Don’t save

Yesterday I told you why RRSPs suck. In Canada, this is dissing Tim’s. Calling Don Cherry a nutjob. Pitying Saskatchewan. Hating snow. Envying America. Renting.

But the fact is, most people make their financial lives worse because they RRSP  just to secure a tax refund. They stick the money into dead-end GICs, then pull it out years later and get whacked with tax. In fact, seems most people think an RRSP is a thing that you buy at the bank, rather than a financial tool. So they screw it up.

In the previous post I gave you eight reasons to be careful. The banking and mutual fund industries will hate me for this, but it’s a long list already.

Nonetheless, there are some uses for registered retirement savings plans, which have a lot more to do with tax avoidance than actually retiring. Avoidance, by the way, is legal. Hell, it’s a moral obligation. Let’s dig in.

First, the baby-friendly RRSP. One of the best uses for this thing is to finance a maternity leave, but you’ll have to do some advance planning (good luck). So at least three years before your little family pops, set up a spousal plan in the wife’s name and start whacking money into it. You are allowed to contribute to a spousal up to your own contribution limit (18% of income, or about $22K), and deduct that amount from your taxable income. But after three years the money becomes the property of your spouse. So, during a mat leave year she can withdraw it for family expenses. And because her income tanks, there’s virtually no tax.

This is an example of income-splitting. The guy gets to deduct the contribution and slash his taxable income. The gal gets to use the money, and yet pay little or no tax. This is right up there with making a ‘contribution in kind’. In that case you can put an asset you already own (like an ETF) into an RRSP, and it will act the same as if you used fresh cash. For selling yourself something you already owned, the feds will send you a cheque. Is this a great country, or what?

An RRSP, as the baby thing shows, is a good tool for evening out income during various stages of your life. For example, throw money in during your working years if you plan on going back to school and become a pole dancer or financial advisor (roughly equivalent, but one has better tips). Or you might work in a shaky job or a sunset industry, when it makes sense to contribute to a plan, get a tax refund, then live off the collapsing RSP while you find other work.

Of course, an RRSP can also fatten up your regular paycheque. Most people wait until a tax year is over to make a contribution (like now), which is dumb. In that case you’re simply buying back some taxes you paid months earlier. A much better route is to make regular contributions throughout the year and get a refund in each pay. Go to cra.gc.ca and click on Form 1213, Request to Reduce Tax Deductions at Source. Fill it out. Send it to your local tax office. They will instruct your boss to reduce withholding taxes on your cheque. Presto, you have more money to spend drinking with The Smoking Man.

RRSPs can also make sense if you work for a company which matches contributions. This is like free money. Take it.

One other strategy to consider is an RRSP mortgage. The system allows you to hold a residential mortgage inside your plan, and if it happens to be your home loan then you get to make payments to your plan, instead of the dudes at the bank. This is a highly sexy idea, but not without considerable hair on it. Setting up a plan takes time and money. You must insure your RRSP mortgage with CMHC. You can’t charge yourself a ridiculous interest rate, or default and foreclose on yourself. But it works. I’ve met people who took this advice from me 20 years ago, and never looked back.

Of course, there’s the Home Buyer’s Plan. The feds let house-horny, lusty young things suck $25,000 from an RRSP to use for a down payment (or $50,000 for a couple). This is a tax-free loan, but you have to pay it back over 15 years. Miss payments, and it’s added to your taxable income. One strategy to consider: Beg or borrow the whole fifty and dump it into your plans a few months before you start house hunting. That will earn you a refund of $15,000 or so. Now you have a downpayment of $65,000.

And what happens if you end up being a wrinkly geezer with a fat RRSP? At age 71 it must be cashed out or turned into a RRIF, which means you’re forced to take about 7% a year as income – fully taxed and possibly pushing you into a higher bracket. In that case, you can meltdown your plan.

Borrow money and invest it in a nice balanced non-registered portfolio. Now make the interest-only payments on that investment loan from your RRSP. The RRSP money is taxable, but the loan payments are 100% tax-deductible, so over time you are transferring money from the registered plan into the after-tax one.

Finally, understand that when some blessed, miraculous MP (who should have a statue, by the way) invented the TFSA years ago, it was the beginning of the end for the RRSP. In a stroke, the upstart tax-free savings account provided tax-free growth inside the plan, but eliminated the nasty tax grab when you actually spend the money. There’s no deduction for making a contribution, but as I explained yesterday, that ‘refund’ everybody is hot to get only gives you back taxes you already paid – and will pay again.

So, the first five grand extra you get should go into the TFSA. But don’t wimp out and stick it in the orange guy’s shorts, or be seduced by [email protected] Invest, don’t save.

Okay, I’m done. You’ve been a very ruly class. Now go break something.

 

 

179 comments ↓

#1 Corban on 01.16.12 at 9:52 pm

Way better picture today. Yesterday’s had way too much spandex for my taste.

#2 Homeless Bill on 01.16.12 at 9:52 pm

hey Garth it’s Homeless Bill here….feel free to pass on my contact info to any rich women who like what they see :)

#3 pathcontrolmonk on 01.16.12 at 9:55 pm

You forgot to ridicule ice hockey in your opening statement.

Damn. — Garth

#4 Josef on 01.16.12 at 9:55 pm

First!!! OH YEAH BABY!!!!!

#5 Young Old Fart on 01.16.12 at 9:56 pm

FIRST…… From South America anyways……..

Heeheeheeeheeeeee

#6 george on 01.16.12 at 10:04 pm

Beat the bank: How to boost GIC investment returns

http://www.cbc.ca/news/business/taxseason/story/2012/01/12/f-rrsp-boosting-gic-returns.html

Are you serious? Nobody should have a GIC. — Garth

#7 Mark on 01.16.12 at 10:12 pm

Garth, I like the concept of moving $ from my RRSP without losing $ on tax. But does not your idea of the investment loan imply making more in investment income minus taxes than the loan is costing you? Otherwise are you not really just diminishing your RRSP with a gain less than simply taking the RRSP as income? Could you provide a simple example with numbers? Thanks

#8 Peter on 01.16.12 at 10:19 pm

I bought a junior gold stock in august for half of my TFSA
have sold half at a 30%profit..trying not to get greedy,will probably sell the other half soon as it is topping out.

#9 Rick on 01.16.12 at 10:21 pm

“One other strategy to consider is an RRSP mortgage. The system allows you to hold a residential mortgage inside your plan, and if it happens to be your home loan then you get to make payments to your plan, instead of the dudes at the bank.”

This might not have been illegal 20 years ago but it is now. You can only do arm’s length mortgages with a self directed RRSP.

Of course. How else would you do it? — Garth

#10 Peter on 01.16.12 at 10:21 pm

I forgot..wash rinse repeat..tax free.

#11 smartalox on 01.16.12 at 10:28 pm

Garth, you forgot two other reasons to contribute to an RRSP:

1. The ability to forward tax credits, to offset taxes on contributions, such as inheritances,

2. The life-long learning plan, to pay for one’s education.

Open an RRSP when you file your first tax return, even if you’re not contributing. The annual contribution limit is set every year, but if you can’t contribute enough to fill it, you get to forward the balance to future years, when you can contribute more than you would in any one year. This is especially useful for offsetting lump sum payments, like bonuses, commissions and inheritances.

Otherwise, use your RRSP savings to pay for an MBA or law school, or med school, then make some real money.

#12 NYCer on 01.16.12 at 10:29 pm

Wow never thought about the “fat RRSP investment loan” option. Brilliant.

Thanks Garth! Should be many many years later but this is invaluable information.

#13 truth hammer on 01.16.12 at 10:29 pm

The ‘crack reporters’ are apparently wowed by the ‘buy now or be priced out forever’ propaganda the government and real whores have been selling the country. I am shocked at the level of irresposible journalism in Canada. But…ask yourself….who is Canada’s biggest advertiser? OK….now you know why pimps and whores are the worlds oldest partnership.

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/buy-now-to-get-an-unheard-of-rate-for-a-10-year-mortgage/article2304460/

What had happened is that we have seen a hail mary thrown by the finance ministry to stave off the ‘deflationary and political ‘ pressures a downturn in real estate prices would , in their short term opinions’ have. Lets all forget the rape and pillage this ZIRP program has had and is having….will have on the ROC if it is carried into the future.

As I posted yesterday…this bubble exceeds every stat that has occured in the US of A….more bubblicious pricing..low incomes…zany expectations ….wowee prognostications by the media and the pimps who love the weak kneed sluts who write ‘news’.

OK….I’m sold……..where do I sign?

#14 LJ on 01.16.12 at 10:32 pm

Ok, off today’s topic, but still relevant to this blog:

A longtime blogger I follow from down in the States posted an interesting article yesterday on how he sees the Vancouver market.

http://www.doctorhousingbubble.com/canada-housing-bubble-ripe-for-popping-vancouver-housing-bubble-2012-pop-real-estate-canada/

Food for thought.

#15 shane on 01.16.12 at 10:33 pm

Garth, I just want to know if im understanding you correctly? if i have 20k in RSP i can use that money to payoff my non-register loan? so if i go out and get a loan for 50k to invest and i have to pay montly payments to pay it off i can use my rsp money to pay it off?

Shane

You can use RSP money for whatever you want. If you take cash out, it’s taxable. In this case that liability can be offset by the deductibility of interest-only investment loan payments. — Garth

#16 InvestorsFriend (Shawn Allen) on 01.16.12 at 10:33 pm

DELETED

#17 Income Splitting Rules on 01.16.12 at 10:33 pm

Hi!

Aren’t there some new major changes to income splitting (spousal) rules this tax year?

Any hints or leads would be appreciated in this area.

#18 Victor on 01.16.12 at 10:34 pm

First, the baby-friendly RRSP. One of the best uses for this thing is to finance a maternity leave, but you’ll have to do some advance planning (good luck). So at least three years before your little family pops, set up a spousal plan in the wife’s name and start whacking money into it. You are allowed to contribute to a spousal up to your own contribution limit (18% of income, or about $22K), and deduct that amount from your taxable income. But after three years the money becomes the property of your spouse. So, during a mat leave year she can withdraw it for family expenses. And because her income tanks, there’s virtually no tax.

If one’s spouse goes on parental leave but collects EI during the leave period, do the EI cheques count as taxable income?

Always. — Garth

#19 Jsan on 01.16.12 at 10:35 pm

So Garth, it appears the banks are literally tripping over each other to out mortgage each other all in just the last week or so, what’s up in your opinion? Are they sensing an end to what has been a couple of years of a very lucrative mortgage market and now trying to secure the final few house buying stragglers while they can? You don’t try to coax people into a market unless you believe that the future prospects may not be so great.

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/buy-now-to-get-an-unheard-of-rate-for-a-10-year-mortgage/article2304460/

.

#20 Devore on 01.16.12 at 10:38 pm

#9 bob’s my uncle

Apparently you know best how long the TFSA will last, so why ask Garth or anyone else who has no influence on the subject?

#21 Axehead on 01.16.12 at 10:40 pm

“Become a pole dancer or financial advisor (roughly equivalent, but one has better tips).

Priceless…

I know (sorry to admit) too many housewives, ex-pastors, unemployed students, car salesmen, who are now non-certified financial advisors…how about a future blog on ‘credentials’?

#22 Spiltbongwater on 01.16.12 at 10:47 pm

So would you hold low tax dividends in the Non registered account so as to minimize the taxes owed on the distributions? Also, this is quite the change from when you were a politician and wrote a blog of why the RRSP is best and TFSA is only for the rich. Did you grow wiser, or just start telling the truth outside of politics?

Actually I said both favour high income-earners, which they do. You could have asked that without impersonating a dickhead. — Garth

#23 Boombust on 01.16.12 at 10:57 pm

Forget all that for the moment. HUGE listings today in the Greater Vancouver area. Minimal sales.

Uh oh.

Right on schedule. — Garth

#24 Don in the east kootneys on 01.16.12 at 10:58 pm

Garth–“borrow money and invest it in a nice…..”

Already RRIF’d at 65

..if you are able to increase your RIFF portfolio yearly..7%-9% would it be adviseable to start to melt down your plan at 65 <take advantage of the $2,000 fed and $1,000 prov deduction? At 65 you have to take min 4% but can take more …and if still growing at 71yrs –take the reqd 7% and pay the tax. Taking more then the reqd before 71 could save some taxes vs not taking any now and pay the tax later ? It all depends on how much you have to last into your later years and not "run out of $$"

#25 pablo on 01.16.12 at 11:00 pm

Hey Garth;
not to get off topic or anything, but recent news articles caught my eye and would like your take on these: first of all, 5yr fixed rate mtgs at the big 5 for less than 5% with competition heating up. secondly, our bonds and cdn $ being thought of as secure, safe investments by the rest of the world apparently flocking to these assets. i don’t see a interest rate increase anytime soon, and consequently no major correction in real estate in cda. pity.

#26 pablo on 01.16.12 at 11:01 pm

correction; make that 5yr fixed rate mortgages at less than 3%, better put down the scotch now.

#27 Coraline on 01.16.12 at 11:02 pm

I had a thought about why a persistent number of people want to be “first” on this blog every frigging night. They have a certain irrationality and compulsiveness that seems hard to explain. But then I thought, “they must be gamblers.” They think that being first will bring them luck, so they can’t help themselves. So not only are they gamblers, they are superstitious gamblers.

#28 InvestorsFriend (Shawn Allen) on 01.16.12 at 11:03 pm

Okay, I have hit the big time have my very own impostor. Keep on deletin’

You need a dog. — Garth

#29 Ontarian in Cowtown on 01.16.12 at 11:11 pm

Great post as usual, Garth. Just so we’re clear, your beef with RRSP’s is that people use them poorly, not that the RRSP itself is a terrible venue for retirement savings? If I loaded up my RRSP with preferreds and REIT’s, you’d be a fan, as long as I’d filled up my TFSA first?

Almost. Do not put preferreds in an RRSP or a TFSA since you lose the benefit of the dividend tax credit. — Garth

#30 Bankers in a Panic of Canada's housing crash on 01.16.12 at 11:19 pm

Looks like bankers are throwing everything they got into this very obvious housing bubble. Not many suckers left. Canada’s housing bubble is bigger then anything the US has seen. Canada is different from the US….we have a bigger housing bubble.

#31 Fifty Percent Correction Predictor on 01.16.12 at 11:25 pm

#28 pablo on 01.16.12 at 11:00 pm,

Just to repeat what have been discussed here: interest rate is only one of the factors. Just look at US and Japanese real estate to see how the almost zero rate is doing to their real estate.

One definitely big factor for a bubble to burst is it simply runs of out bigger fools. I believe that moment has arrived here and now!

This Spring is going to be a rout!

#32 Junius on 01.16.12 at 11:27 pm

I think that Vancouver is falling apart at warp speed.

The market is spiralling downward at a rate that shocks me.

#33 smartalox on 01.16.12 at 11:27 pm

Inert more question: what’s the best way to treat dividends earned by RRSPinvestments? Can they be used as income, and benefit from the dividend tax credit, or would dividends be taxed like RRSP withdrawals?

Everything earned inside an RRSP is taxed as income coming out. — Garth

#34 Trailer Park Boys on 01.16.12 at 11:32 pm

Must have good connections Garth

How you got ZZ Top to pose for your photo…

#35 Kilt on 01.16.12 at 11:32 pm

Good Advice!

Kilt.

#36 Devore on 01.16.12 at 11:38 pm

#25 bob’s my uncle

A. No he hasn’t.
B. You didn’t answer the question. Why would Garth, or anyone here, know?

Getting a little wearing scrolling past all the posts asking crystal ball questions. When will be a good time to buy? Is this house a good deal? How low will prices go, preferably down to the cent? What will prices be in 10 years, preferably down to the cent? When will government do X? Amazons or Spice Girls?

#37 City Slicker on 01.16.12 at 11:48 pm

Garth I love how that TFSA came shortly after the 2008 crash. Good time to have stuffed it with gold juniors. I made 300% of one and bubbled my TFSA to over 45K. The dream now is to keep growing it and buy dividend paying stocks. All divy’s will be tax free. Thanks for this product! You da man.

#38 Rutherford on 01.17.12 at 12:01 am

Question regarding the spousal:

Let’s say the wife doesn’t work and I contribute to her spousal RSP yearly. She has to wait 3 years before she can take that money out and claim it as her own income.
So we have to stop contributing to that account for three years, and then we can take the money out.

During that time, can we create spousal account #2 and put money into it, and still take money out of spousal account #1 after those three years?

The money vests in the same account every three years. — Garth

#39 a prairie dawg on 01.17.12 at 12:08 am

Thanks Garth. A nice summary of RSP options. And yes, the banks won’t like that either. lol

And I’m guessing that H’s statue committee is just backlogged…

#40 Renters Revenge on 01.17.12 at 12:10 am

“I think that Vancouver is falling apart at warp speed. The market is spiralling downward at a rate that shocks me.”

http://youtu.be/YkADj0TPrJA

#41 a prairie dawg on 01.17.12 at 12:18 am

#4 Josef at 9:55 pm

First!!! OH YEAH BABY!!!!!

– – –

3 minutes late, is a significant improvement over 8 minutes late, but you’re probably not training hard enough.

I recommend a daily regimen of texting and mouse click calisthenics for 1 hour each, followed by 2 hours of cardio on Wii.

And don’t forget the Red Bull.

#42 Chaddywack on 01.17.12 at 12:22 am

Garth you mention HBP. All things being equal with one’s income, would you advise making any attempt to pay back the HBP or just have it added to income over the 15 years? It seems that the TFSA is the better bet and spreading the pain over 15 years would have minimal tax implications.

#43 Across the Pond on 01.17.12 at 12:32 am

Nice post today Garth, enjoy the financial postings a lot more the housing issue is starting to unfold. As I’m 24, the baby RRSP is something I’ve been thinking of for a bit, as the good lady is EI-free self-employed (that said, I’m erked by the loss of the spousal tax credit, and might not RRSP after crunching the numbers).

Glad to see you’re pushing people to think about the complexities of each financial decision they make. Without sitting down and working things out, it’s a minefield of potentially expensive decisions and missed opportunities out there.

Looking forward to more posts like this – thanks man!

#44 Candian Watchdog on 01.17.12 at 12:34 am

Too bad there’s no Horizons BetaPro RRSP Bear+ ETF.

#45 Nostradamus Le Mad Vlad on 01.17.12 at 1:04 am


Good post, but we’re more interested in the non-registered plans and TFSAs.
*
No money for wages in January, but jobs are available here; Taxing mansions Another reason to avoid McMansions; Downturn affecting families.

Wall St. in all its’ redundant glory; Capitalism vs. Consumer Sovereignty Curious take; EU borrowing set to soar; Putin on economics and oother things; BoE and BoC The Bank of England wants to fondle the Bank of China’s bum; Freak Out 2012 global risks; Sleep Is Good! Easy to dream about being a multi-zillionaire; China’s growth slows; 65% of Italians say Euro made things worse; Other EU countries agree; Greece just threw up; Chinese Gold Bugs; Smart Phones Microsoft and Nokia may upset the odds.
*
Politics Ron Paul and Obama tied, Romney sliding; Oct. 12, 4772 Link in. Good news — the end of the Mayan Age has been deferred; Pix of UFOs Evidently they do exist. and Argentina; Iran War merchants’ trying to mess things up; Montana Stirring up trouble re: the NDAA; US govt. has seized all power. Guess we’re next; Guantanomo Interesting that the US likes to point out other countries wrongdoings, yet conveniently ignores its own; Hu Jintao Major winner in Taiwan’s election.

Nearly half of all drugs produced in unregulated factories in China; Black Wednesday Wikipedia blacking out for one day; Oil Firms Same thing happened in Libya after ‘regime change’. The countries have been pillaged and looted by the west; Stop SOPA!

#46 kilby on 01.17.12 at 1:06 am

Vancouver, east and west only…
3,067 listings today.

#47 Ozy - Ditch all gov plans - bring FLAT TAX at 15% on 01.17.12 at 1:14 am

Men and women of kanata, when you’ll wake up for your interests! I guess never. Then forget ditching all of such perverse gov. plans RRSP TSFA RESP, you name it – bring the smart FLAT TAX at 15% per year, and firing of 50% of gov. employees to cover for lost revenue.

#48 City Slicker on 01.17.12 at 1:14 am

[email protected]

What does this mean?

#49 Kalergie on 01.17.12 at 1:18 am

Hi Garth. Spot on post again. Quick question: If you were to buy plain vanilla US and Canadian ETF (i.e. XIC, XBB, VTI), where would you put what? Canadian: TFSA, US: RRSP? Does it matter with ETF?
Quick answer would be enough. :) Cheers.

#50 Aloha - NO ONE LEFT TO BUY on 01.17.12 at 1:24 am

Amazing, NO ONE LEFT TO BUY crappy canadian real estate, suckers got it all down their throat.
Will need to demolish and rebuild soon or leave like paupers…man, travel the world, not 3rd world countries and compare…you are living in auto-denial, induced dreams, well you will go down in history as usual the fools do.
The immigrants of 2010, 2011, 2012 simply won’t buy in a BUBBLE, after seeing Belfast, Dubai and Shànghǎi crashes.
You are sooooo DOOOOOOOOMED

#51 a prairie dawg on 01.17.12 at 1:35 am

#47 Canadian Watchdog

Too bad there’s no Horizons BetaPro RRSP Bear+ ETF.

– — –

Better yet find a REIT that holds a bunch of retirement care homes. Go long on boomers. It’s different this time.

#52 Kind of Different on 01.17.12 at 1:43 am

Great post, Garth! Will use my RRSP for further education, soon. Do you think TFSA’s are good for American/Canadian citizens as the IRS doesn’t view TFSA’s as tax exempt??

#53 zman on 01.17.12 at 1:44 am

hi
Your investment strategy of increasing the non registered plan and using funds from the registered plan to cover the interest is an intriguing strategy. The question is how much of a loan can I get and will the banks loan me money to do this. how do you pay off the loan since this could be challenging considering all of the other expenses one has to pay.

is there any way to take your registered plan and convert into a non registered plan with very little tax implications.

#54 Alan on 01.17.12 at 1:58 am

Garth,
Great to see such positive, proactive and intelligent financial advice. There’s hope in that grey matter. Good on you old man.

#55 a prairie dawg on 01.17.12 at 2:00 am

#2 Homeless Bill

feel free to pass on my contact info to any rich women who like what they see :)

– — –

Go down to the public library and use their computer to create a free gmail account. Then write your email address on your sign. You’ll be miserable before you know it.

#56 Ronaldo on 01.17.12 at 2:15 am

http://www.shillington.ca/Financial_Planning/Index.htm Additional good advice on RRSP’s

#57 Ronaldo on 01.17.12 at 2:27 am

An excellent article by Richard Shillington published by the C.D. Howe Institute regarding RRSP’s etc. A must read for anyone considering investing in these things.

http://www.cdhowe.org/pdf/backgrounder_65.pdf

#58 Junius on 01.17.12 at 3:01 am

#35 Junius Imposter,

Are you bored or just stupid?

The Vancouver market is melting. Warp speed down is your future prospects.

#59 BB on 01.17.12 at 3:21 am

Watch out for the spousal attribution rule with the baby friendly rrsp. Any more put in within 3 years prior to the withdrawal and then withdrawn $ is taxed in the hands on the contributing spouse.
I give up, what does [email protected] stand for?

Yes, I specified three years. The second one you need to figure out. — Garth

#60 Realtors work so hard for you! on 01.17.12 at 3:48 am

Brand new listing in Bubble Vancouver. Anyone have 1.3 million to spend on a lot value house in East Vancouver???
http://www.realtor.ca/propertyDetails.aspx?propertyId=11454261&PidKey=-1377461057
Nice to see the two realtors could only take one picture , and no measurements of the rooms. When you have 1.3 million, you don’t need to know these things. A bunch of PREC’s for sure!
This is how all the realtors list in Vancouver, unless they are super desperate, then they will use some photos in their database of the last time they listed it in 2008. Yup, good ole realtors. Selling your house is their priority.

Now the US debt clock is still ticking away too….
I think they blew through their 900 billion in the past few months. Awesome, lets fight some more wars and launder that money.

#61 sam on 01.17.12 at 4:03 am

Garth,

Can you give us your thoughts on the low interest rates the banks have been offering lately 5 years at 3% 10 years at 4%.

On one hand the bank economist are saying the housing market is headed for a small decline but they keep on wanting to prop up the house market.

What are your thoughts on this?

#62 john on 01.17.12 at 4:31 am

Miscellaneous thoughts:
Most investors in dividend common stocks concentrate on the dividend yield. However the rate of change of yield over time is very important. CNRail (CNR:TSX) is an example. The stock has a current dividend yield of 1.6%, but boasts an impressive 16% average dividend growth rate over the last 5 years and has increased its dividend for 14 consecutive years. Fortis (FTS:TSX), the widows and orphans stock, has increased its payment 12.25% a year compounded from 2005 to 2011 and has increased its dividend payment 35 years in a row! An interesting thought would be if some mathematically inclined person could combine the numbers for yield and rate of increase in yield to give a combination number that investors could use.
I just bought some bonds the other day. The number that is used by the brokerage houses is yield, meaning yield to maturity (YTM). I don’t like it. Why? Well it is a present value concept. Nothing conceptually wrong with this except it spikes the punch bowl in terms of the yield. We don’t use present value for the return of dividends from a dividend paying stock, so why for a bond? After all some bonds have the future coupon rates set at the discretion of the issuer so they aren’t known in advance just as the the future dividend payments of stocks! I prefer the current yield to get an honest view of the return. However you can’t have your cake and eat it too. You can consider yourself to be either getting the coupon plus a capital gain, if you bought the bond less than par, or you get the current yield, but you can’t have the current yield and a capital gain since then you would be double counting.
The coming real estate market correction will be a sea change for the boomer generation. The hoary old phrase the ‘opiate of the masses’ of Karl Marx comes to mind. Well the ‘opiate of the masses’ in Vancouver is certainly not religion. It is real estate prices, and a lot of dirty business gets swept under the rug as a result. For example the ‘Millenium Water’ dirty deal. Someone should be in jail at hard labour for 20 years for this! In the future the public will not be as forgiving. The public mood will darken, though this will not be adequately represented in the media e.g. Asper’s asswipe and Chorus misinformation network(aka CKNW).
On a Chorus misinformation program recently a caller stated that he paid $5,000 plus for real estate taxes in Abbotsford! Yikes! Can anyone really afford this? How about $260,000 for a condo with a view of the mud flats(when the tide is out) in Birch Bay? Of course if you invested $260,000 at 5.5% you get $14,300 a year and can go anywhere in the world for a holiday. But of course we know that this is cheap compared with ‘flex space’ in Gastown?
There will be a lot of victims thrown under the bus as a result of a real estate correction!

#63 Aussie Roy on 01.17.12 at 4:36 am

Aussie Update

Banks continue to slash staff numbers

http://www.theage.com.au/business/thousands-of-bank-jobs-face-axe-ubs-20120116-1q2os.html

BPOE this one is for YOU.

FOR the property true believers it is always a good time to buy. Booming market: get in now before it is too late. Stagnant market: great opportunity to buy at a discount. Falling market: what a bargain!

Housing, it would seem, is not a place to live nor even an investment. No, it’s a religion. Facts are curved, fitted, ignored, dismissed. Faith reigns supreme. All you have to do is believe and house prices will keep on rising.

Like religion, the protagonists are vociferous and dogmatic. Just check out the online comments under any article on housing on a major newspaper website and you’ll see how fervently the views are held.

http://www.couriermail.com.au/news/opinion/test-of-faith-for-property-believers/story-e6frerdf-1226244864491

The Delusional goes all the way to the top.

Europe has itself to blame, says PM

http://www.theage.com.au/national/europe-has-itself-to-blame-says-pm-20120115-1q1fx.html

First home buyers are back, well they are a little bit back, but lets push the good news.

http://theage.domain.com.au/real-estate-news/housing-recovery-driven-by-first-home-buyers-20120116-1q2pn.html#comments

The great southern land is still in denial – no bubble here.

#64 Canuck Abroad on 01.17.12 at 5:17 am

Hi Garth, would you kindly comment on the shape of this chart?

http://www.doctorhousingbubble.com/canada-housing-bubble-ripe-for-popping-vancouver-housing-bubble-2012-pop-real-estate-canada/

Looks like if the bozos in Ottawa had left well enough alone, the Canadian real estate correction would be nearing the end of the worst and the peak prices of 2008 would have retraced to 2005 levels in 2011 (assuming we follow a similar pattern to the US and other countries – except Japan of course which never recovered).

However, we have the unfortunate situation where Ottawa reflated the 2008 bubble making it even worse. So where to now? Still back to 2005 prices? Earlier? I know you have said a drop and then several years of slow melt. Has Ottawa made housing a purchase to avoid for a decade, or do you see us being through the worst in 3-5 years?

#65 Onemorething on 01.17.12 at 5:56 am

If the government is hungry it will tax 15% of your RRSP holdings when you hit that magic age putting tons of boomers in the next tax bracket!

Funny how they can play with your money eh folks!

oh and onemorething…there’s not a damn thing you can do about it!

It did the magical some time ago and cashed in all my RRSP’s during a currency spread on the CAD which limited my witheld tax losses, took the opportunity to buy GOLD and Silver at 750 and 8 USD and sold at the top. 2.5x gold, 6x silver!

#66 Last on 01.17.12 at 6:10 am

Garth

love the blog but maybe you need to go like LawProf and institute a new comments policy.

Unless the comment is on topic and adds to the discussion it will be ruthless deleted!

Particularly Nostradamus Le Mad Vlad, he adds nothing to the conversation, dude get a life.

Over time you’ll have fewer but much better comments to go over. Nothing worse than having to wade through 200 comments to get to the best 50

PS excellent post today!

http://insidethelawschoolscam.blogspot.com/2012/01/new-comments-policy.html#comment-form

#67 truth hammer on 01.17.12 at 6:30 am

Don’t you dare warn ‘BUBBLE’ warn the pimps..

http://www.montrealgazette.com/business/That+Canadian+housing+bubble+remains+elusive/6005869/story.html

Instead, lets engage in a game of synonyms and silly semantics…….’Mild Overvaluation’…Bwahahahahahahaa…….’Canadians are not really in debt……they’ve just borrowed too much’. Bwahahahahahahahaha…oh stop….I’m gonna pee myself.

Is crack use so wide spread in Montreal that an article like this can be printed and the offices of the Gazetter not immediatley surrounded by angry by citizens seeking clarity. The National Enquirer has more journalistic integrity than this rag.

#68 sam.i.am on 01.17.12 at 7:39 am

#51 google it ‘[email protected] site:greaterfool.ca’

#69 Aussie Roy on 01.17.12 at 7:52 am

Aussie Update

PM says naughty Europe has too much debt, as she spends debt like there is no tommorrow.

Europe debt bad, Aussie debt good ?.

The criticism came as Julia Gillard yesterday continued her attack on her EU colleagues for their financial management, saying more action was needed to tackle “far-reaching” debt problems. “It is absolutely critical that European leaders lay out credible medium-term plans to get their budgets on a sustainable footing,” the Prime Minister said.

Opposition finance spokesman Andrew Robb accused the government of “deliberately misleading” the public over the nation’s indebtedness, with combined state and federal gross debt heading towards half a trillion dollars, or close to 40 per cent of GDP. “We have federal government debt hurtling towards quarter of a trillion dollars in gross terms, which leaves us very vulnerable if our terms of trade come off as a consequence of events in Europe and the moderating growth in China that we are seeing,” he said.

http://m.theaustralian.com.au/national-affairs/treasury/robb-slates-icelandic-scale-of-national-debt/story-fn59nsif-1226245864418

#70 I'm stupid on 01.17.12 at 8:13 am

Hi Garth

I had a few questions for you.
1 Almost. Do not put preferreds in an RRSP or a TFSA since you lose the benefit of the dividend tax credit. — Garth. What should be in a tfsa and rrsp?

2. What do the ones with pensions do? Contributions to my pension fund is about 2k less max. My fear is that when I retire the fund will be insolvent. I do not have the option to opt out. I emailed you sometime back explaining how I’m funding someone else’s retirement. How long can this go on until the fund is dry?

(1) Put fixed-income into an RRSP first, since you avoid tax on these highly-taxed assets. (2) High-growth, higher-risk assets in a TFSA make sense, like emerging market or small cap ETFs. (3) Find out how/when you can commute accrued pension contributions, then do it and have them managed externally. — Garth

#71 GregW, Oakville on 01.17.12 at 8:18 am

Hi #51City Slicker, Welcome!

It’s short for, the nice lady at the bank. ([email protected])

And FYI, Garth book ‘Money Road’ is worth every penny of the $20. ;) see top right of this blog.

#72 XTR on 01.17.12 at 8:27 am

Garth, several posts back you claimed the MF Global is not possible in Canada and here it is: Barret Capital Management. All is possible apparently…

http://www.winnipegfreepress.com/business/breakingnews/barret-capital-management-accused-of-using-client-cash-for-its-own-purposes-137439933.html

I said investors in Canada were 100% covered in such an eventuality (of corporate dissolution), unlike in the US. — Garth

#73 debtified on 01.17.12 at 8:37 am

Thank you, Garth.

Just a couple of quick questions:

On the baby-friendly RRSP, do you have to be married with the mommy or does this also apply to common-law relationship (both in the contribution and withdrawal stages)?

On the education front, I heard there is a limit. Is this true (how much)?

Thanks again…

(1) Common law is equal to married. Sorry guys. (2) You can withdraw up to $10K per year under the Lifelong learning Plan. — Garth

#74 Ray MacDonald on 01.17.12 at 8:53 am

The TFSA is great but we didn’t have it when we were working – retired now.
Early on in my career I changed jobs every 5 years or so, and back then you didn’t get vested after 2 years. Two of the companies I worked for gave me back my pension plan contributions, and the third had a company paid pension plan that didn’t vest for 10 years. I got nothing from them and in fact was penalized in having reduced RRSP headroom during the time I worked there.
Nevertheless I stuck with my RRSP and did get into a good pension plan for the last 20 years I worked.
The RRSP is available to make up the difference and will provide a decent pension income when needed. It will hopefully give us some inflation protection and money for unforeseen medical and other expenses going forward. If our daughter has to use some of it for paying our taxes at the end, well those are the breaks. We have some life insurance to partially defray that cost.

Every retired person should have a fully-funded TFSA. Why pay tax on thousands of dollars in investments when you don’t have to? — Garth

#75 House on 01.17.12 at 9:08 am

OK you don’t know what the Future Value of Money is.

#76 GW on 01.17.12 at 9:16 am

First, for funding a maternity leave – why not just top up your spouse’s RRSP instead of bothering with a spousal plan. Then you don’t need to wait the 3 years.

Second, why keep preferred shares in non-registered plans only just to get the dividend tax credit? Isn’t the point to maximize your AFTER TAX return of your entire portfolio? And since anything you pull from your RRSP is taxable as income, you want to maximize your before tax return there. And a steady stream of dividends in your RRSP is a good way to do that as part of your balanced portfolio.

(1) A spousal lets you claim contributions to your spouse’s plan from your income. The other does not. (2) Do what you want, but losing the dividend tax credit means money you could make at 15% tax will be subject to 30% tax. Doesn’t sound too wise. — Garth

#77 Kevin on 01.17.12 at 9:22 am

@bob’s my uncle:

“I will still be around in 3 years, cant say the same for the TFSA though”

What is with you Doomers stoking fears of things that will never happen? What evidence could you possibly have that makes you so certain that TFSA’s will be eliminated? Or is it just pure, cynical conjecture?

Not only will the TFSA still be around in 3 years, Harper will even have raised the annual contribution limit (per his election promise). Quote me on it.

#78 DodgedBullet on 01.17.12 at 9:23 am

Garth,

thank you so much for sharing this information.

All the best to you and the Amazonians.

Ben.

#79 househornyhousewife on 01.17.12 at 9:26 am

Garth,

Regarding your “transfer” from a registered to a non registered RSP, isn’t the interest deductible only from your investment income (ie. the return made on the newly purchased non registered RSP) ? If your newly purchased RSP doesn’t make as much income as the interest being paid, then that excess investment loan interest would not be deductible against your RRSP withdrawals. I am quite sure that you cannot claim the loss against the RRSP withdrawals. Right ? This is the way I understood it.

Some good ideas regarding uses other than retirement for RRSP’s. However, would the government still pay someone maternity employment insurance if they are making RRSP withdrawals (which are counted as income on their tax return) ? This would be something to check out before doing this. Same goes for students who may otherwise qualify for certain bursaries, unless they make over a certain amount. Because RRSP withdrawals appear on the tax return as income, one must be careful about any employment insurance income or other government payments, I would think.

I still think that the TFSA is not large enough to matter just yet. My husband and I use it instead of a regular savings account (ie. short term investment not a BANK savings account .. which would obviously pay you nothing) but the 10 grand a year, even with the compounded interest, will be a drop in the bucket by our retirement. I mean, work out how much money in interest the government is actually allowing to keep tax free. It ain’t much (but I’ll still take it of course). In comparison, the RRSP’s at least allow us to pay less taxes on 18% of our income today PLUS the interest earned on that 18% (compounded) is also sheltered for a while.

The question then becomes, is getting 18% of your income, tax free, during all of the years that you work, in addition to not having to pay tax on the return of that 18% (compounded), also for that same period, WORTH having to pay taxes for however many years during your retirement ? Yeah sure, once I’m dead, the person inheriting my “fortune” (ha ha) will have to pay full tax on those “deemed to have been cashed out” RRSP’s. But what the heck do I care ? I’m DEAD. What matters is what happens when I’m alive. In that respect, I still think this tax deferral tool is worth it.

Oh and Garth, I am not sure that the right term is “tax avoidance”. I’m pretty sure this is a big no no in tax speak. I think the politically correct terms are “tax planning” and “tax deferral”. Tax avoidance implies that you are avoiding paying taxes that you actually owe (as in having an account in the Cayman Islands whose income you are not declaring). With legal “tax planning” or “tax deferral” one will not owe more taxes than they have to. Not that I care about political correctness .. money is money after all. But you never know, big brother may be watching.

Some good ideas overall Garth, my faith in you has been restored.

All the best.

HHHW

(1) Tax avoidance is entirely legal. Tax evasion is not. (2) You do not grasp the concept of an RRSP meltdown. Pension plan withdrawals are made (taxable) and use to pay investment loan interest (deductible). This has nothing to do with with gaisn or losses. — Garth

#80 detalumis on 01.17.12 at 9:38 am

The very, very best way of all to pay for mat leaves and stay-at-homes while the kids are itty-bitty is to oh my, this marriage ain’t working out, too bad you cannot afford to leave – SEPARATE and pay the spouse half your income as spousal and child support. There is no requirement anymore to move out of the place and you can reconcile when the stay-at-home partner goes back to work later on.

Your prize for the Day’s Dumbass Comment is in the mail. — Garth

#81 Ballingsford on 01.17.12 at 9:48 am

ING is offering 10 year mortgages for 3.99%. Things must be getting desperate out there.

Garth, when is your new book coming out? I haven’t heard any hype about it lately.

#82 Ballingsford on 01.17.12 at 9:49 am

Whoops, forgot to include the link for the ING mortgages.

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/buy-now-to-get-an-unheard-of-rate-for-a-10-year-mortgage/article2304460/

#83 GW on 01.17.12 at 9:56 am

Re: #75
(1) A spousal lets you claim contributions to your spouse’s plan from your income. The other does not. (2) Do what you want, but losing the dividend tax credit means money you could make at 15% tax will be subject to 30% tax. Doesn’t sound too wise. — Garth

For #1 you are absolutely right. But using a spousal plan only makes sense if your wife doesn’t have much money or room in her RRSP. I’m thinking of my situation where using a spousal plan for this wouldn’t have made any difference.

For #2 I also have preferred shares outside my RRSP to take advantage of the tax credit. The point is that inside an RRSP you want to maximize before tax rate of return however you can, and the steady dividend on a preferred share is a good component of a balanced portfolio. In a non-registered plan you look at after tax returns. Two different measuring sticks.

#84 OttawaRenter on 01.17.12 at 10:12 am

Thanks Garth. Good post, and a nice reprieve from Real estate. This is exactly the advice I need.

#85 Chris on 01.17.12 at 10:13 am

Garth, i believe you forgot another good reason to invest in a SRRSP. (this is how to avoid the 3 year attribution rules)
Here is the idea, open a Spousal RRSP. Let the higher tax bracket individual make a contribution.

The contributor gets the deductation and the spouse can use that money for the HBP after 90 days has passed.

#86 Bubble 'n Fizzle on 01.17.12 at 10:16 am

You say that by using RRSP funds to pay interest on a loan to set up a non-registered portfolio you are “transferring money from the registered plan into the after-tax one.” But that is nonsense. You are paying the INTEREST on the loan with untaxed funds (the tax-deductibility of the interest payment offsets the tax paid on the withdrawal) but when your RRSP is emptied out from paying this interest you will still owe all of the principal on the loan. You haven’t transferred anything at all. I suppose you could point to the income and capital gains in the non-registered account and claim these represent some kind of “transfer” but that’s stretching the interpretation. The fact that none of your loyal blog dogs have spotted this indicates that they are yapping reflexively and not actually understanding much of what you are writing.

Of course you are paying interest by draining an RRSP, while building equity in a non-registered plan. The net effect is transferring wealth. — Garth

#87 Stevenson on 01.17.12 at 10:28 am

When you contribute to RRSP is it not the main point to drop your tax bracket to lower one? There is significant difference in your taxable income. The TFSA does provide that feature in any way.

btw… soft landing for China and Toronto RE sales are up for December. Looks like the ball is going to keep rolling. If you look at the places that were inflated the most that have high demand(so called pockets and anonymous areas) are still selling quick with bidding wars.

#88 angela on 01.17.12 at 10:33 am

#51

[email protected] giggles – the nice lady at the bank

#89 tammy on 01.17.12 at 11:11 am

Garth could you expand on the lending from your rrsp’s to your own mortgage. Is this anything like the “Smith maneuver”? Also what do you think of the maneuver?

The Smith maneuver does not work. — Garth

#90 Ammo & Viagra on 01.17.12 at 11:14 am

#68 Last
how dare you diss our Nosty ! F#@8k you mister !
Nosty is a fixture here unlike newbies like you..
who are you? and btw, your post sucked !

#91 sid on 01.17.12 at 11:16 am

I remember empyting my rrsp during my mat leave and my banker told me I would regret this when I retire some day. Do reits pay dividends or interest payments? You have not mentioned whether they should go in an rrsp or not. Thanks for the great info!

#92 Rich Renter on 01.17.12 at 11:30 am

It would be nice to seen some appreciation for people who actually save their money, compared to the sarcasm that we’re all dumb and have no clue what we’re doing Mr Turner.

In this environment, savers lose. Some day you’ll thank me. — Garth

#93 Blacksheep on 01.17.12 at 11:33 am

Last #68,

“Unless the comment is on topic and adds to the discussion it will be ruthless deleted!

Particularly Nostradamus Le Mad Vlad, he adds nothing to the conversation, dude get a life.
—————————————-
Disagree…
Ever things connected.
Nost, adds colour to the blog.
I feel Garth strikes a good balance, as is.
NO blog Nazi’s needed.

take care,
Blacksheep

#94 sam.i.am on 01.17.12 at 11:42 am

I agree with #85. This blog/message board is way, way better than anything else out there, in great part because the comments are moderated and rudeness is not tolerated. I think it is just fine as-is.

#95 Landlord22 on 01.17.12 at 11:43 am

I noticed you tend to write as if speaking to an all-male audience. Remember us ladies are reading too!

My feminine side is on strike. Lysistrata thing. — Garth

#96 Frank on 01.17.12 at 11:45 am

Well there you go, lowest mortgage rates in history. So if you are a first time home buyer that is looking for a place to live and do not have the cash, then this is the best time to get a mortgage. Mortgage rates will take years before they even reach 7% and by then you will have saved a ton of money on interest payments. No RE crash in Canada folks, not in the near future at least.

#97 Candian Watchdog on 01.17.12 at 11:47 am

#54 a prairie dawg

I wouldn’t touch REITs until the market corrects and all the hot money is purged. At that point, the better performing REITs will decouple from the bunch.

As for if it’s different this time (housing market), I present this except from a parliament committee meeting regarding CMHC’s lending activities: http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=5097272&Language=E&Mode=1&Parl=41&Ses=1

Mr. Finn Poschmann to Karen Kinsley:

“Let’s not forget there are risks going the other way. Back in the 1970s, CMHC ran aggressive home ownership programs, low-income rental housing programs specifically designed to bring low-income people into rental arrangements or ownership arrangements. When the 1981 downturn came, these lending arrangements, insurance arrangements, absolutely went to pieces. By 1984, the actuarial deficit that CMHC was running was $800 million. That represented a significant draw in numbers of the day on the public purse.”

That’s when lending was somewhat prudent, those were the days….

More bad advice. REITs will become more valuable when housing corrects. — Garth

#98 Frank on 01.17.12 at 11:48 am

Saving is the poor person of investing and investing in stocks or other methods is a rich person way of investing.
A rich person can withstand the ups and downs as where a person just getting by cannot.

Then enjoy staying poor. — Garth

#99 disciple on 01.17.12 at 11:52 am

WORLD WAR 3 is firmly in progress – increasing in scope and in breadth. Even George Lucas says the world will end this year:

http://www.torontosun.com/entertainment/movies/2011/01/18/16927446-wenn-story.html

And here is Joseph P. Farrell speaking on the Nimrod Rothschild myth.
AACI – Anglo American Corporate Interests
UCIF – Underground Criminal International Fascist Organization
ETS – Extra Territorial State
JIRC – Japan India Russia China
Consciousness interfacing with the medium of time-space. Interesting guy. Theologian too, Oxford grad. I think I’ll buy his latest book and set beside Money Road on my shelf.

http://www.youtube.com/watch?v=UrDPNnJuQLg&feature=youtu.be

#100 Al on 01.17.12 at 11:53 am

Junk House with new lipstick just sold for $60,000 more than asking in Thornhill !!. The crazy market continues.

#101 Al on 01.17.12 at 11:55 am

RRSPs in some Provinces are creditor proof but not so in Ontario. What gives ?

#102 Alistair McLaughlin on 01.17.12 at 11:55 am

I used RRSPs to pay my way through university. Worked for a few years and socked it away. Then took it out when going to school with little income and tuition tax credits to offset whatever tax I’d have paid. The [email protected] acted like I was nuts. “You’re cashing out RRSPs to pay for tuition? That’s the worst thing you can do. Would you like to talk to a financial advisor?”

“No.”

#103 Ogopogo (né Okanagan Renter) on 01.17.12 at 12:03 pm

Great post, Garth, and a balanced complement to the first. I’ve printed a copy for my permanent records. Your response to “#72 I’m stupid” is precisely the answer I was seeking. Now I can get my affairs in order before the Taxman comes a-knockin’ for 2011.

A motto to live by: “Tax avoidance is entirely legal. Tax evasion is not.” So many saps would have avoided lengthy prison sentences if this had been heeded.

#104 disciple on 01.17.12 at 12:09 pm

I have read that it is not ideal to hold any foreign equities in your TFSA because of the various witholding taxes on your distributions and/or dividends, which differs from an RRSP in which no taxes are payable at all, until withdrawal time, of course. Any truth here? When I contact the Investor Relations departments of various companies, I get cryptic answers. Most of the remaining income trusts either explicitly state no taxes are withheld or payable, but some do not specify. A bit of a grey area right now for me. Not my top priority anyway.

Garth, I will have that statue built, I’m sure you will approve, so I’ll just go ahead. I’ve never concerned myself with the legality of anything, I do what I believe to be just and true. Always. Catch me if you can.

#105 Dr. WAYNE on 01.17.12 at 12:17 pm

Don Cherry IS a nutjob … of the first order.

#106 disciple on 01.17.12 at 12:41 pm

Two decades ago, my Dad and I found him laying on the cold, rotting wood floor of a tiny house on a busy street in Toronto. His eyes were closed, he was on his side, hunched over, in full parka and he had on his signature worn-out leather boots. Sadly, he was… no more.

Back in his day, my uncle was a daring, bold, fearless explorer, charting new territory for his expanding extended family. He had established enterprises from Vancouver to Halifax, helping all of his siblings and cousins up and above that dreaded line we call poverty. He never stopped giving of his time, his labour, and most of all, his advice. That was the most precious of all his gifts, and one that I will never, ever forget.

I still hear the echo from our finished basement where he insisted on taking up lodging with us when visiting. Having no wife or children, he considered his nephews and nieces his top priority. “No worry, no fear” was his timeless refrain. I also still see his lightly bearded face, no glint of sorrow or despair in his always bright eyes. Yes, he had his vices, the worst of which was drinking very heavily and very often. But I never considered this a weakness, until I found him there that day, alone, gone, from me.

My Dad would sit with him for hours, I wish I had listened more intently to their conversations, but I was just a young boy, more interested in other things. Why do my thoughts turn to him today? Why is it only now, that I remember his advice with more clarity than ever before? Perhaps his words had taken root deep within the inner sanctums of my unconscious, the meaning itself dying and being reborn many times as I went through the cycles of life, but now I can see the shadow of that great and terrible creature that is my destiny. Thanks in large part to him. No worry, no fear.

#107 Candian Watchdog on 01.17.12 at 12:47 pm

More bad advice. REITs will become more valuable when housing corrects. — Garth

I believe that’s what I said. REITs will be cheaper in the near future so this is not a good time to buy. Best thing to do now is some research on targeting which REITs will outperform or decouple to the upside in a recessionary economy. There’s too much speculative froth in the market—NAV premiums show it.

#54 a prairie dawg

https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=160&itm=31&lang=en&fr=1326817267686

Average monthly rent for senior bachelor units including one meal:

Canada Average $1,909
Quebec $1,397 (lowest)
Ontario $2,677 (highest)

Sooner or later someone will start to notice and think of a cheaper solution.

#108 Arshes on 01.17.12 at 1:00 pm

#106 disciple

Check out this site http://blog.taxresource.ca/tfsa-non-resident-withholding-taxes/

#109 bill on 01.17.12 at 1:09 pm

http://www.youtube.com/watch?v=j7GJcKuVGm8

A graphic representaion of the housing market to come…..

#110 Arshes on 01.17.12 at 1:09 pm

@ househornyhousewife

Interest paid for money borrowed for investment purposes is tax deductible, regardless if income is made. Its the purpose and intent of the loan that matters.

#111 Joel on 01.17.12 at 1:17 pm

Hello, new to the blog and looking for guidance. My wife is a struggling artist and makes about 7500 a year, I am a city worker in the ems field and have been employed as such for 13 years. I am 35 years old and my wife is 32. I have an omers defined benifit pension plan. We have rented for ten years and will continue to do so. We currently have 30000 in rrsp and 130000 in bonds. We are good savers but as I have read on this blog this is not going to cut it going forward. We do not have a TFSA. I have just set up a td waterhouse account and a td online mutual fund acount to take advantage of there e-series funds. I was thinking of using the couch potatoe plan but am open to other options. Please let me know what do to. I don’t want to be a greater fool anymore. Thanks

Then get an advisor. Nobody in the 30s should have the bulk of heir net worth in bonds. — Garth

#112 Mixed Bag on 01.17.12 at 1:20 pm

Back when we were not all that in tune with the world of finance, we bought a house right around when our parental leave ended, in the month of September. We did HBP, as advised by the advisor. Looking back, we wonder should we have taken the RRSP out period. But the advisor suggested that because of the EI income and back-to-work income for that calendar year, our tax bracket was not that low and there wouldn’t have been a difference in paying the taxes then, compared to the tax refund when we contributed earlier in our lower-salaried careers. (Fully aware of the advisor’s bias here).

It seems to me that the RRSP mat leave method is particularly worthwhile if your child is born at the beginning/end of the calendar year, where one spouse will be home for the majority of the calendar year and have low income for the calendar year. But if the child is born mid-year, and your spouse goes back to a now higher paying job? You have to do some math…

What I also did was contribute more during my lower earning years when my expenses were lower, and deferred some of those RRSP claims to offset against (hopefully) future higher earning years. If I had been particularly savvy, I could have fine-tuned this better.

For the longest time, with the media broadcasting “do we need to teach financial literacy in school” my answer was “no, just learn math”. But it’s not just math, it’s strategy, so now my answer would change to “yes”.

Garth, can you verify that RRSP income is not considered working income, so as not to trigger any clawbacks of EI?

Yes, of course. Money taken from any RRSP is taxed fully as if it were earned. — Garth

#113 Junius on 01.17.12 at 1:50 pm

#90 Stevenson,

You said, “soft landing for China.”

Evidence please? Also evidence on how this impacts Canada.

Or do you plan on staying in the “say it and pray it” pumper crowd forever?

#114 Dorothy on 01.17.12 at 1:53 pm

#108 – Mixed Bag
I think it’s a good idea to teach about personal finance in schools. The problem is, who would teach it?
I used to work in a school, and believe me when I say that many of the teachers lack personal finance skills themselves. So again, WHO would teach such skills to the students?

#115 VICTORIA TEA PARTY on 01.17.12 at 1:57 pm

“THE OTHER CA BUBBLE…”

Check out Dr. Housing Bubble’s site this date. He normally deals with California’s real estate problems.

BUT, his January 15 post lasers in on Vancouver real estate and, with a few illustrative charts, this piece should put some starch of doubt into SOME of those who still think real estate never declines on our west and snowy coastline.

Also, note an associated article detailing the huge shadow property inventory of unsold homes throughout the US. Shocking. Could that happen here? Nah!

THAT CAPSIZED FEELING

The Costa Concordia, that giant shallow-draught barge-like ocean cruiser, loaded down with hotel room-like suites and various other architectural distractons for addled, bored customers, is a tragedy filled with more than sea-water off the Tuscany coast; try also symbolism, for example.

This capsize, followed by a [email protected] skipper’s early bailout, and many onboard deaths, occurred concomitantly with Italy’s latest credit downgrade.

This big maritime event also speaks legions about the world’s perilous financial condition given that the passengers come from all over the world, as well. In the end, we’re all on the rocks!

While the vulture-like salvagers are soon to show up with their cutting torches and giant sea-going tugboats to haul away the bits and pieces of this six-year-old vessel, who’ll be hauling away the bits and pieces of the world’s failed monolithic economic structure?

I’m just wondering, is all…

#116 jess on 01.17.12 at 2:00 pm

Monday, January 16, 2012
Tax avoidance is rent seeking, not productive activity

Wikipedia
In economics, rent-seeking is an attempt to obtain economic rent by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth . . . attempting to enrich oneself by increasing one’s share of a fixed amount of wealth rather than trying to create wealth . . .the extraction of uncompensated value from others without making any contribution to productivity . . . people accused of rent seeking typically argue that they are indeed creating new wealth

=======
“Policy has tended to trail behind galvanizing events. The U.S. Foreign Corrupt Practices Act (FCPA) of 1977 followed both the Watergate scandal, which helped create the right political climate, and a series of investigations revealing that more than 400 corporations had admitted paying $300 million to foreign government officials to win projects. Yet the FCPA did not trigger a decisive shift in global policy debates, since other countries did not follow America’s lead. After 1977, companies from Germany, France, Britain and other countries still did business as before, gleefully corrupting foreign and domestic officials to steal contracts from under the noses of their more squeamish American competitors. It seemed inconceivable that genuine global cooperation on corruption was possible. What is more, the presence of secrecy jurisdictions allowed American companies to drive a coach and horses through the FCPA by enabling foreign corruption to continue to take place under the veil of offshore operations.”
========================
IRS finds U.S. tax evasion $385 billion per year

I.R.S. Renews Disclosure Program for Offshore Assets
By BLOOMBERG NEWS
Published: January 9, 2012

…Mr. Shulman said 33,000 disclosures were made in the two previous versions of the voluntary program. An effort that began in 2009 resulted in $3.4 billion in collections. The second program in 2011 yielded about $1 billion for the I.R.S., and Mr. Shulman said he expected that amount to rise.

Still, the $4.4 billion is unlikely to plug the gap between the amount of taxes owed by American citizens and the amount the I.R.S. collects. The agency said on Friday that American companies and individuals did not pay $385 billion in taxes owed in 2006, the most recent such data available, an increase from $290 billion five years earlier.

http://www.nytimes.com/2012/01/10/business/irs-renews-disclosure-program-for-offshore-assets.html?_r=2

#117 Candian Watchdog on 01.17.12 at 2:04 pm

Today’s TREB Mid-Month Report January 17, 2012. http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0112.htm

“Greater Toronto REALTORS® reported 1,506 sales through the TorontoMLS® system during the first two weeks of January 2012. This result represented a six per cent increase compared to the first 14 days of January 2011. New listings were also up on a year-over-year basis, but by a lesser 3.7 per cent.”

Let’s take a close look at these numbers…

January 2012, Mid-Month Report
416 sales (552) average price ($467,152)
905 sales (954) average price ($431,351)
GTA sales (1,506) average price ($444,473)

January 2011, Mid-Month Report
416 sales (581) average price ($416,647)
905 sales (839) average price ($404,341 )
GTA sales (1,420) average price ($409,376)

Jan 2011 sales 1,420 / Jan 2012 sales 1,506 = up +6.06%

However, a little Google historical search finds us figures TREB initially reported back in January 2011: http://www.thinktorontohomes.com/blog/2011/1/21/gta-realtors-report-mid-month-resale-housing-market-figures.html

January 2011, Mid-Month Report
416 sales (628) average price ($418,951)
905 sales (935) average price ($409,947 )
GTA sales (*1,563*) average price ($413,565)

Jan 2011 sales 1,563 / Jan 2012 sales 1,506 = down -3.65%

And there you have it folks, rigged manipulated moving averages for anyone who’s willing to buy a home based on misreported headlines. Not only that, they even went as far as to remove January’s 2011 mid-month report archive and replace it with 2010—just so it looks like a mistake.

Try to find it http://www.torontorealestateboard.com/market_news/release_market_updates/news.htm

Fools…

#118 PG on 01.17.12 at 2:07 pm

Garth, any idea if you have to wait the 3 years before you can borrow from your spousal rrsp for the hbp or for education?

Any money taken out prior will be attributed back to the contributor. — Garth

#119 City Slicker on 01.17.12 at 2:26 pm

#74 GregW, Oakville on 01.17.12 at 8:18 am Hi #51City Slicker, Welcome!

It’s short for, the nice lady at the bank. ([email protected])

And FYI, Garth book ‘Money Road’ is worth every penny of the $20. ;) see top right of this blog.
———————————————————
Thanks! But I’m not new here, not sure how I missed that though.

#120 TheRealTruth on 01.17.12 at 2:41 pm

Carney’s hands are tied…. he can’t raise rates. He said it himself. Our Interest rate policy is officially tied to house prices now!

Why bubble? Because…

1) Low interest rates both fixed and variable. Caveat: But most people only guaranteed this for only 5 years or so.

2) CMHC will tinker with policies caving in to wishes of Banks, Politicians, RE/Corporate complex. For example, why no limit on value of individual mortgage that is insured?? Caveat: what will they do when supply dries up?

3) High temporary immigration policies. These are not counted in statscan figures for some reason. Caveat: this will stop when the face of Canada changes to the point of a backlash. What happens then?

My view over the last couple of years has always been that the gov complex will let our currency suffer rather than raise rates.

#121 TheRealTruth on 01.17.12 at 2:48 pm

#2 above… demand instead of supply.

#122 disciple on 01.17.12 at 3:03 pm

Arshes… thanks for the link! It seems that there are some other forms you have to file specifically for each equity or company or trust that you are invested in, such that, your normal 30% is reduced to 15% only if you do the fancy paperwork jig. If you don’t do it properly, you get dinged for the full 30. But I’m not really sure. Sorry, I wish I had more time to verify all, but right now I’m studying these new Fluorine batteries from IBM, which look to make lithium obsolete before it even took off… tips from the tipster…

#123 Okanagan Renter on 01.17.12 at 3:21 pm

#114 Joel
I have just set up a td waterhouse account and a td online mutual fund acount to take advantage of there e-series funds. I was thinking of using the couch potatoe plan but am open to other options. Please let me know what do to. I don’t want to be a greater fool anymore. Thanks

Then get an advisor. Nobody in the 30s should have the bulk of heir net worth in bonds. — Garth

Joel, I’m going to go out on a limb here and guess you’ve been reading Dan Bertolotti’s book on couch potato portfolio’s. Before you go ahead with TD’s e-series, check out the published Couch Potato returns report just released. REITs still rule the day.

http://canadiancouchpotato.com/2012/01/09/couch-potato-portfolio-2011-returns/

#124 Fifty Percent Correction Predictor on 01.17.12 at 3:45 pm

“There’s some indication of some softening in the housing market in Canada recently,” Mr. Flaherty told reporters. “We watch the housing market carefully and we are prepared to intervene if necessary. Having said that, we’re not about to intervene in the housing market now.” (Jan. 17, 2012)

What intervention? To suck in and trap more morons? To extend the amortization period? To lower the rate to zero?

When a bubble bursts, nothing, I mean nothing, you can do about it until the crash runs its own course. At this monent, I am predicting a 50% correction in the GTA condo market. Until then, nothing really matters! That is the fate of a bubble. For evidence, just look at the South.

#125 renting and waiting on 01.17.12 at 3:49 pm

Did anyone catch this? Barrett Cap. Mgmt accused of using client money a la MF Global:

http://www.canadianbusiness.com/article/66119–barret-capital-management-accused-of-using-client-cash-for-its-own-purposes

this is why all the normally wise investment advice in the world won’t get me to invest at this point in history.

Why? The firm was caught, will pay the price, and all clients made whole. Sounds like the system works. — Garth

#126 renting and waiting on 01.17.12 at 3:50 pm

another article on barrett

http://www.thestar.com/article/1116850–barret-capital-battles-against-suspension-by-regulator

Like I said, our regulatory environment works. — Garth

#127 eaglebay - Parksville on 01.17.12 at 3:58 pm

#116 Junius on 01.17.12 at 1:50 pm
#90 Stevenson,

“You said, “soft landing for China.”

Evidence please? Also evidence on how this impacts Canada.”
———-

Have you checked out the price of copper lately?
Poor China, only growing at 8.9% in the last quarter.

#128 eaglebay - Parksville on 01.17.12 at 4:01 pm

#117 Dorothy on 01.17.12 at 1:53 pm

It shows that the teachers are not trained properly and that the school boards are ignorant of the needs of their students in particular and society in general.

#129 SaggyBottomBoomer on 01.17.12 at 4:08 pm

“Government ready to intervene on housing, but not now: Flaherty”

Well I can sleep easier knowing that F is at the switch and ready to jump in at the first sign of a problem in the real estate market.

http://ca.reuters.com/article/domesticNews/idCATRE80G1S320120117

#130 Brad in Calgary on 01.17.12 at 4:22 pm

“The Smith maneuver does not work. — Garth ”

I assume you meant to say… “does not work for EVERYONE?”

http://business.financialpost.com/2011/10/05/smith-manoeuvre-is-alive-and-well/

#131 spaceman on 01.17.12 at 4:29 pm

Another strategy HBP and Spousal.

Here goes, my wife works part time, annual income $5000, but i have been loading up her Spousal.

At some point in time (I am hoping this year) we will pull out 25K each for HBP. But the deal is, you have to pay it back, or get taxed. Ok, so they tax her portion? Who cares, we will have to pay it anyway. So come tax time each year, I pay back my portion of RRSP, Via the HBP plan, but not hers. Chances are she can declare it as income, and pay little tax on it anyway. That way the tax is deffered over a longer period. Now I could have taken out the entire portion (25K) and she could have paid tax on the lump sum… wait … that would be stupid…

Garth, or anyone care to comment? Is this going to work?

#132 45north on 01.17.12 at 4:29 pm

Canadian Watchdog: However, historical search finds us figures TREB initially reported back in January 2011:

sounds a lot like the NAR (National Association of Realtors) who last month admitted that its reported sales since 2007 were 14% too high.

The group revised down figures going back to 2007 by an average 14 percent, putting them more in line with other measures of demand.

http://mcaf.ee/vi0q1

if you’re selling a house in Toronto, you don’t need bullshit sales figures

#133 a prairie dawg on 01.17.12 at 4:30 pm

#110 Canadian Watchdog

Where is the sarcasm button when you need it. Part of my post was sarcasm. Some of it was true.

There will be growth in businesses catering to seniors, given the aging boomer demographic. There will be ways to profit from that trend as well. (senior care homes, mobility assistance devices, and hearing aides, prescription drugs, etc)

Finding ways to profit from it might be worthwhile. That’s the only point I was trying to make.

#134 Devore on 01.17.12 at 4:31 pm

#94 sid

As with all distributions that are not strictly dividends, it depends. Check the investors relations page for the particular fund/trust, and verify the tax treatment. For example, for CapREIT:

http://phx.corporate-ir.net/phoenix.zhtml?c=124438&p=irol-tax

#135 spaceman on 01.17.12 at 4:37 pm

PG
Garth, any idea if you have to wait the 3 years before you can borrow from your spousal rrsp for the hbp or for education?

Any money taken out prior will be attributed back to the contributor. — Garth

HMMM for HBP I believe it is a 90 day hold policy. To remove entirely is 3 years, not the same thing. HBP is a loan against your RRSP, spousal or not.

from ccra

“Note If you or your spouse or common-law partner withdraws an amount from an RRSP to which you or your spouse or common-law partner had made contributions during the 89-day period just before the withdrawal, you may not be able to deduct part or all of these contributions for any year. For more information, see How to make an HBP withdrawal.”

I am correct. Money put into a spousal and withdrawn for any purpose prior to three years is attributed back to the contributor. If it is a HBP withdrawal then the contributor will need to repay it into the plan over 15 years. — Garth

#136 Blacksheep on 01.17.12 at 4:47 pm

Renting and waiting # 128,

“Another client gave Barret $10,000 with assurances
it would be invested in gold and silver bullion. Instead, alleges IIROC, the money was invested in
the futures and options market, and was all lost.”
———————————————
Why? The firm was caught, will pay the price, and all clients made whole. Sounds like the system works. — Garth

What body covers the losses by the client?
Thanks in advance.

take care,
Blacksheep

In the case of insolvency, the Canadian Investor Protection Fund (CIPF). — Garth

#137 Shane on 01.17.12 at 4:55 pm

Garth,Carney also stated that house prices are likely to remain elevated, in part because low mortgages are making even high-priced homes affordable to many Canadians. and no interest rate hick maybe not till 2013 i’m confused now??? i thought prices will come down?

Shane

#138 RRSPtoDRIPtoTFSA on 01.17.12 at 5:01 pm

The gross up on dividends is somewhere around 42% so putting higher dividend stocks, or former trusts in a TFSA I figure will lower the claw-back bracket, by lowering the artificial income.

#139 Canadian Watchdog on 01.17.12 at 5:06 pm

#132 SaggyBottomBoomer

Intervention by the government will only expedite declining incomes and inflate the national debt. They’ve done too little and are far too late to stop headlines like this from coming in http://i43.tinypic.com/2zgzs7p.jpg

#140 Kevin on 01.17.12 at 5:09 pm

Ottawa ready to intervene on housing, but not now: Flaherty
http://business.financialpost.com/2012/01/17/ottawa-ready-to-intervene-on-housing-but-not-now-flaherty/

“The Canadian government is watching the housing market closely and is ready to intervene if needed, but is not about to do so now, Finance Minister Jim Flaherty said on Tuesday, noting he saw indications of softening in the market.”
“He was speaking to reporters after the Bank of Canada said that very favourable credit conditions were expected to buttress housing activity, and that Canada’s ratio of household debt to income was expected to rise further.”

OK, when the financial crisis hit in Sept 2008, total household debt was $1.29 trillion, mortgage debt was $884 billion. Household debt to income was 138%, while household debt to GDP was 82%.

So the Bank of Canada cut rates and the Canadian consumer continued the credit orgy part 2. Canadian consumers have borrowed from the future to spend for today since the start of credit orgy part in the fall of 2008.

Now the household debt to income ratio is at 153% and the household debt to GDP is at 94%.
At the end of Nov 2011, total household debt was at $1.59 trillion, mortgage debt was at $1.1 trillion. By the middle of January, maybe even today, household debt will have passed the $1.6 trillion mark.

Consumer credit is not really the problem right now, growing at about 3% to 4% year over year. Mortgage credit growth is the big problem growing at 7.7% in Nov 2011, probably will hit 8% in Dec. And if there is a surge in demand with the low fixed rates in Jan, expect to see mortgage credit growth to be around 8%.

For those keeping score Canadian mortgage credit growth for the last 3 years looks like this:
2011 will hit about 7.5% ( I’ll be off by .2 either way)
2010- 6.8%
2009- 6.3%

With household debt to income, household debt to GDP ratio’s expected to climb higher, it’s a good thing “the Canadian government is watching the housing market closely and is ready to intervene if needed”. Because we would hate to have a housing bubble appear out of nowhere, with nobody “watching” the housing market.

Garth,
it’s gonna feel like -47 in toon town tonight.

#141 AprilNewwest on 01.17.12 at 5:10 pm

#138 – Shane. Where does Garth say “house prices likely to remain elevated”. I read his posts regularly and I’ve never read that???

#142 AprilNewwest on 01.17.12 at 5:11 pm

Shane – sorry my mistake. Carney not Garth.

#143 Victor on 01.17.12 at 5:37 pm

Garth, it doesn’t like like F will intervene with new mortgage rules after all?

http://ca.finance.yahoo.com/news/government-ready-intervene-housing-not-185743280.html

#144 Financial Illiteracy and Schools on 01.17.12 at 5:38 pm

#117 Dorothy

The educational system is designed from the top down to promote financial illiteracy.

#145 Van guy on 01.17.12 at 5:46 pm

#138 Shane on 01.17.12 at 4:55 pm
Garth,Carney also stated that house prices are likely to remain elevated, in part because low mortgages are making even high-priced homes affordable to many Canadians. and no interest rate hick maybe not till 2013 i’m confused now??? i thought prices will come down?

Shane
——————————————————————-

Shane,

Where are you thinking of buying? Van avg sfh prices are down 15% since May 2011. YoY prices are flat. Listings exploding this months. Very few sales too. Don’t listen to Carney. You shouldn’t rush to buy yet.

#146 T.O. Bubble Boy on 01.17.12 at 6:01 pm

@ #120 Candian Watchdog:

wow – nice catch!

I’ve noticed certain TREB links not working properly or pointing to the wrong month before, but never thought to google the press release to see what really happened to the data.

That is BRUTAL — completely “re-writing history” to suit their PR needs. What a joke.

It’s also odd that the average price for full-month January 2011 was $427,037, which was significantly higher than the mid-month average price. More manipulation?

#147 John on 01.17.12 at 6:06 pm

difference between a pole dancer and a financial advisor?

one lives in a trailer while one lives for the trailer

#148 Canadian Watchdog on 01.17.12 at 6:09 pm

#140 Shane #143 Kevin #148 Van guy

The BoC’s mandate is exchange stabilization and to provide liquidity during times of credit contraction, that’s it. The only reason why the BoC lowered rates during the 2008 crises was because the CAN was plunging against the USD. Even if household debt-to-income soared to 160%, as long as the USD/CAN is in range of the BoC’s target, they won’t adjust rates.

Household debt is Ottawa’s problem, which they have the authority (but lacking will power) to address.

#149 T.O. Bubble Boy on 01.17.12 at 6:23 pm

So, let’s say I wanted to buy BMO Economist Sheery Cooper’s home for $3.25M:
http://www.realtor.ca/propertyDetails.aspx?propertyId=11434529

If I get a nice CMHC-insured 5% down/30-yr loan (no limit on those, don’t ya know), and the nice BMO 2.99% fixed rate mortgage, that works out to only about $13,000 a month!

Seems like everyone wins here: Sherry sells her house, BMO gets a lot of mortgage interest, CMHC keeps growing, and there is zero risk anywhere in this entire scenario… unless the buyer can’t afford $13k a month for a mortgage payment — and who can’t afford that!

#150 poco on 01.17.12 at 6:28 pm

#134spaceman on 01.17.12 at 4:29 pm
Another strategy HBP and Spousal.
Here goes, my wife works part time, annual income $5000, but i have been loading up her Spousal.
At some point in time (I am hoping this year) we will pull out 25K each for HBP. But the deal is, you have to pay it back, or get taxed. Ok, so they tax her portion? Who cares, we will have to pay it anyway. So come tax time each year, I pay back my portion of RRSP, Via the HBP plan, but not hers. Chances are she can declare it as income, and pay little tax on it anyway. That way the tax is deffered over a longer period. Now I could have taken out the entire portion (25K) and she could have paid tax on the lump sum… wait … that would be stupid…
____________________________________________

it can work that way
the 25k each is paid back over a 15 year period (the year you take it out and the following year are exempt)

if paying it back into your RRSP you can pay anything (minimum$1.666–25k divided by 15 years) or all of it in the first year–each year the CRA lets you know the minimum –via tax return–what your amount is to be repaid the next year

the catch is if you are adding it to income and have no intention to replenish your spouses or your own RRSP, the maximum you can claim per year as income is the $1,666 minimum–so in a year you have no income you can not claim anything in excess of the $1666

that’s how i read it

#151 Rich Renter on 01.17.12 at 6:29 pm

Hear Hear #151, The honorable Mr Turner should have a word with his old buddy F.

#152 Stevenson on 01.17.12 at 6:34 pm

#116 Junius

Time to come out from under that rock and stop choosing/selecting what you want to hear.

http://www.bloomberg.com/news/2011-11-22/world-bank-says-sees-china-soft-landing-as-asia-withstands-europe-economy.html

It means nothing for Canada as we are doomed in your eyes either way. You have made your choice already. It’s not what’s going to happen that’s important, but more so how make use of the opportunity.

#153 jess on 01.17.12 at 6:37 pm

Apple has released a report on working conditions in its suppliers’ factories 62% of the 229 facilities it inspected were not in compliance .
Duh?

” Bad ethics increasingly drive good ethics out of the markets and manufacturing jobs out of the U.S. and into more fraud-friendly nations. ”
==========
Anti-employee Control Fraud
by William Black

http://neweconomicperspectives.blogspot.com/2012/01/anti-employee-control-fraud.html#more

… CEOs who are willing to routinely defraud their workers and expose them to grave threats to their health are exceptionally likely to commit other forms of control fraud. ..”

http://online.wsj.com/article/SB10001424052970204409004577158764211274708.html?mod=WSJ_hp_LEFTWhatsNewsCollection

PS WIN america

#154 Stupesing in Cabbagetown on 01.17.12 at 6:49 pm

The IMF is now wagging its finger at Canada: http://www.bloomberg.com/news/2012-01-17/canada-courts-housing-bubble-imf-sees-as-risk-with-record-rates-mortgages.html

#155 Two-thirds on 01.17.12 at 7:24 pm

And in other news: Carney leaves rate untouched

http://ca.reuters.com/article/domesticNews/idCATRE80G14H20120117?sp=true

Interesting that this has not been posted yet today. It seems that cynics may be correct and C will just follow Bernanke’s lead and interest rates will not move until 2013 (at the earliest).

Hence a “great” time to renew/take new mortgages in Canada – depending on personal circumstances.

Nobody expected rates to change today. Hence, no news. — Garth

#156 Joeseph Q on 01.17.12 at 7:30 pm

I have some inconvenient truths for the “it’s different here” crowd. Prices in Toronto have fallen steadily since May of 2011 and losses are accelerating. I draw your attention to real facts – Page 25 of the Toronto Real Estate Board December report. Average price sits at $451K in December ’11 vs. $485K in May ’11

http://www.torontorealestateboard.com/market_news/market_watch/2011/mw1112.pdf

What’s that? Things will pick up in the new year? Unfortunately, First half of January has been a disaster with prices now sinking to $444K.

http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0112.htm

Even Vancouver is falling off a cliff! Average detached home now at $1,064K vs. over $1,200K in May.

http://www.yattermatters.com/2012/01/vancouvers-average-home-price-freezes/

Now, average real estate prices have declined year over year in Vancouver ($701K in Dec 2012 vs $689K in 2012). My condolences to anyone who bought in the last 12 months!!

http://www.crea.ca/public/news_stats/statistics.htm#

My advice would be to not wait around to be told by the main stream media that the real estate bubble has popped in Canada. Find out the facts for yourself.

#157 Arshes on 01.17.12 at 7:31 pm

#117 Dorothy

Personal finance is very personal. Most people who are good with thier money, they learn it from their parents.

Teaching it in schools really wont matter, if kids dont get good examples at home.

#158 Nostradamus Le Mad Vlad on 01.17.12 at 7:36 pm


#92 Ammo & Viagra, #96 sam.i.am and #95 Blacksheep — Appreciate the back-up! Evidently, I’ve hit a raw nerve with last.

Could be that last and egomouth – Dumpsterville are paid PR hacks for Monsanto, big pharma, the paid-for and controlled m$m (six individuals control 96%, and ABC is the WH’s mouthpiece), big oil or anything else.

Whatever. Time will tell.

#106 disciple — “. . . I will have that statue built . . .” — This one?

#109 disciple — “No worry, no fear.” — Excellent advice!

#157 Stupesing in Cabbagetown — Good link. Apparently, we’re not austere enough. N. and C. America have to become PIIGS in waiting, to be slaughtered along with the others.
*
Occupy DC Much like Canada, they don’t represent us and 2:006 clip Occupy the Vatican; Lawrence Lessig Truth teller; Savings “I think it is high time we stopped pretending there is a recovery and started tarring and feathering the bankers who got us into this mess with the mortgage-backed securities fraud!” wrh.com; Greece Lawrence Welk’s intros. are better: Anna one – two – three etc.; Hungary Not playing nice with the IMF, so regime change; 4:39 clip Sarkozy is a broken joke; 3:28 clip “Regardless of your views on Olbermann, this is a GREAT clip.”; Politicos It helps to have ultra-rich friends.
*
9:26 clip Prelude to WW3; 3:32 clip The elite lied about numerous things. Payback time? NASA New job — letting lawyers and money junkies get involved; Mitt Romney and drug dealers; Iran Embargo failed, move on to war but No nukes is good nukes, so it’s not too hard to figure out who is pressing all the buttons; Nuclear Electricity costs ten times more; La Nina weather patterns can lead to pandemics; Facebook Reason to avoid; Demented Cop This is what a cop does, and Toronto cop; Death by Fluoride; Democratic Govt. is a fraud; Cherries Miracle food? Ron Paul “More cheap shots and dirty tricks against the good name of Ron Paul.”

#159 shane on 01.17.12 at 7:38 pm

post #148 144 and 145 i was thinking of buying in Markham Ontario.

Shane

#160 Junius on 01.17.12 at 7:46 pm

#155 Stevenson,

Thanks for actually posting!

Under my rock I found the following article which calls the numbers into question:

http://chovanec.wordpress.com/2012/01/17/bbc-chinas-2011-gdp-numbers/

China is notoriously difficult to figure out because of the government control of information. However their real estate market is over heated and going down.

When did I ever say that Canada was doomed? I am not a doomer. Although I do confess to disliking pumpers.

I have said that Real Estate is in a bubble that is popping and that it will go down for years. However there is still hope for those of us not dependent on the ponzi economy.

#161 Van guy on 01.17.12 at 7:49 pm

Poco,

Did I answer your question correctly on the weekend? I was waiting for your answer. I gave you 2 days to dig yourself out of the snow.

#162 Mike Rotch on 01.17.12 at 8:15 pm

Save your breath on this……the mathematics and tax planning is clearly too tricky for a lot of the readers.

It’s the same reason why they don’t realize why it’s better to fill the TFSA before looking at RRSP contributions.

Thank you so much for several years of solid advice. It’s worth way more than we pay for it!

___________________________________
Bubble ‘n Fizzle on 01.17.12 at 10:16 am
………

Of course you are paying interest by draining an RRSP, while building equity in a non-registered plan. The net effect is transferring wealth. — Garth
.

#163 Daisy Mae on 01.17.12 at 8:30 pm

I just had to do it! I had to look up ‘Lysistrata’ thru Wikipedia. You’re always teaching us somethin’…

“Lysistrata persuades the women of Greece to withhold sexual privileges from their husbands and lovers as a means of forcing the men to negotiate peace — a strategy, however, that inflames the battle between the sexes.”

#164 Ray MacDonald on 01.17.12 at 8:31 pm

Every retired person should have a fully-funded TFSA. Why pay tax on thousands of dollars in investments when you don’t have to? — Garth

Of course we both have fully funded TFSAs. But they have only been around since 2009.

Forty grand of no-tax investments is worthy of respect. — Garth

#165 Smoking Man on 01.17.12 at 8:34 pm

Garth said
Presto, you have more money to spend drinking with The Smoking Man.

Wish I saw this earlier, would have invited the great one and the other blog dogs for a pint on me, was at earls tonight.

Lefts early, tired 3 hours sleep last night, got a call my son was taken to hospital in an ambulance . soon as I put down the phone started laughing my guts out. Full story next post

#166 Stevenson on 01.17.12 at 8:53 pm

For those doomers who think RE in Canada will crash.

http://www.theglobeandmail.com/report-on-business/economy/housing/moderate-growth-eases-concern-of-crash-in-housing-market/article2303868/

Hate the player don’t hate the game.

You might want to read the IMF, as well as CREA. — Garth

#167 Junius on 01.17.12 at 9:12 pm

#169 Stevenson,

Real Estate Markets almost never move sideways. They move either up or they move down. What you are looking at is a market in transition moving from market top and preparing for a fall.

In my opinion.

#168 NDtrader on 01.17.12 at 9:27 pm

I am correct. Money put into a spousal and withdrawn for any purpose prior to three years is attributed back to the contributor. If it is a HBP withdrawal then the contributor will need to repay it into the plan over 15 years. — Garth

Garth, what is your source? Does this mean that the 25K withdrawn from a spousal account before 3 years has past would be consider to be the the contributor 25K for the HBP?

How can you not understand this? Money put into a spousal plan is not the property of the spouse until three years have passed. Until then, it’s the property of the contributor. — Garth

#169 truth hammer on 01.17.12 at 9:47 pm

#157…the IMF has been ‘outing’ Canada for bad economic policy for several years. Read the CDN news papers though and you’d think we’re #1…….the truth is otherwise once out of the ‘bubble’ micro world of Canadian advertising rags …whoops….sorry….. newspapers..

Unions are at it again……some can’t make ends meet after their union bosses support outrageous policies that drive up costs….so what do they do……..dig deeper into the taxpayers wallet thats what. Theres no sense of parody in the union ranks is there.

http://www.vancouversun.com/business/teachers+seeking+cent+hike+over+three+years/6009663/story.html

Its like they think that money comes from a magic hole in the back yards of parliamentarians.

#170 Habbit on 01.17.12 at 10:22 pm

#80 Kevin I’m getting that warm fuzzy feeling. Remember the income trusts?

#171 NDtrader on 01.18.12 at 12:25 am

How can you not understand this? Money put into a spousal plan is not the property of the spouse until three years have passed. Until then, it’s the property of the contributor. — Garth

Garth, I believe your wrong. There is a lot of confusion about this topic on the web. Take a look at this post.

http://www.hawthornevillager.com/phpbb/viewtopic.php?t=5489

Let them be confused. I am correct. — Garth

#172 NDtrader on 01.18.12 at 12:52 am

Sorry Garth, but here is another one too.

http://www.milliondollarjourney.com/how-the-rrsp-home-buyers-plan-hbp-works.htm

#173 John Ratadlin on 01.18.12 at 2:18 pm

Low interest rates did not help Japan and it will not help here . Financial repression 101.

#174 Dan on 01.18.12 at 3:26 pm

Garth, I’m one of those pention building, planning obsessed teachers, who happens to be 25 and still living with his parents. (one step ahead of renting i’d say, but with living with social stigma). Trying to follow your advice to stay liquid and avoid those GICs, but I just keep shipping all my cash to the orange guy, because I have zero knowledge of the market and I’m still sexed up enough to think that I may want my money in 3 or 4 years to invest in a property. Also think that after all the mutual fund fees, and the market the way it is, I might not get a much better return. My friend says my money is devaluing because I’m earning 1.5 (below the average 3% of inflation). Also I’m contributing to my RSPs religously because I can use it for a first property purchase. Questions are:

Should I continue to add to my RSPs and then once I make my first house buy, stop adding to them?

With 60K in the bank and guaranteed salary certainty for the rest of my career, where do I put my money now?

What do you mean when you say take the five grand for the TFSA and invest it…not save it?

Great blog, big fan.

Why would you keep $60,000 in a savings account? Because you are uneducated (a teacher should know better) or skittish (a tragedy at age 25)? — Garth

#175 Rick on 01.18.12 at 4:42 pm

“And what happens if you end up being a wrinkly geezer with a fat RRSP? At age 71 it must be cashed out or turned into a RRIF, which means you’re forced to take about 7% a year as income – fully taxed and possibly pushing you into a higher bracket. In that case, you can meltdown your plan.”

Tried to get my mother to understand the meltdown plan, but doesn’t want to borrow or take on the risk. I am wondering why she does not get advise on these matters from her investment company, 1 million+ in RRSP’s with a respected money manager.

How much more risk is there borrowing money to buy (for example) quality fixed income assets, writing off the interest and having her mandatory RRSP/RRIF withdrawals finance it, than in handing over 35% of her money to the government? Get a new advisor. — Garth

#176 Ben on 01.18.12 at 5:02 pm

Obama Administration Said to Reject Keystone XL Oil Pipeline

http://finance.yahoo.com/news/obama-administration-said-reject-keystone-164402713.html

#177 SRV on 01.18.12 at 8:27 pm

$5K a year… Garth, you were asleep at the wheel!

Just kidding… I’m sure you fought for more. Very good RSP analysis (thanks… and the meltdown’s ‘a keeper’) but it’s not always so bad for high earners… I was able to purchase private shares in my busness in my plan over several years, drastically reducing my tax rate and realizing 50%+ returns inside the plan (a growing business). Fortunately I’ve been able to downsize, which will keep the tax rate reasonable, but I get your point (of course my TFSP is topped up and invested in… well I’m sure you can guess… with lots of leverage).

#178 TurnerNation on 01.18.12 at 8:41 pm

My, our Forum Host is chatty today on this scotch fueled weblog :-)

#179 Onemorething on 01.18.12 at 8:46 pm

3.99% 10 year mortgages! It doesnt matter if it’s 0% when RE takes a dump and you dont have the money down to keep the bank from collecting the under way value!

Bank doesnt care, they are protected!

Given the above, THIS IS a last ditch effort to grab the last of the manipulated to get off the fence and buy!

It means the end to the bubble!