The tax storm

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This week the feds started softening us up for the next budget. Fewer public servants, less grant money, no stimulus bucks. But that’s just the start. The country’s about to launch into a tax storm simply because there’s no option. Are you ready?

Avoiding taxes is now essential. In every year between 2010 and 2015 Ottawa will be spending tens of billions more than it gathers in taxes. The federal debt has just surpassed a half-trillion dollars and the feds are on track for a 2009-10 deficit of $56 billion. Meanwhile the independent Parliamentary Budget Officer is estimating that by the middle of the next decade we will still be bleeding red – and that’s without any more crises popping up.

But, let’s face it, the odds of things not working out exactly as planned are huge. The US is in rough shape with its housing market unlikely to even hit bottom before 2012. At the end of 2009 there were more than 500 American banks on the watch list, on top of the 120 that just failed.  Countries from Japan to Dubai to Britain have amassed unrepayable debts and the economic recovery every politician dreams of has proven elusive and expensive.

In Canada the feds will spend at least $170 billion more than will be raised in taxes between just 2010 and 2015 – unless, of course, taxes increase. This is a disaster on its own, but as interest rates increase so will charges on the accumulated debt. Corporate taxes collapsed following the global financial crisis as profits vanished and at the same time a spike in unemployment meant a crash in income taxes paid while jobless benefits spiked. Economists call it a vicious circle.

Every major Canadian province is in deficit. Cities are in budget crisis. User fees are exploding, along with new pressure on property taxes and sales taxes. The introduction of the HST in British Columbia and Ontario is a taste of what’s to come, while Toronto now charges its citizens a new tax to buy a house, own a car or put out an extra bag of garbage.

The last time Canada faced a federal financing problem this big, we got the GST. But this time the problem’s far more acute (and the GST is still in place).

By the way, I didn’t even mention the Boomers. Almost 70% of this crowd have no corporate pensions. Half have no retirement savings whatsoever. While the majority own real estate, they seem destined to start unloading it about the same time, when the market is exhausted and prone to be pushed down by a surfeit of new listings. Not only will this not solve their retirement income problems, but it will depress the market for everyone else, costing a lot of equity. Most importantly for government, by 2015 we will have 9,000,000 newly-minted public pensioners also reaching the age when they become major health care users.

This, then, is the cause of a structural deficit in Canada, estimated to be $15 billion a year by 2015, which you can add to the deficit left as the hangover of our tough economic sledding.

I mention this because now we know these things lie ahead in 2010:

  • higher interest rates
  • no stimulus money
  • HST for 16 million people
  • government spending cuts.

Might be a fine time to stick your mortgage in your RRSP, and pull the sheets up.

161 comments ↓

#1 HouseBuster on 12.02.09 at 10:21 pm

Are you saying that those boomers with no savings and a house will sell and downsize or sell and rent?

Both. The goal is to find liquidity. — Garth

#2 calgary_rip_off on 12.02.09 at 10:25 pm

Avoiding taxes in Canada? That really doesnt make any sense. This isnt the USA. Best to try Monaco.

#3 Sid on 12.02.09 at 10:27 pm

How safe is the rrsp as a tax shelter anyway? Do you foresee the government penalizing rrsp’s in the future? perhaps adding an additional surtax to withdrawls, or even seizing a portion of it. Perhaps an rrsp maintenance fee?

Not that. But the tax deduction could turn into a tax credit – cutting the benefit by half for higher income-earners. Plus the ability to make up past contributions could be axed, which means any rational person should borrow today at 2.25% to catch up, then use the gov’t refund cheque to help pay off the loan. — Garth

#4 Jonathan on 12.02.09 at 10:37 pm

Is that a real picture. I could only wish that in my lifetime I see something as magnificent as that cloud.

#5 mooncake on 12.02.09 at 10:40 pm

Don’t forget the wild card: oil prices. Next year, Who knows how pipelines is getting blown up? How many hurricanes will hit the gulf of Mexico? China and India increase oil consumption year after year.
Next 10 years will be very painful for the average Canadian. People better get used to a lower living standards.

#6 Just Janice on 12.02.09 at 10:41 pm

The best a person can do is tax deferral and tax minimization. Make smart choices, an RRSP might make sense but again it depends on your personal circumstance and your expectations about future tax rates – if you think you’ll face a higher marginal rate when you go to take the money out than you do now you might be better off to investigate other options like the TFSA. Ideally – families should act as a unit when it comes to tax issues as the lower earning members might be the best opportunity to spread income out and minimize the tax exposure. Unfortunately, few are in a position to take advantage of this by having a corporation and having family members provide services to the corporation. Also, leave no deduction unturned – get smart about receipts and realize the opportunities that a small home-based venture might be able to generate. Accountants will do well in the years to come, particularly those who know their ways around the tax system. It’s not Monaco or the US but there are tools that people can avail themselves of.

#7 Casey on 12.02.09 at 10:56 pm

I sure hope your new book comes out soon. Sounds like putting the 10% aside will not be enough. I need your advice to keep the money in my pockets and not the stinking govenment’s!!!

#8 Taxpayer like you on 12.02.09 at 10:56 pm

“But the tax deduction could turn into a tax credit – cutting the benefit by half for higher income-earners. Plus the ability to make up past contributions could be axed, ”

My mom predicted this nearly 500 – I mean 20 – years ago…..

#9 InvestorsFriend on 12.02.09 at 11:03 pm

Tax Storm a comin’??

I can’t argue with that…

It may start in 2010 but probaly won’t get real ugly for a few years… not in Canada that is…

Meanwhile in the U.S. it could be really really ugly. I believe many States face devastating revenue losses. And they’re not allowed to forecast a deficit.

They got no choice but to raise taxes, and pronto.

Gonna get real ugly down south…

Sit back and watch…

At what point are all the poorer Americans going to rise up and revolt?

Remember, poor Americans have one thing we don’t. Guns and lots of ’em.

Obama is not the people’s answer… They are now gonna look for a truly radical leftist socialist leader to get behind.

I am right wing and believe in free markets. But enough is enough. When Wall Street puke Punks take absolutely obscene bonuses even after getting bailed out, there is no one left to defend them.

At this point even republicans are ready to vote for a more fair distribution of wealth…

Again, let’s sit back and watch…

#10 Sid on 12.02.09 at 11:03 pm

Garth- when you withdraw gains from an rrsp from stock you pay full tax on the gain, whereas if you cash out a stock outside an rrsp you only pay 50% capital gain. Are there funds that pay high dividends or interest rates that you recomend to put into an rrsp instead of buying stock?

#11 Jonathan on 12.02.09 at 11:13 pm

All the same issues that were present in 2008 are worse today than they were now. The problem with Keynesian economics is that they think they can cheat the economy on a macro level and make it better. They don’t recognize that it the decisions of millions on a micro scale that makes for the future fundamentals of an economy.

Spending now is like buying your wife a diamond after you cheated on her. It’s not going to make things better. Best to not have cheated in the first place.

#12 nonplused on 12.02.09 at 11:32 pm

Great. The patient is on life support and now the government is going to start trying to bleed it. I don’t think that can do anything but make matters worse.

You can’t get blood from a stone. Raising tax rates from where they are will most likely lead to a fall in actual revenues, compounding the deficit, as the economic effect of additional taxes at this point is too discouraging to productivity.

The only solution that will work at this point is to cut expenditures. But that is the one that will not be tried.

#13 Dan in Victoria on 12.02.09 at 11:47 pm

Post# 3 Sid great question thanks for asking it.
I just came home tonight dead tired, wet, cold, covered in foundation sealer and grumpy. I was driving home thinking what is going to be next with these bandits, where are they going to strike next ?
Damn Garth, my brains been in steady thinking/planning mode since your seminar.
We’ve planned most of our retirement out realizing that we are tail end boomers, and have always been behind, no biggie, just figured it out.
I was thinking about your post when you talked to Micheal Wilson about the GST and thought they will jack that up in short order if they ever get a majority.
The rest has to come from somewhere.
I just about crapped myself when I read that about the rrsp’s (Garths answer) Of course! Not much doubt about the direction this is going to take.They will come up with some angle to relieve us of our hard earned cash.These guys must read this blog for inspiration on how to screw us, how about a code Garth?
Then we could have secret decoder rings.
And secret handshakes.
Oh wait, isn’t that in the Plutocracy hand book.

#14 Into The Sunset on 12.03.09 at 12:05 am

The government has a lucrative tax available……when selling a house ! And as you pointed out, will occur when the millions of Boomers (and non-Boomers) needing retirement funds start to sell and when the present house purchasers experience higher mortgages than the equity they thought they bought !

Federal Capital Gains Tax !!

Calculate what a cash stream to the government coffers this would produce…..and the government wouldn’t necessarily have to allow the mortgage interest to be deductible. They could simply tell taxpayers, it’s not a potential profit producing asset…..if they even felt like telling the tax payers anything.
Retirees with no real source of retirement income; crushing deficits and budgets. All creating desperation in governments…so why would any government have to justify….no matter what political party is in power ?

Of course we should all do as Garth has pointed out and pay our taxes maintaining our honour.

Just as the honourable taxpayers as Paul Martin and Canada Steam Ship Lines going offshore and the Bronfmans with their small transfer of $800 million out of Canada have done without paying taxes. I believe Garth, you were a member of both the parties that cut the red tape for these events.
By the way…..who pays their medical costs…..or do you think they may have offshore/foreign health insurance. I understand hey have never and still do not wait if medical treatment is required. Even Mr. Matins in-laws, the Cowans don’t!

Oh….You wanted proof I wasn’t committing tax evasion when I offered to provide some tips on tax avoidance.

Well I left info. on your blog on one of the last pieces you wrote referencing one method I use to not pay taxes.
I’ll refer to it again here. ITA Section 110.1 and 118.1, and please note – it’s based on 100% of the taxpayers income for the year.

#15 The Truth on 12.03.09 at 12:16 am

Garth is right on this one. You will see higher taxes. Where will they come from?

Individuals will probably start to research ‘aggressive tax planning strategies’. Works for self-employed with deductions…not for salaried workers.

Do you see a flat tax with limited deductions in the future Garth?

#16 Grantmi on 12.03.09 at 12:17 am

Can you believe these SCUMBAG banks in the US!!

This is what they’ve been doing with their TRAP money! HORDING it.. so they can give it back, so they don’t have to worry about the FED under their noses.

So much for helping the FORGOTTEN MAN in getting his mortgage fixed.. or loans to small business.

WAKE UP PEOPLE!!! Look around you!!!!!

****************************************

Bank of America to Repay Bailout, Easing CEO Search (Update1)

Dec. 3 (Bloomberg) — Bank of America Corp., the nation’s biggest lender, will repay $45 billion of U.S. government bailout funds, helping free the bank from curbs on executive pay that have hampered its search for a new leader.

The bank will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities, according to a statement. The firm plans to increase equity by $4 billion through asset sales, and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees.

http://bit.ly/4FwqjL

#17 goldenfox on 12.03.09 at 12:18 am

How many people understand what money is and where it comes from. I bet not one in a thousand understands. Yet you would think that a subject, such as money, which dominates all avenues of our lives, that there would be common knowledge of it. Which brings me to a question for you, Garth. You were the financial minister of Canada, is it true that the Bank of Canada, like the Federal Reserve is owned by private shareholders?

#18 Mark on 12.03.09 at 12:31 am

The national catastrophe is that 70% of Canada’s engineers are out of work right now, and this situation has persisted for the past decade.

Why doesn’t the Harper government give a damn about Canada’s engineers?

No other occupation generates the sort of tangible economic growth and real results as engineers do.

#19 don bool on 12.03.09 at 12:32 am

#3 Sid on 12.02.09 at 10:27 pm

How safe is the rrsp as a tax shelter anyway?

In some cases rrsp,s we,re not safe at all. The reason so many investors will not let the taxation of income trusts go away is the fraud that was committed by Harper with this policy. Harper and Flaherty don,t consider income trusts in rrsp,s to be tax deferred as all other equitys are. They state they want their money now. They don,t want this nation to be a country of coupon clippers. rrsp,s will be taxed when converted to a rif at the normal rate but an added tax of 31 1/2% will be tacked on also. So if you were unfortunate to be invested in income trusts in your rrsp you,ll be double taxed. Can you imagine a senior paying tax on their rif of upwards of 60 %.

In a cash account income trusts will be taxed at the same 31 1/2 %. The saving grace in a cash account is they qualify for the dividend tax credit. This tax credit will soften the tax consequences to a major extent. If you have quality income trusts they,ll do just fine whether they stay in the trust model or convert to corporate status.

The results of the taxing of income trusts is that those who saved frugally in their rrsp,s will be taxed at an astronomically ridiculous rate(double) while investments outside of an rrsp will qualify for the dividend tax credit and be taxed at a normal rate.

These are the consequences from unscrupulous governments that can blind side an investor and have a major impact on their retirement and quality of life. The taxation of income trusts should raise a red flag for those seeking security in their retirement objectives. This government is capable of coming up with taxation schemes that i couldn,t begin to fathom. After all, desperate situations call for desperate means .If you,re one of the 70% of Canadians who have no pension it would be wise to be especially diligent so as not to be blind sided again, although most knowledgable investors never saw this coming . Just think of seniors who invested their life savings in rrsp,s as canaries in the mine.

#20 Alberta Ed on 12.03.09 at 12:33 am

Somebody tell Harpo. In the meantime, I think I’ll have another beer…

#21 AxeHead on 12.03.09 at 12:40 am

I think the question everybody is thinking about and some are asking and nobody really know is WHEN. A related question will be HOW FAST. Hey, there must be some clues, some estimates, some examples we can go by. I just want to know when the inevitable slide starts.

#22 slownsteady on 12.03.09 at 12:54 am

Reverse mortgages may “save” the day. That should extend it for another 5 years past 2015.

#23 Steve on 12.03.09 at 1:00 am

Why don’t at least a few politicians remember their lessons from Sunday school?

The Pharoah had a dream. He dreamed of seven fat cows followed by seven emancipated cows. When he asked Joseph about his dream, he was made to understand that the cows represented 7 years of abundance followed by 7 years of drought.

Knowing this, the Pharoah stored grain during the first 7 good years, and his people were fed well in the 7 lean years that followed.

Our politicians at all levels need to stop nodding off in Sunday school and stop spending every penny that comes into their hands.

#24 Zed on 12.03.09 at 1:11 am

Figure 2: Canada’s Debt – Consolidated Stress Test

Item C$ Value % of GDP

Official Debt $519 billion 34%
Provincial Debt $365 billion 24%
CPP/QPP Deficit $850 billion 56%
CMHC Contingency $100 billion 7%
Other Contingency $150 billion 10%

Total $2,000 billion 131%

http://marketdepth.typepad.com/marketdepth/2009/11/so-shall-we-reap.html

#25 Genghis on 12.03.09 at 1:26 am

Canada Federal government stimulus to end January 29, 2010. According to this article the infusion is peaking now (late 2009), so it is only downhill from here. Let’s hope that the private sector is ready to take over (an outcome that is far from assured if the US recovery falters). Given the Fed and provincial fiscal situation there is definitely less flexibility (compared to a year ago).

http://www.theglobeandmail.com/report-on-business/business-faces-end-of-stimulus/article1386225/

#26 Michael on 12.03.09 at 1:41 am

Hi Garth,

your thinking on the RRSP is rather interesting. I have been in the country for 10 years (almost) but out of a variety of reasons only recently became a landed Immigrant, meaning, I never put any money into the RRSP because I wasn’t sure about the future (yes, good timing there).

As a result, I have almost 10 years of RRSP contributions I haven’t used, I take it, the best would be to maximize on this ASAP?

#27 Onemorething on 12.03.09 at 1:50 am

Well taxes will be the crux of Canada’s future and the US as well and you’d be best to understand what is coming down the pipe.

Likely what Garth’s new book will allude to!

As with all new taxes, there will be interpretations of them and with long and hard taxes, the sure fired ways to avoid paying the full pop.

People in RE that goes under water will be jailed for only the period they still own it, if they sell they will be jailed until the debt is paid.

DEBT IS CONSTANT – VALUATION A VARIABLE!

I agree with Garth’s predictions on the boomer mentality, pensions, retirement and health care all putting the nail in the RE coffin.

We may not need to wait for the bubble to pop initiated by government changing direction, the boomers may get the ball rolling and the government play the blame game.

On RRSP’s, yes the government will tax those as well but in that good ole backhanded way which will have you taking out more, earlier, so you can pay taxes on the greater income.

Good luck fellow Canucks! You will need it!

#28 Ghost of Tom Joad on 12.03.09 at 1:53 am

From G&M: STIMULUS CHECK

Sometime next year, we taxpayers will again receive another Economic Stimulus payment.
This is a very exciting program. I’ll explain it using the Q and A format:
Q. What is an Economic Stimulus payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A The plan is for you to use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China ?
A. Shut up.

Below is some helpful advice on how to best help the economy by spending your stimulus check wisely:

If you spend the stimulus money at Wal-Mart, the money will go to China. .

If you spend it on gasoline, your money will go to the Arabs.

If you purchase a computer, it will go to India .

If you purchase fruit and vegetables, it will go to Mexico , Honduras and Guatemala .

If you buy a car, it will go to Japan or Korea .

If you purchase useless stuff, it will go to Taiwan

If you pay your credit cards off, or buy stock, it will go to management bonuses and they will hide it offshore.

Instead, keep the money in Canada by:
1. spending it at yard sales, or
2. going to hockey and ball games, or
3. spending it on prostitutes, or
4. beer or
5. tattoos.
These are the only businesses still operating in the Canada .

Logical Conclusion:
Go to a ball game with a tattooed prostitute that you met at a yard sale and drink beer all day.

#29 Anon on 12.03.09 at 3:12 am

There is an easy way to avoid taxes- don’t work and don’t buy much. Just relax and enjoy your time.

#30 Anon on 12.03.09 at 3:35 am

Garth, gold is money. More so than many other currencies.

#31 TheBigLebowsky on 12.03.09 at 4:44 am

#3 the hst applies to mutual fund management fees so they will be going up 8%

#32 Maurice on 12.03.09 at 6:40 am

Amigos: We are going to face a new kind of tax to get out of this. Something like, estate taxes, capital gains on home sales or the carbon tax. The unfortunate thing is what ever taxes are increased will not go directly to pay down the debt. Rather, they will mostly increase the size of government.

#33 grumpy on 12.03.09 at 7:17 am

Garth, the Chinese have said two things about gold over the past few days.

1) That they will buy when the price comes down.

2) That gold is in a bubble but that they will increase thier gold reserves from 2% to 4%.

In other words , the Chinese want to accumulate gold and are trying to ‘jawbone’ the price of gold down so that they have the opportunity to buy at a lower price before prices get to high.

After last years institutional ‘repricing’ of commodity prices which gave the Chinese the opportunity to scoop up global assets at bargain prices it would seem that they are trying to re-engineer another attempt to stonewall reality with obfuscation while doing the exacy opposite of what they say.

Bottom line- China has joined the crush and is shifting out of paper and moving into hard assets.

The tax storm is coming as you predict. The government has no willingness to admit that they have based thier revenue projections on bubble prices and is tring to hide the fact that prices are unrealistic and unsustainable.

The buzz word they are selling is for us to fear is ‘deflation’ but thats just BS isn’t it. Prices have tripled in RE and quadrupled in durables in the same time frame. Pyramid scheme anyone?

We have reached an inflection point where value is meaningless and ‘price’ has been replaced by ‘payment’. There is currently no ‘level playing field’ in the RE market because the government has phonied up ‘affordability’ with artificial interest rates. Ergo, prices of RE are meanigless due to the fact that the public has been taken out of the game and replaced by the CMHC.

People are buying gold not on speculation but to defend themselves against the systemic mis management of thier savings. The Keynsian system has failed as anyone could have predicted. It should be obvious that the gov can not continue to sew inflation ad perpetuum. The BOC represents inflation as being stable but thats all BS. Consumables are rising in the 20-30% p/a range. I just paid $5 for a gallon of milk that was priced at 2.99 a year ago. Chinese prices are going up as they import inflation from us.

Garth we are well and truly screwed without revolution against the current government mis management.

#34 Mikey on 12.03.09 at 7:29 am

Garth, The way this country is going there will be a mass exitus of people leaving Canada over the next few years.

Mikey

#35 ca on 12.03.09 at 7:50 am

Garth —

Do you think the outcome you describe will be the same in the U.S.?

#36 David Bakody on 12.03.09 at 7:53 am

And to think we had big bucks in the bank and approx: 30% of people gave us Harper & Co, but I digress.

Both. The goal is to find liquidity. — Garth

Garth I mentioned this once before could this be yet another sad cash crop for most seniors?

Reverse mortgages carry hidden risks: report

Looking for a way to stretch their money, many older people are exploring reverse mortgages, which allow homeowners 60 or older to trade the equity they’ve built up in their home for a lump sum and tax-free monthly payouts.

Although still small, the number of reverse mortgages rose last year to 7,000 with an outstanding value of $837 million — just about all of that offered through the Canadian Home Income Plan Corporation program sponsored by the newly-minted HomEquity Bank, and offered through brokers and lenders.

But these loans can be terrible for seniors who don’t understand the complicated rules governing them and how quickly high fees and interest charges can balloon, maintains Consumer Reports.

http://www.everydaymoney.ca/

I do not recommend reverse mortgages. — Garth

#37 pjwlk on 12.03.09 at 8:23 am

Garth, sounds like an extended plug for your new book… When is it coming out? Soon, I imagine…lol
——
#14 Into The Sunset said: “By the way…..who pays their medical costs…..or do you think they may have offshore/foreign health insurance. I understand hey have never and still do not wait if medical treatment is required.”

It goes like this… when you have enough money to make large donations to starving institution you get what ever you want. Ask around Oakville-Trafalgar Hospital why they got such a massive donation from the TD bank for their new wing – it’s an interesting story…

#38 charles on 12.03.09 at 8:39 am

My first comment since you gave up on the federal candidate nomination effort. Sad but true.
Regarding what lies ahead, we have been taught that black swan events will happen. Earthquake, Tsunami, Hurricane, Volcanic activity, Nuclear confontation, Political upheaval, Assasinations, more war or worse for the boys down south, no war.
One thing is sure, shit happens. Game changing events have happend often even in our brief lifetimes.

#39 AM on 12.03.09 at 9:04 am

“But the tax deduction could turn into a tax credit – cutting the benefit by half for higher income-earners. Plus the ability to make up past contributions could be axed, ”

It still amazes me how many don’t seem to understand the difference between a tax deduction and a tax credit. Harper continuously uses this to push his agenda. Case in point, the goverment of Canada’s “economic action plan” was sold to canadians largley as “tax cuts”; whereas the biggest benifit of the program is in the form of tax credits that go to those who spend money. Enjoy your $1350 home reno tax credit after spending $10,000. (the $10,000 you borrowed and will likely pay someone the $1350 in financing charges)

Sadly, I think there is a good chance that Harper will revamp the RRSP system, as Garth has indicated, to help balance the books. One way or another we will be screwed by a conservative majority…bank on it!

#40 pbrasseur on 12.03.09 at 9:10 am

Not to mention that the government of Canada is responsible for backing up much of the huge real estate bubble.

http://americacanada.blogspot.com/2009/07/cmhc-and-our-government.html

“At this rate the Government of Canada will be insuring well over $500 billion in securitized mortgages and lines of credit by the end of 2010. It will also have issued over $600 billion in outstanding mortgage insurance.”

All this while the CMHC holds about 8 billions in assets (…) a bailout is clearly foreseeable here and could add billions to the public debt.

#41 DaBull on 12.03.09 at 9:12 am

#34 Mikey

To Where?????

#42 George on 12.03.09 at 9:17 am

Obviously this is not an offshoring blog suggesting better ports for the particular storm on the horizon but doesn’t it seem ridiculous to anticipate a book about being a tax contortionist and learning all the elaborate moves for avoidance purposes when perhaps the real problem might happen to be with the system. Controlling the debate here as a blog moderator gets to do and herding inquiring minds. The solution – be more clever than the rest, I’ll show you how. Pink Floyd has that tune “Us and Them” You are complicated Mr Garth. We as humans get so sucked in to complexity as the solution to our concerns. And then the years go by and weren’t we so clever devoting countless hours to the pursuit of our complexity that we actually got to have more than the next. I don’t know

#43 T.O. Bubble Boy on 12.03.09 at 9:19 am

“Fewer public servants, less grant money, no stimulus bucks”

Isn’t that exactly Harper’s master plan??? His Conservative hacks want to cripple and eventually eliminate as much of the government as possible (a la the rhetoric from Bush/Cheney/Rove/etc.)

Also – on the grants – doesn’t this guarantee that there will never be another “Made In Canada” product or company for the foreseeable future? The Government’s anti-science stance is truly baffling here: how can anyone justify that $1M per job to save some GM workers for a couple of years is better for the economy than someone starting the next RIM or discovering Insulin?

#44 Herb on 12.03.09 at 9:19 am

Garth, I’ve been congratulating you for a couple of days for having gotten off the Liberal campaign bus before you would have been thrown under it. For you, the HST would have been the Liberal version of the Clean Air Act. And the HST will only be the start of further tax extortion.

There is no way “the politics of division and derision” (from an LTTE in to-day’sOttawa Citizen) of the Neandercon goon squad can deal with the far tougher Tory times ahead. And there is no way the disjointed and disconnected Liberals could or should get into government.

We are sunk collectively. There are no life boats, except for crew and First Class (as always in government, but not in Christian navigation.) Pity that middle class and steerage couldn’t afford to equip themselves with survival suits and life preservers before the storm.

But the TSX climbs higher and higher …

#45 Kurt on 12.03.09 at 9:23 am

#4 Jonathon: It’s real all right. Come live in the foothills for a couple of years and you’ll be able to see one with your own eyes. They are just as scary as the photo. Keep an eye out for gust fronts emanating from them, as well as the occasional funnel.

#46 pjwlk on 12.03.09 at 9:27 am

#14 Into The Sunset: You’ve also touched on something I mentioned here earlier. Charities and Charitable foundations – another tax loophole for the elite.

If you can find a copy of this book, it very interesting reading: The charity game : greed, waste and fraud in Canada’s $86-billion-a-year compassion industry – Walter Stewart

#47 Gord In Vancouver on 12.03.09 at 9:28 am

Great post, Garth.

Don’t forget today’s impulse real estate buyers who can barely afford the record low (e.g. 2.5%) rates that are being offered today. Even if their homes appreciate in value, they’ll still be in a stressful situation if expected tax hikes come into fruition.

#48 Drake on 12.03.09 at 9:44 am

We’re heading toward economic and political collapse. It doesn’t have to be a bad thing, but likely will. This could be an opportunity to build greater voluntary cooperation & exchange (markets) and less coercive control (govts). But people have a religious devotion to govt, and distrust of the markets, so there you go. I believe we’d all be better off with little or no government though I’m not hopeful that view is going to win out in the end (this time around, anyway).

Mikey – where are people going to go?

#49 McSteve on 12.03.09 at 9:48 am

What about raising corporate taxes which are now lower than the US? What am I saying!? It’s easier to clobber the middle class…

SS

#50 young & foolish on 12.03.09 at 9:50 am

good point grumpy ….

“We have reached an inflection point where value is meaningless and ‘price’ has been replaced by ‘payment’. ”

Today, most RE purchases are made on “affordability” factor, and on the assumption prices always go up!
Garth’s point about the inevitability of higher taxes
and interest rates will spell big trouble for RE values.

#51 pjwlk on 12.03.09 at 9:59 am

Does anyone here know for sure if Canadians have to pay taxes when buying physical gold from within Canada?

I’ve heard both yes and no but I’m not sure if the information is US based or not.

There is no federal sales tax on coins at the time of purchase (but PST may apply). Gold bought for investment purposes is subject to the same capital gains taxes as all other securities. — Garth

#52 Tony on 12.03.09 at 10:03 am

Hey Garth,

Been pouring over my wonderful Andex Chart and I noticed that in the beginning year of every decade since 1970 (’70,’80,’90,’00) there has been a significant drop or downturn started in the major indexes. This historical information combined with the historical highs in gold and real estate (in Canada), market rebounds without any basis in fundamentals, and the looming problems that lie ahead (taxes, debt, unemployment, boomers, and so on) leads me to believe that this is the perfect recipe for another market stinker in 2010.

#53 AM on 12.03.09 at 10:23 am

#52 Tony

……and we’re only days away.

#54 AM on 12.03.09 at 10:27 am

Everybody into the pool……TSX to hit 13500 in 2010

http://finance.sympatico.ca/Home/ContentPosting?newsitemid=ubs-george-vasic-tsx-forecast2010&feedname=CBC-BUSINESS-V3&show=False&number=0&showbyline=False&subtitle=&detect=&abc=abc&date=False

#55 facepalm on 12.03.09 at 10:30 am

According to this site:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/12/canadas-housing-starts-are-following-the-recovery-script.html

One point I suppose I should address is the possibility that we’re seeing the beginning of a housing bubble. This isn’t something I’m inclined to worry about just now. We’re trying to crawl out of a recession, and housing construction is exactly the sort of economic activity that we’re looking for.

If you think I agree with this, then google the username I’ve picked.

#56 Erasmus on 12.03.09 at 10:32 am

Everything Garth has been saying re real estate confirmed for the US market. As the US goes, so follows Canada. Spring 2010 is when the sh** hits the fan.

http://www.stockhouse.com:80/Community-News/2009/Dec/2/Housing-sector-mirage

#57 Evangeline on 12.03.09 at 10:40 am

#9
(Obama is not the people’s answer… They are now gonna look for a truly radical leftist socialist leader to get behind.))

I’d bet that after Obama the U.S. is gunna move further right not left. The squishy middle that won Obama the last election is gunna give up on the liberal left for a very long time after 0’s tripling the deficit in a matter of months. Plus it’s the right that has most of the guns, the left favours gun control, y’know.

#58 Larry on 12.03.09 at 10:44 am

Meanwhile in Calgary Remax predicts a 5% increase in house prices for 2010. Anyway thanks for the heads up about the RSP Garth, i’ve been thinking this myself and have 10 years of contributions to use up and that i will. I’ll use the tax refund to buy myself a car as i’m getting too old for standing out in the cold waiting for a bus.

#59 robert on 12.03.09 at 10:46 am

How much of that ‘170 billion more’ is essential spending I wonder? And whose shoulders will the tax burden weigh heaviest upon? Faced with paying for boondoggle and/or the failure of incompetent or corrupt businesses I’d like to think that the tax payer might have a Howard Beale moment, sooner rather than later.

I think #49 McSteve might be on to something. At the very least quit subsidizing corporations and getting burned when they leave town. Clobber the middle class? There won’t be a middle class when this is done.

And #52 Tony much as I would not be surprised to see your ‘prediction’ unfold the relationship between correlation and causation should not be ignored.

#60 M R Ducks on 12.03.09 at 10:49 am

Buy a home and receive a FREE can of Pork-n-Beans.. “We open doors for you”
http://www.columbiadailyherald.com/

#61 Drake on 12.03.09 at 10:54 am

#51 pjwlk – in some provinces, Ontario included, you’re charged PST on gold coins (including maple leafs). Not on gold bars. Same with other PMs. When I lived in BC, I didn’t pay any tax on coins.

#62 kw on 12.03.09 at 11:00 am

Off topic but I’m trying to find info on the entity that insures your rrsp holdings. Not the CDIC but the Canadian Investors …. ….. that guarantees your holding per account up to 1 mil. Does anyone know the name of this?

There is no specific RRSP insurance. Assets sold by an investment dealer are protected in the case of insolvency by the CIPF, while CDIC covers interest-bearing securities at member institutions. — Garth

#63 Shawn on 12.03.09 at 11:00 am

#9 Plus it’s the right that has most of the guns, the left favours gun control, y’know..

Yeah… the left intellectuals favor gun control…

I was talking about the all the poorer people in the U.S. who don’t even know these terms Left and Right mean in terms of polictics. They are not much interested in voting either… but they might for a new socialist leader…

The poor have always felt left out.

The lower middle class too felt that the spoils were going to the rich.

The upper middle class was hoping to get their turn at the top or trough or whatever.

But now the vast majority of these people see the real excesses at the top.

A dynamic socialist could take control in the U.S.

#64 Bill on 12.03.09 at 11:11 am

I should just move back to India. What a waste of time and money to move all the way here.

#65 T.O. Bubble Boy on 12.03.09 at 11:22 am

speaking of bad blogging:

http://rosemanblog.sovereignsociety.com/2009/12/canada-in-a-sweet-spot.html

“Residential mortgages in Canada require a 25% down-payment and the CMHC, or the Canada Housing and Mortgage Corporation, is a strictly regulated operation where foreign housing agencies look to mimic. ”

HAHAHAHAHAHA

I guess anyone can pretend to be an expert.

#66 David Bakody on 12.03.09 at 11:55 am

#22 slownsteady on 12.03.09 at 12:54 am

“Stop the Clock” and think, when we are old and have to sell our home to rent, most likely in a assisted home complexes (more being built every year) we will need all the money and more to take full advantage of the amenities. There were three (3) new buildings constructed here in my area and they sold out very quickly, I went to an open house and I was pleased at what I saw. I have not heard any sad tales, most seem to have moved in and accepted the change with grace, the grounds are clean neat and tidy, the units are new of course and spacious.

Is this for everyone, of course not, but the way I see keep all options open, pay down debt save wisely and enjoy life and be in a position to be able to choose as time rolls by. Being a mortgage slave in hopes of turning a fast buck will not get you there, if that was the case the people selling you the homes (REA’s) would be buying an flipping themselves!

#67 David Bakody on 12.03.09 at 12:06 pm

Here is a good story courtesy of the Arizona Republic: Cash-short Ariz. maxes out new line of credit.

The state’s cash-flow problems are so dire that it took less than two weeks for government to tap the entire $700 million loan it had borrowed to help with short-term needs.

Is this big scale borrowing and specualtion not the same as Canada’s housing bubbles and low interest lines of credit spending?

#68 unbalanced on 12.03.09 at 12:10 pm

# 14- Sunset.

Well said. How did the Bronfmans get away with that? What year was that ? I wonder WHO got paid off to keep their mouths shut !!!! And the Government wonders why people evade taxes.

Just remember ” What goes around, comes around !!!!!

#69 Evangeline on 12.03.09 at 12:21 pm

more state bank goodness:

link

((Economist Farid Khavari, a Democratic candidate for governor of Florida in 2010, is proposing a Bank of the State of Florida (BSF) that would take full advantage of the potential of a bank charter. It would not only act as a depository for the state’s funds but would actually make loans to Floridians at much lower interest rates than they are getting now. It would do what the State Bank of North Dakota does now. Among other benefits, a state bank could open up frozen credit markets, save homeowners many thousands of dollars in payments, produce major revenues for the state, and allow the state’s own debts to be refinanced at much lower rates. All those benefits are possible, says Khavari, because of the “fractional reserve” banking system used by all banks when they make loans. As he explained in a July 29 article in Reuters: “Using the fractional reserve regulations that govern all banks, we can earn billions per year for Florida’s treasury, while saving thousands of dollars per year for Florida homeowners…For $100 in deposits, a bank can create $900 in new money by making loans. So, a state bank can pay 6% for CDs, and make mortgage loans at 2 percent. For $6 per year in interest paid out, the state bank can earn $18 by lending $900 at 2 percent for mortgages. “A state bank can be started at no cost to taxpayers, and will be a permanent engine driving the state’s economy. We can refinance state and local projects at 3 percent, saving taxpayers billions and balancing state and local budgets without higher taxes.” The state would earn $15,000 per $100,000 of mortgage, at a cost of about $1,700; the homeowner would save $88,000 in interest and pay for the home 15 years sooner. “A state bank will save people about seven years of their pay over the course of 30 years, just on interest costs,” Khavari said))

#70 Forewarned is forearmed on 12.03.09 at 12:26 pm

#43 T.O. Bubble Boy on 12.03.09 at 9:19 am
“Fewer public servants, less grant money, no stimulus bucks”

Isn’t that exactly Harper’s master plan??? His Conservative hacks want to cripple and eventually eliminate as much of the government as possible (a la the rhetoric from Bush/Cheney/Rove/etc.)

Also – on the grants – doesn’t this guarantee that there will never be another “Made In Canada” product or company for the foreseeable future? The Government’s anti-science stance is truly baffling here: how can anyone justify that $1M per job to save some GM workers for a couple of years is better for the economy than someone starting the next RIM or discovering Insulin?

Agree #43 – Everything’s going according to their plan. “If Ottawa giveth, then Ottawa can taketh away. ” I think it won’t just be a question of higher taxes but deep cuts to all social programs.

#71 Calgary Rip off on 12.03.09 at 12:41 pm

#63 Shawn:

The U.S.A. is a third world country not even worth caring about. Be thankful you are in Canada and not the USA. The USA is a pathetically run corporate empire.

All the people who want to avoid taxes should go there. They will encounter guns, dogs, violence, and crazy stuff.

#72 rory on 12.03.09 at 12:41 pm

#18 Mark you said:
“Why doesn’t the Harper government give a damn about Canada’s engineers?”

Mark, the gov’t was not created to look after you but we all fallen asleep and think it is our right to have the gov’t look after us …if Engineers are so damned important then a smart bunch should be able to dream up a great product and sell it to the world …hello individually responsibility… hello entrepreneurship …we have fallen so far.

As to all the others speaking on increased taxes, nice to see you and even some MSM types are starting to understand and speak out on the magnitude of the problem …I have been advocating for months across the board reduction in public services wages and pension of 20% …and there will be a large reduction in everyone’s standard of living ….global wage arbitrage, baby…of course IMO.

This is not a popular positon (desreasing wages/pensions) but it needs saying …the gov’t cannot save us only we can (private sector) save us but the G can sure as heck sink us. Start thinking individual responsibilty.

#73 Mike (Authentic) on 12.03.09 at 12:48 pm

Just heard yesterday the USA is introducing a 50% DEATH TAX. Congress is fighting to reduce it to 45%.

So much for boomer inheritances.

Death and taxes. Now the same thing(R)!

Mike

#74 Mike (Authentic) on 12.03.09 at 12:49 pm

And 1-5% US WAR TAX as well.

1-5% off your gross income to support the war in iraq, afganistan and coming soon pakistan, iran then china…

What a waste.

Mike

#75 Kelly McMae on 12.03.09 at 1:16 pm

#28 Ghost of Tom Joad on 12.03.09 at 1:53 am

Priceless.

and the HST stinks. is it possible to collectively refuse to purchase anything that charges this tax? is there any way that we the citizen can have a voice on this matter, rather than the backrooms of some tiki bar where Gordo is getting primed for a joy ride into the Hawaiian sunset?

and how is it that Scandinavia is fairing better than most during this down turn? shouldn’t the slime of socialism and the public good be suffocating those countries back to the days of Viking lore?

#76 Kelly McMae on 12.03.09 at 1:22 pm

#39 AM
“Sadly, I think there is a good chance that Harper will revamp the RRSP system, as Garth has indicated, to help balance the books. One way or another we will be screwed by a conservative majority…bank on it!”

I sure hope we’ll not have to live with a Harper majority. I trust that %70 of the population are smart enough to not let this happen.

#77 Soju on 12.03.09 at 1:23 pm

Here’s a link: http://www.rebgv.org/news-statistics/strong-demand-carries-late-fall

Greater Vancouver sales up over 250% in November when compared to November of 2008. Listings down over 8%.

Will home buyers have time for Christmas dinner this year?

#78 kitchener1 on 12.03.09 at 1:25 pm

I see no one mentioned it yet so I will.

Remeber the conservatives new tax free account up to a maximum of $5000 that was brought in last year.

Well here is the kicker:

Up until recently (last month I beleive) there was a 1% penalty if you overcontributed. ie. you put in 1 million into the tax free account, you get a $10 000 penalty but the 1 million remains in the tax free account.

Someone please tell me how politicans (lawyers, accounts) who draft these laws failed to see this GIANT loophole? I wonder how many wealthy people took advantage of it?? I wonder in the first few months, how many Conservative party memebers took advantage of it?

They changed this last month so people over contributing into the tax free account now face a 100% penalty should they go over $5000, basically killing the loophole.

Does anyone honestly beleive that this was an oversight?

That being said, we all have to remeber that its the top 5% of wage earners that pay something like 40% of all tax.

The law was changed Oct. 16. But there are many creative uses of TFSAs still possible. — Garth

#79 Crash on 12.03.09 at 1:33 pm

#51: Does anyone here know for sure if Canadians have to pay taxes when buying physical gold from within Canada?

I can only speak for British Columbia; there is no GST or PST tax on bullion coins (.999 or greater purity) or bullion .9999 purity bars. If you buy a coin that is less than this .999 purity, then PST is charged. For exmple, a Kruggerand while containing one ounce of gold, also has other base metals to make the coin harder and less prone to wear and thus is not .999 pure and so is taxable with PST at time of purchase. Regarding any taxes of physical gold at the point of sale (capital gains tax?); it would be very difficult (impossible actually) to enforce this as no one can prove when the gold was purchased, or for how much.

You are required to pay capital gains taxes on profits bullion yields. Selling it to a bank, for example, will require a receipt of purchase. — Garth

#80 Gord In Vancouver on 12.03.09 at 1:34 pm

Does This Surprise Anyone?

http://www.vancouversun.com/business/Housing+market+remain+strong+2010/2298497/story.html

#81 Makeorbreak on 12.03.09 at 1:43 pm

Don’t know if this has been posted on a previous entry:

http://www2.macleans.ca/2009/11/30/fat-city/

#82 Calgary_rip_off on 12.03.09 at 1:50 pm

Garth!

The latest from the Herald on rising house prices. Better hope those interest rate increases come quick so Calgary is levelled!!
http://www.calgaryherald.com/business/Calgary+home+prices+forecast+rise+2010/2297992/story.html

#83 jess on 12.03.09 at 2:00 pm

==============
job stimulus:
But the first law of growth economics states that to create wealth through growth, some inflation needs to be tolerated. The solution then is to make the working …”poor pay for the pain of inflation by giving the rich a bigger share of the monetized wealth created via inflation, so that the loss of purchasing power from inflation is mostly borne by the low-wage working poor, and not by the owners of capital, the monetary value of which is protected from inflation through low wages. Thus the working poor loses in both boom times and bust times.”

“Make the cost of wage increases deductible from corporate income tax and make the savings from layoffs taxable as corporate income.”

Henry C.K. Liu

#84 Another Albertan on 12.03.09 at 2:19 pm

There were 36595 Professional Engineers and 8256 Members In Training in Alberta in October 2009. This sums to 44851 Engineers in Alberta, neglecting special licensees. I doubt 31396 of them are unemployed right now. I will make an informed statement that, in 2009, at least 5000 did lose their jobs in Alberta as the EPC companies downsized radically.

There are over 200000 Engineers registered in Canada. I also very much doubt that 140000+ are unemployed. If that were fact, it would be front page news and the economy would have devolved well past the point of simply stalling out.

Engineers are the leading edge of the economy. When we (’cause I am one) stop working, about 9 to 12 months later everybody else stops working. Why? Because if we aren’t designing things, there isn’t a need for anyone else downstream for manufacturing, construction, commissioning, operations and paper-pushing.

Or maybe Mark meant 7% instead of 70%. 14000-odd engineers out of work across the country? I might have an easier time swallowing that number. But since we’re all still embroiled in stock market melt-ups and radical debt expansion, what’s an order of magnitude between friends?

Maybe as the single largest self-regulating senior profession out there, we’re also supposed to have the ability to wipe our own backsides too.

#85 darcy on 12.03.09 at 2:28 pm

how do I put my mortgage into my RRSP?

Extremely doable, a little complicated. I have an extensive strategy laid out in the new book. — Garth

#86 goldenfox on 12.03.09 at 2:36 pm

Why our government wants low intewrest rates and is printing $ like crazy

“Surviving The Cure For Asset Deflation
by Daniel R. Amerman, CFA | December 3, 2009
Print

Overview

The US and other governments around the world have a major problem: powerful asset deflation has taken hold, and governments lack the power to directly cure asset deflation. However, when it comes to symbolic or fiat currencies, governments do have full power to stop monetary or price deflation at will, so long as they are sufficiently determined. This dual relationship opens up a loophole for the US government: it can’t really cure asset deflation, but it can fool almost the entire population.

Understanding this loophole may be the single most important financial survival task for investors over the next five to ten years. In this article we will explore the limits of government power, show how deception can be used to cover up those limits, and introduce some of the opportunities that open up to investors when they see through the deception.”

http://www.financialsense.com/fsu/editorials/amerman/2009/1203.html

#87 robert on 12.03.09 at 2:42 pm

#76 Kellie Mae

As long as the faux boom in houses and stocks continues and the Opposition is in disarray, be afraid. Be very afraid.

#88 robert on 12.03.09 at 2:48 pm

#63 Shawn

“A dynamic socialist could take control in the US.”

Can we please reanimate the bullet riddled corpse of Huey Long?

#89 Jeff Smith on 12.03.09 at 2:55 pm

Looks like Garth is wrong. Check out this website:
http://money.ca.msn.com/banking/mortgages/gallery.aspx?cp-documentid=22786872

RE is gonna go up in 2010.

#56 Erasmus on 12.03.09 at 10:32 am
Everything Garth has been saying re real estate confirmed for the US market. As the US goes, so follows Canada. Spring 2010 is when the sh** hits the fan.

http://www.stockhouse.com:80/Community-News/2009/Dec/2/Housing-sector-mirage

#90 SKgirlinAB on 12.03.09 at 3:08 pm

Garth my husband and I follow your blog religiously and we take your advice seriously. Because of your advice about buying a home and saving we have a large down payment in our savings account waiting for the right time to buy (which sure as hell isn’t now). Because we don’t have a big mortgage we are able to travel and enjoy life without having to worry about whether or not we’ll be able to pay our big mortgage next month. Having fun sure as hell beats an overpriced box in the sky or the burbs.

#91 jess on 12.03.09 at 3:18 pm

tax the layoffs as a profit /hire get a tax deduction. Wouldn’t this stop the jobs going over seas to cheaper labour?

what happened to :
2006 grant and a promise of hiring
3,000 new jobs by 2010 and the $1-billion investment ?

Canada’s second-largest auto parts maker said Thursday it is closing its plant in Batawa, Ont., with the loss of 134 jobs.

“We regret the personal impact that this will have on employees and their families and sincerely appreciate their co-operation during the orderly wind-down of operations.”

The cuts follow the layoff of between 400 and 500 workers in August 2008, after a slump in the auto and construction industries. Linamar also makes scissor-lifts for industrial markets.

The company said the closure does not affect its other Ontario plants, where new business continues to be won and production levels are rising. Linamar has more than 9,000 employees around the world.

#92 dosouth on 12.03.09 at 3:32 pm

Welcome to the Okanagan…. Real Estate taking off!!

http://tinyurl.com/yczjgq6

#93 Keith in Calgary on 12.03.09 at 3:33 pm

I’ll be an ex-pat before 2015, and FWIW I’m almost there now anyways……….so Canada won’t be getting a dime of my future earnings from that point forward, which means that over the next 2 decades roughly $1MM of tax revenue will be missing from their coffers because I’ll have packed up and left the country………..permanently. Gonna watch it rot from the inside out on far away beach.

Oh well, not to worry, they can just print some more to make up the shortfall……heh. If you have money, I’d get it out of the country now before they don’t let you do that any more.

#94 Crash on 12.03.09 at 3:34 pm

You are required to pay capital gains taxes on profits bullion yields. Selling it to a bank, for example, will require a receipt of purchase. — Garth

The bullion dealer I asked (not a bank) only requires picture ID on a sale.

You are still required to declare capital gains on bullion. 50% of the gain is taxable. — Garth

#95 Jayman on 12.03.09 at 3:42 pm

Ghost of Tom Joad #28. Beautiful post. I laughed out laod and loved it. Thanks.

#96 Mark on 12.03.09 at 3:49 pm

Another Albertan, thousands of APEGGA members are not employed in engineering jobs, and I was referring to the fact that only 1/3rd of Canada’s engineering graduates actually are able to find jobs in the field.

Yes, I mean 70%. Not 7%.

#97 dave99 on 12.03.09 at 3:54 pm

#78 kitchener1,you wrote

“Up until recently (last month I beleive) there was a 1% penalty if you overcontributed. ie. you put in 1 million into the tax free account, you get a $10 000 penalty but the 1 million remains in the tax free account.

Someone please tell me how politicans (lawyers, accounts) who draft these laws failed to see this GIANT loophole? ”

Uh, they probably failed to see this GIANT loophole, because it doesn’t exist. Your description is wholly inaccurate.

The correct penalty was that any overcontribution would be taxed at 1%/monthly. Remember further that the contribution to the TFSA is post-tax.

So if you over contribute $1m, you are paying $10k a month.

Thus, if you profit 12% a year you only break even.

However, there are ways to benefit from this (ie you contribute into high risk short term investments). Hence, the closed small loophole.

Seriously people, if you are going to post some inflamatory expose, please try to spend 3 minutes googling for the correct details first (that’s the amount of time it took me to find the facts which refute Kitchener’s post)

#98 Jess on 12.03.09 at 4:02 pm

creative uses of TFSAs still possible. — Garth

if one goes bankrupt – isn’t pension money safe (from creditors) as long as it was held for one year or more ? Does this include TFSA?

No. TFSAs and RRSPs are not creditor-proof, unlike seg funds. — Garth

#99 Seilfworcehtsa on 12.03.09 at 4:22 pm

Time to buy shares in golf club companies. Elin Woods demonstrated a new use for a 9-iron and the ladies are snapping them up like hoola hoops. While coveting the assets of others Tiger Forgot to cover his own ass-ets. And you thought that home buyers were the only brainless nitwits out there.

#100 I Got Gold on 12.03.09 at 4:25 pm

Surviving The Cure For Asset Deflation

by Daniel R. Amerman, CFA | December 3, 2009

In the real world – most of the people do get fooled most of the time, as sad as that state of affairs is.

At this moment, however, you do have a choice. Which is whether or not to take personal responsibility for your future.

There is a saying: “Fool me once, shame on you. Fool me twice, shame on me.” In its essence, that is a statement about taking personal responsibility in an unfair world. This is something that in practice only a very small percentage of the population will do. Through inaction, most people effectively choose victim status, allowing themselves to be fooled twice, and then some.

link –

http://www.financialsense.com/fsu/editorials/amerman/2009/1203.html

#101 miketheengineer on 12.03.09 at 4:25 pm

#84 Another Albertan

Fellow Engineer. From what I have seen in Ontario, 50% of the automtive manufacturing parts producers have closed their doors within the last 18 months. Hundreds of thousands have lost their jobs in Ontario. Cities like Windsor and St. Thomas (Ford Assembly facilty due to close soon) are hurting big time. Real Estate is depressed in those cities, Unemployment is high.

I don’t know how many engineers are out of work, but I have about 20 friends that would give their right elbow to have their old job back. Most out of work over 12 months, EI now long gone. How long before these folks go for broke? When the smartest of the smarts can’t find work, look out below.

You are entirely correct. In about 12 months, you will see the effects of the Government. High cost of fuel, has killed the economy. Globalization has killed the economy. All the work that I used to do, is now being done by offshore companies and greatly reduced cost (and quality). Why? Because the government allowed it to happen. Why? Because we as the people allowed the government to do it. Why? Because the Billion dollar companies and Billionaires allowed it to happen? Why? Greed. Plain and Simple. All for me and none for you.

Why is real estate climbing? GREED. The pumpers and RE pushers are pushing people through propaganda, along with the government, pushing them too!

Garth is correct, there is only one way for RE, down. I predict the downward trend will start in June, when the “devil’s” tax, HST kicks in. People will be “spent out” by then. Price has exceeded affordablity. All who want one, will have their home, only the pushers will be left…..to push to the other pushers.

Garth you are 100% correct on your predictions. Only timing will be the issue. When will the downward slope start. This is the question the RE pushers and pimps should be asking.

#102 winnipegger on 12.03.09 at 4:31 pm

#69 Evangeline

See Ellen H. Brown’s articles on http://www.webofdebt.com; sounds like her research is being referenced by this Dem.

#103 I Got Gold on 12.03.09 at 4:42 pm

Gold and The Central Banks: The Game Theory
by Mencius Moldbug

The gold price has been increasing at roughly 20% a year since 2001. Perhaps coincidentally, the global dollar supply is diluting at rates not too different from this. Betting on the continuation of this trend is not difficult – one the way to bet on it is to buy gold. Which causes the trend to continue. Reflexivity! The dollar itself is a bubble, held up by the monetary demand for dollars – and the dollar does not appear to be an especially stable currency.

Thus there is an entirely different Nash equilibrium out there – one in which all the central banks dump the dollar for gold. This causes the gold price to skyrocket, creating permanent profits for all the reserve-accumulating central banks.

Don’t believe me? Think about it. When remonetization is complete, by definition the CBs will be computing their accounts in gold. Since the price of gold in dollars, under this scenario, is much higher than it is today, it will look like the CB made an enormous profit on the transaction: in exchange for green pieces of paper, now of minimal value, it received good gold. Or it was foolish and held on to the green paper, in which case its bankers are lynched in the street.

Link – http://www.safehaven.com/article-15189.htm

#104 miketheengineer on 12.03.09 at 4:44 pm

Garth et al:

FOOD BANK NEEDS FOOD, PLEASE HELP THEM.

This was in the Hamilton Spectator:

http://www.thespec.com/News/Local/article/683696

The food banks have had a surge, by 20% of the families in need. If you can find it in your heart, especially those who have the ability to do so, and you know who you are, please donate. You will save some lives in this country. Save your friends and neighbours, donate some food.

#105 jmcanuck on 12.03.09 at 4:50 pm

#77 Soju

Comparing to 2008 is misleading. An ant hill looks pretty high when viewed from the bottom of a crater.

#106 TheBigLebowsky on 12.03.09 at 4:58 pm

#79 but selling it to a bullion dealer requires no receipt like border gold . The banks try and charge pst on the sale which is illigal because the coins are legal tender. so you can call them on that and they back down. And unless you voluntarily want to clain capitol gains there is no way the Gov will figure it out. Those criminals should be behind bars not taking more money from us in the form of taxes.

Tax evasion is illegal. It cheats everyone. — Garth

#107 TheBigLebowsky on 12.03.09 at 5:07 pm

#85 its called the Smith Manouver. Basically as you pay down your morgage you take out an investment loan and invest the same amount in stocks and bonds. The interest on the loan is tax deductable where as your morgage interest isn’t. I would not advise this because you are essentially backing up an investment loan over time with stocks and bonds which could tank when the U.S Gov along with most G-8 nations default on their debt next year. Better to pay off your morgage or stay out of debt all together. Who know what will happen next year after the U.S devalues its currency giving 1 new dollar for 3 old ones. A person is crazy not to own some gold/silver and good quility mining shares that are un-hedged. There will be a flight to quality no matter how much Garth poo poos on precious metals.

No it is NOT called the Smith maneuver. That strategy is based on leverage and does not work in an environment such as we are in today. I have never, and never will, recommend that action. There is far more conservative and effective way of sheltering a home loan inside an RRSP, making mortgage payments to yourself. — Garth

#108 jess on 12.03.09 at 5:10 pm

carousel fraud used as a tax scheme

Europe’s flagship carbon trading scheme suffered a blow today as the Danish government was forced to rush an emergency law through parliament to clamp down on a virulent form of VAT fraud.

On the eve of the Copenhagen climate talks, which will attract world attention to emissions trading schemes, police and tax investigators across Europe are believed to be investigating hundreds of millions of euros worth of fraud involving carbon quotas originating in Denmark….

“carousel” fraud involving carbon credits moved to Denmark, where registration of carbon quotas for the European Emissions Trading Scheme (ETS) is easy and a VAT rate of 25% makes the fraud attractive to international criminals.

Experts said today that Copenhagen had long been an accident waiting to happen in terms of carousel fraud.
The fraud occurs when a trader of carbon credits in one EU country buys some from another country free of VAT, then sells them on, charging the VAT to the buyer. The seller then disappears without handing the VAT to the taxman.

Some criminals re-export the credits, reclaiming VAT as they do so, then re-import them. They can do this repeatedly, reclaiming VAT many times, hence the “carousel” label.

Britain lost billions of pounds to carousel fraud, mainly on mobile phones, in 2006 and 2007 before the government changed the mobile trade so that tax was levied only on the final buyer.

#109 jess on 12.03.09 at 5:14 pm

Thanks garth but what about this?

For all provinces:

RRSPs – effective July 7, 2008 RRSPs are exempt from seizure in a bankruptcy. This exemption is subject to a one year clawback for amounts contributed within one year of bankruptcy.

See also what the Canadian Bankruptcy Federal Legislation allows you to keep, including Directive 11-R.

You are almost correct. The change to the Bankruptcy and Insolvency Act protecting RRSPs from seizure came into effect September 19th – just 10 weeks ago. TFSAs are not covered. — Garth

#110 nonplused on 12.03.09 at 5:19 pm

#49 McSteve

Most of the middle class saves for their retirement (those who save, anyway) by buying stocks in corporations. So raising corporate tax rates gets you either way.

There is no way for the government to raise taxes without it costing everyone more, somehow. Corporations do not pay taxes out of something they have. They raise prices for their products until they have enough money to pay the tax. They cannot get the money anywhere else, they don’t have a magic printer. So consumers bear the brunt of all corporate taxes.

In the end of the day, only productive labor can raise value and that is where all taxes eventually trickle back to. If a working man has to work 4 hours to earn enough to feed his family, the net effect of taxes is to make him work 8 and have the same amount of food. It doesn’t matter if it’s presented as direct taxes or taxes on the businesses producing consumer products.

Take total government expenditures (all levels) and divide that number by GDP and you have the effective tax rate on labor for the country. There is no way to get around that, everything else is just concentrating the wealth and taxing it at fewer locations. Financial shell games in other words.

Shaking down the bankers is good, but all the government is doing then is stealing the money that the bankers stole from the laboring classes, or each other. Still, there is some satisfaction in that I suppose if we don’t have the guts to stop the original theft.

#111 Forewarned is forearmed on 12.03.09 at 5:21 pm

#92 miketheengineer on 12.03.09 at 4:44 pm

Thanks for reminding me to send my cheque. I’ve got 2 bags of nonperishables sitting beside my front door to drop off. For those who can afford it, we should all be helping those who find themselves in dire straits. For the smug libertarians and neocons who believe in a deregulated market, dog eat dog world, you too could end up in the bread lines one day.

#112 Bob on 12.03.09 at 5:31 pm

When will the new book be available? Hopefully before tax time?

Greatly interested in methods to reduce my tax exposure, including any creative uses of TFSAs and RRSPs.

‘Money Road’ will be in Chapters Feb. 1 and available here two weeks earlier. — Garth

#113 Crash on 12.03.09 at 5:38 pm

Tax evasion is illegal. It cheats everyone. — Garth

Unfortunately we are at a point in time where Joe Public has had enough of paying increasingly higher taxes with less benefits and “Joe” will begin to resist the system. You (and I) may not agree with this approach, but it is a fact. Also let’s acknowledge the corporate welfare bums who don’t pay their fair share either.

#114 $fromA$ia ( Y ) on 12.03.09 at 5:41 pm

Tax evasion is illegal. It cheats everyone. — Garth

Ok, wiseguy!

You know what worse, F$*#ing polititions voting in their own pay raises and expanding government. That should be the peoples choice.

Giving yourself a payraise is plain wrong as well.

That has not happened for years, at least in Ottawa and Ontario. Pay is determined by third-party commissions. Besides, what 308 people make in Ottawa running the country is no excuse for anyone not paying their fair share. For every carpenter working for cash, a legitimate home improvement company employing several people and covering health and workplace benefits suffers. — Garth

#115 Another Albertan on 12.03.09 at 5:48 pm

Mark, so what is it? 70% of engineers or 70% of new grads? BIG difference.

If you are the latter, I empathize. But at the same time, engineering jobs were exactly growing on trees in the early to mid 90s. If you graduated and got on with a major (it typically helped if you were a former co-op student at these companies), you were golden… at a radical 40 to 42 thousand per year. Everyone else was lucky to get on at a smaller firm anywhere from 28 to 35k/yr. Oh, and don’t forget that you had a high probability of having to work in the middle of nowhere if you wanted to work.

So if we say that there are 15000 newly-minted engineers every year out of Canadian universities and 70% can’t get jobs, that’s about 10000 who haven’t been able to get a first job. That sounds about right. We’re resetting economically. I’d expect that.

If you want to be pedantic, the number of engineers in Canada who actually have to stamp and sign drawings is WELL below the full total. That doesn’t mean that being a manager or running economic forecasts is any less engineering than doing load calculations for beams.

Life isn’t a Hollywood movie. Sorry if you thought it was. You have arguably one of the best educations available on the PLANET as your starting point. There are lots of things I didn’t feel were fair when I started off either. Unfortunately “life” happens. Either deal with it or check out. You aren’t owed a job nor is it the government’s responsibility to create one for you if the private sector can’t. We’re going through a large-scale economic reset and unfortunately the timelines used by large institutions is slow compared to personal timelines. One quarter in corporate terms is a drop in the bucket. One quarter in personal terms is a helluva long time.

Mike – the proper leading indicator is long-lead items. Right now, there is still SFA being ordered that requires engineering and manufacturing slots. Just look at any heavy industrial capacity from Cat, GE, Siemens, etc. The order books for 2010 are very very light and are essentially empty beyond. The “actual” economy is still hurting badly.

#116 Peter wiener on 12.03.09 at 5:52 pm

re # 61 Drake

Drake, could you please tell me where I can buy gold bullion bars in Canada (Ontario even?) without PST or GST being charged on top?

Thanks in advance for any assistance you can offer, I have been unable to find Gold anywhere in Cda that does not attract one or both taxes, but maybe I’m not looking in the right places.

Precious metals are exempt from GST / HST. A precious metal is defined as a bar, ingot, coin or wafer of gold or silver, refined to a minimum purity of 99.50% in the case of gold, and 99.9% in the case of silver. Provincial sales tax is applicable in certain provinces on coin & bullion sales. — Garth

#117 Forewarned is forearmed on 12.03.09 at 5:53 pm

Hi Garth – Am really looking forward to the release of your new book. I recall reading about investments in TSFA’s a month ago, but can’t find my bookmarks right now.

Re the $1350 home reno credit, I’ll take any credit I can as I’m in the midst of a reno but not borrowing to do it. Next year we’ve got to change most of our windows and siding. My husband was working in the basement and discovered the 2 X 4 under the window was completely rotten. It was better than my compost. He called someone he knew who sold windows. I thought it was due to carpenter ants and the guy agreed. Husband thought it was due to my shrubbery/plants in front of window. He wanted to buy a window to replace it. I spent half a day on various sites, including Nat Resources re windows and doors. Great site re energy efficiency. Husband has agreed we’ll wait until next spring. He’s replaced 2X4’s, etc. so we can wait until next spring. During the winter I shall ask questions of all retailers and make a decision and hopefully be able to take advantage of the fed and prov rebate energy program – if it exists by then :-)

#118 tjmikey on 12.03.09 at 5:58 pm

#96 Mark

Did you P eng’s ever think that maybe you should have decided on a different career path?

Like everything else (with some exceptions) there are just to many of you.

Quit bitching and get on with it.

#119 TheBigLebowsky on 12.03.09 at 5:59 pm

#106 ok Garth , my aplogy then, thought thats what you were refering to.

No problem. Smith has spent his career telling people I approve of his idea. I do not. — Garth

#120 kitchener1 on 12.03.09 at 6:04 pm

RE# 97 Dave

said
So if you over contribute $1m, you are paying $10k a month.

Thus, if you profit 12% a year you only break even.

The point is not what you pay on a monthly basis, the gains for that 1 million are TAX FREE. Its pretty easy to get a better then 1% return on a monthly basis with a 1 million dollar account. Just by buying short term bonds.

Now think bigger, 10 million, a high school kid could get you a better then 1% return a month on that kind of capital.

The point that you missed is that large traders can use a 1 million bankroll, with no taxes on gains by paying a $10K penalty/ per month.

Let me put it too you this way, in the world of Bay street, this was a god send to private investors and their accounts.

There are day traders that trade in the 100k’s volume daily, its not that uncommon, I know two people that do this daily. For these guys, this was a gift as they are constantly bring in returns of 12-14% on a bad year, some years they are bringing in 20%-30%, this are leveraged investments and high risk, but these guys have the stones to excute the trades and the brains to take the gains.

If it is of no consquence as you imply, why was this loophole closed?? Why did the govt bring in a 100% penalty on going over 5K? Its because they where losing millions on this every month.

Stop thinking like a private investor whose capital is locked into a GIC and start thinking like a trader. Buy and hold is for suckers, the money is in trading daily/monthly. Goldman Sacks does not make money by buying and holding. LOL

Its not an expose, just a fact.

#121 Soju on 12.03.09 at 6:18 pm

#104 JMCANUCK

Actually, November 2008 was the peak of Vancouver real estate prices. We’re less than 2% away from the peak at this moment.

Considering how many more sales we have this November and the more economical mortgage rates at the moment, we will eclipse Our previous peak by a long shot. We’re good until September 2010.

#122 Live Within Your Means on 12.03.09 at 6:37 pm

That has not happened for years, at least in Ottawa and Ontario. Pay is determined by third-party commissions. Besides, what 308 people make in Ottawa running the country is no excuse for anyone not paying their fair share. For every carpenter working for cash, a legitimate home improvement company employing several people and covering health and workplace benefits suffers. — Garth

Agree Garth but what can one do when companies who pays benefits, etc. won’t give you a quote because you’ve bought all of the fixtures, tiles, etc. in advance. They make money on them, but I spent about 1 year researching and buying these fixtures – most not high end – because my husband refused to start any reno until I chose them. Some of them were very reputable companies. We chose a guy that worked under the table and let him go after 2 days. Now my husband is doing much of the work. He renovated our kitchen/dining/living room 10 years ago. Did all the wiring, plumbing, walls, cabinets in kitchen (except doors) and cabinets and shelves surrounding fireplace. Even laid the granite around fireplace.

We’d like to hire ‘registered contractors’ but have given up. We’ve got a part time tiler who’se going to give us a quote this weekend. He’s a son of a friend of ours. His Dad says he’s slow but does a great job. BTW, the tiler is in the military. We’ve been to his parents home and yes he did a great job. The parents are Dutch/German and have a real worth ethic.

Don’t blame me for going underground. Wait until the HST kicks in in Ont. and BC. And don’t blame the Libs for supporting it. It was Stevie and Flaterty who bribed those provinces to combine the tax and then tried put the onus on the provinces – scumbags is all I can say.

#123 Maurice on 12.03.09 at 6:47 pm

Amigos: Those like Nestor who just don’t get it as far as gold goes, this is the chart on CEF.A.
http://cxa.marketwatch.com/TSX/en/Market/intchart.aspx?symb=CEF.A&sid=103316
After four years it is back to where it was. No gain, just your “worthless” fiat currency back.

#124 Drake on 12.03.09 at 6:55 pm

#116 Peter wiener – check your local coin shop. They shouldn’t be charging you tax on bullion, just coins. I don’t fully trust my local coin shop (sold me a questionable 1oz bar) but you shouldn’t have trouble in major centres (I’m in Windsor, not many shops here).

#125 Onemorething on 12.03.09 at 6:56 pm

#41 DaBull, where do you think? Anywhere else which has an emerging market and low tax rates.

HINT: There are no Western Destinations which are in the emerging markets!

#126 Drake on 12.03.09 at 7:01 pm

That taxing income is far and avoiding such is cheating everyone is religious dogma. We’d all be far better off if the govt didn’t have its hands constantly in our pockets but have to raise money honestly, like everyone else.

#127 Toronto C9 Renter on 12.03.09 at 7:01 pm

#120 kitchener1 on 12.03.09 at 6:04 pm

“10 million, a high school kid could get you a better then 1% return a month on that kind of capital”

How? Are you saying that with 10M invested it is childs play to generate 1.2M in annual capital gains?

By the way, the TFSA loophole was simply that – an inadvertent loophole, as oftens happens with new tax legislation. A few smart (and highly risk tolerant) investors discovered how to exploit it, so its been shut down. No big deal.

#128 Weston on 12.03.09 at 7:03 pm

Garths becoming a gold expert. LOL.LOL.

There’s hope.

Precious metals are exempt from GST / HST. A precious metal is defined as a bar, ingot, coin or wafer of gold or silver, refined to a minimum purity of 99.50% in the case of gold, and 99.9% in the case of silver. Provincial sales tax is applicable in certain provinces on coin & bullion sales. — Garth

You are still required to declare capital gains on bullion. 50% of the gain is taxable. — Garth

You are required to pay capital gains taxes on profits bullion yields. Selling it to a bank, for example, will require a receipt of purchase. — Garth

There is no federal sales tax on coins at the time of purchase (but PST may apply). Gold bought for investment purposes is subject to the same capital gains taxes as all other securities. — Garth

I’ve owned gold for 35 years, As I have recommended in my books, a holding of 10-15% is prudent. — Garth

#129 ManfredSteyn on 12.03.09 at 7:19 pm

Interesting article comparing the U.S. housing bust with Canada’s housing resiliency:

http://tinyurl.com/yl3vtqd

#130 Bottoms_Up on 12.03.09 at 7:21 pm

#101 miketheengineer on 12.03.09 at 4:25 pm
————————————————–
Good post. My dad use to (2 to 3 years ago) say that the ‘great equalization’ was coming. What is that? Well, it’s the redistribution of wealth around the globe. Not necessarily a bad thing, but for you and I it’s a significant decrease in living standards. Back then I told him it wouldn’t happen in our lifetimes. I was wrong, we are seeing it today.

#104 miketheengineer on 12.03.09 at 4:44 pm
————————————————
Thanks for the link. I also encourage everyone to think about what it must take to sign up for a Christmas box, and have to go to a special store so that you can afford food for your family. Please think about helping out this holiday season.

#131 Forgot Your History? on 12.03.09 at 7:21 pm

77

The “peak” in prices was reached in May 2008, not November 2008. By November 2008, prices had fallen almost 14% in roughly seven months, the fastest decline amongst any other North American bubble city.

And with a 257% increase in sales, and still we have not surpassed the peak, this market is all but done.

With record unemployment, affordability eroded once again, demand from the past and future absorbed, interest rate decisions around the corner, and the soon to be end of the Olympic hype, its only a matter of time.

Enjoy the ride my friend – it will be a show stopper!

#132 $fromA$ia ( Y ) on 12.03.09 at 7:29 pm

That has not happened for years, at least in Ottawa and Ontario. Pay is determined by third-party commissions. Besides, what 308 people make in Ottawa running the country is no excuse for anyone not paying their fair share. For every carpenter working for cash, a legitimate home improvement company employing several people and covering health and workplace benefits suffers. — Garth
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Agreed, but everybody needs a job, care to comment on all that undeclared rental income?

#133 Heinz Skitzvelvett on 12.03.09 at 8:05 pm

On the topic of financial markets, I have to shake my head when I see headlines like, on CNBC:

“Buy ‘Riskiest’ Assets—Markets Will Rise: Strategist”
“Buy Gold Today—Be ‘Very Happy’ in 2 Years: Strategist”

It seems to me that we’re back into the old game again – build your positions in asset classes, then loudly ‘strategize’ that assets will increase in value, and sell into strength to retail investors before the trap door opens.

Eerily similar to the pumping the likes of Jim Kramer et al. appeared to be doing that got him a well-deserved and publicly-embarrassing slap courtesy of Jon Stewart.

I might be a fool for going 2x short on what I consider a market teetering on the edge of a massive correction, but at least I’m not part of the herd.

#134 jess on 12.03.09 at 8:08 pm

…thanks again Garth for restoring me to whole.

What about this SICK tax storm
GLOBAL IMPACT
International money laundering in VAT carousel fraud
Goods are traded around the carousel, which is often controlled by a ‘guiding mind’ who also determines the price and time of each transaction. Each time the goods change owners, a small profit is attached which both increases the VAT that can be reclaimed at the end of the chain and hides the illegitimacy of the transactions. One consequence of the circular nature of the fraud is that the goods become evermore expensive as they are “traded”, which if unchecked would lead to prices spiralling out of control. This means that in every carousel, the goods have to be undervalued before they are again. This often occurs when the goods are in ‘third countries’. This
undervaluation has an added advantage as it reduces the import tax/duty due to the third country. This financial ‘loss’ to the organisation is by the VAT repaid by the EU member state.
Payment for the goods may not go directly to the missing trader. Instead, one of the buffer
companies will pay the EU supplier directly and send the balance to an off-shore, ‘third party’
account4. The ‘third party’ account is used to pay the ‘handling fees’ for the facilitators of the
fraud (the buffer companies). Invoices for services rendered (e.g. repayment of loans at
excessive rates of interest) may be used to legitimise these third party payments. This reduces
the risk for the missing trader of having any significant assets that could be seized by law
enforcement agencies. It also negates the need for a missing trader to have a bank account
and thus prevents the need to produce proof of identity to a bank. Examples have also been
identified where payments are made in instalments, where the VAT element follows after the reclaim has been paid.”
http://www.fatf-gafi.org/dataoecd/16/3/38335020.pdf

#135 Taxpayer like you on 12.03.09 at 8:22 pm

69 Evangeline.

I havent read past your post yet, so this may have ben covered already. A quick question:

If my state bank gives me a mortgage at 2%, can I then take that money and re-deposit it at 6%?

I’ve read a little on the ND state bank, and I just don’t think it’s the total solution that its trumped up to be.
People like to point to North Dakota as a great example of a prosperous state, but I think it’s just the nature of its aggy economy and low population growth that kept it and its citizens from going credit nuts.

#136 Soju on 12.03.09 at 8:35 pm

#131 Forgot your history

You sound like a broken record. When you can speak for yourself and not repeat the words of others then I’ll care about your forecast. 2010 will be much better than 2009 for Vancouver. The fun has just begun. When the fools who can barely get buy start buying-in then it’s time to sell.

Like a broker friend told me when the small clients start calling about the same stock it’s time to sell. The same with real estate.

We just got a new batch of people with new 5 year pre-approved mortgages with rates between 3.95 and 4.10% to keep us going for a while until they increase rates again. They’ll be running after the market.

Sorry, dude. Although I’m off the general point is the same. Big money for 2010!

#137 Jeff Smith on 12.03.09 at 9:09 pm

>#101 miketheengineer on 12.03.09 at 4:25 pm #84
>Another Albertan
>[snip]

>Fellow Engineer. From what I have seen in Ontario,
>I don’t know how many engineers are out of work, but
>I have about 20 friends that would give their right
>elbow to have their old job back. Most out of work
>over 12 months, EI now long gone. How long before
>these folks go for broke? When the smartest of the
>smarts can’t find work, look out below.
[snip]
>You are entirely correct. In about 12 months, you will
>see the effects of the Government. High cost of fuel,
>has killed the economy. Globalization has killed the
>economy. All the work that I used to do, is now being
>done by offshore companies and greatly reduced cost
[snip]

If you think the situation is bad right now, wait a few years and chances are a lot of engineers you know will never find work ever again, at least not at the salary that they used to have. Because the floodgate has been opened that will allow a massive number of foreign engineers and other professionals coming into Canada with the same credential as you, or the ability to quickly get the same credential. I bet they are willing to work for lower pay. I feel sorry for the new and existing graduates who are having difficulties landing a job. Now they are going to be competing with equal talents from all over the world, probably for a fifth of the wage. All I can say is: You haven’t seen nothing yet. If possible, get out of debt quickly. Become flexible. Its gonna get real tough from here on.

http://www.google.com/hostednews/afp/article/ALeqM5igKS0Z3Ubcu6_Ek89IUlIQhwEdBQ

http://www.google.com/hostednews/afp/article/ALeqM5igKS0Z3Ubcu6_Ek89IUlIQhwEdBQ

The rest of it here:
http://news.google.com/news/more?pz=1&cf=all&ned=us&cf=all&ncl=dCmA4XMgSw0U56MmsnY-A1tMUl-lM

#138 ottawa pete on 12.03.09 at 9:18 pm

I predict an economic wall will be erected to prevent people from leaving Canada to move elsewhere with their cash, thus ensnaring people in a tax trap…call it a “tax wall” that cannot be walked or run around and cannot be scaled…

#139 Dan in Victoria on 12.03.09 at 9:24 pm

Post#122 Live within your means. I’ll explain the contractor side of things to you so you understand where we are coming from.DON’T take offense none is meant from me.
Home owner buys all nessasary materials.
So you want a labour contract.
I pay all the stuff Garth was talking about re taxes.
As soon as I put foot on your site I am losing money. Period. Profit on material is required.
I cannot run a buisness at break even or a loss.
We don’t do it as a hobby.
Most home owner supplied products (not all) have been bought as a clearance items, damaged, scratched etc.”Deals”
Again (not all) materials supplied are sometimes difficult if not impossible to assemble/use.
Example, Chinese light fixtures, plumbing faucets/taps, sinks, some makes of cabinets, floor tiles (sizes and thickness)
Lumber, check your sizes, some American mills have slightly diffrent milling standards than Canadian mills.
Drywall, paint, hardware quality etc. “Or” missing key parts.
My favorite, “contractor pot light packs” Do you honestly think we should spend 10 minutes per light adjusting bulb angles and heights? On something we would never ever use?
And the construction of them, “Gee we got these for 3 dollars each.”Now look at them, the junction box is on top,where does the heat from the bulb go? Right, it goes into the junction box and cooks the wires, result fires in 20-25 years.
We know what is best. It is basically not worth our time to come to your site look through what you have to determine if it is suitable then do the “labour contract”
How do I know that that bag of insulation that is open has not had a dog lift his leg on it, or worse.
How do I know that paint you have is not eggshell and semi gloss mixed together?
Once we have installed your owner supplied materials most people think hey I have a problem with my toilet running on MUST be something the contractor did I’ll phone him to come look at it.
We come over, nope not us look at the ball and flapper doesn’t seat right sorry.
Result maybe 2 or 3 hours lost time.
If we supply we bring a replacement and fix it.
No questions asked.
Keep in mind that here in BC the electrical MUST be performed by an electrical contractor who takes out a permit, You as a home owner may do the work but again a permit is required.
What happens if there is a “issue”and no permit, “unlicenced work.” Think about it.
Also plumbing is starting to go that way.
Those are some of our reasons for us to avoid these types of jobs.
I honestly wish you well with your project and hope it is a smooth one,and turns out like you dreams.
Good Luck.

#140 Live Within Your Means on 12.03.09 at 9:30 pm

#85 darcy on 12.03.09 at 2:28 pm
how do I put my mortgage into my RRSP? Lots of info on the web. I read about the strategy at least 20 yrs ago. Think Diane Francis (Nat Post IIRC) wrote about it at the time as well as others. Unfortunately, we didn’t advantage of it.

#141 dave99 on 12.03.09 at 9:36 pm

120 Kitchener,

The information you posted at 78 was entirely wrong. I point it out at 97, and you take no responsibilty for that, and repeat your original conclusion with the corrected information at 120?

Really?

You say that anyone with $1m can make 25% easy? Which is what is needed to cover off the 12% penalty (ie which is equivalent to a 48% tax rate). Really? 25% return is a gimme for anyone w $1m???

Further, I didn`t say there was no loophole, just that it is not the GIANT loophole you had claimed based upon the false info in you post at 78.

You made a mistake. It happens. Don`t compound it.

#142 Artisuseless on 12.03.09 at 9:37 pm

@#129 ManfredSteyn:

Note that there’s not a single mention of the CMHC in that entire article.

Hmmm…..

#143 Live Within Your Means on 12.03.09 at 9:38 pm

#127 Toronto C9 Renter on 12.03.09 at 7:01 pm

Poor legislation with little oversight. Anything to pander to voters.

#144 Tony on 12.03.09 at 10:23 pm

I bought long term bonds yesterday the people who think rates will go up next year are just like the fools who bought gold and silver. Wrong in the first place and monkey see, monkey do… clueless. Rates will actually fall as the stock market crashes again next year. Put in a heavy short on gold and especially silver.

#145 Another Albertan on 12.03.09 at 10:28 pm

Jeff Smith –

This isn’t news. Anyone walking the halls of the western Canadian EPCM firms in the past years would have already seen or heard the impacts of technically-skilled immigration. It’s a veritable United Nations.

In my experience, most of the power engineers in western Canada are foreigners. Canada cranked out two decades of electricals that moved more and more into telecommunications and software. Industrial programs languished while telecom and computer programs boomed. We know what happened when dot-com blew out. Unfortunately many electricals are in painful race to the bottom.

This has been going on for a decade. Nobody really cared or noticed as long as the paycheck kept coming in.

#146 Herb on 12.03.09 at 11:02 pm

#139 Dan in Victoria,

Homeowner speaking up to put the shoe on the other foot.

Had one of the largest and most reputable construction/renovation firms in Ottawa work on my house a few years ago. Contract called for costs plus 10% overhead, plus 10% profit, plus GST. The cost schedule was $48/hour for a carpenter. Checked around, and this was considered standard.

As I discovered as we went along, I was paying $60/hour ($48+10%+10%+7%) for “carpenters” actually paid $20/hr by the company, not to mention an apprentice who was paid $10/hr, all without any benefits. This firm hardly had to rely on materials for profit, although they took their cut there too.

I would be surprised if Ottawa were the only city where construction and renovations were labour rackets.

#147 CalgaryRocks on 12.03.09 at 11:06 pm

Some TFSA loopholes as referred to by Kitchener

http://www.financialpost.com/story.html?id=2138002

#148 Taxpayer like you on 12.03.09 at 11:32 pm

kitchener/dave99 please don’t fight guys. Here’s a link
for back in Ocotber:

http://www.globeinvestor.com/servlet/story/GI.20091020.escenic_1331028/GIStory/

It does appear a few big-time traders made serious tax-free dough, but no particulars are given.

#149 gold bugger on 12.04.09 at 12:20 am

Calgary ripoff wrote: “The U.S.A. is a third world country not even worth caring about. Be thankful you are in Canada and not the USA. The USA is a pathetically run corporate empire. All the people who want to avoid taxes should go there. They will encounter guns, dogs, violence, and crazy stuff.”

You write some crazy stuff, but it’s usually harmless whining about real estate. But this is your all-time howler. The U.S. is not a Third World country. Nor is the choice between “paying crippling taxes and anarchy” as you imply. That false choice is a favorite rhetorical device of the Encephalitic Left (c).

#150 kitchener1 on 12.04.09 at 12:38 am

#141 Dave

I’ll admit that my info was incorrect, although not totally wrong, I missed the part about per month penalty as opposed to a yearly penalty. And for that I apologize.

RE# 127 Toronto C9 Renter

Stop componding the interest on an annual basis and look at the week/bi-weekly/monthly charts on the Dow, S and P, TSX etc… a 1% return is a joke to make on any half decent stock(s). Look at the volatility of the market and think big, like bay street traders do.

Its possible to make 2-3% on stocks on a weekly basis, on trade will more then cover the 1% penalty on the stocks. Just look at Gold and Silver, now think options trade and its big money. Buy and holding is for suckers.

Unlike you, I don;t think it was an honest mistake, maybe I am too cynical when it comes to politics but I give those guys a lot of credit, these are smart, well educated people we are talking about, most of whom are/where lawyers. They are taught to recoginize and exploit loopholes as a part of their trade.

#151 Ronaldo on 12.04.09 at 1:16 am

#123 Maurice – check the chart again. It is for 1 year. Select the 4 year chart and you will find that CEF was 7.23 and Dec. 2nd 15.92 for a 120% gain. Not a bad return.

#152 Ronaldo on 12.04.09 at 1:39 am

#116 – Peter Wiener, for purchase of Gold and Silver Bullion check out: Northwest Territorial Mint – Wash.
Kitco – Montreal
Border Gold – Surrey
Jason Hommel – Calif.
First Majestic Silver – Vancr

A good way to invest is by purchasing 1 oz. bullion rounds as no tax or duty if purchased from U.S. All have a good selection of different products. I prefer to purchase 1 oz. silver rounds. No sales tax and no duty if purchased from the U.S. I found Kitco to be very competitive and they can have the product on your doorstep in two days via FedEX. Each has a web site that you can check out. I have had good success with all of these. If you are interested in investing in a pure Silver Fund check out Silver Bullion Trust which was launched on July 29th and trades on the TSE as SBT.UN, there are warrants as well SBT.WT. The fund is backed by silver bullion stored in Canadian Chartered Bank/s. The fund is managed by the same people who manage Central Fund of Canada that has been around since 1961. This fund invests in Gold and Silver Bullion. This is one of the safest ways to invest in bullion that I’m aware of within Canada and not have to take delivery. Another good way to invest in bullion that offers good leverage is to purchase warrants of gold or silver producers in particular those with an expiry date well into the future. As an example you can check out the returns on the SBT.WT since July29th. Hope this information is of assistance to you. May your investmens be brilliant.

#153 Peter Wiener on 12.04.09 at 2:04 am

re # 124 Drake

Thanks for your input, but money changers, even the Gold Depot in Toronto charge GST unless you have a tax number (jewellery business I guess). As to coin shops -I don’t have a lot of faith in them, nor jewellers for that matter – borderline thieves working on the ignorance of their customers.

#154 Forgot Your History on 12.04.09 at 3:12 am

136

I see that when you are corrected in your “analysis,” your rebutal contains no substantive arguments to support your position. And those are my words, unless of course you can find those comments somewhere else. So I am unclear as to what exactly you are referrng to.

Your own post is even illogical and contradictory. You note that when those that can barely afford to buy purchase RE, it is time to sell. Of course, ever indicator points to a decline in affordability, and even the banks have acknowledged it. So now would be the time to sell, as people are all talking about it like your stock analogy. Then you turn around, and imply that things will keep going up for some years with all those people chasing the market.

Dude, pick a side, and at least try to put some effort into identifying some reasons why the market would continue. Until then, your comments simply mimic the most crass realtor with their extensive knowledge of economics arising from their 6 week “professional” training.

#155 Ian on 12.04.09 at 10:00 am

InvestorsFriend – “At what point are all the poorer Americans going to rise up and revolt?

Remember, poor Americans have one thing we don’t. Guns and lots of ‘em.”

There have been poor americans with weapons for decades. If you think newly laid off white collar workers are going to lead a revolt you are deluded. There are many people down south that have had much better reason to take up arms than an economic recession. I am thinking slavery, preemptive wars in oil soaked countries, human rights, ghettoization, political scandal, racism………..One thing I noticed travelling in some poorer areas of the US is that the crappier the trailer home…the bigger the american flag flying outside was.

#156 Live Within Your Means on 12.04.09 at 1:54 pm

I accidentally hit the wrong key and ended up on yesterday’s blog.

#139 Dan in Victoria on 12.03.09 at 9:24 pm
Post#122 Live within your means. I’ll explain the contractor side of things to you so you understand where we are coming from.DON’T take offense none is meant from me.
Home owner buys all nessasary materials.
So you want a labour contract.
I pay all the stuff Garth was talking about re taxes.
As soon as I put foot on your site I am losing money. Period. Profit on material is required.
I cannot run a buisness at break even or a loss.
We don’t do it as a hobby.
Most home owner supplied products (not all) have been bought as a clearance items, damaged, scratched etc.”Deals”
Again (not all) materials supplied are sometimes difficult if not impossible to assemble/use.
Example, Chinese light fixtures, plumbing faucets/taps, sinks, some makes of cabinets, floor tiles (sizes and thickness)
…………..

Dan, fine I can understand that. But the contractors have seen the quality of the products that I purchased , e.g. I’ve bought Caroma 3/6 litre toilets from Australia, Fleurco top of the line shower stall for downstairs (which once the upstairs bathroom is finished will only be used by guests), good quality tiles, fixtures by Crane from a local well known plumbing dealer. etc.
…………

Lumber, check your sizes, some American mills have slightly diffrent milling standards than Canadian mills.
Drywall, paint, hardware quality etc. “Or” missing key parts.
My favorite, “contractor pot light packs” Do you honestly think we should spend 10 minutes per light adjusting bulb angles and heights? On something we would never ever use?
And the construction of them, “Gee we got these for 3 dollars each.”Now look at them, the junction box is on top,where does the heat from the bulb go? Right, it goes into the junction box and cooks the wires, result fires in 20-25 years.
…………

My husband redid our kitchen/dining/living room area 10 years ago and those ‘contractors’ that came to give us a quote praised his work. He spent 6 months renovating it. He’s very knowledgeable about electrical wiring, etc. and wouldn’t buy those cheap pot lights, etc. Unfortunately, he has a bad back now and is unable to do the heavy work that he used to. If you don’t believe his electrical knowledge just check out http://k100rt.aforumfree.com/. Yes, its not about home renos, but he’s not a stupid guy. He’s done all the electrical schematics on the K100 bike. He worked in the trades in France & the Cote d’Ivoire & learned so much from his father who is capable of doing just about anything electrical, mechanical, plumbing, etc. His father built their house.

Oops accidentally deleted your frist sentence. hE now what is best. It is basically not worth our time to come to your site look through what you have to determine if it is suitable then do the “labour contract”
How do I know that that bag of insulation that is open has not had a dog lift his leg on it, or worse
How do I know that paint you have is not eggshell and semi gloss mixed together?
…………….

That’s a pretty weak response.
…………..

Once we have installed your owner supplied materials most people think hey I have a problem with my toilet running on MUST be something the contractor did I’ll phone him to come look at it…………
We come over, nope not us look at the ball and flapper doesn’t seat right sorry.
Result maybe 2 or 3 hours lost time.
If we supply we bring a replacement and fix it.
No questions asked.
……………

Maybe the problem is the contract wasn’t written properly to begin with.
………

Keep in mind that here in BC the electrical MUST be performed by an electrical contractor who takes out a permit, You as a home owner may do the work but again a permit is required.
………….
AFAIk, it only has to be approved by an electrician here.
……………

What happens if there is a “issue”and no permit, “unlicenced work.” Think about it.
Also plumbing is starting to go that way.
Those are some of our reasons for us to avoid these types of jobs.
I honestly wish you well with your project and hope it is a smooth one,and turns out like you dreams.
Good Luck.
…………
Thanks Dan. We actually had the guy we hired sign a contract re insurance, etc.

I’m not worried. We had a contractor guy who levelled out part of the basement. He knew exactly what to do and with my husband’s help it was done in 4/5 hours. He’s a contractor but works under the table in his spare time. If you’re in Ont or BC you’ll see lots more of that next year.

Before I retired I was a business analyst. I don’t like making rush decisions. It took me 6 months to make the purchases because I did lots of research on the quality/price ratios, if that’s the correct word. I shall now spend another several months checking out window and siding vendors. I learned a tremendous amount on our Nat Resources site about energy efficiency and shall base my purchases on research rather than emotion. Plus I hope to take advantage of the Energy program – federally and provincially.

#157 Soju on 12.04.09 at 5:42 pm

#154

Sorry, but I said we’re good until September 2010. Where did you get many years from? You really don’t have much to say do you?

#158 Forgot Your History on 12.04.09 at 6:50 pm

156

Pot calling the kettle black eh little Soju…

Again, a complete lack of a substantive rebutal.

Better head back to realtor school to brush up on your sell techniques, or at least the identification of some simple arguments that every bull can spout off…

Tsk tsk..

#159 Evangeline on 12.05.09 at 6:29 pm

#150
((Unlike you, I don;t think it was an honest mistake, maybe I am too cynical when it comes to politics but I give those guys a lot of credit, these are smart, well educated people we are talking about, most of whom are/where lawyers. They are taught to recoginize and exploit loopholes as a part of their trade.))

you mean ‘smart’ like the genius designers of financial models (derivatives) that have brought the world economy almost to its knees?

#160 Jmack on 12.06.09 at 10:37 am

6 more banks fail. Nothing to see here… move along…everything is fine.

#161 Jess Valenzuela on 12.07.09 at 8:19 pm

Hi Garth,

I shared this post to Facebook Group called Stop Ontario HST http://www.facebook.com/group.php?gid=2399458411

and http://twitter.com/StopTaxGrab