twisted ?
if most canadians do not have 5K a year for TFSAs how come they have money to put in GICs and HISAs ?

do they have or not money ?

#105 Moneta on 04.14.11 at 9:45 am

Afterthought/addendum… For, when you’re gasping your last breath and the ‘showreel’ of terminal recollections cues, it won’t be your portfolio allocation or net position that occupies your thoughts – will it?
———-
No, for most it will be: “I shouldn’t have let them kill socialized healthcare!”

#106 Ferris Bueller on 04.14.11 at 9:48 am

Good Post Garth, but unless you lived in the other guy’s shoes – that’s a bold statement. I agree, most if not all who visit this blog have some sort of money – and the risk level may not be that of a certain % of the population.

Working in the front line(Bankruptcy Trustee) – those who can put a couple of dollars together, believe me – they need that security – the hell with 6% return, and to park some money in a GIC is a huge accomplishment. Lets look at it at another angle – people who walk into the office – often lost nearly everything or on the verge – the little they may actually have – guess what – that small amount is what holds everything together –

I personally don’t follow the logic that banks are a “lock” with dividends – I don’t recall who it was, (maybe it was GE) but when the sh$t hit the fan in 2008 – it was the first time in 90 years they did not distribute dividends – and what happen yesterday surely isn’t what someone can base on what will happen tomorrow – in our history has there ever been a time when the world was so intertwined (economically + politically) and facing dire future prospects and some keep chirping on buying stocks and bonds….(again – very bold -)

Nothing in this world is a sure thing – even our fiat money system –

I am not here to argue with Garth’s stance – I very much praise his trying to get the message across – but I have seen more then my share of people who live paycheque to paycheque – do you think for a second that very small savings – their only objective is too keep it as safe as possilbe – sound logic considering the turmoil they have experienced.

#107 xyz on 04.14.11 at 9:59 am

Anyone of Median income can easily stash away 10K a year. But it takes sacrifices.. I can’t because my 10K goes to private school for my son for services that should be offered in the public school but are grossly under valued. And I still save.. Its not much but I live on a little as humanly possible cause I know I don’t need all that crap…

#108 sue on 04.14.11 at 10:03 am

I find people refuse to give up their multiple Tim Horton’s/day habit, Red Bull, Cola habit or even slash a few channels from their inflated cable bill to save.

The Wealthy Barber is an amazing book that shows that anyone can invest and be financially secure.

I sell this amazing antioxidant drink that costs 77 cents a day to feel great energy and health. It’s very depressing to hear people say they can’t afford it but spend 5-10 dollars a day on the above beverages just to drag their sorry asses through the day…off topic..just venting a bit. It’s just the self-destructive part of human nature.

Making the necessary changes to be financially and physically/emotionally healthy sooo rocks and is doable for anyone given the right priorities.

#109 Your Mom on 04.14.11 at 10:03 am

Prices of new homes in China’s capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday. http://tinyurl.com/3ucq263

#110 Kaganovich on 04.14.11 at 10:08 am

Oops, these folks must not have got the memo about life not being fair and there is no use in trying to change it:

http://www.commondreams.org/headline/2011/04/13-3

Quick, all you rugged individualists, write in and explain to them their folly!

#111 Fuzzy on 04.14.11 at 10:08 am

Line of Credit = Emergency Fund

That line of credit can be yanked away from you at any given time … especially if they sit unused, like those intended to be an emergency fund.

Be a man, sacrifice 1 year (or 6 months, or minimum 3 months depending on your confidence) of expenses in a savings account, sleep better knowing it’s always there, and use the rest of money you save to invest in various ways. It doesn’t have to be all or nothing.

#112 45north on 04.14.11 at 10:13 am

Ferris Bueller: people who walk into the office – often lost nearly everything or on the verge – the little they may actually have – guess what – that small amount is what holds everything together –

that would be me Ferris

#113 This is Wonderland on 04.14.11 at 10:17 am

If you want to lambaste someone on this blog Garth how about this guy and not the people that actually come to your blog with honest questions. I know I know I can always go somewhere else but wouldn’t that play into the hands of the sleazy people you are trying expose.

http://www.moneyville.ca/article/974579–this-site-tracks-your-condo-s-value-even-before-it-s-built

http://www.metronews.ca/toronto/comment/article/831636–canada-dominates-hoousing-market-growth

http://toronto.uli.org/Events/Upcoming%20Events/~/media/DC/Toronto/Toronto%20Docs/81510903bio.ashx

#114 Rs on 04.14.11 at 10:26 am

Hilarious Garth, nice closing!

#115 grantmi on 04.14.11 at 10:28 am

#2 aslan on 04.13.11 at 10:02 pm

first one

First idiot!!!

#116 Daisy Mae on 04.14.11 at 10:41 am

CalgaryRocks on 04.14.11 at 12:57 am

“Wow, great post Garth.

Now, what are we going to do about Iggy? Watching the French debate I wasn’t sure if he was running for PM or for Jack Layton’s job.”

How hard can it be, to come up with a decent Liberal leader? This party continues to disappoint….

Is it too late to bring Paul Martin back?

#117 NUR on 04.14.11 at 10:42 am

Garth,
Can you also give us a little insight into RESP investment.

#118 Martha on 04.14.11 at 10:54 am

Canadians love real estate because any capital gains on a primary residence are not taxed. As interest rates go up it makes little if any sense to invest in TFSA. You would be better paying down your mortgage. Sorry Garth but your mortgage is a sure thing, the TFSA is not. If interest rates rise as high as you say the average professional money manager will have a hard time outperforming a fixed 5 year mortgage interest rate which is a sure thing to pay down.

You have no idea what you’re talking about. — Garth

#119 Timing is Everything on 04.14.11 at 11:02 am

Who knew? ‘Hot’ real estate in the US…

http://www.msnbc.msn.com/id/42555888/ns/us_news-life/

#120 Moneta on 04.14.11 at 11:09 am

I think the pension system should be pay-as-you-go. That’s it that’s all.

The CPP should be to stop people from going to the poorhouse and that’s it.

If they want more, they can just save more.

What really bugs me about government retirement incentives is that we give all these tax breaks and people still have no money. We will have given all kinds of freebies to people and we will still need to give them more to compensate them for all their losses.

Asking people to plan beyond 40 years without any formal finance education is beyond belief. We are asking them to:

1. Go against human nature
2. Specialize when they already need to be specialists in other areas.

Heck, even the finance pros can’t agree on anything!

Returns have been atrocious, most managers underperform, fees are the highest in the Western world. From a bottoms-up approach individuals have a chance if they specialize, find a good advisor but from a top down approach, the system makes no sense and is set to fail. We know form the get go that most people will fail. How can leaders promote a system that will fail most of its people?

Our current system guarantees that we pay twice.

#121 Prof ANON on 04.14.11 at 11:10 am

@ #38 Cato

“Saver vs Spender is a character trait set during childhood”

Incorrect. Saver vs spender is a tendency that is learned and that can be unlearned with some effort and time. The only way a trait is “set” is if it is hardwired pre-birth. There are very few of these kinds of traits. Personality is much more malleable than people want to admit because believing it is “set” removes personal responsibillity while believing much (but not all) of personality is learned and can be unlearned implies that there is a lot of hard work to be done.

#122 Moneta on 04.14.11 at 11:13 am

If they want more, they can just save more.

On their own, no government meddling.

#123 Alberta Ed on 04.14.11 at 11:22 am

Apparently the Canadian RE industry is starting an ad campaign to counter the growing number of FSBO/internet RE websites. Your realtor is your best friend, after all, and can guide you when making the biggest financial decision of your life. R-i-g-h-t…..

#124 bridgepigeon on 04.14.11 at 11:23 am

Everyone should read some Gandhi sometime in their lives. Similar, in many respects, to the favourite philosopher of the conservative fundamentalists, Jesus. Amazing (speaking of conservatives) how in this day and age our Canadian leader has a science minister who believes the planet is less than 10,000 years old.
Gandhi’s non violent resistance will only become more important in the future. Obama, Bush et al are being charged with war crimes for over 1.5 million dead in Iraq. So far a militant resistance hasn’t been successful. For us here, who seem to be giving up more of our liberties for freedom, it has a roll also. Should we be incarcerating our neighbours for partaking of a certain harmless herb? Should we allow strangers to grope our children at airports? Should we be allowed to gather and peacefully protest our elected leaders’ policies etc ?
Eventually, the way things are going, a lot of average people are going to be taking a stand for something. Here’s a guy that peacefully got the empire out of his country. Gotta repect that.

#125 young & foolish on 04.14.11 at 11:31 am

Boy, oh, boy … some of the things one reads on here ….

Capitalism, Socialism, Nazism, Communism, Corporatism … etc. All relevant movements created by people much like us in response to particular circumstances (some natural, some opportunistic, and some tragic).

So, what political movement will claim the near future?
No one knows for sure, but it helps to keep the following wisdom in mind: You can turn an angry man, but you can’t stop a hungry man.

#126 PEI Red on 04.14.11 at 11:33 am

I think people make the mistake of assuming that having a little money is better than having no money. In retirement that little bit of money will disappear faster that it would from an ETF etc especially early on in it’s investment journey.

What Garth is trying to say is $15k today will buy you a base model car; in 20 years you’ll be lucky to fill your tank with it. You have to stay ahead of inflation and HISA’s, CD’s and terms aren’t doing that.

#127 AKatz-Oaville on 04.14.11 at 11:39 am

Jesse Kline: Parties silent on possible housing bubble

http://fullcomment.nationalpost.com/2011/04/13/jesse-kline-parties-silent-on-possible-housing-bubble/

#128 Roial1 on 04.14.11 at 11:41 am

Yes, like the socialist paradise of Denmark, where the lowest tax rate is 42.6%. — Garth

Garth, I am ashamed of you.

To get a true comparison with what we have you must use Norway as your “bad example” not Denmark. They too have oil. And socialism, BUT, instead of “Giving” it away to the international oil cartel they made them pay world prices (Royalties) for it.
Then they invested (as a country) so that when it runs out (The oil) there is going to be plenty to live on.
When are we going to get a government with a “set” to do the same??????????

Oh! that’s too commie.

Then again, there is Saudi Arabia. The government owns the oil. Private enterprise? Well, the royal family is the government after all.

By- the- by. The Danes are very happy with the system they run and pay for.

#129 Mr. Reality on 04.14.11 at 11:44 am

Question Everything.

That is what Garth is doing and guess what? if you did it to you would learn alot about this world and your views would change. This world is nothing but a game, a financial game setup for you to lose!

Sheeple follow the financial herds to late and a dollar short. Retail investors(sheeple) buy after the institutions have sold and take on risk they never knew existed.

Sheeple jump into mortgages because its a passing fad and argue on this blog about how good of an investment it is. Problem is how much interest are you pissing away to the banks in your 30 year mortgage? How much money are you sheeple spending on ‘maintaining your investment’ every year? How much money are you paying in extra taxes because of that home?

You have been setup. You will lose. That is how the system is designed!

Question Everything.
Educate yourself on the system.
Throw your ego and emotions out the door.
Invest wisely.
Don’t follow the hype…..ever
Buy low, sell high.

That i show you beat the game.

#117 Martha = Sheeple

Mr. R.

#130 Moneta on 04.14.11 at 11:50 am

Prof ANON on 04.14.11 at 11:10 am
———-
I agree that things can be learned and unlearned but I’m not sure we have mastered that art yet.

For example, how many people do you know who have been treated by psychologists/psychiatrists have come out “healed”?

We have barely started to scratch the surface of the human mind. Ironically, most people think they and others can control it. If you look carefully, you will notice that our entire system is built to fail us at every turn­. It expects individuals to go against human nature when we know the masses always go in a specific direction.

We humans are so full of hubris!

#131 Cellar Dwellar on 04.14.11 at 11:59 am

I have friends that make excellent salaries(70 – 80 k), they live pay cheque to pay cheque….
One guy bitches about his pay and financed a 30k motorcycle for 5 years with zero down. Another bought hundreds of dollars “worth” of the old $2 Canadian Bills as an “investment” .
Another spent $5000 on hardwood floors for his RENTED apartment because “it looks so modern!”

and the moral of the story is…… No matter how MUCH you make. If your smart with money you will find ways to save. If your an idiot with your money, You’ll never have enough……..
Which are you Terry?

#132 Moneta on 04.14.11 at 12:00 pm

Example of our hubris…

Top-down we know that there will always be structural unemployment of around 4-5% minimum. We have enough historical data to know this. That’s why we have EI.

Bottom-up many look at the unemployed and can’t help but think of them as losers, slackers, lazy bums, parasites on society, etc.

#133 Prof ANON on 04.14.11 at 12:04 pm

@ #129 Moneta

I think we are on the same page. Doing something substantively different requires that we recognize that something about our own nature is wrong (not something our self-esteem protecting brain wants us to admit), have the time and spend the effort to figure out a better paty (not something our schema/heuristic driven brain wants to do-we are cognitive misers), and recognizing that there will be substantive and real rewards for changing our behaviour/thought process (which our brain discounts and ignores because, at the present time) these rewards are ambiguous and far away.

Not easy stuff, and not something I claim to have mastered.

#134 SAD on 04.14.11 at 12:04 pm

To: #124 young & foolish on 04.14.11 at 11:31 am

So, what political movement will claim the near future?

We have accepted the U.S. system.
Lobbyist and special interests influence and manipulate to the extreme.
No harmony or common sense left.
And we are heading down the same road to the same extreme consequences just like all the western democracies…

#135 Prof ANON on 04.14.11 at 12:05 pm

oops..in previous comment, “paty”= path.

#136 ??wth?? on 04.14.11 at 12:07 pm

Those of you who put all your faith in your investments may be in for a suprise one day. All it can take is a hyper-inflationary depression and your prized investments will be pulverized.

It can’t or won’t happen here, you say? Lets hope and pray that it never does, but it is possible.

Garth, you say it yourself many times here that the world is gone funny:
-the middle east termoil
-the japan quake-tsunami,
-families in Canada / US having no money to spend to get the economy back strong,
-indebted families over their heads,
-the federal reserve printing money like it was for a game of Monopoly etc,etc.

The world is not exempt from another worldwide depression. If anything, the uncertainty we are all in makes it more probable.

There is no certainty that any investments will be there for any of us , period.

Many of you who look down on those who do not or cannot save money may be the ones who will be crying, “If life were fair…” You may be no better off than the person who saved nothing one day and may even need his help.

Diversify, diversify, we are told to diversify our portfolios. Do any of you think that maybe we should diversify not only some of our money into doing good and helping others, but time and efforts into building relationships and learning to be human to each other once again? This is the only thing that will matter if the monetary system is ever wiped out.

If a worldwide depression or natural disaster hit North America, we will need the skills of humanitarianism to relate to and help each other as our worthless money will do nothing for us. Better to slowly detach yourself from money now as it will be much harder and even impossible for some to do this if the monetary system fails and crashes all at once.

Dude. Buy looser underwear. — Garth

#137 stage1dave on 04.14.11 at 12:08 pm

Great column…being self -employed for almost 27 yrs, I feel re-energized & will try to do something really enterprenurial today! Gee, it’s almost like I’ve been legitimized…

Big Al; I also agree with what you wrote 100%…I reconcile this in a pretty simple way: monolithic/transnational corporations are not “enterprenerial” They’re simply huge enterprises backed by a sophisticated public & private organizational & credit menagerie that allows very few of them (if any) to truly experience the “free enterprise” system.

Regardless of the perhaps humble beginnings of any large multinational, their current domination of large sectors of the world’s economy has reached a textbook definition of socialism amongst themselves IMHO.

Which brings me too the next point, even though 90% of the things that a person has to deal with on a daily basis are out of their control; you still get to make your own choices about how to DEAL with that 90% and more importantly, the 10% that’s YOURS. Enabling your own talents & staying out of debt are two of my faves…keeping your ears & eyes open are a couple others.

(For instance, I restored a car for a fellow a couple years ago that didn’t pay me much money, but I learned a ton from him about how to invest money intelligently, which has made me a few bucks)

The most important tool anyone has in uncertain times is the ability to think for themselves…irrespective of ones’ education level. What works for you? What do YOU want to do? I roll these questions around in my head every time a friend complains about mortgage payments, car payments, essentially the cost of everything they’re buying…I always want to ask who FORCED them to do these things?

Consumer debt seems to be a giant black ooze almost everyone starts walking into after their teenage years & becomes a mire for them shortly afterward!

I’ve become convinced that the “education” system is maybe that in name only…but they sure will “learn” ya. You’ve got to educate yourself…as several posters have noted, there’s a huge difference between “charity” & “help”.

I try to pass along the help & charity I’ve received over the years as I can, or as I feel it’s merited. (Somedays, however, I can’t even help myself!) I stopped trying to save the world about the same time it quit trying to save me, so I pick & choose my spots.

Which brings me full circle to the RE market…several friends have houses listed, trying to sell, blah, blah, blah…no offers, no action, etc. SO? The markets down 25-30% in Edmonton…that’s why a house bought in 2007 won’t bring the same dollars today!

(I once sold a 70 Super Bee I had invested over 6K into for $750…I didn’t look for a bailout, gov’t assistance or anything else…I looked in the mirror, then decided I’d never be that dumb again…I simply couldn’t afford to)

Just because a couple of zeros have been added to a poor investment decision doesn’t make it anyone else’s problem! The socialist in me realizes in many ways “we’re all in this together”, but all I can presently contribute is a roll of duct tape…sorry, Red…

I do, however, resent the fact that various cartels have pushed the housing market upwards to a point where even a minor correction will have enervating effects on EVERYONE.

Anyway, I’m now off to work to beat fenders & will wrap this up. (I’m hoping these actions will improve the IQ of both places) I need to continue working toward my ultimate goal…being “suspended with pay”

#138 Martha on 04.14.11 at 12:10 pm

Garth I think you are sucking and blowing at the same time. Perhaps you are in dejavu election mode? As interest rates rise equity markets will struggle. You advise people against fixed income in a TFSA so you can’t have it both ways. Who do you think you are Revenue Canada who interpret the same policies two different ways, or a Politican who cuts taxes and spends at the same time?

70% percent of all active mutual funds will not beat the market. Then for the others that make up the other 30% that are successful, those mutual funds will mostly not produce the same results the next following year.

If you invested $100 in the Canadian Stock Index (now called the S&P/TSX Composite Index) on January 1, 1976, it would be worth $2,707.55 as of December 31, 2009 or about 10.6% annualized return.

Lovely to hear about people beating the street but sadly the average investor is not Peter Lynch. If investing were that easy mutual funds managed by professionals would consistantly beat the street and that simply doesn’t happen. A lot of people think the TMX is overbought and will correct in the comming year so now may not be the best time to fill up the TFSA. The time would have been last year. F knows that, why don’t you?

If market has returned 10.6% than the average mutual fund with commissions has produced less. So back to my point if fixed mortgage rates rise to say 8% why put money in a TFSA for like return if you could pay down your mortgage risk free? What do you think the average Canadian has made in equities over the past Decade? I would estimate 5-6% would be a typical return for a doit yourselfer who buys investment books by the truckload and assuming they didn’t miss a chapter and are still in the game :)

In regards to why Canadians like real estate it is one of the few ways left in Canada to accumulate wealth tax free. Canada has one of the most complicated tax systems on the planet and even the CRA doesn’t even understand their own lingo sometimes. Years ago there were many tax loopoles for families and small business but those days are gone. One in four Canadians works for the goverment and the Goverment of Ontario has increased 70% since the Liberals took power. Someone has to pay their wages, pensions and perks.

Where did I say to buy mutual funds? As for higher rates, they will rise incrementally. The impact on equities will be negligible, since there are far more profound influences at work. — Garth

#139 GregW, Oakville on 04.14.11 at 12:15 pm

Hi Garth, These pics go with the deer. This bear has a plan that seems to be panning out.
I hope he doesn’t get impaled on the stick?
And I thought the squirrels were bad around here.
http://message.snopes.com/showthread.php?t=13834

#140 realpaul on 04.14.11 at 12:15 pm

Watch Out !! Anyone who bought a foreclosure in the US could be in serious doo doo when this process catches up with your property. US Gove to overturn foreclosures with a new ‘lookback’ procedure that will consist of a new agency reviewing all the foreclosures to see if they complied with the letter of the law federally, stae and local………………of course a bulk of them didn’t. This is going to create havoc.

http://urbansurvival.com/week.htm

#141 realpaul on 04.14.11 at 12:22 pm

And BTW….people…the reason most Canadians don’t have a pot to piss in is that the government has designed the economy to produce exactly that result. Blame the real enemy …which is your own government for mis handling the economy for decades and jacking your direct and indirect taxes up tp 90% of income. Focus people…Garth is not the enemy. When special interest groups rake off 99% of the budgets of every Ministry and theres bugger all left for the people then…..obviously the dipshits who steal the bulk of the money are in the way of national prosperity. Get rid of all the parasites and the perks and this country will run with milk and honey.

#142 GregW, Oakville on 04.14.11 at 12:22 pm

Hi #94 S.B., I wonder if people that think electronic voting sound ok have seen this??

Proof of voter fraud in the USA – from the horse’s mouth
http://www.youtube.com/watch?v=mq9WVuKGwOM

#143 debtified on 04.14.11 at 12:39 pm

It’s indeed important how much one makes. However, how much one spends determines how much one saves.

If you live paycheque to paycheque, your rate of spending is higher than it should be. Reduce spending if you can’t increase your rate of earning.

I know it sucks if you see your neighbour living in a nicer house and driving a nicer car. No use feeling sorry for yourself. Get motivated!

#144 Mike Rotch on 04.14.11 at 12:41 pm

Kenny (99)

>>Most Canadians don’t have 5k a year of after tax income (let alone 10k) to gamble away on risky investments.

You would be surprised. Just visit any casino, lottery ticket counter, poker game, race track, etc. and you’ll see that people making less than 25K per year are well represented.
~~~~~~~~~~~~~~~~~~~~~~~~~~

The power of compound interest coupled with discipline is staggering.

I recently showed a low income earner loosely fitting Kenny’s profile something interesting:

If he re-directed his Tim Hortons habit, he could be a millionaire in 30 to 35 years without cutting any other vice, and without needing to buy anything riskier than preferred bank shares.

(Imagine if you could simultaneously cut down your slot machine, cigarette, and beer habit? )

Now, I don’t think this guy is actually going to end up being a millionaire, but I’m hoping he ends up in better shape 30 years from now than otherwise!

#145 Mr. Plow on 04.14.11 at 12:42 pm

I appreciate stories like Cellar Dwellar’s and Shoggy’s and everyone else who says “when I was starting I made nothing, so I cut expenses and still managed to save”.

Well I would ask you all to be consistent in your thinking.

Other days you all preach that inflation with increase interest rates and asset deflation (RE) is where we are heading. So keeping with that, in our inflationary times (groceries, gas prices etc…) how do you think you would manage on $25,000 a year today vs in the early 90’s when it cost $20 to fill your tank and $100 a month for groceries.

I am not the least bit shocked that Terry can’t save if his income is $25,000. If I was in his shoes, I doubt I would either. Maybe 20 years ago you could, but now I don’t see it.

His other comments are off base, but comparing his situation today to yours 20 years ago just doesn’t work for me.

#146 SAD on 04.14.11 at 12:43 pm

Foreign investors?
“My international clients never ended up purchasing because they could not get financing, even though their assets and cash available was very good.,” one Realtor told the NAR. “I tried several different lenders and banks and no one would give them a loan. They said it was because they didn’t have a Social Security number, and there was no way for them to verify their income or assets or look at their tax returns”

Read more: More Foreigners Snapping Up Foreclosed Property – 24/7 Wall St. http://247wallst.com/2011/04/13/more-foreigners-snapping-up-foreclosed-property/#ixzz1JW1wn7MA

#147 Timing is Everything on 04.14.11 at 12:48 pm

#124 young & foolish

…And if they’re hungry and angry…

…that’s when the heads roll. (figuratively and literally)

#148 Mike Rotch on 04.14.11 at 12:48 pm

95 Housebuster

You shouldn’t have your ‘emergency fund’ in your TFSA.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Ideally no, but if the sum of your alotment for investment and for rainy day funds totals less than $5K per household member per year, well, why the hell not? :)

#149 Forget the French: Mexicans are happier on 04.14.11 at 12:49 pm

Yes, the French are miserable, but perhaps it’s not the economy or money, as people from many countries much poorer than France are considerably happy than people in France. People often forget that money — either the lack or abundance of it — really doesn’t have much to do with our actual happiness or enjoyment of life.

The happiest countries? Denmark at #1 (which has the world’s highest taxes), Switzerland at #2, Canada at #8, Guatemala at #9, U.S.A at #17, and France at #39.

Check it out: http://www.financialjesus.com/how-to-get-rich/top-10-happiest-countries/

#150 JoshL on 04.14.11 at 12:52 pm

#8 Flint,
The risks are no different, just your tolerance for loss. You are mistaken that you don’t have enough funds for diversity. That’s what ETFs (exchange traded funds) and mutal funds are for. Each one will allow you to carry hundreds of companies in one fund. If you’re self trading then your bank should have all the research tools you need to pick out some great ETFs. Go conservative with a high % (40 to 50%) in fixed income funds. Bond funds like CLF.TO and XBB.TO offer 4% yield and holdings are Candian and Provincial bonds … so unless Canada goes bankrupt you’ll be safe. For your Canadian content go with CRQ.to or XIU.to. Both are stuffed full of big banks, big energy, big mining … same stuff that drives the TSX. Use AAXJ on NASDAQ to get some Asian (excl. Japan) exposure if you like. SPY on NYSE will get you your US exposure (Exxon, Apple, GE, Microsoft, JPM, P&G). So you can hold 3 or 4 funds and literally own hundreds of companies.

These are only suggestions and are not the only options out there. Of course if you’re not self directed then your investment adviser can pick out the right ETFs or mutual funds for you.

#151 Many countries are happier than France on 04.14.11 at 12:52 pm

Actually, people from many countires — including those that are much poorer than France — are happier than France, so money (either the lack of or abundance of) seems to have little to do with happiness….we seem to keep forgetting that.

The happiest countries: Denmark at #1 (which has the highest taxes in the world, by the way), Switzerland at #2, Canada at #8, Guatemala at #9, USA at #17, and France at #39.

Check out the other countries: http://www.financialjesus.com/how-to-get-rich/top-10-happiest-countries/

#152 Mr. Plow on 04.14.11 at 12:57 pm

#97 Shane

What might suit your needs better is to offer the seller a deposit of ‘X’ on the land, with a late closing date and give him/her a better price on the land to carry the mortgage till that closing date.

That way all that you have at risk is your deposit. The seller could always look at suing you to enforce the contract, should you back out, but I doubt the courts would award anymore damages than your deposit.

That way the seller continues to carry costs on the property, and the benefit to him/her is they get a better price for their land. But downside for them is they are carrying the risk. Most sellers I find, depending on how sophisticated they are, will like the idea of getting more than their asking price and not take into account that they are carrying the risk on the property.

Just my thoughts.

#153 Junius on 04.14.11 at 12:57 pm

#137 Martha,

You said, “Lovely to hear about people beating the street but sadly the average investor is not Peter Lynch. If investing were that easy mutual funds managed by professionals would consistantly beat the street and that simply doesn’t happen.”

No one is suggesting you even try to beat the street. In fact, quite the opposite.

The core investment strategy should be to invest in broad market based index funds that rise with the market so individual stock picking is left to a minimum. Use ETFs like this and place them into your TFSA because they offer the best long term growth potential.

Garth counsels against mutual funds because their management fees are too high at over 2%. Most of the broad market ETFs have management fees under 1%.

BTW – this is the investing philosophy of the legendary John Bogle who started the Vanguard Funds in the US. Basically Bogle argues that since no one can predict the market with any certainty you are better to buy a broad fund that is just indexed against the market. That guarantees a long term, solid return on your money.

#154 Junius on 04.14.11 at 1:03 pm

#125 PEI Red,

Here is what I think Garth is trying to say.

1) If you have savings put it first into a TFSA and invest in a broad market based indexed type fund like an ETF that charges low (under 1%) management fees instead of GICs, “high” interest savings and mutual funds.

2) If you are over 30 and under 65 and can’t save $5K per year to put in a TFSA you are screwed when you retire so you better fix something quick.

#155 Mr. Plow on 04.14.11 at 1:04 pm

#84 realist

You know why they don’t qualify for CMHC?

Because CMHC can give a rats ass when the buyer is putting 20% down.

They only insure unconventional mortgages. i.e., less than 20%

#156 kilby on 04.14.11 at 1:08 pm

#49. Big Al.

Great post, keeps things in perspective.

#157 JPG101 on 04.14.11 at 1:18 pm

I live in mid Vancouver Island on one of the Islands. People are getting older and some I talk to want to cash out of their ‘million dollar homes’ for various reasons but the young potential buyers can barely afford the cheap rent here… I rent a 700000$ home for 1200$ a month and there is a lot of rental inventory to choose from. Americans aren’t coming back for a long time and Asians don’t seem to like living on rural ‘islands off islands’. The Alberta people might come back but for these prices they could go to the US and get castles…

1. Vancouver Island north of Victoria seems to have a minimum of 25-50 years supply of million+$ homes. No MSM or local paper will even touch this story but it’s obvious we here are in a very depressed market.

2. Those rich Asians seem to find real estate less attractive at least in Beijing…
Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month
http://www.zerohedge.com/article/chinese-real-estate-bubble-pops-beijing-real-estate-prices-plunge-27-one-month

#158 Larry T. on 04.14.11 at 1:23 pm

I hope the Canadian/Vancouver real estate bubble never bursts, I hope people can keep on paying millions for properties in Richmond, Burnaby and all the other suburbs of Greater Vancouver, I hope we can keep on living in Moo Moo Land, but when the real estate bubble does go pop society will be hit hard. It will filter down to every section of the economy. There are so many other recent examples of this: the U.S., Ireland and other European countries. The political parties should make this a federal election issue.

http://www.vancouverpropertynews.com/canadian-housing-bubble-should-be-a-federal-election-issue/56/

#159 berrywater on 04.14.11 at 1:29 pm

#3 tiedattutu “The Dirty Harry of the Great White North. I think I am in love. How come I never get to vote for a guy like you”?

We almost had him here in Caledon but the Liberals were too intimidated to allow him to run here. Now were stuck with that creep David Tilson again.

#160 doctore on 04.14.11 at 1:47 pm

I laugh at the critics of the TFSA and coming up with 5k for it. So what if you can’t come up with 5k or a majority of population can’t. What does that have to do with the TFSA anyway? Are these people jealous or something? Throughout history and today there has always been different tiers of society. There are the poor, middle class and the richer and well off. It is human nature to be envious of people that make or have more than you. Besides the TFSA is after tax money that is placed into it, the person has already been taxed on their money they are putting in. The idea is anything you make in it and take out is tax free, and if you have a loss in it, well tough luck you can’t count the loss for anything. Sheesh don’t understand these critics.

#161 JB on 04.14.11 at 1:50 pm

Would just like to clarify the point I was in agreement with Terry yesterday in my post #46… I simply meant that not all Canadians can take FULL advantage of the TFSA simply because the cost of living makes it very difficult… Especially those of us who are in our mid 20’s… When I re-read my post It sounded as if I agreed with him, go pound sand u-know-where Mr. Terry…

I have a maxed TFSA, this years 5k is all in small caps, say a few of them do well and I turn that into 10k. What would my allowable contribution be for 2012?

#162 Oasis on 04.14.11 at 1:57 pm

i wonder if the USD is up today… let me check..
nope.. not today. sinking down to oblivion again today.

how about gold and silver… let me check..
oh. look at that. BIG rallies there… isn’t that interesting.

maybe the USD will go up tomorrow. lol

#163 “People are getting older and some want to cash out of their ‘million dollar homes’ for various reasons but the young potential buyers can barely afford the cheap rent here” | Vancouver Real Estate Anecdote Archive on 04.14.11 at 1:58 pm

[...] “I live in mid Vancouver Island (on one of the Islands). People are getting older and some I talk to want to cash out of their ‘million dollar homes’ for various reasons but the young potential buyers can barely afford the cheap rent here… I rent a $700K home for $1200 a month and there is a lot of rental inventory to choose from. Americans aren’t coming back for a long time and Asians don’t seem to like living on rural ‘islands off islands’. The Alberta people might come back but for these prices they could go to the US and get castles… Vancouver Island north of Victoria seems to have a minimum of 25-50 years supply of million+$ homes. No MSM or local paper will even touch this story but it’s obvious we here are in a very depressed market.” – JPG101 at greaterfool.ca 14 Apr 2011 1:18pm [...]

#164 dd on 04.14.11 at 2:01 pm

#162 Oasis

maybe the USD will go up tomorrow. lol
……………………………………………………………………..

Bang on.

#165 Kate on 04.14.11 at 2:13 pm

If an average Canadian cannot save 5K per year, how can he/she afford (save for) a house of 400K?

#166 Hoof Hearted on 04.14.11 at 2:14 pm

#50 BigAl (Original)

I hear you..

However society is a clusterf*ck of rules and regulations.

They say the fall of Detroit….which began in the 1950’s and has lost more than half its peak population, began with outsourcing and states competing with favourable tax regimes. What does that imply….greedy unions…greedy gov’ts or greedy capitalists…or all 3?

Unfettered capitalism is simply communism.

The US broke up the Rockefeller monopolies over 100 years ago…

What stands out for me is that residential RE was ever allowed to be purchased by off shore, and Iwill qualify that via non rental units. Foreign or domestic ownership of rental is irrelevant, because there is a local benchmark of what the market will bear.

Like an old timer once said..the world doesn’t owe you a living, but it owes you a right to make a living. No-one is owed a home, but our gov’t shouldn’t juice the system via allowing a combination of laundered money
and prostituting the CMHC.

This will end up bad.

#167 tkid on 04.14.11 at 2:14 pm

I wish I knew Garth back when I was a twenty-something putting a needed-elsewhere $100 into an RRSP GIC. I might have had a decent amount in my retirement fund instead of the pittance I have in there now.

#168 Hoof Hearted on 04.14.11 at 2:26 pm

#157 JPG101

Those Homes in Victoria and especially the Gulf Islands are by and large owned by 1st wave of boomers and older. The land was proportionaly cheaper 30+ years ago….many of them have been passed through the family.

However, younger generations don’t have the interest nor the income to supprt this lifestyle. Unless principal residence, many of these 2nd home places will get hit with big time with capital gains taxes in estates, plus the squabbling of the heirs trying to share a place.

The Islands trusts seems to have the biggest NIMBY factor, aka “We we here first F*ck you”

Property taxes for rural areas are outrageous and geting worse

I see this class of property as toast.

Victoria is for the newly wed and nearly dead…it’s gov’t town and that’s due for major layoffs once the real world gets hit.

#169 John on 04.14.11 at 2:29 pm

Terry,

By all means put your rainy day money into a GIC or high interest savings account. For my wife and I, we saved what we could until we had enough to live for 3 months. For us, that was 5k.

Once you have a small safety cushion, make sure anything else you manage to save gets invested at a level of risk that matches the time horizon of your investment.

Keeping 5k in a GIC will cost you money, but that is the price of feeling safe. I consider it my personal employment insurance. Putting your house, education, or retirement savings in a GIC is a gift to the bank.

Obviously, TFSA contributions will have to be capped eventually. Otherwise, the government could save on paperwork by just eliminating all taxes on investment income.

I personally think that at some point they will restrict the annual contribution but allow unlimited lifetime contributions. This probably won’t happen for another ten years or so.

#170 a prairie dawg on 04.14.11 at 2:32 pm

@ #161 JB

It’s $5,000 contribution room each year, every year. Double that if you’re married. (if you each have one) It has nothing to do with what the existing balance grows to, just how much you contribute towards it each year.

You can personally hold more than 1 TFSA too, just remember the limit is for all of them combined, not 5K in each one.

“easy peazy yumpin’ easy…”

#171 John on 04.14.11 at 2:32 pm

JB,

What you earn inside your TFSA does not affect your annual contribution limit.

#172 Another Opinion on 04.14.11 at 2:42 pm

Well either it’s a little humor or the terrifying truth about the Japan Nuclear Crisis.

http://www.youtube.com/watch?feature=player_embedded&v=lpAqiGSp29c

#173 realpaul on 04.14.11 at 2:45 pm

‘Denial-Couver South’ getting reamed but pimps insist it’s ‘business as usual’. Because it’s differant there eh?

http://globaleconomicanalysis.blogspot.com/2011/04/housing-denial-in-australia-feeds-off.html

And now the latest desperate spin from the pimps is that we’ll have an endless supply of offshore Chinese to keep the local market pumping ever higher. What next…….Somali pirates bringing the loot to safety in Canada? The one thing you can count on from the pimps is bullshit……and more bullshit.

#174 Timing is Everything on 04.14.11 at 2:53 pm

#157 JPG101 – said “Vancouver Island north of Victoria…”

Agreed. You’re island is out of the ‘zone’…The zone is the CRD. Above the Malahat is not in the zone. Location, location, location…Blah, blah, blah. Access to services for old farts (demographics). That’s the ‘future’. An international airport and excellent health care close by is a must. You may as well be in Weyburn, wrt your ‘Little Island Paradise’. Just sayin’.
We will all ‘take a hit’…some just a much more brutal hit than others…If life were fair.
———————————————————
Garth,

Money can’t buy you love or happiness, but can rent it for an awful long time. ;)

#175 palebird on 04.14.11 at 2:56 pm

#151 pretty funny..actually most of the top ten are rich countries in that list but I lived in Luxembourg for six years and it is not what I would call a happy place nor is Iceland and that was before the crash..these people are like most others in the first world..out for all they can get in a materialistic society and they cannot be satisfied so that definition of “happy” is elusive..oh what a tragedy :)

#176 Nostradamus Le Mad Vlad on 04.14.11 at 3:00 pm

RE stagnant to deteriorating here, ‘tho there are other things to pay attention to.
*
#59 totalchaos — “Let’s not forget the food bill . . .” — On top of the booze and cable bills, this is where self-discipline comes in. Some have it, most don’t. Good post.

#95 S.B. — “Air pollution and noise? What about those polluting jets dropping WMD onto people in Libya? The war must go on, and this time we are all targets.”

That’s right. Depopulation, bee and bat die-off, CC, carbonazi taxes, big pharma, monsanto with the elite — Brzezinski, Soros, Rockefellers, Rothschilds et al all pulling the strings and moving us around like puppets.

Other than the two HAARPs (US and Chinese space control), there is nothing anyone can do to prevent the supra-natural events happening.

#124 bridgepigeon — Great post. Puts a healthy dose of reality into a daft, every-changing world!

#129 Mr. Reality — “Throw your ego and emotions out the door. Invest wisely. Don’t follow the hype…..ever. Buy low, sell high.”

Egos and emotions are stem from vanity. If sheeple can’t be bothered to learn how to rise above these two, they get what they deserve.

Buy low — Sell high. That’s what penny stocks were invented for, esp. when put into TFSAs then cashed out when those stocks rise to $8-$15 and I agree with that premise.

#134 SAD — Good point. That is why I would choose Independent, Libertarian or None Of The Above.

#144 Mike Rotch — “The power of compound interest coupled with discipline is staggering.”

Correct. Self-discipline and smart investing so that one does not outlive one’s funds are paramount. Good post. Goes with #143 debtified — “If you live paycheque to paycheque, your rate of spending is higher than it should be.” — That is not self-discipline, just random spending.

#157 JPG101 — “Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month”

Gotta start somewhere, ‘tho with all the mfg. / industrial production going east anyway, chances are good that it will be Chindia and the Far East that surfaces first.

#177 Devore on 04.14.11 at 3:40 pm

#161 JB

I have a maxed TFSA, this years 5k is all in small caps, say a few of them do well and I turn that into 10k. What would my allowable contribution be for 2012?

http://www.tfsa.gc.ca/

$5k. Don’t make it more complicated than it is.

#178 CalgaryRocks on 04.14.11 at 4:05 pm

#110 Kaganovich on 04.14.11 at 10:08 am
Oops, these folks must not have got the memo about life not being fair and there is no use in trying to change it:

http://www.commondreams.org/headline/2011/04/13-3

Common dreams hein? This feels like when my old boss would walk into my office end explain to me what our ‘common objectives’ would be for the next 6 months.

#179 JB on 04.14.11 at 4:16 pm

Ol’ lady and I both have maxed TFSA (15k each), I have two separate ones, a Tax Free Trading Account and a regular TFSA…

Using the same scenario, say I turn my 5k in small caps into 10k inside my TFSA, withdraw the profits of 5k December 1st, 2011…. I would then be able to contribute 10k January 1st, 2012 correct? Just want to be 100% on this.

#180 jess on 04.14.11 at 4:33 pm

“The best way to keep struggling people struggling is to deny them information. ”

…. off with their heads!

http://hsgac.senate.gov/public/index.cfm?FuseAction=Press.MajorityNews&ContentRecord_id=51bf2c79-5056-8059-76a0-6674916e133d

#181 Kaganovich on 04.14.11 at 4:42 pm

#178 Calgary Rocks (except when it doesn’t)

Perhaps, but to me your analogy is mistaken. I forget who it was that quipped ‘taxes are the price of civilization’…and after some reflection, I would tend to agree despite the odd reservation.

#182 RedDeer1 on 04.14.11 at 4:48 pm

I think the one relatively simple point that has been missed which supports Garth’s recommendation of the TFSA for terry is:
A TFSA is a much better investment and savings tool for a lower income earner than an RRSP for a number of reasons, including the lesser benefit (tax-deferral) that an RRSP has for a lower income earner who pays less tax and is taxed at a lower rate, than a TFSA (tax-free growth) easily accessed at any point.

If terry’s investments are placed in an rrsp and his taxable income increases substantially due to obtaining better employment/promotion to say 50K per year he will be taxed at a higher tax rate upon redeeming the rrsp, which won’t be nearly as good as having those investments grow tax free being able to be withdrawn tax-free.

The TFSA is a very good thing. The problem is for those people that have much in excess of 5K a year to invest (but who cared about them, right?). They either invest the remainder of their investable income inside an RRSP or outside of an RRSP which is fair, they’ll either pay tax now or later, but their paying tax. Its their choice to choose the optimal strategy for them. If they feel they have made to much money and have more than they need, maybe they’ll choose to donote some back to somebody(seriously), thats up to them.

The TFSA levels the playing field for low income earners big-time compared to just having the rrsp option.

#183 BigTownBoy on 04.14.11 at 4:49 pm

Here is what I’ll do if I can’t scrape together $5,000 into TFSA – forget about TFSA, invest in myself, education or whatever. It gives way better rate of return.

#184 VICTORIA TEA PARTY on 04.14.11 at 4:53 pm

PEAK OIL? DESERT MIRAGE ? FRASER CANYON ‘BURBS?

Bloomberg reports:

‘Crude Oil Advances on Reports of Saudi Arabian Output Reduction

April 14 (Bloomberg) — Crude oil climbed for a second day in New York on reports that Saudi Arabia, holder of the world’s largest oil reserves, reduced output this month.

Futures rose as much as 1.3 percent after…the desert kingdom cut production by 300,000 barrels a day. Barclays Plc said Saudi Arabia may be reducing production of its lighter oil blends introduced in response to the slump in Libyan output.

“The news that the Saudis are cutting output should be scaring the daylights out of people,” said Bill O’Grady, chief market strategist… “

It looks like they couldn’t find buyers for their light blends. Now, we’ve got two sources who are saying they aren’t producing as much as they said they were.”

…Prices have advanced 18 percent this year as unrest spread from Tunisia to Egypt, Libya, Yemen, Bahrain and Syria.’

MEANING EXACTLY WHAT?

Referencing the late Matt Simmons’ watershed book about Saudi oil, “Twilight in the Desert” and other information gleaned, from here and there sources, current production cuts have two main drivers:

1) The Saudis, to help “contain” restiveness amongst its young and idle, need to sequester supply for future considerations and various “job creation” projects.

2) And, they’re running out of oil! Who cares, because we’ll just keep whistling past that graveyard, in our re-called Ford F-150 pick-ups, right? Because we’re entitled to; says so on our birth certificates!

MEANWHILE, IN LIBYA…

That desert kingdom’s much sought-after, easy to refine, very light crude will also be sequestered for some time, due to human incompetence from the snob-palaces of downtown Europe.

The Libyan civil war must figure out a winner. BUT this process is hampered by the amazing set of non-stop incompetencies now extant within NATO.

WHY? IT’S THE EQUIPMENT, STUPID, AND…PACIFISM

NATO airforces lack proper close air-support aircraft of the US variety, specifically the A-10 “Warthog”.

This plane is essentially a 20-foot-long heavy calibre gun barrel dressed up to look like an airplane. The thing is, it flies (the device would be more properly called “The Shredder”)! Nothing much is left of the enemy’s equipment once this aircraft has had a go at it.

So the Europeans must substitute their can’t-fly-very-slow at low altitudes Typhoon or Raphael aircraft. They feature high stalling speeds and bitchy twitchy flying characterisitcs. Couple that disability with hot desert air near ground level and Gadaffi’s folks will keep on keepin’ on…until the Warthogs come back!

AND…PACIFISM

Oh, yes. And Europe, at relative peace since 1945, hates the sounds of war. Can’t say I blame them. But pacifism, by fighting Gadaffi in fits and starts and refusing ground troops intervention, won’t halt this civil war and oil supplies THERE will be tied up…indefinitely.

Meanwhile Shia-dominated Hezbollah is feeding weapons to Libyan rebels who are fight Gadaffi’s Sunnis. Shia/Sunni: never the twain shall meet, so bloodshed meanwhile, and future oil choke-points.

ON TO OTHER THINGS–VANCOUVER REAL ESTATE

The various human dregs and other detritis (riff-raff) comprising Vancouver’s real estate “industry”, must think that Chinese mainlanders are the best thing since 0/40!

But I must REITERATE my concern that the hype and sales, and resulting inflation, will cause a lot of recent (and future) real estate purchasers to go bankrupt once the central bank starts to jack up rates, SOON, which it must.

AS FOR the successful sellers, it’ll be a much-deserved Hell on Earth in the form of many financial tsunamis:

–higher assessments rates,

–higher property taxes,

–higher public sector pay demands,

–higher local food and other servicing costs.

ARE YOU HAVING FUN YET?

If you sell, where THEN will you buy?

Wouldn’t surprise me a bit to see the following soon:

“Hell’s Gate Meadows, in the beautiful downtown Fraser Canyon; a new kind of place! Bring your own pitons and ropes! Special deal on a 50 square foot piece of vertical canyon wall ONLY $2 million! Water views! Don’t fall for real that old real estate bubble talk! This is the real meal family deal! Hurry while space lasts!”

#185 Jeannie on 04.14.11 at 4:55 pm

Love this photo…your ‘sexiest’ picture yet, keep it up.

#186 Junius on 04.14.11 at 5:14 pm

#165 Kate,

You asked, “If an average Canadian cannot save 5K per year, how can he/she afford (save for) a house of 400K?”

Bingo! You win the daily prize.

The answer – of course – is that they don’t have to save for a house because the bank will refund the down payment or lend you the money to make it. At least that is what we have seen for most of the past decade.

A better question might be – if you can’t save 5K per year why do you think you can afford or deserve to own a house?

#187 John on 04.14.11 at 5:20 pm

JB,

Yes. If you take money out of your TFSA you can put it back in the next year on top of your new annual contribution room.

It doesn’t matter whether the money you took out was profit from your investments.

What your assets do inside a TFSA has absolutely no bearing on the rules for moving money in or out.

#188 Shoggy on 04.14.11 at 5:23 pm

To #145 Mr. Plow’s comment.

In giving my example from 20 years ago, my intent was to demonstrate that people can always build themselves up no matter what era they live in. Each era is going to have its own issues, but the smart people take those to be their reality and work within their reality to get ahead.

During the great wars, some people were able to position themselves so that they did well in the recovery and boom phase.

In the 90’s in Ontario people lived through RAE days and then came Mike HARRIS with his cuts (on a side note, I think Harris did a great job, he told us what he was going to do and he did just that i.e. cut spending. Too bad he did not stand for leadership of the Federal Conservatives. Had he does so we might since have a Federal Conservative party and not the Reform/Alliance in Conservative clothing). Now people could have used that recession to say there were all these constraints for people getting ahed. Also taxes were higher then and there was no TFSA to help people save tax free. If one looks at things it that light, we have greater opportunities today than we did before. Also today renters are going to get the opportunity to have their landlords subsidise their utilities etc in order to get a renter and not have to eat the cost of their high mortgages.
In the years ahead there is going to be higher costs due to inflation, commodity prices, taxes but there are ways today to not only prepare for this but to take advantage of the opportunities that are going to present themselves.
All I am saying is this. There are always opportunities to get ahead. But these will require risk and sacrifice (time, labour, needs vs wants) and it is up to the individual to make that choice and take the risks.
Shoggy

#189 Obnoxious Perhaps on 04.14.11 at 5:24 pm

Personally I think Terry should consider himself lucky that he actually has the right to vote, or indeed express any opinion on anything whatsoever. The simple fact is that, with few exceptions, anyone with this paltry an income is essentially a tax on the rest of society, ie the 20% or less that count. Elementary school teachers provide value, but burger flippers and truck drivers do not. Their opinions are irrelevant and should be ignored – but unfortunately in a democracy chimps like this garner undeserved attention!

#190 Canada = housing ponzi on 04.14.11 at 5:38 pm

Kate on 04.14.11 at 2:13 pmIf an average Canadian cannot save 5K per year, how can he/she afford (save for) a house of 400K?
———————————————————-

BINGO…….The fact is people with NO MONEY go out and buy $400K homes. People with NO MONEY out bid those who have money since they have nothing to lose(no skin in the game). Yes, this is considered healthy and normal for people with NO MONEy to go out and buy $400K homes. The same people who CAN NOT save $5K . Canada has the biggest sub-prime in the WHOLE WIDE WORLD second to none. Canada is in the biggest housing ponzi in history. When prices go down how fast will NO MONEY walk away? Remember in 2008 NO MONEY was walking away from new condo’s and homes and they will simply get up and walk. Prices in Canada will drop fast just like 2008. Only this time NOTHING can stop it.

#191 Sail1 on 04.14.11 at 5:44 pm

http://www.thestar.com/news/article/974790–what-your-home-is-really-worth

Will residential real-estate ever become affordable again?

#192 Coho on 04.14.11 at 5:55 pm

Yep, it’s not our fault many can’t save money and it’s not our fault that the ship is sinking and few have access to the lifeboats. But, as the ship goes down, the unfortunate (or ignorant, stupid, trusting, hard working) ones won’t just drown and go away. They will be your neighbours, grocers, trades people, muni workers, if employed at all. If they are angry, frustrated and hungry, I’m sure it will also have a negative impact on those who managed to get a leg up on the crash of the middle class. Unless, of course, we class jump” and form our own “wise investor” class and build gated neighbourhoods as far away as possible from the materially disenfranchised lest they begin to covet what we, the “wise investors” have. That’s why the upper classes in societies don’t mingle with the have nots. They don’t want to become the targets of the poor peoples’ anger because they also know life isn’t fair.

Not dissing all rich people, only those who exploit resources, human and otherwise, to the nth degree and never seem to have enough wealth. More money equals more power, which in turn brings in even more money and so on. And this to the detriment of the majority. Soon even the basic needs of people are begrudged so the rich can get richer. We can’t let government (enablers) policies destroy our neighbours’ futures and not have it affect us.

That’s why this derby style every man for himself quest is foolish, in my opinion. If the will of powerful banking interests and mega corporations and their government enablers is bent on fleecing the people, then any apparent gains we make will be reeled in someway at sometime.

Although there is merit to people making the best of their financial situation, focusing on just avoiding the debt traps our “esteemed” leaders in Ottawa are springing on the too young, trusting, and gullible won’t be enough to ensure decent living going forward. Our quality of life will be basically the same as the “poor unwashed” masses among us.

But, remember to always wave at the poor people because they like to be noticed. And remember this as well: Together, we stand. Divided we fall.

#193 jess on 04.14.11 at 6:12 pm

.#128 Roial1

Itchy and Scratchy

EXXON MOBIL:The oil giant that was theworld’s most profitable corporation in 2008 has spent $5.7 million in campaign contributions over the last ten years and $138 million in lobbying expenditures. Its federal corporate income tax liabilities for 2009? Absolutely nothing. Not only did it pay nothing, but it also received a tax rebate the same year of $156 million.

http://www.truth-out.org/12-tax-dodging-corporations-spent-1-billion-influence-washington-over-last-decade/1302670800

================

The Financial Stability Board and the International Monetary Fund sounded the alarm this week, warning that E.T.F. innovations could pose a threat to financial stability.

#194 BuBu on 04.14.11 at 6:19 pm

If we can save as immigrants $40-$50k/year ( not including the contribution to the companies pension) a Canadian born should be able to save more becaIndeed we rent ( I don’t see the value to buy something for now), but even with a mortgage you took before the 2005-2006 boom you should be able to save money… Yes, if you buy at today’s prices forget about savings…

#195 Coho on 04.14.11 at 6:27 pm

Life isn’t fair. Whose world is it anyway?

On the surface, anyway, it appears to be BP’s, Wall Street’s, The Fed and other Central Bank’s, IMF’s, Halliburton’s and the Military Industrial Complex, Mega Media Conglomerates, The Nuclear Power Industry. It’s their world, complete unprecedented environmental disasters, bombs, human misery, suffering and death.

As things get worse, talk of home ownership and retiring in comfort will fade away because we’ll begin to realize that there will be no future to retire into. Technology has partnered up with the dark side of human nature to become the means of our demise.

Indeed, life not being fair is becoming painfully apparent to even the Boomers. Imagine the bleak future (what is left of it) the youngsters have to look forward too.

#196 BrianT on 04.14.11 at 6:28 pm

Sure they break the law, but basically they are the law so what is the big deal with Goldman? http://www.huffingtonpost.com/2011/04/14/goldman-financial-crisis-prosecution_n_848994.html

#197 wetcoaster on 04.14.11 at 7:01 pm

JB,

The way I understand it, you have to wait 12 full months from the date of withdrawl to put that 5K back in that you pulled out, but you can put your annual 5K contribution in on January 1st.

Maybe Garth can confirm this ?

There is no 12-month waiting period. It goes by calendar year. — Garth

#198 Hoof - Hearted on 04.14.11 at 7:18 pm

News Report

Somali Pirates surround Vancouver Island

Ferry Sailings cancelled.

Mainland BC not concerned.
Agrees to sign over Island, if pirates don’t ask for refugee status.

#199 Hoof - Hearted on 04.14.11 at 7:24 pm

#192 Coho

Look at the demographics of your leaders at all 3 levels of gov’t.

High odds they are leading edge boomers, active or retired civil servants, or bored rich people.

They don’t give a shit….they are simply engaged in some legacy building with some sort of brass plaque on some civic project prior to their brass plaque at the cemetery.

So run for office. — Garth

#200 Garth Is Right on 04.14.11 at 7:30 pm

Most families can’t scrape together $20K per year for their TFSAs.

Sucks to be them.

#201 Nostradamus Le Mad Vlad on 04.14.11 at 7:54 pm

-
#198 Hoof – Hearted — “Mainland BC not concerned. Agrees to sign over Island, if pirates don’t ask for refugee status.”

As BC’s parliament is in Victoria, that is a neat idea! The pirates can have the island, as long as all the politicos go with them!
*
These two links somewhat go together — Here and here. Fukushima “Japan’s plan to end the Fukushima nuclear reactor crisis involves letting radiation leak for the next 3 months.”

Oil going up and 16:32 clip Thorium replacement. Scientific stuff, beyond me. IAEA “Maybe if the IAEA had been inspecting the safety of nuclear systems instead of chasing mythical weapons in Iraq and Iran, we would not be in this mess.” wrh.com.

Banxters Why don’t honest bankers demand prosecution for money-grubbing banxters?

Rothschilds Obviously a GE boss is gonna say nice things about nookular. Who owns GE? Who made the Fukushima reactors?

Pentagon Defense Cuts “Memo to Secretary Gates: please remember, sir, that the last 3 wars in which the US is still currently mired were publicly funded wars for potential private profit.

“In Iraq, it was the oil; in Afghanistan, it was the minerals and natural gas transportation projects; and in Libya, it is the oil and the water.” wrh.com.
BRICs “It’s only a matter of time before the US dollar collapses completely, along with a morally and fiscally bankrupt US government.” wrh.com. Thereby bankrupting TROTW.

Bolivia Silver surge? Equities Does the dollar weakness apply to equities?

Employment Shock Less jobs than expected.

Derivatives and their manipulation. GS? Who woulda thunkid. Banxters Two Evidently, they’re so full of themselves (egos) they can’t figure out which way to turn.

Greenhouse Gas theory debunkers debunked.

Danger Zone “Food prices have entered the “danger zone”, threatening to condemn a generation to extreme poverty and malnutrition, the World Bank has warned.” Burning The Candle Raising the debt ceiling + QE2 – 3 – – 4 etc. Debt US$3.6 trillion worth.

Shifting Sands Japan pondering different capital city, rather than Tokyo.

Egypt “Mubarak was so nice to Israel that he sold them Egyptian natural gas at a lower price than the world’s market price. But now Israel will not be getting this favor and many others given to them by Mubarak. That’s why Netanyahu and company were angry and unhappy about Mubarak’s departure. He was too nice to them,at the expense of Egyptians, Arabs and Palestinians in particular.” wrh.com. It will be curiously interesting when Gaddafi is deposed by US – NATO.

BP The pix they don’t want anyone to see, so here they are! Link in.

Rothschilds, a.k.a. Satan’s banxters.

Destroy The Globalists They are not much use to anyone, anyway. Silent Coup This is what the m$m is for — to keep us in the dark.

Funding for America’s wars comes from foreign banks. As they are running out of military personnel, this may be one reason that the WH lets illegal immigrants stay, and why Harper – Obama did away with our border, to use unemployed Cdns. in their wars.

#202 Daisy Mae on 04.14.11 at 7:57 pm

“Amazing (speaking of conservatives) how in this day and age our Canadian leader has a science minister who believes the planet is less than 10,000 years old.”

Good grief…would you believe 4-1/2 billion?

#203 AG Sage on 04.14.11 at 8:20 pm

>#45 The InvestorsFriend (Shawn Allen) on 04.13.11 at 11:52 pm
I do believe that in Canada, if Provincial debt is included, your debt is at +70% of GDP. I wouldn’t brag too loudly, given that.

#204 Devore on 04.14.11 at 8:23 pm

#193 jess

The Financial Stability Board and the International Monetary Fund sounded the alarm this week, warning that E.T.F. innovations could pose a threat to financial stability.

This is actually quite an issue, because, as amazing is it may seem, we don’t know very much about how these open-ended ETFs behave in very adverse market conditions, such as when they are faced with a high rate of redemption. We had a glimpse into this problem recently, but it’s really a kind of black box.

The problem has in a large part to do with how ETF units are created, redeemed and divested, and how that interacts with shorting. Some of these large and popular ETFs have massive short positions, in the range of many hundreds of percent, whereas regular equities are typically in the low single digits. This is of course only possible with a fractional reserve; multiple people have a claim on a single ETF unit, in other words, the NAV is a fiction. If there is a rush for the exits, these funds will implode.

#205 biscuit of ass on 04.14.11 at 8:28 pm

Coho: #192

I couldn’t agree with you more. There seems to be so much emphasis on this blog about the “real estate porn addicts” etc. and comments like “I can’t wait until the bubble bursts and they fail”.

Always someone looking to profit off someone else’s misery. . .but guess what, when a house forecloses that is something that negatively affects your neighbour, or your co-worker, or the nurse who’s about to change your catheter before the doc (who is over leveraged himself) takes out your left nut. . .get it?!

When the economy loses we all lose. The attitude of many on this blog seems to be one of “being comfortable creating money from nothing” (i.e., investments, stocks etc). But when money is created and lost in the stocks it is not tied to any real labour or production–and as such it has not intrinsic value for society (the only thing it does is shift the balance of money–usually in favour of the person who had more of it to begin with. What happened to an honest days work for an honest days pay? What happened to not exploiting the earth for endless material gain? Life is not a pissing contest, it’s a slow lament. . .an endless disintegration where we watch each other and those around us become less healthy, older, more frail.

Surround yourself with those you love, forget that money is the “be all and end all”. . .make enough to live, and buy a house if it suits you because you want a home. Make peace with your neighbours, hump the wife.

And as Coho said. . .together we stand, divided we fall.

Is somebody humming ‘Kumbaya’? — Garth

#206 Flint on 04.14.11 at 8:29 pm

#150 JoshL,

Thanks for the advice. You’ve given me some avenues to explore.

To some of those demonizing the poor (ie. Obnoxious, #189): nothing I say will probably change your mind, but it’s pretty hard to walk out of school into a well-paying job these days. And before you say, “you shouldn’t expect to, you whippersnapper, get off my [rented] lawn,” we don’t. Graduating during the worst point of the recession completely screwed a whole bunch of twenty-somethings, to the point that there were three rounds of interviews for something as shitty as a call centre job.

There are also other ways to contribute to society than hunting money. In condemning lower-wage earners, you insult the people who, in many cases, have voluntarily chosen a lower-paying career in order to produce the media you enjoy or the food you eat (cooks, not burger flippers. Guess what — they aren’t paid all that well, but for some people it’s a calling).

And before you write me off as some hippy, well, I don’t want to cap the TFSA, I shave, and I wear dress pants to work. I also neither want nor need your charity.

I mean, looking down on truck drivers? Seriously? They actually make decent money, since that seems to be a criteria for worthiness, and last I checked our rail infrastructure was too ravaged for the economy to function without them.

#207 VICTORIA TEA PARTY on 04.14.11 at 8:50 pm

#198 Hoof – Hearted

Further to your pirate summation this:

They (pirates) also want full whining rights that are currently being exploited by a pletora of unbathed crazies residing throughout greater Victoria.

Problem is they’ll (aforementioned pirates) will probably be frightened off the island and demand refuge on Galiano Island instead. Bad choice, pirates!

#208 CrowdedElevatorFartz on 04.14.11 at 8:56 pm

Where’s BPOE ? I miss the little Pumper !
He’s so predictably annoying…….
YOO HOOOO BPOE where are YOUUUUUUUUU ?????????

#209 jess on 04.14.11 at 9:10 pm

204 Devore

“Reinvoicing happens when goods are exported from one country under one invoice, then
the invoice is redirected to another jurisdiction – typically a low-tax or no-tax jurisdiction
(or tax haven) where the invoice price is altered, then the revised invoice is sent to the
importing country for clearing and payment purposes. By artificially overpricing imports or underpricing exports, this process shifts profits out of developing countries, usually for purposes of tax evasion.”

•With half a trillion in illicit outflows in 2008 alone, Asia accounted for the largest portion of illicit financial flows from the developing world. Over the nine-year period examined, 89.3 percent, on average, of total illicit flows from Asia were transferred abroad through trade mispricing.

Illicit Financial Flows from Developing Countries: 2000-2009
A January 2011 Report from Global Financial Integrity

#210 Cabot Lodge brylcreem & trenchcoat on 04.14.11 at 9:17 pm

Garth go to G&T buy thousand tacks and sprinkle them in the bike lanes.

#211 BPOE on 04.14.11 at 9:22 pm

#208: CrowdedElevatorFartz, I’m right here monitoring the blog today. I just wanted to see if people missed me. And I am happy to see that SOMEONE misses my pumping, false statements, and propaganda. You offered me a ride in your elevator a few days back. Because I’m a kinky lil’ feller who is now crab-free, can I take you up on it?

#212 Dark Sad Monster Bunny on 04.14.11 at 9:41 pm

120 Moneta – This is a good definition of a pay as you go pension

“Pay as you go is a description of a contribution policy for
a defined benefit plan. A plan that is funded on a “pay as you go” basis means that no money is invested for the plan, as retiree benefits become due the plan sponsor makes the payments directly. No assets are held so if the plan sponsor goes bankrupt, the retirees and any other participants who are due benefits stand in line with the other creditors. This is an illegal funding method for broad based private pension plans in the US.”

And you’re in favour of this?

On a lighter note (posted before I am sure)

http://www.xtranormal.com/watch/7743951/a-day-in-the-life-of-a-financial-advisor

#213 Hoof-Hearted on 04.14.11 at 9:42 pm

So run for office. — Garth

=====

I’ve been asked…..no thanks.

I’ve seen what goes on behind the scenes, it’s often worse than one can imagine. Hence my cynicism .

I stand by my comments. That’s why you quit…right ?

#214 Hoof-Hearted on 04.14.11 at 9:46 pm

#207 VICTORIA TEA PARTY

I dunno…which of the Gulf islands ya rate as the most uppity and anal retentive?

My guess is Saltspring…they are confused as to whether they are rich and / or hippies ? Also Saltspring has two harbours to defend.

#215 SafetyBear on 04.14.11 at 9:55 pm

France is a cool place moving in the right direction whilst the rest of the world gravitates to the rich vs the serfs in sweatshops model.

You’ll be telling us Greed is Good in a put on Gordon Gekko voice next.

#216 alf on 04.14.11 at 9:59 pm

#189 Obnoxious Perhaps

I would love to overhear you expressing this opinion in my presence, preferably while you are standing in front of my truck. You are indeed a douche and for this there should be a very heavy tax.

#217 Steven Rowlandson on 04.14.11 at 10:15 pm

Garth I’ll keep it simple.
Democracy, communism and political correctness is beyond redemption!

Steven

#218 brainsail on 04.14.11 at 10:49 pm

#203 Sage

Try 84%. vs. Portugal at 83.8%.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/canadas-growing-debt-doesnt-go-unnoticed-at-imf/article1981871/

#219 Raven on 04.15.11 at 10:15 am

Just chatting with my 80 year old mom yesterday. In the 1950s, my Dad’s paycheque was $114 a month. They put $80 to the mortgage (cheap shacks $17,000 financed by the bank and factory) and the rest to keeping a family of three, then four, going. Interest rate was 3% for 25 years. Eventually they paid off the house and sold it for $43,000 in the 70s. Bought a lot in cash in Metro Vancouver and built their own house over 7 years (my childhood summers were spent in a car listening to the radio while my Dad and assorted friends built the house outside on his holiday time). Saved all year, then spent the money in the summer for building. Carried no debt. Add another kid.

My point is every era has its challenges. Took them forty years to eventually build the dream home and retire modestly. Along the way, child allowance cheques, a good medical system and public education helped with the kids, and saved us from catastrophes that hard working class people can’t manage on their own. In the States, we would have remained an underclass, without the public services to underpin their careful consistent work. They never looked for a handout or the easy way, but also needed some extra lift that working hard with limited options in a first generation just can’t overcome. Many Canadians today are 40 years away from their goals too. Between individual initiative and a backup safety net, they can do it too. But everyone needs a extra hand once in a while despite their best efforts. Balance.