It could be worse

When my pollster buddy Nik Nanos asked people if they’d be okay if their paycheque came a week late, it was a shocker. Specifically, the question was whether or not they would have difficulties paying their bills if the next paycheque was delayed for a week.

Results: 56% of Canadian women said yes. 46% of men agreed. Only 18% said it wouldn’t be a problem.

This tells us lots. Like (a) half the people you know are insolvent, with more debts than assets. A disruption in cash flow is a disaster. (b) In a country where 70% own real estate you can see what mortgage debt has done. Seven in ten have houses. Five in ten have no money. They live paycheque-to-paycheque (c) There’s a mother of a retirement crisis looming, especially with real estate swooning.

I thought about that when I saw Scott’s email from Vancouver Island.

First off, a thank you for the blog, all of your efforts and insights.  It is both an enjoyable and informative read.  I have been enjoying your brief departures of late from real estate views (as you say, if folks haven’t got it yet, only so much flogging of the dead horse you can do) to broader financial topics.  In that vein, a retirement question for you.

My wife and I are both 40.  Overall we are in good financial shape:  no consumer debt, house we can easily afford and will be paid off in about 10 years, cash in the kid’s RESP, decent sized emergency fund.  The one area we are potentially behind on is retirement savings…together we’ve got about $70,000 in RRSPs.  This is probably low for the kind of retirement we want but it is mitigated by the fact my wife is a teacher and is on pace to collect a pension of about $4,000/month when she is 60 (which alone would be enough for us to live comfortably…add in the CPP/OAS we are likely to get and we’ll have more than we need).  My question to you is this:  how much confidence would you have that these public sector pensions will still be around in 20 years and that those who, at this point are entitled to them, will actually see some/all of that money?  In other words, are we putting too many of our retirement eggs in this basket?

Scott thinks he and his squeeze are in ‘good financial shape.’ Compared to the half of Canadians who can’t afford groceries if they get paid seven days later than expected, he’s right. But that’s too low a bar to measure by. I actually think Scott could be hooped.

Fact is they’ll be 50 before the house is paid off, and it could be worth less then than now. It also seems, based on their meager investments, that day-to-day living expenses preclude much cash flow for liquid assets. An emergency fund (likely in a HISA) is a total waste of money, since that’s why God made lines of credit which cost nothing to have in place.

Seventy grand at age 40 just ain’t enough. Especially when it’s all in registered investments – which means it’s worth only $45,000 after tax. No mention of TFSAs, which are superior vehicles and should be the first thing anyone sticks money into. So obviously these guys are putting a huge amount of faith in a public pension which is going to take another 20 years to materialize.

Four grand a month may sound like a lot, but it’s actually $3,000, after tax. Add in CPP for both (at the max) and this equals $4,600 a month, net. I have a hard time understanding how that gives a good life, starting in 2032, especially with a child or two to raise and educate along the way.

But Scott asked about public pensions. Are they safe? In a word, dubious.

Only 28% of all Canadians now have pensions, corporate or public. Most of those are defined-contribution plans which have no set payout attached to them, and will be dependent on financial markets and economic growth. The bulk of people have no pension plan, or participate in an RSP-matching scheme with their employers, with the funds managed by outfits like Sun Life or Manulife, offering a slate of generic mutual funds. Performance for most has been abysmal.

Only one in ten has a defined-benefit pension plan like Scott’s teacher wife, where the final allowance is known years in advance. Or is it? In Ontario, for example, the teachers’ pension plan has a shortfall between projected income and future obligations of about $10 billion – even after contributions have been raised and benefits trimmed. In the US, retired cops, teachers, civil servants and firefighters have seen their pension payments rolled back arbitrarily by politicians running governments that simply cannot pay. Unfunded pension liabilities are estimated to be $2 trillion.

In Canada the Canadian Federation of Independent Business says the unfunded liability for civil servants alone is $300 billion, and would take a $9,000 contribution from every taxpayer to rectify. Like that will ever happen. The conclusion is simple. In a low-rate, low-growth, low-return world teetering on the edge of deflation with 50% of people living paycheque-to-paycheque, defined pension plans are too good to last. There is no government that will step in and rescue teachers who make $80,000 a year, then expect to retire on $60,000.

This, Scott, is why you’re at risk. Cut the spending and goose the investing. Open two TFSAs, get them fully funded (that’s $50,000 by next January) and properly invested in diversified growth assets. If your mortgage rate is 3% or less, stop accelerating payments and concentrate on a liquid portfolio. Mostly, stop feeling secure. You’re not.

Could it be worse? Yup. Look around you.

Garth Live in T.O. on Tuesday

A reminder for those sad people who have nothing else to do next Tuesday evening, and have reserved a seat to hear me whine and bleat: the event starts at 7 pm sharp, and you might wish to come a tad early to take in at least some of the Amazonian mud-wrestling. The location is the Toronto DoubleTree Hilton Hotel, on the airport strip at 655 Dixon Road. Admission is free, but don’t let that stop you.

244 comments ↓

#1 joe on 10.19.12 at 8:33 pm

yay furrrst!

why do i have the feeling im going to be 15th

#2 T.O. Bubble Boy on 10.19.12 at 8:41 pm

Thank goodness all of the MPs got together today and passed the changes to all future MP pensions (just not their own – of course).

#3 hp on 10.19.12 at 8:43 pm

Nice photo – it is Glacier Point in Yosemite. There are no Grizzly bears there!

Keep up the great work, Garth.

#4 Nancy on 10.19.12 at 8:45 pm

Ahhh, now I know where you get your photos – Facebook!

#5 Not 1st on 10.19.12 at 8:46 pm

“Unfunded pension liabilities are estimated to be $2 trillion.”

Corollary; Unfunded entitlements in the U.S.A are in the 10s of trillions. Result = hooped 100%

That is the public sector liability, the one most impactful on political decisions. — Garth

#6 george on 10.19.12 at 8:48 pm

Banks must be able to fail without taxpayer bail-outs or else the next rescue will provoke “almost uncontainable” levels of public anger, Bank of England deputy governor Paul Tucker has warned.

Paul Tucker warns backlash to another bank bail-out would be “uncontainable”

#7 TimV on 10.19.12 at 8:49 pm

Almost every reasonable scenario I’ve played ends-up with an RRSP ahead of a TFSA, if a choice must be made between the two. The only time a TFSA is clearly a better choice is when you do silly things like spend your RRSP tax refund. Unless I assume a tax bracket that yields a negligible RRSP refund, or unless I make bold (where, I suppose, my definition of bold may be different than someone else’s) assumptions about OAS and CPP, then I’ll take the RRSP.

The RRSP is guaranteed, but OAS certainly is not. I suspect most analysts do not consider that fact.

You’re right. The RRSP is guaranteed to be a tax bomb. — Garth

#8 John on 10.19.12 at 8:56 pm

I thought this was a very informative post. It’s starting to address the seriousness of the situation. The “normal” situation where people are trusting “the system” to look after them is made obvious by the real estate debacle. And once that is accepted, more of the story can unfold…such as was explained very clearly in this article.

As far as Scott’s question being helped by a changed investment strategy, it’s too early to tell. A case could be made for this, but even that contains too much “hope for the best”. Scott doesn’t understand the global financial system ( at least some potential risks), and the article didn’t go as deep into that as it could have.

One thing that has been brought up here over and over is deflation, inflation and gold. People get edgy on these subjects. A level-headed discussion on these and how it touches Canadian life wouldn’t hurt.

#9 Ralph Cramdown on 10.19.12 at 8:59 pm

Thanks for pointing out that a LOC makes a great emergency fund, Garth. I’m tired of hearing experts say you need three months sitting in cash earning nothing for emergencies, and if you plan on buying anything in the next few years, fer gawd’s sake don’t put any of THAT money at risk by putting it to work…

#10 disciple on 10.19.12 at 9:05 pm

Well, it’s safe to say that 18% of respondents lied… Your buddy BaNanos should quit picking on The Bridle Path residents for these stupid meaningless polls… How about get Revenue Canada to give us a monthly rundown along with Equifax? That would be more accurate… yeah, not a good mood today…

#11 JSS on 10.19.12 at 9:05 pm

“that’s why God made lines of credit which cost nothing to have in place”

Never rely on an LOC for emergency. Banks have been known to shut down LOC’s arbitrarily.

#12 disciple on 10.19.12 at 9:11 pm

And another thing… even $5000 or $6000 or $7000 a month still somehow ends up seeming like $3000 (tax bracket magic)… it removes incentive, creates a nanny state, and inversely promotes white collar (and blue collar) crime and fraud… Where are the proposed solutions? Oh yeah, economic action plan mumbo jumbo, while foreign interests are allowed to buy up Canadian capital… traitors, all of them…

#13 Nemesis on 10.19.12 at 9:16 pm

“Could be worse [etc].” – Hon. GT

Yikes! We’re practically talking BroMance.

Clearly, it’s time to focus on my Donkey. And call my OneTrueSweetHeart.

[“A Four Legged Friend — A Four Legged Friend D7 G He’ll Never Let You Down C He’s Honest And Faithful Right Up To The End (First Time Only) D7 G G {D7 D7 G G} That Wonderful One Two Three Four Legged Friend…”]

#14 Tired of Saskatoon on 10.19.12 at 9:17 pm

Still, “It’s Different Here.” That’s one of the reaction of one of my colleagues after reading this post. Another one told me that “This won’t going to happen as it never happened before. We have Potash here and uranium and China will continue to grow.”

He just bought a 500k house this week.

#15 East Van on 10.19.12 at 9:18 pm

(c) There’s a mother of a retirement crisis looming, especially with real estate swooning.

So why did the CONs change OAS so that poor people will no longer be able to collect at 65?

The rich get richer, the poor get screwed by Harper!

#16 THE KIDNEY DIALYSIS WIFE on 10.19.12 at 9:19 pm

18%? And to think Koreans think Canadians are rich. Haha.

#17 Fabrega on 10.19.12 at 9:28 pm

“Unfunded pension liabilities are estimated to be $2 trillion.”

How about the politician parasites? How much of the tax payers money go to finance the circus and the gold plated pension plans of the clowns? Of course their pension plan will never have “Unfunded pension liabilities”.

#18 Randy on 10.19.12 at 9:29 pm

Garth …Is it too late to reserve a seat ?

#19 Dan from Richmond Hill on 10.19.12 at 9:32 pm

An emergency fund (likely in a HISA) is a total waste of money, since that’s why God made lines of credit which cost nothing to have in place.

Could this be one of the source of the problems in western countries ? Too many lines of credit and no savings ?

#20 T.O. Bubble Boy on 10.19.12 at 9:35 pm

And… apparently the MP plan of $158k/year, 100% pension match (for a guaranteed taxpayer-funded pension), and perks galore is COWARDLY:
http://www.montrealgazette.com/business/Changes+parliamentary+pension+plan+cowardly+says/7416289/story.html

#21 Timbo on 10.19.12 at 9:36 pm

Very good advice again Garth. bravo….

http://www.testosteronepit.com/home/2012/10/17/fear-of-impending-economic-collapse-or-just-manipulation.html

“Now, suddenly, these CEOs have become morose. 58% expected sales to increase over the next six months, down from 75% in the prior quarter. By comparison, on the eve of Lehman and AIG, 78.8% of these prescient CEOs had expected sales to grow—and watched with astonishment the nosedive weeks later. Only 30% of the CEOs said they would increase capital expenditures, the lowest score since Q3 2009. And only 29% expected to create jobs, while 34% expected to cut jobs. For a direr picture, you have to go back to Q4 2009—when the unemployment rate perforated 10%!”

Interesting!? CEO’s when faced with paying more decide to threaten doom and gloom…….

http://www.marketwatch.com/story/the-next-stock-market-crash-will-be-tweeted-2012-10-19

” “Twitter would change the whole dynamic,” money manager Michael Holland of Holland & Co. told me. He suggests that this time, small investors would have easier access to the kind of market-moving formation that only Wall Street insiders were privy to in 1987.

Twitter would cause “a democratization of the experience — and in real time,” Holland said. ”

Social media leading the charge into speculative freakout with a side of finger pointing…………..

#22 Andy on 10.19.12 at 9:37 pm

“Open two TFSAs, get them fully funded (that’s $50,000 by next January) and properly invested in diversified growth assets.”

It’s not a big deal but the total would be $51,000 since the annual contribution follows the inflation and for the fifth year the contribution available will be $5,500.

Keep the good work Garth.

#23 george on 10.19.12 at 9:40 pm

And the way I see it, the Fed, ECB and global central bankers today fight a losing battle. The mountain of global debt, securities, and derivatives, along with this destabilizing global pool of speculative finance, just inflate larger by the year – and after each policy response. And the more outrageous the policy measures implemented to try to resolve each crisis, the more these desperate measures further inflate the global Bubble. Ironically, the ongoing assurances of central bank liquidity seem to ensure an eventual crisis beyond the liquidity capacity of central banks. Happy 25th Anniversary, you aged and ornery Credit Bubble. They’ll be reading, writing about and studying you for at least the next century.

http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10721

#24 Ralph Cramdown on 10.19.12 at 9:42 pm

How about the politician parasites? How much of the tax payers money go to finance the circus and the gold plated pension plans of the clowns?

You need to crack the books and learn the difference between a THOUSAND, a MILLION, a BILLION and a TRILLION.

If it would improve their quality, I’d gladly vote for a salary of $1,000,000 for each member of the House of Commons along with a pension of $500,000 a year starting at 65. That’s the price of a gun registry or or an Ontario eHealth scandal every couple of years — which is absolutely peanuts compared to the overall budget. Governer General’s budget is $20 million a year? OMG, the Commons should have spent about 20 minutes talking about that one!

Understand the big picture, and you’ll begin to realize that a lot of these outrages are meant to distract you from the bigger issues.

#25 TurnerNation on 10.19.12 at 9:44 pm

Three more sleeps until a bearded guy brings presents to us, in Toronto!

#26 lawboy on 10.19.12 at 9:44 pm

Dream on Garth. Canadians will be taxed to the extent necessary to fulfill the government’s civil service pension obligations.

#27 TurnerNation on 10.19.12 at 9:50 pm

“with the funds managed by outfits like Sun Life or Manulife, offering a slate of generic mutual funds”

True. I am in one. I rotate between cash, PH&N Bond fund, and a TSX monthly income fund.

Let’s see how that’s done. Just logged in to check it. I did go with 70% into the Bond fund last week which is just now begining to show life again.

Since October 17, 2008 * 5.4%
* Annual compound rate of return.

#28 Bottoms_Up on 10.19.12 at 9:51 pm

$4600 in today’s dollars is enough to live a decent retirement, but you wouldn’t be living in lavish luxury.

In 2030’s dollars that’s probably the equivalent of $2000 today. Meaning Scott and his wife will be eating cat food if they end up having no other source of income.

#29 Brad in Cowtown on 10.19.12 at 9:52 pm

Garth, when are you coming to Calgary? I promise I won’t throw anything at you. If I didn’t know better, I’d say you understand, deep down, Calgary’s real estate market is relatively healthy and not destined for the fall coming to Vancouver, Toronto, etc.
So it makes sense you wouldn’t want to speak here.

#30 Picasso on 10.19.12 at 9:56 pm

Ok Garth lets get this blog up to 2012

Have replies, thumbs up/down…. you know what I mean?

I don’t want to read through 200 posts of crap

I want to search on most popular or replied or newest or oldest

Spend a little money an upgrade this POS !!

#31 Charles Ponzi on 10.19.12 at 9:59 pm

‘Cut the spending and goose the investing.’

I can see a Depression coming.

#32 debtified on 10.19.12 at 10:08 pm

Fort McMurray Update:

Royal LePage’s third quarter House Pricing Survey results are in, and while Fort McMurray saw a slight increase in the price of two-storey homes, condo prices evened the playing field by taking a sizable dip.

Year-over-year results show average two-storey home prices have increased by 1.4% to $730,000, detached bungalow prices have decreased by 1.8% to $625,000, and standard condominium prices plummeted 7.9% to $350,000.

Source: http://www.fortmcmurraytoday.com/2012/10/03/local-condo-prices-sink

#33 jay on 10.19.12 at 10:08 pm

OK, thanks for the advice Garth.

If my mortgage is 2.1% (and we are paying more than the required), I do not need to pay it down faster?

I live in Vancouver West.

#34 Tim on 10.19.12 at 10:09 pm

You don’t think the government would step in to shore up any shortfalls with teachers pensions? Come on, they have a tough deal: they only have 3 months holidays–not including the “professional” development days, job security, and are not paid on performance.

#35 Mr Buyer on 10.19.12 at 10:11 pm

#30 Picasso on 10.19.12 at 9:56 pm
Thumbs down

#36 Picasso on 10.19.12 at 10:17 pm

#35 Mr Buyer on 10.19.12 at 10:11 pm

What are you backwoods, no life, uneducated, just stupid?

I’m bored silly after 20 posts !!

#37 Mark W on 10.19.12 at 10:18 pm

http://philadelphia.cbslocal.com/2012/10/19/survey-40-percent-of-americans-have-500-or-less-in-savings/

40% of Americans have less than $500.00 in savings.

So if Scott and his wife crash and burn the vast majority of the general population will hit the wall long before them.

#38 Cory on 10.19.12 at 10:21 pm

“and would take a $9,000 contribution from every taxpayer to rectify.”

I don’t know, seems CPP contributions might get there soonere than later. Creeping up every year….2217.60 max per year plus employers contribution of the same….adds up quick.

#39 Seven Stars and Orion on 10.19.12 at 10:22 pm

Garth, I like the format of your blog. It encourages people like me who have little to contribute to shut the hell up. (er, most of the time) Most would agree that allowing replies would lead to open warfare around here, compared to the skirmishes we currently witness.

#40 wes coast on 10.19.12 at 10:22 pm

Seems to me that working for a living is stupid. Go on welfare. Defined benefits right there. Dental. Medical. No stress. You don’t even have to wait until you are old and wrinkly. Enjoy your young years on the suckers that feed this BS system.

#41 moneyville! on 10.19.12 at 10:28 pm

??

http://www.moneyville.ca/article/1272912–you-need-advice-from-experts-to-invest-in-residential-and-commercial-rental-properties

p.s. i kinda like sorting through all the comment here…good and bad :)

p.p.s. cheers to garth for allowing an open forum for expression on his blog!

#42 Network Admin on 10.19.12 at 10:40 pm

#11

Yes, LOC is not always a replacement for the emergency fund
http://queercents.com/2008/03/26/citibank-freezes-home-equity-lines-of-credit-helocs/

A personal line of credit is not a HELOC, and Citibank’s American. Emergency funds are relics. — Garth

#43 Van guy on 10.19.12 at 10:43 pm

Devore,

Do you see what I mean about the 20% decline in seafair? Whenanother sale actually happens, I’ll let you know.

#44 Doug in London on 10.19.12 at 10:56 pm

56% of Canadian women said yes. 46% of men agreed. Only 18% said it wouldn’t be a problem.

Wow, that many people would have trouble if they missed a pay cheque? That tells me we’ve failed as a society at financial education. I would expect that in a poor third world country, but not an affluent one like Canada.

#45 Ronaldo on 10.19.12 at 11:04 pm

”You’re right. The RRSP is guaranteed to be a tax bomb. — Garth”

Can’t believe why people havn’t figured this out yet. Too many have discovered too late. TFSA by far the way to go unless you like paying taxes. Especially those in the lower to middle income brackets. TAX TRAP.

#46 Jamie on 10.19.12 at 11:09 pm

Two points. You can’t add CPP to the teacher pension as it is included in the pension amount of $4000.00 per month. Since teachers retire so early, their pensions are topped up with the equivalent of their CPP until they reach the age they would collect CPP then their pensions are reduced by that much so in total they continue to collect the same amount, in this case $4000.00.
The $4000.00 is based on best 5 years salary so is reflective of what a teacher is making now. So in 20 years or whenever she retires, any pay raises she has had which I am assuming will keep pace with inflation will result in her pension being the inflationary value of $4000.00 today.
OK one more point. I am a teacher and worked in the private sector for 10 years before becoming one. I love it and I’m happy with the money I make, and the time off I have to spend with my family. I don’t work nearly as many hours as I used to although I did take a pay cut to become a teacher. It is a great job to have, but I challenge any one of you that bitches about us to try doing what we do. It isn’t for everyone. Most of you would fail.
Thanks Garth, love this blog.

#47 eviee1973 on 10.19.12 at 11:09 pm

I heard the Alberta government bailed out the greedy Alberta teacher’s pension approx. five years ago to a billion or two, not sure the precise amount.

#48 Devore on 10.19.12 at 11:13 pm

#42 Van guy

Clearly text is not a suitable medium for sarcasm, but it sure got you all excited.

#49 Julian on 10.19.12 at 11:16 pm

I find the RRSP vs TFSA discussion interesting. I think everyone should agree that’s it’s not one-size-fits-all and it’s hard to say definitely that either is superior, especially if you’re trying to predict decades in the future.

One thing I find interesting, but that I don’t see oft mentioned, is whether we really believe with all the pressure coming on public finances, that 20 to 30 years down the road (assuming we’re all here), the gov’t is really going to maintain a policy where income derived from TFSA’s does not impact means-tested benefits?

I just find that hard to believe.

Garth, I like your last line summarizing the situation re public pensions (using the teachers as an example). Public sector workers retiring within the next 5 to 10 years maybe won’t see much change, but I think the younger folk in “defined benefit” plans better take a step back and reconsider what “guaranteed” means.

#50 Ronaldo on 10.19.12 at 11:22 pm

#36 Picasso

”I’m bored silly after 20 posts !!”

Nobody is forcing you to come here. Leave.

#51 squidly77 on 10.19.12 at 11:23 pm

Be very, very wary of the statistics offered up by the Calgary real estate board. They have continually changed their reporting criteria.

#52 DodgedBullet on 10.19.12 at 11:41 pm

Thanks for heads up, Garth.

I’ll bring my poncho.

Bests, Ben.

#53 THE CELIAC HUSBAND on 10.19.12 at 11:41 pm

Including myself, pension time is what we neglect a lot.
Who in their healthy mind is thinking twenty years down the road? Nobody, with all the things to do today.

Time to start thinking. I’ll probably need some higher risk vehicles to catch up

#54 Investx on 10.19.12 at 11:49 pm

“a pension of about $4,000/month ”

Not bad. Must be nice.

#55 From Mississauga with Love on 10.19.12 at 11:49 pm

Mississauga update:
8 to 9 listings in my in-laws’ area of Heartland have been languishing for months with some price drops but not a single one sold.
People are being stubborn, though. 3 today (on the same street) just took their listings off. Nobody wants to admit reality. It is interesting if they will relist in the spring.
Track 6ers are stupid….

#56 Snowboid on 10.19.12 at 11:58 pm

Not too sure about other pension plans, but the BC PSPP claims sustainability for ‘base’ pensions.

This means inflation adjustments are not guaranteed.

When the valuation in 2011 showed the plan down to 98%, the decision was made to increase contributions and cut additional benefits in April of this year.

But the fund is pre-funded – which means each generation pays their own share of their pension. 75% of pension funding comes from the investment income.

Not to say there aren’t risks that younger employees will see the same plan 20 years down the road.

BC PSPP Q&A at http://tinyurl.com/9mosetn

BTW, the average 2010 pension was $ 18,197 – not exactly gold-plated!

#57 Hugh Jasz on 10.20.12 at 12:04 am

http://philadelphia.cbslocal.com/2012/10/19/survey-40-percent-of-americans-have-500-or-less-in-savings/

40% of Americans have less than $500.00 in savings.

I recently read somewhere that about 50M yanks are on food stamps. That would account for a sizeable chunk of the 40%. Really doesn’t surprise me as that fits with our own poll responses that 50% of Canadians are in tough.

As for TFSA vs. RRSP, I like putting just enough into the RRSP to get the $5K odd tax credit which can then fill your TFSA.

#58 Jounce on 10.20.12 at 12:05 am

This piece is most refreshing bucket-of-ice water dumped on the civil servant class yet. A fully cogent if not presentient analysis … classic Garthology and a depressingly well written wake-up-call.

#59 ozy - beg to differ on 10.20.12 at 12:09 am

beg to differ, TSFA, RRSP, RESP – kanatian gov. elite scam to dump tax-farm slaves.
put your money somewhere else folks, in non FED-24/7-Printing-Banks countries.
See you ar retirement, hope safe & sound

#60 ozy - beg to differ on 10.20.12 at 12:15 am

Beg to differ Garthello, TSFA, RRSP, RESP – pure Kanatian (copyright Ozy) gov. elite scam to dumb tax-farm slaves (copyright SmokingMan) into submission.

Put your money somewhere else folks, in non FED-24/7-Printing-Banks countries, skip USD, CAD, GBP, AUD

See you ar retirement, hope safe & sound, don’t die working for your upper-class management bonuses.

#61 Ronaldo on 10.20.12 at 12:15 am

#48 Julian –

”One thing I find interesting, but that I don’t see oft mentioned, is whether we really believe with all the pressure coming on public finances, that 20 to 30 years down the road (assuming we’re all here), the gov’t is really going to maintain a policy where income derived from TFSA’s does not impact means-tested benefits?”

Check out these links:

http://dspace.cigilibrary.org/jspui/handle/123456789/13832

http://dspace.cigilibrary.org/jspui/browse?type=author&value=Shillington%2C+Richard

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1581672

http://www.cdhowe.org/pdf/temp/backgrounder_86.pdf

Hope this answers your question somewhat.

#62 AACI Home-Dog on 10.20.12 at 12:19 am

Garth said:
“Admission is free, but don’t let that stop you.”
…hilarious…
anyway…being near retirement, if I have a potentially “huge” RRSP tax bomb…
what kind of alleviatory action may I be able to take…?
thanks, garth

#63 live within your means on 10.20.12 at 12:21 am

#19 Dan from Richmond Hill on 10.19.12 at 9:32 pm
An emergency fund (likely in a HISA) is a total waste of money, since that’s why God made lines of credit which cost nothing to have in place.

Could this be one of the source of the problems in western countries ? Too many lines of credit and no savings ?
………………………

Pardon my ignorance, but what is a HISA?

#64 Concessionman on 10.20.12 at 12:22 am

“The location is the Toronto DoubleTree Hilton Hotel, on the airport strip at 655 Dixon Road. Admission is free, but don’t let that stop you.”

After-Party at the Landing Strip?

#65 AACI Home-Dog on 10.20.12 at 12:26 am

Re: Seven Stars and Orion…said…

“Garth, I like the format of your blog. It encourages people like me who have little to contribute to shut the hell up. (er, most of the time) Most would agree that allowing replies would lead to open warfare around here, compared to the skirmishes we currently witness”.

I agree. Plus, it would take us 10 times as long to get through it all. I waste enough time on this pathetic blog already !

#66 AprilNewwest on 10.20.12 at 12:31 am

Picasso #36 – How ungrateful! Garth is providing a free service here which must be a full time job. How dare you complain.

#67 OlderbutWiser on 10.20.12 at 12:32 am

I think that what you will see happen with public DBP plans is that the earliest date that one can retire with any pension benefit at all, will slowly inch upward until you will not be entitled to claim a benefit until you reach the age of 65 or perhaps even older. This will be regardless of the number of years of service. The taxpayers in this country who will be lucky to ever afford to retire, will insist upon it.

#68 Van guy on 10.20.12 at 12:41 am

#47 Devore on 10.19.12 at 11:13 pm
#42 Van guy

Clearly text is not a suitable medium for sarcasm, but it sure got you all excited.
—————————————–

212-14200 Riverport way Richmond

Listed May 2012 498,500
After 9 reductions
Now 362,900
Assessed 432,000
2 bdr 1100 Sq/ft. south facing the river

4 sales last year in this building all went for over assessment. This one is asking 16% below assessment!

http://www.realtor.ca/PropertyDetails.aspx?propertyID=12077976&PidKey=-224222450

5491 cathay road richmond.
66×119
assessed 1,070,000
sold 1,400,000 feb 2011

8411 carmel road
66×120
asssesed 1,100,999
sold 900,000 sept 2012

500ft between them. same block

thats a 36% decline in 18 months.

There’s way more! Van west sales are seeing below assessment sales. Lots of price reductions everyday. The market is changing fast and many people can’t sell now because they as already underwater. With lots of inventory (around 2300 in rich) and more to hit the market early next year, I think Richmond will crash and Van west could see the same.

#69 live within your means on 10.20.12 at 12:49 am

#24 Ralph Cramdown on 10.19.12 at 9:42 pm
How about the politician parasites? How much of the tax payers money go to finance the circus and the gold plated pension plans of the clowns?

You need to crack the books and learn the difference between a THOUSAND, a MILLION, a BILLION and a TRILLION.

If it would improve their quality, I’d gladly vote for a salary of $1,000,000 for each member of the House of Commons along with a pension of $500,000 a year starting at 65. That’s the price of a gun registry or or an Ontario eHealth scandal every couple of years — which is absolutely peanuts compared to the overall budget. Governer General’s budget is $20 million a year? OMG, the Commons should have spent about 20 minutes talking about that one!

Understand the big picture, and you’ll begin to realize that a lot of these outrages are meant to distract you from the bigger issues.
……………….

So very true.

#70 Mackie on 10.20.12 at 1:04 am

Jamie you got it tough. I bet you the majority of people on this blog could not only do your job but do it better and with more enthusiasm. Take your publicly funded pensions and your work-to-rule and get lost.

#71 Xindai Shan on 10.20.12 at 1:04 am

To anybody not used to heading into the city AND heading to Garth’s talk on the 401 eastbound, allow a A LOT of extra time. With construction, lane closures and resulting stupid road twists and turns, the eastbound 401 is a mess these days.

Seriously, there were more crazy accidents (and resulting slow traffic) in September/October, than I normally experience in a year. Allow double the time or take the 407 to Airport Road and head south.

#72 Deano on 10.20.12 at 1:05 am

I’m curious as to what will happen to my pension when the braying Toronto Sun readers come for it.

Let’s say they convert it to a defined contribution plan at some point (I have 20 years until retirement)…do at least get the money back I put in? Am I just paying for the retirement of the greedy a**hats who are retiring at 55?

#73 live within your means on 10.20.12 at 1:16 am

#26 lawboy on 10.19.12 at 9:44 pm
Dream on Garth. Canadians will be taxed to the extent necessary to fulfill the government’s civil service pension obligations.

…………………
Dream on Lawboy – I was a silly servant for a prov govt & previously a few years with the feds in Ottawa. Bought back those Fed years so I could retire early to get out of the never ending restructuring schemes. My prov. ‘DFB’ pension is now 1.25% & believe I’ll lose all in future years. BTW, I paid lots of $$$$ into my pension plans. Is it my fault the market collapsed? And, BTW, I had no choice with whom to invest.

#74 Bill on 10.20.12 at 1:22 am

#50 squidly77 on 10.19.12 at 11:23 pm

I can’t help but notice the glut of for sale signs in Calgary neighbourhoods that I drive through everyday. Don’t quite understand how listings keep going down every month. Don’t trust the stats they post one bit.

#75 City Slicker on 10.20.12 at 1:31 am

It all sounds good to be one of the “lucky” ones to be in a DB pension with schools or government. But the truth is the amount of contributions employee’s pay into them is crazy. They are better off taking the money and putting it into a TFSA. Or those who look at DC’s as inferior, if you took the same contributions going into DB’s you’d be better off with a DC.

#76 dv8 on 10.20.12 at 1:37 am

When money is printed the beneficiaries are the recipients of the counterfeited cash and the victims the public that must pay for the counterfeited cash with higher prices.

One sentence, done.

#77 Tony on 10.20.12 at 1:48 am

Just like the Canada Pension Plan the teachers pension will see year after year of negative returns in the future years. All that money Scott thought he’d see in the future won’t be there.

#78 Soylent Green is People on 10.20.12 at 2:12 am

Re this line

An emergency fund (likely in a HISA) is a total waste of money

I don’t get that
A line of credit u have to pay back
Fat equals stress

O

#79 Cityboy on 10.20.12 at 2:26 am

Curious position on rrsp vs tfsa, which is currently only 5k a year. I fund my tfsa via rrsp refund. Assuming one is in an higher income bracket, and refunds are re-invested, the tax deferred on the rrsp works for you.

Everyone’s personal circumstances are unique to them.

#80 Teulon on 10.20.12 at 2:28 am

#32 Debtified

You forgot to mention the $300K pieces of dirt to put your trailer on in a 40 year old poorly maintained trailer park! Or you can buy a new trailer (sorry – manufactured home) on a site for around $450K. Good thing wages are through the roof in Ft Mac

#81 Tron on 10.20.12 at 2:41 am

None of us in Canada should worry about being broke when we get old and can’t support ourselves. All we need to do is a crime that will convict us for the reminder of our lives. Here’s what will get:

A clean room with a bed and toilet
Internet and television
3 meals a day
Full medical, dental and eyewear
Diapers
Time to read
A gym
Lots of new friends with interesting stories
Our families can visit at scheduled times

H is busy building these retirement homes at breakneck speed. They may call it Prisoner 65.

#82 Jane24 on 10.20.12 at 3:55 am

Disagree.

We always keep one year’s salary in the bank for family emergencies for us and our three grown-up children. We sleep very well at night and it came in useful this year for a wonderful but unexpected child’s wedding.

Cheers

#83 Freedom First on 10.20.12 at 4:16 am

Garth, love the pic! Most unfortunate, but I know a number of people living on the edge like that right now. It is one thing to read about the debt levels in the news, and hear the hardship stories on your blog, but quite another to hear the people telling their stories up close and personal. Scary thing, I am usually more scared for them than they are for themselves, as the “edge” has become normal for them. Don’t get me wrong about being scared, as in reality, I am just really really grateful I am not them. We are screwed.

#84 Mike on 10.20.12 at 5:17 am

Great post.

#85 detalumis on 10.20.12 at 5:17 am

I suggest you look at your numbers again, this couple does not need to save an additional dime to have a decent retirement as long as they do not get divorced. With the miracle of income splitting they will have about 70K gross from 1 teachers pension with CPP rolled in as per #45, 2 OAS’s, 1 CPP. They will have about 70K yearly in today’s dollars and only pay about 6K income tax giving them a monthly net income of over 5K. All their sources are also inflation adjusted. When I was earning 100K I never had more than 4,000 a month net after paying mega taxes and socking away the max into RRSP and every other savings vehicle so yes I would live like a queen on 5K plus particularly with a paid up house at that point in life. I would live better than the vast majority of working couples who are paying higher taxes to hand over money to seniors who don’t need the break.

Pension splitting for seniors is really a great bonus, I know 100K couples that have an extra $1,000 a month because of it. The two things that might ruin their retirement are a) tax law changes to take away pension splitting which is unlikely since seniors seem to be untouchable b) a divorce

#86 [email protected] on 10.20.12 at 5:24 am

I’m a huge fan of TSFA’s myself.

TSFA’s, RRSP’s, why wouldn’t a person use them both? They both have their place. RRSP’s are a nice tax deferral that should be used to keep one in a lower tax bracket if possible and they can be used down the road for a down payment on RE to avoid taxes on RRSP’s should the numbers and nesting factor come into play down the road so RRSP’s are not a bad thing at all. If its not possible to drop into a lower tax bracket with the use of RRSP’s, I would use allowable RRSP contributions anyway and kick the tax can in case incomes down the road for whatever reason, slump. Health is never a sure thing and should RE buyers take an ugly capital loss, the door could open for cashing in RRSP’s without tax issues.

With savings that has had taxes paid on, why wouldn’t we use a TSFA to invest with aggressively? It’s capital gains free!!!!!!!!!!! That spells a major tax break if investments do well and I would gamble with TSFA’s to be blunt and load them up to the maximum allowable contributions with stocks precisely because its a gains free account but thats just me. I like to gamble.

One could be conservative and load TSFA’s up with bonds, preferreds, REIT’s or ETF’s but because any profit made inside a TSFA is gains free, one should throw some caution to the wind and gamble with an account like TSFA’s and leave the cautious conservative plays for RRSP’s and regular trade accounts.

Take for example what GWY:TSX did today. This is a stock that went up 37% today (along with Calvista at 57%, AUX was busy today). The buyout with GWY was inevitable and sure there is steep risk with stocks but there is also reward if you are patient and guess right. Remember, there are zero capital gains with securities that pop in TSFA’s as opposed to 50% gains with regular trade accounts so basically, a smart investor will have a minimum of 3 accounts: a regular trading account, a TSFA account and an RRSP account. I would use the TSFA to gamble with in the form of stock investments and with the other two accounts, be much more conservative with investments in order to insure wealth preservation and slow but steady growth that insures a comfortable retirement with a model similar to, if not identical with what Garth suggests here at greater fool.

Thats my two cents anyway and should the worst case scenario unfold and stocks get hammered inside TSFA’s, I would stick with allowable contributions of $5,000 each year with TSFA’s and keep investing in stocks with a TSFA account regardless. At some point investor experience and/or a bull run will come along and get you back to par plus and if it never happens, well… you’ll know exactly why it is that Garth preaches diversification, conservative investing models and seeking the council of a good FP.

Our host teaches investing cautiously and conservatively for obvious reasons and that takes discipline and savy but the word diversifcation is also used quite frequently on this blog. Its not foolish to hold a small investment position for stocks and TSFA’s are literally designed for them. Anyone who has experienced measurable gains in the markets knows exactly why that is. No taxable capital gains as opposed to 50% taxed capital gains is a pretty sweet tax break should you ever pick a winner and add a zero.

#87 Francis on 10.20.12 at 6:12 am

Most depressing. Poor Scott and his wife. Following your comforting advice, they may rate a suicide watch !

70% own homes, if that’s not a pregnant bubble I would like to know what is. This pending disaster could have been avoided.

I have just read minutes of the Canadian Real Estate Association Political Action Committee dated March 27, 2007. It highlights the guilty dramatis personae in a frenzy, even while Rome (U.S.) was burning.

#88 Buy? Curious? on 10.20.12 at 6:42 am

Garth, I’ve secretly have a hard-on for this correction to take place seeing how such a correction had a devestating effect on people’s lives. I thought it would be my vengeful insecure god striking down my enemies. But you know what? It isn’t the people I hate that are beginning to suffer, it the people I like. I found out that one of my girlfriend’s husband lost his job and another who has a kid on the way, self-employed, hasn’t had a cheque since the summer and his wife that works as an independent contractor can’t claim benefits or mat leave. I don’t know what these people are going to do. Soon you’re going to see alot more of your friends going broke soon. Quiet bankruptcies will happen sooner than you think. Be warned, and hope it doesn’t happen to you!

Smoking Man, Motivational Speaker of the Year 2012!!

http://www.youtube.com/watch?v=eAAw05J-6ek

#89 John on 10.20.12 at 6:51 am

Mark W wrote:

http://philadelphia.cbslocal.com/2012/10/19/survey-40-percent-of-americans-have-500-or-less-in-savings/

40% of Americans have less than $500.00 in savings.

So if Scott and his wife crash and burn the vast majority of the general population will hit the wall long before them.”
———-

Yet somehow the above fact would still allow Scott and his family to “ride things out” if it gets to that.

He just needs to make some “good investment decisions” now to avoid being pulled into the disarray. Institutions as we currently understand them would just keep on functioning. Nothing to look at here. Move along.

That thinking truly is denial-based. Insanity.

#90 tkid on 10.20.12 at 7:32 am

Scott,

do NOT rely upon your wife’s pension – it won’t be there when she goes to retire. When the pension plan was first founded there were 10 working teachers supporting the pensions of every retired teacher. Back in the 90’s it dropped to 5 working teachers supporting the pensions of every retired teacher. Now it’s 1.5 working teacher to support the pension of every retired teacher.

Yes, if she gets the $4000 you’ll both be on easy street IF you are both still together – but the odds of her getting her pension are not in her favour.

Yes, I know they deduct quite a bit from her paycheque to go towards her pension. Call it a tax, call it out right thievery, but don’t expect to ever get that money back.

http://business.financialpost.com/2012/05/07/teachers-pension-plan-ceo-offers-dose-of-reality/



Troubling is the fact that there are now only 1.5 working teachers for every retiree … “In 15-20 years it will be 1:1. It was 10:1 in 1970 and 4:1 in 1990. As the signs came in that the assumptions were wrong, the changes weren’t made.”

#91 tkid on 10.20.12 at 7:45 am

Disagree on expecting a LOC to be an emergency fund as it leaves you at the mercy of the banks. Better to stash some cash IMHO.

But if the TFSA had been around back when I started saving for retirement, I would have saved money into that first. And a TFSA is a perfect place for emergency funds cash as you can withdraw funds, including earnings, tax free.

#92 Ballingsford on 10.20.12 at 7:48 am

#36 Picasso on 10.19.12 at 10:17 pm

#35 Mr Buyer on 10.19.12 at 10:11 pm

What are you backwoods, no life, uneducated, just stupid?

I’m bored silly after 20 posts !!
*********************************

Picasso, shouldn’t you be painting or something?!?!?!

#93 yorel on 10.20.12 at 7:51 am

$4,600 a month, net, isn’t enough?

#94 Bigrider on 10.20.12 at 7:58 am

“It’s a great time to start looking for an investment property”

http://www.moneyville.ca/article/1272912–you-need-advice-from-experts-to-invest-in-residential-and-commercial-rental-properties

Garth, have you started you search yet ? LOL

#95 Deb on 10.20.12 at 8:14 am

The TFSA is to be indexed to inflation and contribution limits are supposed to be adjusted accordingly every five years. I suspect that the new limit should, therefore, increase from $5,000 to roughly $5,500 effective January 1, 2013.
It’s only ten weeks away and I haven’t yet heard a peep from Ottawa about this.

Don’t hold your breath. — Garth

#96 neo on 10.20.12 at 8:15 am

“that’s why God made lines of credit which cost nothing to have in place” – Garth

You know what costs you nothing. Setting up a weekly and an annual budget and tracking all your expenses. Even software is free now. Google Microsoft Money Sunset. That is now a free program. You needed to combine this post with the post that 2/3 of Canadians don’t budget. THAT is the bigger issue. They have no idea where their money is going. If you knew where every penny was going you wouldn’t need an emergency fund OR a line of credit because you would never put yourself in that situation. Living below your means is the emergency fund. Getting in over your head in debt and then bailing yourself out with a line of credit, which is more debt, is basically Southern Europe’s solution. Which isn’t one.

#97 live within your means on 10.20.12 at 9:01 am

#82 Freedom First on 10.20.12 at 4:16 am
Garth, love the pic! Most unfortunate, but I know a number of people living on the edge like that right now.
………………………

We do also, but I no longer feel sorry for them.

#98 live within your means on 10.20.12 at 9:18 am

The following is TOT, but a friend sent me this video yesterday. I’m a lover of horses. Took English riding lessons eons ago in Hudson, Quebec. These horses remind me of the Lipizzan Stallions. Music is fabulous too.

Friesian Horses”——–

Their manes and tails are the longest that I have seen and I noticed that when performing on grass, their hoofs do not kick up a divot (they land flat footed). This is truly a special video about a very special breed of animal.
Creatures such as these are what makes this world so special. These horses are native to the Netherlands…. It should make your day.
Click below:

_”_

#99 Linda Pearson on 10.20.12 at 9:24 am

#62live within your means on 10.20.12 at 12:21 am

Pardon my ignorance, but what is a HISA?
…………………………………………………………………………..

No ignorance inferred – I didn’t get it either until the 2nd reading after my coffee. It means “high interest savings account”. However, the word ‘high’ is just laughable nowadays, isn’t it?

By the way…how are you feeling lately? Very well, I hope.

#100 housedoc on 10.20.12 at 9:26 am

“It’s a great time to start looking for an investment property”

http://www.moneyville.ca/article/1272912–you-need-advice-from-experts-to-invest-in-residential-and-commercial-rental-properties

Garth, have you started you search yet ? LOL
—————————————————————

How is that funny?
Garth is downright inspirational in his occasional sharing of some awesome properties.
He’s always looking.

#101 Mackie on 10.20.12 at 9:28 am

[email protected]: I agree with you totally. TFSAs are the perfect place for more high-risk investments (if you have the courage and time to investigate what small cap stocks have high potential.) I take it another step and put many small-cap stocks in my RRSPs. Life is full of risk, and if you are willing to do the research and work, you can do much better in small cap high growth stocks than a conservative diversified approach. But, and it’s a big but, it’s not for everyone. Most will lose big time with this approach.

Stocks in RSPs have distinct disadvantages in having tax-efficient capital gains eventually taxed as income at a much higher rate, and also losing the ability to deduct losses (and there will be many) against capital gains. — Garth

#102 live within your means on 10.20.12 at 9:28 am

Looks like my link didn’t work on this blog. If you’re interested go to Youtube and enter friesian horses. The title is The KFPS Royal Friesian Horse. Really worth watching IMHO.

#103 Tony from Calgary on 10.20.12 at 9:38 am

Garth,

You mentioned yesterday or earlier this week that once the housing bubble bursts that this blog will have to focus on something other than houses. I sincerely hope you’ll keep a lot of focus from the contrarian’s point of view on the risks to pensions in Canada, both defined benefit and contribution plans, as I haven’t seen much analysis in this area save for the blog Pension Pulse ran by a sometimes overly-optimistic Leo Kolvakis.

Pension plans in general strike me as legalized ponzi finance, but anemic growth for the next several years and demographic trends lead me to believe pensions are promises that will most likely not be kept – at least in the form and the amounts that are promised today.

Cheers,
-TFC

#104 Eaglebay - Parksville on 10.20.12 at 9:47 am

#76 Tony on 10.20.12 at 1:48 am
“Just like the Canada Pension Plan the teachers pension will see year after year of negative returns in the future years. All that money Scott thought he’d see in the future won’t be there.”
______________

The CPP has been having positive returns and will continue to do so. It’ll be there.
Check your facts. Ever heard of Google?

#105 Van guy on 10.20.12 at 9:50 am

#84 [email protected] on 10.20.12 at 5:24 am

You still need to remember that if you lose all that money, you don’t get to put it back in. 5000 a year isn’t that much. Buying those junior miner sticks are extremely risky. The chance of a single stock to rise like the ones you mentioned, is quite slim. It’s a roulette wheel. I bet you those stocks will return some of the gains Monday. They always do after a run up like that. Except for AUX. that stock is worth a BIG penny !!

#106 Ralph Cramdown on 10.20.12 at 10:09 am

“It’s a great time to start looking for an investment property”

Indisputably! Ream-Max recently managed successful media placement of a report on small (“amateur”) investors being drawn into small commercial and multi-use, e.g.:
http://www.moneyville.ca/article/1272487–new-wave-of-amateur-investors-help-fuel-demand-for-commercial-real-estate

Doctors and dentists are doing it, and you can, too! Now as much as I respect the skill, training and dedication of most doctors and dentists IN THEIR AREA OF EXPERTISE, they’re famously bad investors as a group, likely because they don’t have enough time to babysit their money, but do have enough income to be targeted by every investment salesperson in the country.

Here’s a quotable gem: “[In the GTA,] Retailers themselves
have also been driving sales—including international
clients—focused on actively securing a position in the
Toronto market as part of their overall urban retail strategy, with the realization that prices are only going up.
Wasn’t there an agent-type poster hanging around here saying that calls like that are irresponsible?
If you want to read the full report, including obiter dicta about how risky the stock market is, it’s here:
http://www.remax-western.ca/blog/wp-content/uploads/2012/10/REMAXCommercialInvestorRpt2012.FNL_.pdf

#107 Julia on 10.20.12 at 10:26 am

Re discussion of the value of an RRSP, I basically think of mine as a safety net. If is lose my job and my EI runs out, and these days this is not uncommon, I know I can withdraw some money from my RRSP at a lower tax rate. I try to live comfortably within my means so that I could live ok with less income if I had to.

#108 Just Park It on 10.20.12 at 10:37 am

I can only speak from personal experience – but going through school – at least 95% of my teachers should “not”have taught. They were lifeless, uninterested soul suckers. And they wonder why so many kids drop out of school –

To be an effective teacher, you obviously must know the subject thoroughly – however, more importantly – and thus the major problem with most teachers – they don’t know how to teach it. You can “tell”someone information or you can captivate them in a series of steps in learning… our entire educational system is based on “I say – you learn”. If you have ever watched the Movie Dead Poets Society, you will understand my meaning.

How can someone in that position, making $80K a year and expect to get $60K during retirement. Oh, I hope our government renegs on that. They will be the most overpaid civil servants for the work they do –

During highschool, my sister who was 4 years older had kept all her notes from school – well, I came across a few teachers she had that I currently had – and the tests she kept were the exact same one’s I had – so I became the most popular kid in class when I had printed off the questions with the answers just before the tests..it was awesome until some snot nosed kid ratted me out.

#109 Ronaldo on 10.20.12 at 10:46 am

#62 Live within your mean –

”Pardon my ignorance, but what is a HISA?”

High Interest Savings Account. The ones that pay you 1% or less. They would be better referred to as HEIST.

#110 Enz on 10.20.12 at 10:48 am

Every bubble has 2 basic emotional phases greed and fear… We all agree to the greed excesses what is not obvious to you bloggers is the fear component.. It will become abundantly clearer in the next 6 months.. Be fearful of your investments and avoid avoid anything related to Canadian housing… For you clever bloggers out there begin short positions now.. It is easy pickings now and a fortune can be had.. Remember years from now say 25.. What will the consensus business lessons.. The largest housing bubble in Canadian history and most inconceivable business values …

#111 Cory on 10.20.12 at 11:15 am

I will be there Garth but does a person have to register or just walk in??

thanks

No, you can crawl or be carried. Just as good. — Garth

#112 Steven Rowlandson on 10.20.12 at 11:15 am

The bear looks like it was pasted on to the picture.
Still it does illustrate a point and that is that investors are caught between the bear and a free fall…..
Either way investors are food for the bear.

#113 Doug in London on 10.20.12 at 11:22 am

@THE CELIAC HUSBAND, post #52:
Why would anyone with a healthy mind NOT be thinking 20 years down the road? Surely not everyone wants to work until they die, do they? Doesn’t it make sense to build up a contigency/retirement fund when you are making money? I was thinking 20 plus years down the road when I was on my way to the bank to cash my first pay cheque.

#114 Linda Mulligan on 10.20.12 at 11:28 am

What I have noticed regarding pensions is what seems to be the attitude of ‘if I don’t have one I’ll make damn sure you don’t have one’. The hostility towards any public sector worker with a DB pension plan is misplaced. Instead of envying them, why don’t you ask WHY you don’t have one too? Also, lots of people confuse MLA & MP plans with public sector plans. Not the same thing folks. My ‘lavish’ pension if I took it at age 55 (can’t get it before then) is not quite $30,000 gross – I have now been in the workforce for 36 years. BTW, that is unreduced, not fully funded if I take it at age 55. I have to work until 2017 – which equates to 42 years of work – to get the fully funded plan which is a lavish not quite $36,000 before tax! Also, I had no choice to enter the plan – it is a mandatory plan, condition of employment & yes, can be altered, reduced & contributions increased at any time without recourse. Because I have a pension plan my RRSP contributions are limited because the value of my pension contributions are taken off what I can put in my RRSP. I will add for all those who grumble that ‘the boomers’ are stealing the future from the young – who PAID for the young today? The tooth fairy? All those poor young, who have been fed, educated, supported etc. for all their lives by their selfish boomer parents – shame on them for doing this & stealing their future besides. Oh yes, the selfish boomers also didn’t pay for any roads, schools, water & wastewater treatment facilities, support charities, buy RESP’s, pay anything towards CPP etc. all their adult working lives to date – as if! Bad, evil boomers, taking everything & giving nothing – anyone notice the sarcasm yet? Not to mention that a rather large swathe of said Boomers are likely to be eligible for GIS – which is reserved for the very poorest of the poor in our country. I will note that our local shelters have more than a few seniors who occupy them because they can’t afford to pay rent & eat (or buy their medicine) too.

#115 live within your means on 10.20.12 at 11:36 am

#97 Linda Pearson on 10.20.12 at 9:24 am
#62live within your means on 10.20.12 at 12:21 am

Pardon my ignorance, but what is a HISA?
…………………………………………………………………………..

No ignorance inferred – I didn’t get it either until the 2nd reading after my coffee. It means “high interest savings account”. However, the word ‘high’ is just laughable nowadays, isn’t it?

……………….

Thx for the explanation Linda. ‘High’ is definitely laughable, just like BoNS’ ‘You’re richer than you think.’

Re my health – cancer wise I progressed to a 9 mo. CT scan. Disc problems not so great, but I’m learning to live with the pain while seeing a physio. Thanks for asking.

By the way…how are you feeling lately? Very well, I hope.

#116 Spiltbongwater on 10.20.12 at 11:37 am

I think diversified portfolios are what contributes to the pussification of Canada. Just gambol the money, and let it ride. [email protected] thinks I am crazy, investing in 1 or 2 companies at a time with my whole TFSA, but I see the game as a volume game. Volume is the only way to beat the rake, aka commission.

1) buy shares in volume
2) wait for shares to increase
3) sell for a profit
4)??????
5) reinvest some profits starting at step 1
6) spend some profits on hookers and blow.

#117 Picasso on 10.20.12 at 11:38 am

#65 AprilNewwest on 10.20.12 at 12:31 am

Nothing wrong with Garths writings, I enjoy them and I’m sure there’s a good post amongst the 200 posts of crap.

#118 Julia on 10.20.12 at 11:50 am

#111 Linda Mulligan on 10.20.12 at 11:28 am

Brava!

#119 live within your means on 10.20.12 at 12:00 pm

#111 Linda Mulligan on 10.20.12 at 11:28 am

Great post Linda. I totally agree with you.

#120 Ret on 10.20.12 at 12:03 pm

And of course Scott’s wife realizes that if she is an Ontario teacher, her OTPP pension credits have been only partially indexed to inflation for service after 2009.

Scott’s wife only earned 60% indexing from 2010-2013. They can look forward to a pension falling behind the cost of living every year that she collects. A few years of inflation and Scott will be stocking shelves at Walmart. IMO the fund will never be giving 100% indexing again because there is always a pension liability to be addressed.

Pre-2010 OTPP retirees are not affected by the new rules and continue to get 100% indexing forever (?), 1.9% in 2013. “Forever,” is not always a long time.

The teacher pension benefits can be changed by any government with 3 years notice. Defined contribution plans are all the rage now. Don’t count on you defined benefit plan being grandfathered either.

Nissan parts distribution in Brampton converted every employee’s pension from DB to DC, 2-3 years ago. The existing pension plan was wound down and credits were given to employees to invest on their own.

Lots of employers are re-evaluating their pension liabilities and are looking to do the same. Public sector plans will feel pressure to follow the private sector as they have in many US states and cities.

http://www.otpp.com/wps/wcm/connect/otpp_en/home/member+info/inflation+protection/

No geared-to-income housing, free bus passes, foodbank grocery trips or social assistance freebies either for Scott and his wife. In comparison to some other people, they’re rich!

$40,000 large a year including her CPP, less taxes is not that much for two people unless they like to watch lots of television. The only trips that they will be taking will be to Timmies.

I know lots of similar situations. Nice people who have seriously underestimated their future retirement resources and expenses. I don’t understand how people think that they can live well on pensions that are far less than what they currently make. Did I not read on somewhere on this blog that the majority of seniors are living in poverty when they die?

#121 kreditanstalt on 10.20.12 at 12:04 pm

Tee-hee…!

Actually, this guy Scott may make out OK for the simple reason that, with 50%+ of us living hand-to-mouth or jobless, prices and goods availability will fall to meet the consumer’s ability to pay.

We’re heading for an income disparity society writ large. On one side: government employees, government pensioners, resource industry employees and their pensioners. On the other side: the remaining 70% of us.

#122 live within your means on 10.20.12 at 12:06 pm

#108 Cory on 10.20.12 at 11:15 am
I will be there Garth but does a person have to register or just walk in??

thanks

No, you can crawl or be carried. Just as good. — Garth

………………………..

Just one of the reasons why so many of us are addicted to Garth’s blog.

#123 Stickler on 10.20.12 at 12:30 pm

@ #74 City Slicker on 10.20.12 at 1:31 am

” It all sounds good to be one of the “lucky” ones to be in a DB pension with schools or government. But the truth is the amount of contributions employee’s pay into them is crazy.”

—————————————–

>> BS!…Well for Ontario teachers they pay in ~12% and I (the taxpayer) match it. Then it is professionally managed by some of the best in the business.

A/ I wish I could join!

B/ How is that NOT a crazy sweet deal for the teachers?

C/ As I taxpayer I feel like I am WAY over paying for teachers. Salary + benefits + half of the sweetest pension known to man.

#124 Timbo on 10.20.12 at 12:36 pm

http://www.businessinsider.com/bank-of-england-debt-cancelation-2012-10#ixzz29qv1z6CG

“I met a European trader in a bar this week, who brought up the possibility that at some point, the Bank of England might just rip up the UK government debt it has acquired through quantitative easing — just straight up throw it on the fire, and tell the government it no longer owes the money.”

This might burn some bridges……….

http://www.guardian.co.uk/business/nils-pratley-on-finance/2012/oct/18/dont-blame-starbucks-uk-problem-brewed-in-seattle?newsfeed=true

“The original Reuters investigation said this “licence to lose money” worked in three ways: via royalty payments to a Dutch-based Starbucks company that pays some of its revenue to another Starbucks unit in Switzerland; via purchasing coffee beans from a Swiss-based trading unit; and via high-cost debt financing provided by the US parent.”

Local business forced to compete against multinationals running legal tax dodges?

#125 John Prine on 10.20.12 at 12:43 pm

Just added up all our living costs… taxes, utilities, insurance (3 cars and home) fuel, food, liquor, medical, home and car maintenance. We live in a town of 8,000 on Vancouver Island. No mortgage and not including travel we spend $2,375. Wife(future, still working) and my CPP, OAP and a small pension of $800 give us an after tax income of $2,800. We have some investments for future vehicles and travel but nowhere near what some on this blog think they will need to avoid eating cat food. I think too many pay attention to the “need a million” to retire group.

#126 TRT on 10.20.12 at 12:51 pm

Vancouver area public school enrolments down this year…including Surrey.

Administration perplexed and say it is a blip.

It’s because parents are sending their kids to private schools. Relatives just enrolled all their kids in Southridge private school.

Teachers don’t know what’s coming. Their pension plans are going to be wiped out…or mandate that they all have to work until 60? 65? 67?

Will not be enough public teachers to support the retorted. Simple Math.

#127 TJ on 10.20.12 at 12:53 pm

37 – oh Tim, don’t you know speaking out against teachers or their parasitic union means you hate children?

#128 jess on 10.20.12 at 1:01 pm

So many failures in audits/mis statements etc …should we believe the numbers given regarding Mr. Romneys taxes?

Forbes Magazine: Lying With Numbers
The SEC is busy chasing Ponzi schemers and foreign bribers. But bogus accounting remains a bigger danger to the markets.
http://www.forbes.com/sites/francinemckenna/2012/10/18/is-the-secs-ponzi-crusade-enabling-companies-to-cook-the-books-enron-style/

Now, in a new study by the Tax Justice Network, we see that there is a positive correlation between a jurisdiction’s (remember, not all tax havens are independent countries) secrecy index and the number of banks and Big Four accounting firms (PwC, Ernst & Young, KPMG, and Deloitte) per capita present there. The report documents one “leveraged partnership transaction” that PwC both designed and then pronounced to be legally valid (in what is usually termed an “opinion,” for which it was paid $800,000), which the U.S. Tax Court strongly criticized as a “conflict of interest” when it upheld the Internal Revenue Service’s squashing of this arrangement

http://www.businessinsider.com/romneys-accountants-busted-in-new-tax-justice-network-study-2012-10

More on chinese audits
“PCAOB Chairman Doty has even warned he may start de-registering audit firms.”

http://retheauditors.com/2012/10/08/casino-industry-suffering-from-china-denial-syndrome/
…”None of the Big Four audit firms in Hong Kong used by these casinos to audit their Chinese operations have ever been inspected by the PCAOB. The SEC recently sued Deloitte Touche Tomahtsu Shanghai in federal court to obtain the audit workpapers related to two alleged mainland China frauds. Deloitte’s China firm refused to cooperate, claiming Chinese state secrecy constraints. Ernst & Young Hong Kong is facing similar legal action from Hong Kong’s securities regulator to obtain their workpapers for another mainland China client, Standard Water Ltd..

#129 Gunboat denier on 10.20.12 at 1:15 pm

56 Hugh / 78 City – to generate a $5K refund requires a
$15K RRSP contribution on a $90K income in BC – ie close to the max allowed on a decent income.

On the $90K you would pay $21K tax, then fork the 15 into the RRSP which generates the $5K for TFSA. Your
take home would then be $54K, but your sheltered
savings would be almost fully funded.

81 Jane24 – a wedding is an emergency? We dont share the same priorities.

#130 Old Man on 10.20.12 at 1:15 pm

There will be a rare show tonight which will be going live across Canada in every major city for several hours.
In Toronto it can be heard on CFMJ – AM 640 starting at 1:00 AM with none other than Gerald Celente who is considered to be the top financial expert in USA. You can agree or disagree with what he has to say, but he has been right all too often; he will be addressing the present and the future economy.

#131 JuliaS on 10.20.12 at 1:20 pm

Whatever happened to good old fashion saving? I mean, taking money and not spending it – having total control over it. Whatever happened to “if you don’t hold it, you don’t own it”?

I do not like TFSA’s. They’re like a chalk drawn circle in a lion’s den where he promises not to eat you. It’s money locked up and money in somebody else’s pocket. It’s money loaned to the government as oppose to the bank. Now if you think one set of money laundering crooks is more trustworthy and accountable than the other, then go ahead, give your savings to them.

I have money in domestic and foreign currencies and liquid assets on hand, distributed between different members of the family. We all share access and we trust eachother a lot more than any institution pretending to be “family”.

Inflation tax is the only “tax” we pay on our fiat savings. No hidden charges, no monthly fees, no transaction limits. It’s there the moment we need it.

Calculating how much it would take to move money out of someone else’s pocket (be that HISA’s, CPP’s or else) and into mine? Why?

Half the people won’t last a week without a paycheck? By the time I retire, the chances are the government will be more broke than the taxpayers. All of the safety nets will magically disappear and TFSA will be a meaningless acronym.

#132 Angel on 10.20.12 at 1:20 pm

Saving is a huge sacrifice to our lifestyle and it sucks most days because we won’t see the fruits of it for 30 more years. We forgo a lot of luxuries so we can save. I’m sick.to.death of saving. I’m sick of compromising, sick of the trade-offs. We can buy anything we want, we could take two really nice trips a year. Or we could save. And yesterday was one of the days where it was really pissing me off. And so I come here and I read a sober second thought. Thanks, Garth! I don’t come here for the RE natter, I come here to remind me why we’re doing the complete opposite of everyone we know.

#133 Ronaldo on 10.20.12 at 1:31 pm

#111 Linda Mulligan – you make some excellent points. And yes, 36000 after 42 years is not exactly a lavish pension as I assume that you would have had to contribute a fair chunk of your own cash into this plan in those 42 years.

But, if you consider what amount a person without a pension plan, maybe a self employed individual, would have had to save in order to receive this amount given the low interest environment that we are in today, he/she would have had to stash away around $900,000. (asume 4% ROI) So you see, the mutual fund sales people are correct when they say that you need to save a million in order to retire today.

For most people that is an impossibility. So maybe a more realistic figure might be $300,000. (with a lot of sacrifices) If this person was lucky enough to obtain 4% they would earn $12000. So, with their CPP based on average of around $5700 if taken early plus OAS of around $6500, they could gross around $24,200. All taxable. They would not qualify for GIS as their income would have exceeded the threshold of $16500.
Assume a tax of 15% their takehome would be about $20600. They would not qualify for many of the means tested benefits.

Lets compare that figure with a person, who never saved, had no pension, and relied solely on CPP and OAS and GIS. Here is what he would be looking at:

CPP 5700, OAS 6500, GIS 5400 for a total of 17600. Since GIS would not be considered as income. The gross would be $12200. He would pay No Tax. Plus would be elligible for many other means tested programs such as free medicare, subsidized housing, etc. This could have considerable value. Add that to the 17,600 then compare that to the person who saved dilegently all his life.

Does this make things more clear as to why TFSA’s are a better vehicle for savings over RRSP’s for persons who are in the lower to middle of wage earners?

The above example is based on a single person but I believe it makes a point.

I know of many older retired people (over 65) can relate to the above and is the reason why many older people are sitting on wads of RSP’s that they will not draw from because of the clawback situation. They will however be forced to when they reach age 71.

This is one of the main reasons that the government after years of being lobbied finally came up with the TFSA in order to rectify these inequities in the system. Any monies earned within a TFSA do not affect any of the means tested programs.

You can be certain that the [email protected] or any other financial services company flogging mutual funds will ever warn you of these risks associated with RSP’s. Excluding Garth of course. RRSP’s are not for everybody.

#134 JuliaS on 10.20.12 at 1:33 pm

#101

“Ever heard of Google?”

In fact I’ve heard a lot about them this last Thursday and Friday.

Ever heard of Nortel or Ontario Teachers’ Federation?

#135 debtified on 10.20.12 at 1:33 pm

#91 yorel on 10.20.12 at 7:51 am

$4,600 a month, net, isn’t enough?
*****************************************************************************

What is $4,600 worth 20-30 years from now? Is that pension guaranteed to be there when you need it? When saving for retirement the appropriate question should be: “Is it enough?”.

#136 smarter than terry on 10.20.12 at 1:34 pm

#80 Tron
Yes there is television but NO internet in federal prison

#137 JuliaS on 10.20.12 at 1:36 pm

#106

TFSA is HISA where the government pays itself 1% on money you lended it.

#138 Victor on 10.20.12 at 1:46 pm

http://themashcanada.blogspot.ca/2012/10/price-drop-3-107-marlborough-avenue.html

Surprise!!!

The flipped semi in Summerhill that was delisted 12 days ago is back on the market with a price drop!

It was initially listed at in May for $1,839,000 which was crazy. I thought it was maybe a $1,539,000 house.

After not selling, they dropped the price a few weeks later to $1,799,999. A $39,001 price drop wasn’t going to do much.

And it didn’t. The price was dropped again in July to $1,739,900.

Well, that didn’t work so that took the listing down. I suspected it would be up again in a week for $1,699,999.

It is now listed at $1,689,000.

#139 dosouth on 10.20.12 at 1:47 pm

This time it’s probably “not” different – The Housing Bubble explained – very well.

http://tinyurl.com/9djtzch

#140 joe on 10.20.12 at 1:47 pm

I am also noticing for sale signs sprouting everywhere in Calgary, yet the stats say we have declining listings and double digit sales % increases every month. CREB stats are a scam.

#141 CalgaryRocks on 10.20.12 at 1:57 pm

#111 Linda Mulligan on 10.20.12 at 11:28 am
What I have noticed regarding pensions is what seems to be the attitude of ‘if I don’t have one I’ll make damn sure you don’t have one’. The hostility towards any public sector worker with a DB pension plan is misplaced. Instead of envying them, why don’t you ask WHY you don’t have one too?

Some reasons were described in previous messages above, such as the ratio of people working vs people retired, much longer life expectancy etc, etc…

But, to put it simply, most people do not have a pension plan because the math does not add up on the extremely generous public service pension plans without the government’s power to tax the private sector in order to fund them.

#142 CrowdedElevatorfartz on 10.20.12 at 2:04 pm

Scott’s concerns about his wifes’ pension plan are valid.
I have risked the wrath of my government employed friends over the past year or so by voicing the same opinion. ” These govt. employee pensions are unaffordable and will be clawed back one way or another.” To a man(or woman) they ALL vehemently disagree with me and shout my opinion down. “Our pensions are paid for! They cant cut our pensions! We will take the govt. to Court!, Etc.etc.etc…..”
When I point out that unpensioned taxpayers “top up” these municipal,provincial,federal defined benefit pension plans….. they refuse to believe it.
I give up.
The emperor isnt naked , he has a beautiful, invisible cloak……. and in a world of retiring boomers, reduced tax base, govt employee pension plans are perfectly safe.

#143 Gunboat denier on 10.20.12 at 2:07 pm

123 TRT – In my area the decreasing enrollment has been evident for years. A few years ago we were graduating twice as many from grade 12 as were enrolling in
kindergarten. It had nothing to do with private schools.

JuliaS – what are u talking about? Put something other than a GIC/HISA in your TFSA.

#144 Roial1 on 10.20.12 at 2:14 pm

#80Tron on 10.20.12 at 2:41 am

All we need to do is a crime that will convict us for the reminder of our lives.
————————————————————

DELETED

#145 TurnerNation on 10.20.12 at 2:16 pm

Weekend quiz.

Which of the following has most-successfully adapted to their native environment:

1. Fruit Fly.
2. Gnat.
3. Realtor.
4. Tick.

#146 EdmontonJim on 10.20.12 at 2:19 pm

I don’t know about an emergency fund being a total waste of money.

My wife and I keep 1-2 months of expenses in a HISA, and a few hundred in cash hidden in an emergency kit. Anything more than that would be a total waste, but I figure the sum of the emergency stash is costing us about $20 a month in lost interest, which we can live with. I mean that’s about the same as our renter’s insurance.

Mostly though, it’s not there to bail us out in a pinch – as you say that’s what lines of credit are for. It’s there in case we have to bail out a family member – most of my in-laws aren’t as prepared as us.

#147 bill on 10.20.12 at 2:19 pm

picasso is a bit of an asso

#148 Cristian on 10.20.12 at 2:28 pm

Garth, you always talk about a hypothetical rate of 7% of a balanced portfolio.
I feel that that number is not very realistic, especially in the current world economy.
Here’s what somebody else has to say:

“When it comes to investing for the long term, the important figure to consider,” say Thailand-based moneycraft advisers Chad and Peggy Creveling, is the real rate of return – total return (capital growth plus income), less inflation.
“When planning, using a real rate of return provides a better idea of how much purchasing power you can derive from your investments” for long-term goals such as retirement
They give these average rates of return over recent decades for American investors in a “moderately allocated” portfolio consisting of half large-cap US stocks and half intermediate-period US bonds:

1952-61/62-71/72-81/82-91/92-2001/02-11
Total return10% 6.1% 6.6% 15.5% 10.1% 5.2%
less Inflation 1.3% 3.3% 8.9% 4.0% 2.5% 2.4%
= Real return 8.6% 2.8% -2.3% 11.5% 7.6% 2.7%

Aren’t you happy you don’t live in Thailand? — Garth

#149 salonist on 10.20.12 at 2:39 pm

united states of america

“Household Debt Has Fallen to 2006 Levels, But Not Because We’ve Grown More Frugal”

http://business.time.com/2012/10/19/household-debt-has-fallen-to-2006-levels-but-not-because-were-more-frugal/

#150 Crazyfox on 10.20.12 at 2:44 pm

#102 Van guy on 10.20.12 at 9:50 am #84

(Can’t believe I put my email out in the ether. Doh! Don’t go on line at 3 am, you’ll mess up I swear! God, I was even sober)

Its is stocks, its is gambling but because TSFA’s are gains free I believe the rewards are worth the risk. I will reiterate, I’m not asking a novice investor to invest more than 10% of their net liquid worth into the markets here (well… if they are worth less than $200 G’s I might). Just TSFA’s, thats it. The reward factor of avoiding gains, I believe, is worth taking on that risk.

If one really wants to reduce the risk, then use ETF’s and lets look at it from a gambler’s perspective for a moment. I can throw away $20 bucks a day like some gamblers do on lotto tickets or in the casino or bet on sports or I can tilt the house in my favor and buy 5 G’s worth of stocks annually. Maybe I’ll clue into a vibe like shorting RONA from a site like this and make a lazy 20% or maybe I get lucky and find a Ventana. AUX, the same corp that bought out Galway and Calvista bought out Ventana for over $13 dollars a share in late 09′. 10 months before in early 09′ (just as TSFA’s were coming out), Ventana was a junior miner IPO that you could have bought shares with for as low as .06 cents with volume. A risky mere one grand investment in a junior gold stock in a TSFA would have generated $200 G’s tax free in that scenario if you would have rode it to a buyout conclusion.

For folks living outside the city, thats actually enough for retirement. They might still die broke, but its enough to see them through the end if they play it right. Cinderella stories like that only happen every 3 or 4 years in the TSX but they do happen and if I had to take a wild guess, I’d say there are 3 or 4 stocks (including warrants) in the entire TSX that inflate by 5000% or so each year.

Here’s an example of boom going bust back to boom. TCK.B Check out the 5 year chart on Canada’s largest mining company. In 09′, Teck bottomed below $2 bucks and less than 2 years later it peaks at $60. Investors don’t have to mess with juniors to add a zero but they need the luck and timing and thats why I say if you take losses in a TSFA with stocks in mind, keep at it and at some point it’ll likely turn around. Either you’ll luck out with a bull run or hit the skids with a bust but the opportunity that follows a bust could be your saving grace. Along the way, the lessons good and bad will get learned but most importantly, a person will at least be organized enough to have a trade account going for that next crash and it will happen whether its global or domestic, that much we can count on. Call it hiccups or growing pains but the majority of investors over time will mature.

Teck is actually a perfect example because it chronicles the true risk of stocks. I mean, look a the bath investors took if they rode Teck to the bottom if they owned Teck before 08′. Teck lost 95% of its value from peak to trough during the 08′ financial crisis (a large cap at that) but for those who bought low and sold high from there… easy money.

I really have to wonder about the advice I give here because its kind of like leading lambs to slaughter in a way. Most of us are financially illiterate. The way TSFA’s are used by Canadians only furthers that point. Depending on when investors enter into the market, a large minority if not not a majority of us who hop into the stock markets will encounter losses, some steep, I have no doubt about that. However… if novices would have entered the stock market in November of 08′ on through 09′, they would have most likely doubled if not tripled their money plus investing blind. A quick look at the indexes proves my point. Sure they probably would have lost their gains in 2011 or 2012 but look at what they would have gained in experience. Sometimes its just luck, but sometimes its not. Sometimes its just balls with investing in a stock that investors shun but but still have a bright future like Teck. Buy low, sell high speaking of which, we’ve all heard the expression buy low, sell high and Garth repeatedly tells us that as valuations rise, so does risk and thats what I want to talk about is how to recognize that risk.

The risk of buying into bubbles (like RE and gold) is that once the froth settles buyers get creamed so the best bit of advice I can give to those who would be brazen enough to say…. gamble with 10% of their savings is this. Never buy into a sector that is coming off a bubble. Real estate is coming off a bubble. Gold, believe it or not, is coming off a bubble and if I’m wrong, we won’t see $3,000 an ounce here, not going to happen. If the U.S. recovers like I think it will, gold will hit triple digits again and it won’t be an ascending currency that does it, but simple stability that follows true attempts toward fiscal balance and as for RE! Anyone who bought RE in the last 3 years especially, who used extreme leverage, literally gambled with most if not all of their savings and now the bubble froth is gone and deflating. We are better off at least knowing we are gambling with stocks and managing the percentages of that risk through discipline (never risk what you can’t afford to lose), than those who believed buying a house or property during a bubble because they believed mania hype carried little risk merely because it was real estate.

#151 Roial1 on 10.20.12 at 2:47 pm

#122John Prine on 10.20.12 at 12:43 pm

Absolutly agree with you on needs, vs wants.

Also on V.I. but rural. (Low property tax) (Also pre-planned.)

Wife and I travel. Two months at least per yr.
You do NOT NEED to be rich. Just frugal and plan well.
This Dec. will be in Vietnam and Jan. in Thailand.
We are NOT rich. Just practical in our planning.

Like, one air fare to cover two countries——- big time.

When we go to Europe to visit family it is for a minimum of two months just to get our full use from the big expence of the air fare.
You can see a lot in two months. (we bought a diesel car over there. It gives us freedom of mobility and costs squat as we share it with b-in- law’s wife.)
You just have to plan your retirement in the ways that will alow you to spend the rest of your life doing the things that you want to do.

IT DOES NOT HAVE TO BE EXPENSIVE!

#152 Paul on 10.20.12 at 2:54 pm

Not sure if America agree’s with you.

http://angerinamerica.cbc.ca/#5-super-pacs

#153 futureexpatriate on 10.20.12 at 3:01 pm

I have to disagree this time, and this time alone.

That photoshopped disaster (pic) couldn’t be worse.

#154 jess on 10.20.12 at 3:03 pm

Earthships: Radically sustainable buildings made with recycled materials
“. . . the Earthship is the epitome of sustainable design and construction.

100 dollars/year utility bill
no sewer needed recycled into plants that live in the home
the same water used 4x’s

http://earthship.com/guatemala

#155 Toon Town Boomer on 10.20.12 at 3:06 pm

Funded Status of a defined benefit pension plan stating based on an actuarial valuation of the plan at December 31,2010 the plans assets are not sufficient to cover the plan’s liabilities.The plan has a solvency ratio of 80.28 per cent,representing a solvency deficit of $862 million at December 31,2010.

On a scale of 1-10 how bad is this?

#156 jess on 10.20.12 at 3:13 pm

trying to change the herd

http://topdocumentaryfilms.com/garbage-warrior/
http://earthship.com/earthships-could-transform-philadelphia.html

#157 live within your means on 10.20.12 at 3:26 pm

#128 JuliaS on 10.20.12 at 1:20 pm

Your post was funnier than Garth’s.

#158 live within your means on 10.20.12 at 3:43 pm

OOP’s re my last post. I love Garth’s sense of humour.

#128 JuliaS on 10.20.12 at 1:20 pm said:

I have money in domestic and foreign currencies and liquid assets on hand, distributed between different members of the family. We all share access and we trust eachother a lot more than any institution pretending to be “family”.

………..

Nice sentiments, but I’d never share access to our ‘main accounts’ with family.

Institutions have a fiduciary responsibility. Families have none. — Garth

#159 the guy in the hat on 10.20.12 at 3:55 pm

Not a chance public pensions will be cut. They’ll tax people to the bone or print money like Zimbabwe before that happens.

You’re almost always spot on Garth, but in this specific case you’re choking on your own dogma. Public liabilities will be funded, one way or another.

Now, whether teachers or any other public servants will in 20 years get the same sweetheart pension deal is another matter entirely.

Now Garth, I enjoy reading your thoughts immensely, and you’re a small but important part of why I’m making a career in business and finance. But there’s a few things that get on my nerves that you repeat ad nauseum. 4,600 a month, net, for two retired people is plenty. Not all retirement lifestyles can be funded by this, sure, but they’ll be in the top 5% retired people in terms of disposable income, and you’d have to be delusional to chastise someone for that. Stick to your original good point, the one made in the survey.

When you grow up you will understand the goal of life is not subsistence retirement. BTW, I suggest you drop Zimbabwe references. Nobody wants to hire a guy who trash talks. — Garth

#160 Crazyfox on 10.20.12 at 3:59 pm

#98 Mackie on 10.20.12 at 9:28 am

Both you and Garth make good points but I wouldn’t ignore large caps, Mackie. The teck example of my earlier post is a good case in point but so are large cap tech’s following the dot.com crash and 911. Large caps are the place to be for most post crashes, take profit midway through recovery and then diversify with mids and later small caps from there.

I believe like Mark Carney does that the commodity super cycle has legs left especially with energy and agriculture but the best is behind us. To bet on endless commodity strength is to bet against america because the main driver with commodities hasn’t been supply/demand fundamentals half so much as it has been the fall and instability of the U.S. dollar of which all commodites are priced in. Smart investors always break away from the traps of investing in just one sector. They diversify and the opportunites to do so will come.

On that note a strong warning to those can’t walk away from shiny PM’s. GWB tax cuts are set to expire in Dec. and January. If congress simply allows them to expire and the next president either can’t or won’t get a new round of fresh tax cuts through congress, 2013 will be a lacklustre year in economic terms because of tax increases but housing will recover and jobs will come back regardless most likely in 2014 and what does that spell for gold? What happens if Romney wins and axes Obamacare, an $835 billion dollar public medicare expense? What happens if Obama wins and raises taxes on the rich? What happens if defence spending shrinks by a third to its 3.3% of GDP 20 year average on defence spending over the next couple years with either president? Gold will plumment, thats what will happen and look at what that will do to the mining sector because the TSX and Ventures is laden with gold stocks. Garth’s message of diversifcation is worth repeating over and over. I’m paraphrasing here, but never ride a bubble into deflation hoping for former glory or you will get creamed.

Seriously, when I read gold pumpers on this site rant on about how fiscally doomed the U.S. economy is without recognizing the risk relating to what U.S. governments can do in terms of tax increases and spending cuts, I think… novice investor every time and one that is about to learn why the hard way. (I guess I had best be gentle about that, they have my email after all lol)

#161 Angel on 10.20.12 at 4:10 pm

Someone mentioned about income splitting. My husband and I have gone so far as to jokingly, half serious, considering getting a divorce so we can income split via child and spousal support payments. I doubt the government would like it if we were still under the same roof.

#52 THE CELIAC HUSBAND “Who in their healthy mind is thinking twenty years down the road? Nobody, with all the things to do today.”

Guess we’re not in our healthy minds. I don’t enjoy it, but it’s necessary. “With all the things to do today?” Meaning what? Hawaii, Canucks tickets and Starbucks? Everyone has something they can cut back on and save a couple hundred bucks a month surely.

#162 Linda Mulligan on 10.20.12 at 4:28 pm

Thanks to all for feedback on my earlier comment. Re: ‘Calgary Rocks’ – keep in mind there is no pension protection in Canada except for some extremely limited legislation in Ontario. That means any employer, including the gov’t, can unilaterally change the terms at any time, including winding up the plan & cutting the benefits. This also includes the universal CPP etc. benefits – raise the age to 67, anyone? Did we get a say? Ditto the increases. Yes, my contributions are considerable re my pension plan, as it is 50/50 funding or 49/51 since my employer’s contributions are 1% greater than mine. Yes, I’m lucky to have a plan at all but my point is that everyone should be able to have a plan. I will add that my marriage partner has no pension other than his savings, although by law he is entitled to half my pension should we ever split. We are the same age so will be retiring together & thus my pension will be used to fund the needs of 2 people if our savings etc. are not enough to cover our costs. Many of my coworkers are in the same boat. I will note that given how municipal & state gov’t down south have cut back the salaries & benefits including pensions due to not having enough money to pay them is something I do believe could also happen here & in fact is happening in Ontario as the gov’t there tries to trim the deficit. Maybe the best thing to do is to double CPP benefits for all & increase CPP contributions enough to ensure that plan is funded, doing away with any other kind of pension plan entirely. That would get rid of the pension envy since we’d all have the same pension prospects – MP’s & MLA’s wouldn’t get a separate (better) deal. That would sure give them incentive to make sure the universal plan was a good one, no? Thing is, lots of people have no money sense. They make lots but spend it all & more & no amount of education corrects that problem. So for those people forced savings that they can not touch is the only thing that will keep them from a) working until they die or are incapacitated & b) joining the lineup at the nearest shelter/learning how to dumpster dive. Good luck to us all – we are sure going to need all we can get.

#163 Realtors are in an all out panic on 10.20.12 at 4:47 pm

Victor on 10.20.12 at 1:46 pm http://themashcanada.blogspot.ca/2012/10/price-drop-3-107-marlborough-avenue.html

Surprise!!!

The flipped semi in Summerhill that was delisted 12 days ago is back on the market with a price drop!

It was initially listed at in May for $1,839,000 which was crazy. I thought it was maybe a $1,539,000 house.

After not selling, they dropped the price a few weeks later to $1,799,999. A $39,001 price drop wasn’t going to do much.

And it didn’t. The price was dropped again in July to $1,739,900.

Well, that didn’t work so that took the listing down. I suspected it would be up again in a week for $1,699,999.

It is now listed at $1,689,000.
———————————————————-
This must be happening all over Canada. Driving around the GTA today every second street has an open house and for sale sign as far as the eye can see. Very few sold signs if any. Realtors are hungry for a sale and many have not made a single sale for months now. It’s going to be a nasty crash realtors, a nasty crash!

#164 Herb on 10.20.12 at 4:53 pm

#118 kreditanstalt,

Oh, look at that shiny thing over there!

No, not the purported 1% vs 99% disparity in wealth, but the 30% public sector sponges vs 70% private sector peons pension problem! And while we’re at it, “From each according to his abilities, to each according to his needs.” Aw heck, wrong ideology.

#165 Julia on 10.20.12 at 5:06 pm

When you grow up you will understand the goal of life is not subsistence retirement. — Garth

LOL Spoken by a guy who will likely never retire.

#166 Dan from Richmond Hill on 10.20.12 at 5:34 pm

When you grow up you will understand the goal of life is not subsistence retirement. — Garth

Garth, what do you think the goal of life is ?

Freedom of choice. — Garth

#167 a prairie dawg on 10.20.12 at 5:34 pm

Those damn squirrels!

http://life.nationalpost.com/2012/10/20/drunk-drivers-excuse-for-speeding-and-swerving-squirrels-fault/

#168 roadrunner roadrunner on 10.20.12 at 5:39 pm

in response to #144 bill on 10.20.12 at 2:19 pm who said….”picasso is a bit of an asso”

“Pablo Picasso never got called an asshole”

(at least according to Jonathan Richman)

#169 Eaglebay - Parksville on 10.20.12 at 5:50 pm

#131 JuliaS on 10.20.12 at 1:33 pm
#101

“Ever heard of Google?”

In fact I’ve heard a lot about them this last Thursday and Friday.

Ever heard of Nortel or Ontario Teachers’ Federation?
_________________

Google isn’t Nortel and never will be.
The fearful chickens are gone and this gives us an opportunity to buy low. I always buy thing on sale.
What you heard about Google was from the MSM.
Duh…

#170 live within your means on 10.20.12 at 6:28 pm

#158 Angel on 10.20.12 at 4:10 pm
Someone mentioned about income splitting. My husband and I have gone so far as to jokingly, half serious, considering getting a divorce so we can income split via child and spousal support payments. I doubt the government would like it if we were still under the same roof.
……………………………..

Not so far fetched. An old g’friend’s brother did that about 25 years ago. Not sure of the outcome as am rarely in touch with her now.

#171 james on 10.20.12 at 6:38 pm

“I will add for all those who grumble that ‘the boomers’ are stealing the future from the young – who PAID for the young today? The tooth fairy? All those poor young, who have been fed, educated, supported etc. for all their lives by their selfish boomer parents”
——————————————————————

From my experience (please accept that my perspective will be vastly different from yours on this topic) the Boomers “supported” subsequent generations for FAR LESS TIME THAN WE WILL SUPPORT THEM.

I personally think we should make a mandatory smoking program for 65 yr olds. Weekly cigarette intake monitored by physicians should reduce wonky population demographics, no problem.

How is being an ageist different from being a racist? — Garth

#172 bill on 10.20.12 at 7:01 pm

#165 roadrunner roadrunner on 10.20.12 at 5:39 pm
very true indeed or at least not by many.
Jonathan was the inspiration though none the less.
couldnt resist…

#173 tkid on 10.20.12 at 7:09 pm

http://www.youtube.com/watch?feature=player_embedded&v=b4zOAHoncF0#!

The Narrator-Gentleman explains, using bigger words and more coherent sentences, my thoughts regarding Central Bank debt and gold, plus he throws in a few words on bonds as a bonus.

#174 Macrath on 10.20.12 at 7:13 pm

subsistence retirement !

A good used shopping cart and a prime dumpster location behind a fancy restaurant so you know you will be eating well.

#175 Van guy on 10.20.12 at 7:26 pm

Lorne McCuaig,

I agree with your points. But it’s a extremely risky time to be buying micro cap stocks.

#176 live within your means on 10.20.12 at 7:30 pm

My life insurance terminates in a couple of days. I only had $60K because I took it while I was single. Had the option to continue it w/Sun Life “without having to provide proof of good health”. Met with the rep last week. She started asking me if I had diabetes, was on any meds, etc. Cost for 10 yrs life insurance I added up to be over $25K. She tried to sell me other, more expensive plans. Called her & said No Thank You. I could probably get a better return if I invested the money. She didn’t try to argue with me. I Then called our Benefits, Public Service Commission & related my story. The lady told me they had already rec’d several complaints about her and she would relay mine as well to the Commissioner. Doubt anything will change, but at least I felt better for having complained.

#177 John on 10.20.12 at 7:34 pm

Old man wrote:

“There will be a rare show tonight which will be going live across Canada in every major city for several hours.
In Toronto it can be heard on CFMJ – AM 640 starting at 1:00 AM with none other than Gerald Celente who is considered to be the top financial expert in USA. You can agree or disagree with what he has to say, but he has been right all too often; he will be addressing the present and the future economy.”

He exposes crony capitalism, that’s his game. He does it very well, but unfortunately is not including the over-consuming public as responsible in the current global crisis.

He’s also repeating the same lines over and over in many media, meaning he is in a well-planned public relations game. He’s smart, knows how to use emotional reactivity, and is good at creating an inflammatory environment.

Finally, the guy is appealing to re-install a “golden era” of the “hard working honest American”. And this is not realistic. He’s underestimating the pent up energy of power groups within society.

He also has made links with some not so stable people…like Alex Jones. I suspect he knows that Alex is not 100%, but knows the “public relations punch” is strong with that liaison. Celente’s behavior here is a little cynical.

Is he “helping” or selling? It would be interesting to dig into his selling motives. Why is he selling fear? The crony capitalism stuff stands…but what’s his motive?

#178 kreditanstalt on 10.20.12 at 7:34 pm

#161 Herb,

No kidding! On my hike today I picked up $11.50 worth of beer and soda containers.

Bet a public employee couldn’t find that many!

#179 Daisy Mae on 10.20.12 at 7:52 pm

#155live within your means
#128 JuliaS said: “We all share access and we trust each other a lot more than any institution pretending to be “family”.”

………..

Nice sentiments, but I’d never share access to our ‘main accounts’ with family.

Institutions have a fiduciary responsibility. Families have none. — Garth

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

Good luck with that, Julia. I agree with #155 and Garth.

#180 Julia on 10.20.12 at 7:55 pm

When you grow up you will understand the goal of life is not subsistence retirement. — Garth

Garth, what do you think the goal of life is ?

Freedom of choice. — Garth

What a great blog topic… How the choices people make freely can limit their own freedom down the road. And how we often live in prisons of our own making and too often it’s all in our own heads because we think we need a lot of things that we really don’t. And we think certain things make us happy but instead they become our prison cells.

Okay I know this is getting way too philosophical.

#181 Mic D'angelo on 10.20.12 at 8:29 pm

If the $50,000 TFSA is invested in provincial strips at 3.50% today and if bond yields never go higher the next 25 years it would be worth $118,162.25. A $5,000 TFSA contribution and $5,000 RRSP annual contribution by him and his wife they would each be worth $194,749.28. All together that’s $507,600.81. If they don’t need to touch that money until 71 RRIF withdrawl time and kept adding to their RRSP’s and TFSA’s until 71 it would all be worth $689,545.57. Remember bond yields are never rising over the next 31 years slim chance of that happening.They should have non-registered money as well invested set aside. One last point if the $70,000 RRSP was invested until 71 it would be worth $203,352.20 don’t forget this point.

A $50K TFSA invested at 7% would be worth double that. Nobody should be happy with a yield which will slip below the rate of inflation. — Garth

#182 Mackie on 10.20.12 at 8:51 pm

This Julia S person has absolutely no idea what a TFSA is. Holy smokes lady, do some research before you start typing.

#183 SmarterThanYoo on 10.20.12 at 9:28 pm

Why do the comment righters here think people care what they half to say. If I wanted to get crap opinions I can watch the news, that’s what you people regurgitate anyway.

Does it make you feel importante?

#184 Bottoms_Up on 10.20.12 at 9:34 pm

#173 live within your means on 10.20.12 at 7:30 pm
————————————————-
Did I just have deja vu or did you post the same story twice in the past couple days?

#185 Bottoms_Up on 10.20.12 at 9:41 pm

#168 james on 10.20.12 at 6:38 pm
—————————————
humans need to stop finding ways to divide, and stop blaming others. if you were born a couple decades earlier you’d be a boomer too. and just as most boomers, would have had little influence over government policy, inflation, etc. etc. It’s not their fault they only supported the older generations for X number of years??! Social support will likely have to change given our changing demographics.

#186 ChickenLittle on 10.20.12 at 9:53 pm

Garth, I’m a chicken when it comes to investing. I tried in the past during the Tech bubble and seen my $35000 investment turn to $120000 and then fall to $3000.00

Sold my house and I am now sitting on $200000.00 while I rent.

I set up an online trade account and bought $30000.00 in ETF’s, REIT’s.

I can’t sleep at night, I’m too worried about it going down.

Right now I am saving $2000.00 a month to HISA (orange guy) from my pay cheque, monthly bills are cheap, no debt.

Is there any other way to invest that is guaranteed returns? Adding $2000.00 a month plus my $200000.00 going forward?

My thinking is, I don’t need to be rich, I just need to have more money than my neighbour in the long run. If most people have no money or savings than I will be higher up on the social ladder.

Yes, I thought of using some of this money for a testicle transplant but too cheap to spend any of it.

Why did you hire an inexperienced amateur to manage your money? I’d be scared, too. — Garth

#187 Mic D'angelo on 10.20.12 at 10:08 pm

Garth , financial advisors were using in recent years 12% then 10%, and now 7%. Warren buffet said pension assets would grow 6.50%. I read articles saying a mix of investments would produce 5.8%. The rate of return keeps dropping. I even see apartment REITS now that used to be 8.00% are now 7.00% Centurion. This rate of return is on a sliding slope.

It’s a low-yield, low-inflation, low-rate world. It makes investing wisely all the more critical to fund future needs. — Garth

#188 Devore on 10.20.12 at 10:16 pm

#82 Freedom First

But Canadians are financially very conservative, as you will read in any mainstream media article discussing household money matters. Must be one of those wishful thinking things, repeat it often enough it will become true, even as we rush headlong down the exact same path as Americans. Millions of Canadians are in trouble if they miss a paycheck by a week? A week! That’s the difference between paying rent/mortgage and getting a nice letter from their landlord/bank reminding them of their responsibilities and commitments.

#189 Devore on 10.20.12 at 10:26 pm

#88 tkid

“In 15-20 years it will be 1:1. It was 10:1 in 1970 and 4:1 in 1990. As the signs came in that the assumptions were wrong, the changes weren’t made.”

That’s because the pension benefits and contributions are enshrined in the union contract, and cannot be adjusted as needed, for example as yields have steadily fallen over the last 30 years in step with long bond rates. Because they’re in the collective contract, they are used as bargaining chips when negotiating a new contract (usually with the threat of a strike, or a actual job action already in progress), so it’s near impossible to move contributions upwards without significant and equivalent concessions.

As a result, most defined benefit pensions, private or public, are terribly underfunded, and projected to get even worse as the number of contributors begins to be overwhelmed by the number of beneficiaries.

#190 ozy - parking spots at mall still hard to find on 10.20.12 at 11:48 pm

Parking spots at mall still hard to find, kanatians spending like craznatians, forget about retirement, leave your life, little ants, said the grass-hopper.

Garth, let the grass-hoppers have their life, they are so many, the ants will have to bail them out with good social pensions, since grass-hoppers will yield great power politically (always did)

#191 Tom from Mississauga on 10.20.12 at 11:51 pm

Defined benefit pension and RRSP contributions don’t go well together. RRSP is for only those that do not have a company plan and make over 85,414 in 2012. That’s it.

If an income is below 85,414 TFSA or non-registered is the best. Garth you may have to explain the dividend tax credit and captial gains again.

#192 Toronto CA on 10.20.12 at 11:53 pm

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/homeward-bound-but-hold-off-on-buying/article4625029/

Good lord. I wonder what Americans or Irish or Spaniards must think reading a financial facelift like this. A 31 year old couple, just having a baby and wife not working, has $465k in mortgage debt and wants to take on another $500k worth to buy a second mortgage, so go nearly a million bucks into debt to buy housing.

$120k in cash for the 2nd house downpayment, meager rations in RRSPs and $10k in TFSA between them.

Ridiculous.

#193 Network Admin on 10.20.12 at 11:54 pm

#42 A personal line of credit is not a HELOC, and Citibank’s American. Emergency funds are relics. — Garth

This is a Canadian bank example for personal LOC: http://www.ellenroseman.com/?p=290 (it was rolled back later though). One can argue that GFC won’t happen again, though…

#194 young & foolish on 10.21.12 at 12:12 am

Freedom of choice. — Garth

If it is permitted. Unfortunately, politics trumps economics, and when necessity warrants rules change to protect the majority. In this case, the over-extended.

#195 Canadian Watchdog on 10.21.12 at 12:15 am

“Is there any other way to invest that is guaranteed returns? Adding $2000.00 a month plus my $200000.00 going forward?”

Learn how to preserve your purchasing power instead of trying to invest just to not lose money. There’s a big difference.

#196 Devore on 10.21.12 at 12:29 am

Immigrants to the rescue of Toronto real estate!

http://canindia.com/2012/03/affordable-housing-in-toronto-gets-harder-for-new-immigrants/

Most newcomers surveyed earned under $20,000 working at temporary positions or part-time with no benefits against an average wage of $69,000 in Toronto.

/…/

This goes contrary to the myth that all immigrants do better over time – that they start under difficult circumstances and gradually things get better for them.

Oh, well, maybe not.

#197 THE CELIAC HUSBAND on 10.21.12 at 3:27 am

#44 & #113 Doug in London

I agree that one should think ahead, but my statement is one of reality. Do I regret not having paid attention in my prime earning years? Of course. That’s why I said, time to look for higher return vehicles.

http://philadelphia.cbslocal.com/2012/10/19/survey-40-percent-of-americans-have-500-or-less-in-savings/

This survey sort of confirms that people do not think 2 month ahead, never mind 20 years.

Good for you on your foresight.

#198 dv8 on 10.21.12 at 3:47 am

#150 Crazyfox on 10.20.12 at 2:44 pm

hey buddy you seem to know alot about TFSA’s ,ETF’s, Stocks ETC………….you must have been taught in an economic school funded by a bank institution that didn’t teach you much about monetary science ,read history much ?? money eventually dies and a new currency emerges so you gonna transfer all your wealth through paper assets you own that will be worthless due to the fact that they are denominated in worthless dollars ?happens all the time im not making this up, just reading history .Only this time it will be the us dollar (world reserve currency) that will be at risk of total collapse WHY ?? because all the debt attached to it
When it goes so does the rest of the western nations currencies and the IMF will come to the rescue with a replacement currency for the entire western world called the SDR look it up for yourself .you seem to ignore the one fundamental issue of printing money to fuel this debt based consumption as if it can go on forever no currency has ever lasted forever but gold has outlasted all currency isnt that interesting ?central banks biggest buyers of gold ???huh you mean they dont trust their own paper money you so love via the stock market ETF’s …….i can see you celebrating with champangne when the DOW hits 50 000 (and it will with the money printing )but will have little purchase power when you cash in your investments . May i suggest a little study in the subject of monetary science
http://www.huffingtonpost.com/2011/02/11/imf-calls-for-dollar-alternative_n_821795.html

http://seekingalpha.com/article/459471-10-reasons-why-the-dollar-s-reign-as-the-world-reserve-currency-is-about-to-end

#199 lpt on 10.21.12 at 6:09 am

It’s a low-yield, low-inflation, low-rate world. It makes investing wisely all the more critical to fund future needs. — Garth

Does this apply to emerging markets too ?

#200 Linda Mulligan on 10.21.12 at 7:12 am

#185 Bottoms Up on 10.20.12 at 9:41 pm – An excellent point re: your response to James – I know 2 current & 3 now retired coworkers who all support aged parents. One current coworker is looking at a $4,000 per month bill for round the clock care of her mother which she & her husband will be paying for out of their savings – or taking out a loan to pay if their savings don’t last. James seems to think long life is the prerogative of Boomer’s only – boy has he got a lot to learn & as for taking care of us for longer than we will take care of him, lots of younger generations are still at home at age 30 these days. Even if they do leave, lots end up moving back & in some cases, bringing their children with them. In the ‘good old days’ the women of the family took care of the elderly for free which is why previous generations didn’t have to pay for elder care – not that any value was placed on those women working themselves to death by anyone. Women who stayed at home didn’t WORK was the mantra.
#189 Devore on 10.20.12 at 10:26 pm – don’t confuse pensions with union contracts. Unions might negotiate pensions for their workers, but they are not ‘enshrined’ in any union contract I know of. Nor are the contribution rates mandated by union/employer negotiations. What DOES mandate those rates are CCRA rules so in other words our gov’t. Plans with shortfalls which most have these days can’t arbitrarily raise the contribution rates because of CCRA rules limiting how much one CAN contribute. The plan I belong to does over contribute but has to get CCRA permission to do so, which can be withdrawn at any time. Most of my coworkers would be more than willing to pay more into the plan to ensure it is funded – it being in their own best interest to do just that – but poor market returns mean our plan just like most still shows as underfunded. If interest rates did rise to the 8 – 10% range our ‘deficit’ would disappear & we might even get back to being fully funded, which we were in the late 90’s. BTW, this also affects CPP & is why our rates keep on going up there, too.

#201 John on 10.21.12 at 8:30 am

After not having checked The Toronto Star since about 2005, this year I have looked at it several times. With Canada entering an unheard of real estate unwind, and a very dynamic global stage….this is what was on top Sunday morning:

A “gay atheist” donating 700 dollars to the Gitmo prisoner now in Canada, and another article about a “Gitmo kitty”, some “bullying” breakdown and sports.

Really amazing little hyper reality going on. As well as some pretty obvious heavy hand politics in the editorial department. So with this culture, is it unusual that people would accept cheap global bank cartel derivatives loans for their “homes”? And then not realize what it is?

Someone explain how that’s odd. Because it seems very aligned to me.
————-

“SALT SPRING ISLAND, B.C.—A British Columbia man says he’s leaving Omar Khadr some money in his will, even though he thinks the Canadian war criminal wouldn’t approve of his lifestyle as a gay atheist.
Jack Hallam of Salt Spring Island says 26-year-old Khadr could put the money toward funding his education now that he’s been repatriated to Canada after being held at a U.S. military prison in Guantanamo Bay for a decade.
Hallam says he has set aside $700 for Khadr because he thinks the Toronto-born man has been treated badly by both the American and Canadian governments.”

#202 jeff on 10.21.12 at 8:43 am

#54

“a pension of about $4,000/month ”

Not bad. Must be nice.
_______________

become a teacher and you can have it too; don’t forget, they contribute a good chunck of their paycheque to finance the pension

#203 Ralph Cramdown on 10.21.12 at 9:04 am

#197 dv8
money eventually dies and a new currency emerges so you gonna transfer all your wealth through paper assets you own that will be worthless due to the fact that they are denominated in worthless dollars

Actually money continues on uninterrupted, much like your sentences. My paper assets represent ownership in hard assets like railroads and gas stations. If the currency becomes worthless, my companies will ask to be paid in geldings, florentines, galts or whatever the new currency is. And if you don’t have them, we’ll throw your worthless ass out the door.

#204 TurnerNation on 10.21.12 at 9:22 am

I notice the metalheads are out in full force with print and radio ads urging joe blow to buy metals.

Just as we are beginning a new downtrend in gold & silver. Fool me once. I bet the same people are still waiting for that elected senate, to TFSA room indexed to inflation.

http://finviz.com/futures_charts.ashx?t=GC&p=w1
http://finviz.com/futures_charts.ashx?t=SI&p=w1

#205 TurnerNation on 10.21.12 at 9:23 am

Old Man about the cheap condos in that area. I suspect these guys are the renters…

http://www.torontopolice.on.ca/homicide/mostwanted.php

#206 SGM on 10.21.12 at 9:29 am

A great article that clearly explains the problem with the Ontario teacher’s pensions plan especially for us younger members.

http://mises.ca/posts/articles/the-ontario-teachers-ponzi-plan/

#207 Timbo on 10.21.12 at 9:42 am

http://www.nakedcapitalism.com/2012/10/greek-society-unravels-under-austerity-measures.html

“Now that’s finished. That’s come to an end. These two parties are completely discredited. The center is hollowed out. And what has happened is that parties on the left and parties on the extreme right have been strengthened.”

A taste of things to come?…..

http://www.arabianmoney.net/us-stocks/2012/10/21/professors-shiller-and-siegel-review-chances-of-another-black-monday/

“Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller index of property values, and Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School, talk about the 25th anniversary of the Black Monday stock crash and current market risks.”

Repeating the same mistakes will lead to the same outcomes no matter the justification…….

#208 Mackie on 10.21.12 at 9:50 am

DV8 lol struck me the same way. An expert in his own mind. lol.

#209 Bottoms_Up on 10.21.12 at 10:02 am

#190 ozy – parking spots at mall still hard to find on
—————————————————-
hard to find because many fell for the suburban life hook line and sinker. and poor urban planning of course.

#210 TurnerNation on 10.21.12 at 10:18 am

#192Toronto CA – they’re spending almost $500 each month on dry cleaning and charity? #firstworldproblems.
What planet are they living on. What a waste of money.

#211 Canadian Watchdog on 10.21.12 at 10:24 am

EMs will be hit in the short-to-mid term from rising food prices.

Remember trading is king, not cash. Volatility is your friend.

#212 md on 10.21.12 at 10:39 am

Hey Garth, should I buy a house tomorrow and use all the money I’ve saved over my life time to finance it, effectively putting all my eggs in one basket? …I don’t feel that you have properly covered this topic

No. Spend it on therapy. — Garth

#213 Tony on 10.21.12 at 10:57 am

Re: #195 Devore on 10.21.12 at 12:29 am

Actually the converse is true. Immigrants will be the demise of Canadian real estate. For the very simple reason they put the minimum down just like the NINJA loans in America.

#214 Victor on 10.21.12 at 11:22 am

#209 TurnerNation on 10.21.12 at 10:18 am

#192Toronto CA – they’re spending almost $500 each month on dry cleaning and charity? #firstworldproblems.
What planet are they living on. What a waste of money.

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

Perhaps some of those charitable contributions are going to Unicef, Free the Children, World Vision and Doctors without Borders — perhaps helping to assist with #thirdworldproblems?

Don’t be so hasty to judge.

#215 Doug in London on 10.21.12 at 11:44 am

There’s a lot of talk about the sustainability of pensions (private as well as government pensions face similar challenges, by the way) in this topic. Obviously some people in government saw it all coming. That’s why in the early 1990’s the eligible amount of RRSP contributions was increased, early last decade the amount of foreign content in RRSP’s was increased, and last but not least the TFSA came into being. I wonder how many people, at least the higher income ones with extra money to save, took the hint?

#216 Hawk on 10.21.12 at 11:50 am

#202 Ralph Cramdown on 10.21.12 at 9:04 am

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

My problem with shares in corporations is that we live in a day and age when one has to wonder if the management of any corporation can be trusted, with traditionally defined fiduciary responsibilities.

With hard assets one at-least has comfort that if they lose a lot, they’ll never go to zero and in a long time frame will turn around, but paper assets that represent ownership of others are only as good as the people managing them (for example Nortel, a Canadian Icon is finished for ever).

The problem with equity ownership for people nowadays, isn’t the willingness or unwillingness to risk a particular business model, employed but to trust the Big wigs that steal from society………….and of-course never get any meaningful punishment for it.

You have far more to fear in the way of volatility and capital loss with metals than blue chips. Nortel was an extreme and unusual case, completely unrepresentative of most corporations. — Garth

#217 Canadian Watchdog on 10.21.12 at 12:16 pm

“You have far more to fear in the way of volatility and capital loss with metals than blue chips. Nortel was an extreme and unusual case, completely unrepresentative of most corporations. — Garth”

Might I remind you what happened last August when the U.S. lost its credit rating from debt ceiling dilemma? Chart Now there’s another debt ceiling increase and fiscal cliff to deal with in Q1 2013, which will surely be kicked again and followed by another downgrade.

Can always count on you for the fear factor. The market decline in the autumn of 2011 was an excellent buying opportunity, and the fiscal cliff might provide the same. Those who sell in such circumstances always lose. A smart chartist would know that. — Garth

#218 Snowboid on 10.21.12 at 12:43 pm

Just when I thought I had seen it all…

http://www.smartwomenbuyhomes.ca/

#219 Ralph Cramdown on 10.21.12 at 12:52 pm

#215 Hawk
My problem with shares in corporations is that we live in a day and age when one has to wonder if the management of any corporation can be trusted, with traditionally defined fiduciary responsibilities.

That’s a fair comment; the lack of shareholder rights in both Canada and the US make a mockery of our supposed ‘capitalist’ society. But there is a solution: You could invest in companies with a major controlling shareholder, where that company is the major source of the shareholder’s wealth. Then there’s no question that management’s and shareholders’ interests will be aligned. Here ya go:
http://en.wikipedia.org/wiki/List_of_Canadians_by_net_worth

Just buy ETFs. Problem solved. — Garth

#220 DonDWest on 10.21.12 at 1:43 pm

#217 Snowboid

Nice find. Young single women have definately played a large part in fueling this bubble; much to the frustration of this young man. This is something that simply didn’t happen during our parents era and it’s driving up costs.

Damn those blinders full of women. — Garth

#221 Daisy Mae on 10.21.12 at 2:42 pm

#203 TurnerNation: “I notice the metalheads are out in full force with print and radio ads urging joe blow to buy metals.”

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

They’ve taken to renting kiosks in large malls, eager to buy your gold/silver coins and jewelry….

#222 jess on 10.21.12 at 2:50 pm

Institutions have a fiduciary responsibility…to themselves!

David Cay Johnston: “The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind”

#223 jess on 10.21.12 at 3:51 pm

210 Canadian Watchdog
voilitity is your friend …economists are out and algo’s are in

algorithms ….with the average stock held for just 22 seconds. http://www.guardian.co.uk/business/2012/oct/21/superstar-traders-lost-magic

“The National Stock Exchange of India said 59 erroneous orders prompted a plunge in equities that briefly erased about $58 billion in value, underscoring the growing global concern about the integrity of financial markets,” Bloomberg News reports

#224 T.O. Bubble Boy on 10.21.12 at 3:56 pm

Garth’s ultimate investment failure:

http://www.theglobeandmail.com/globe-investor/investment-ideas/no-stocks-and-bonds-for-me-thanks/article4625199/

– 29 years old
– only invests in his mortgage, high-interest saving account, and GICs

There are no high-interest savings accounts. — Garth

#225 Old Man on 10.21.12 at 4:31 pm

#177 John – Celente has no motive, and respect him as has been right most of the time, and is a good Italian boy with a sense of dignity and morals. He has been divorced for years with no kids, and all his family are gone. He is very wealthy, but needs it not, so is having fun in his old age by speaking out as feels the pain of what American has become from what it had been. Oh he knows the hard times from his childhood, and is a great marketing expert to make a buck, but he needs it not, but looking deeper into his soul, he in his own way has the freedom to speak out with facts and a sense of truth out of frustration. He is no longer afraid to speak his mind, and respect him for it all; not for the money, but as a matter of conscience – that is the difference, and we in Canada must standup, and speak out before it is too late.

#226 WaterlooResident on 10.21.12 at 4:53 pm

Have you seen what Apple stock is doing lately?

It peaked at $700, is now $600, and soon will be down to $300, maybe less.

#227 DH on 10.21.12 at 5:06 pm

I actually disagree with this one this time. Their pension is enough and so are their savings, they just have to live within a certain life style and be aware of that.

As for TFSA, it’s a good strategy but if the future for the world is so grim and everyone doesn’t have enough money, then there is going to be limited return on investments too.

#228 Canadian Watchdog on 10.21.12 at 5:07 pm

#222 jess

I like how they bash economists, only that it is the old school economists who can profit watching a higher-skilled thief steal from another. It’s the way one thinks and measures the market that sets them apart from the rest. My advice to many is to unlearn what they learned about finance. It’s just a game.

#229 Old Man on 10.21.12 at 5:33 pm

#204 TurnerNation – you must have missed my link, as said the integrity of any property that is too cheap must depend upon a hidden factor, as am always looking for a bargain to hoop for a rental unit to throw into my Investment Company. Do not worry about me, as know why the prices are at 1981 levels, and that area of Etobicoke is off my page forever, and it is much more that what you are saying. Hey, when something looks too good to be true, I do my homework.

#230 TurnerNation on 10.21.12 at 5:41 pm

#213Victor – the majority of that money is siphoned up internally within the charity. Up to 80%. Or handed out to NGOs. Salaries and local bribes must get paid.

Tell me, what happened to all the cash you sent to Haiti a few years ago? Anything in our papers, or a total news backout of the US military occupation? Haiti is a valuable drug and human smugglng port. Get over it already.

Last year I saw a corporate event presentation from one of the brothers heading a charity ‘for the children’. Man they laid it on thick. A well-rehearsed multi-media pitch. It all sounded so good, so easy. Just give them money. They’d swoop in and everything would be peaches. Makes you wonder why it took so long.
Despite all the beers my BS filter was working fine. I waited. Then it came. They let it slip.
The reason why they have to “Save” the people (from what, from whom?), by building a school was due to the drugs. One mention of it. DRUGS.

Sure, send money to the local armed drug lords who will in short order co-opt the kids into well paying drug jobs.
That this guy is a Rhodes scholar, Harvard edcuated lawyer., well I’m not handing my money over to pay his salary.

#231 Victor on 10.21.12 at 6:06 pm

#229

Read charity annual reports and financial statements. Cost of fundraising is more than clear for those who wish to spend a few minutes to be judicious with where their dollars go.

#232 Victor on 10.21.12 at 6:08 pm

#225 WaterlooResident on 10.21.12 at 4:53 pm

Have you seen what Apple stock is doing lately?

It peaked at $700, is now $600, and soon will be down to $300, maybe less.

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

If you’re that confident, short the stock.

#233 TurnerNation on 10.21.12 at 6:52 pm

A few weeks ago I tried warning about Loblaws’ charity (the billionaire Weston Boys begging for your spare change).

Since then, Loblaws announced 700 layoffs at its corporate offices. Maybe they’ll pass on the savings to a charity. Naw. I make joke.
And a merry christmas to all the laid off workers!?! Charity begins at home?!?

Earlier post:
http://www.greaterfool.ca/2012/09/14/next-6/#comment-195857

#234 prairieperson on 10.21.12 at 7:34 pm

From Reuters

An article in Reuters today has F saying that he has done enough and won’t do anymore to cool down the market.

.

#235 jess on 10.21.12 at 7:38 pm

just a game eh watchdog…

DAVID CAY JOHNSTON: OK.

AMY GOODMAN: How did the Yankees and Mets owners grab like, what—collect $1.3 billion in public funds?

DAVID CAY JOHNSTON: They very quietly got the government to put up the money to build their new stadiums, and the news organizations somehow missed covering that.

AMY GOODMAN: Paris Hilton, her grandfather?

DAVID CAY JOHNSTON: Paris Hilton’s grandfather arranged to essentially steal two-thirds of a billion dollars from the starving children of the earth by subverting his father Conrad Hilton’s will. And he got to keep the money until he died, and then it had to go to charity. And so, imagine if you could have $641 million to use for, say, 30 years, and then you had to give it back. That alone would make you rich.
—————–

AMY GOODMAN: When you’re talking about the fine print, just go through example after example, as you did your research over these years, of how people are robbed blind and how you can fight back. But give the specifics, David.

DAVID CAY JOHNSTON: OK. Well, and indeed, one of the things I do in this book is show various ways that you can fight back about this. The pipeline industry, let me go back to them. During the Bush administration, they got an administrative rule passed. They created something that didn’t exist in the law in terms of hearings, so they could have one-sided contact with the commissioners—the industry could—that allows the pipeline industry to collect from their customers—and they’re all captive customers—the corporate income tax. But pipelines don’t pay the corporate income tax, because they’re partnerships. And there’s a court case that shows this increases their profits as much as 75 cents on the dollar. So if you’re going to earn a dollar, you actually get a dollar and 75 cents in your pocket at the end of the day if you own one of these.

#236 Daisy Mae on 10.21.12 at 7:46 pm

186TurnerNation on 09.15.12 at 7:32 pm
#50Canadian Watchdog on 09.14.12 at 11:19 pm

Y’know, Loblaws stores are exhorting people to give $2 on their final bill to their childrens charity at this time.

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

Walmart does this on a regular basis — ALWAYS asking for donations for this ‘n that cause.

‘Charity begins at home’ period. End of story.

#237 Daisy Mae on 10.21.12 at 7:52 pm

I sponsor a child in Uganda. Feel good about it. But always skeptical. As long as World Vision keeps their nose clean, I’ll continue.

#238 gb on 10.21.12 at 8:29 pm

Garth,

Long time reader and defender of you sir. As you know, many accuse you of cherry picking information and data to support your economic and financial planning advice. Generally, I find you to be highly credible and as such, try to follow much of your advice.

Unfortunately, I think the cherry picking accusation may have some bite with this last entry of yours…

You quoted the Canadian Federation of Independent Business (CFIB) as if they have any credibility whatsoever in any discussion concerning pension sustainibility.

It seems you have chosen to accept as fact the data they have compiled in a clear agenda to send average Canadians on death spiral towards a “race to the bottom”.

Here is another view:

http://www.benefitscanada.com/pensions/governance-law/cfib-pension-tension-campaign-is-all-wrong-20008

I don’t think the numbers you (or should I say CFIB) quoted tell the right story.

For clarity, I did not laud or support the CFIB report, merely referenced it. In saying, “It seems you have chosen to accept as fact the data they have compiled in a clear agenda to send average Canadians on death spiral towards a ‘race to the bottom'”, you’ve picked a fine cherry yourself. — Garth

#239 Snowboid on 10.21.12 at 9:28 pm

#219 DonDWest on 10.21.12 at 1:43 pm…

My intent of posting the link was to illustrate how low the RE marketing machine has sunk, to coin the phrase that “Smart Women Buy Houses”

Nothing else.

#240 happy renter on 10.21.12 at 9:29 pm

The currency wars will soon come.The u.s. will go down and canada too because are gold holdings are low.Gold and silver and commodities will do well.Prepare for a slow collapse

#241 gb on 10.21.12 at 9:49 pm

Well, I did not say that you lauded the data…just that you quoted it.

And when you quote something in absentia of alternative data, it generally means you believe it to be true.

You used the mythical data to support your claim of a “simple conclusion” that defined benefit pensions are “too good to last” (as you put it).

My point is that CFIB lacks significant credibility and I don’t think it’s wise to use their agenda driven data to support a position.

The link I provided largely debunks the data provided to the readership here.

I think it’s important for average Canadians to get the right data and strive for improved rights, benefits and pensions rather than CFIB’s desire to have workers “race themselves to the bottom”.

#242 Dupcheck on 10.22.12 at 9:51 am

You could accelerate/pay the mortgage down now before the high rates kick in, this way when the high rates come, you have less damage.

#243 Dupcheck on 10.22.12 at 9:56 am

How is it any different that charities are allowed to be collected at Walmart or other stores, but the guy at the corner light can be put in jail at any time for begging? We are such hypocrites.

#244 CrowdedElevatorfartz on 10.22.12 at 7:10 pm

@#242 Dupcheck
Arrested for begging in front of WalMart were we?