Savers

saver

One day does not a trend make. But it can sometimes stop one. Tuesday felt like one of those, with triple-digit increases for stocks in both Toronto and New York. No fluke, either. Consumer confidence in the States went up. American home prices shot higher by 12%. Sales hit the best level in eight years. And all of a sudden it looked like the 5.8% decline we’ve just had might be, well, a pimple.

But forget equity markets. Let’s talk about savers. They’re getting screwed, and it’s time we did something about it.

Last Wednesday when Fed boss Ben Bernanke ruminated about turning off the stimulus tap which has kept mortgage rates, bond yields and savings accounts lower than pond scum, the cost of money erupted. Bond prices fell and yields bloated faster than anyone expected. Mortgage rates moved higher almost immediately, and what was 2.89% at the big banks weeks ago is now close to half a point more.

Government bonds have increased in yield between 50% and 64%. American mortgage rates are a full 1% more than a month ago. And there’s the sense in both countries the days of absurdly-low interest rates – those emergency measures with us since the disaster of 2009 – are gone. Forever.

Meanwhile savers have seen nada. Zero. Ziltch. Diddly.

Chequing accounts at TD, for example, give you 0.10% on balances up to $25,000. That’s $25 a year – taxable. ‘High interest’ savings accounts pay 1.05% at the banks, and as high as 1.9% if you trust a Lithuanian Steelworker’s Catholic Credit Union in Ladysmith. Five year GICs? Total joke. Expect 1.4% to 2.8% for tying up your money for five long years, with no liquidity (these are non-redeemable), and no income. Interest is paid on maturity, yet each year you must declare it and pay tax. Worse, the interest is treated as income, at your marginal rate. Yuck.

None of these pathetic rates have changed in the past few weeks, as mortgages swelled and bonds bloated. Nor are they likely to bump up in any meaningful way until the Bank of Canada decides it’s time for a general hike, and moves its key rate. That’s expected in about a year, with the first pop being a half point. Yup. It’ll still be a disaster for savers.

Sadly, Canadians have more money in GICs than any other single asset. That includes risk-averse older people who would rather live on Whiskas and oxygen than contemplate losing anything, and a shocking number of sub-30s who defy understanding. These are the same kids willing to borrow more money than they can fathom to buy a condo destined to devalue. Go figure.

In case I wasn’t clear enough, GICs are a terrible place to put cash. They’re usually illiquid. Interest is treated as income. You’re taxed on money you haven’t yet received. And the rates suck. This will continue, even as stock markets recover, bond yields rise and fatter mortgage rates hasten lower housing prices.

You can blame the Royal Bank for part of this. When the behemoth swallowed Ally Canada it lessened competition and removed pressure to raise returns for savers. Wow. What a coincidence. Ditto for ING, after Scotiabank ate it. The orange guy’s shorts now have serious ED.

It’s no secret that with new mortgage applications plunging, the monster banks will see their monster earnings under some pressure. Hardly a time to expect them to hand out bonus interest on savings accounts or GICs, just because the rate environment’s changed. The longer they can enjoy current spreads, the better it is for shareholders.

Which begs a question: if you like having money in the Royal Bank but don’t want a one-year GIC paying 1.3%, which is taxed as income, why not buy preferred shares in the same bank and collect about 5%, taxed at half the rate? Or a basket of good preferred shares in an ETF, currently returning 4.8% monthly? These things act and smell like bonds, but pay better and offer the dividend tax credit. They’re far more stable than common stock and – bonus! – happen to be on sale this week.

Ditto with real estate investment trusts, which own shopping malls, office towers or blocks of apartment buildings and produce an income stream distributed monthly to unitholders. The returns here have averaged 7% over the past decade, with an ETF basket of solid REITs now paying 4.84% monthly. And, yes, also on sale, thanks to the hyperbolic bond selloff last week that sideswiped innocent bystanders like preferreds and REITs.

By the way, unlike GICs these things pay you regularly – monthly or quarterly. They’re 100% liquid, meaning you’re not locked in and can get your money back at any time. Some pay dividends, for way less tax. Others give you a return-of-capital payment,  free of tax.

The downside? The underlying asset value can (and does) fluctuate – as has just happened, although both have performed far better recently than blue-chip Canadian stocks. But if it’s predictable, recurring, steady-eddy, boring, routine, dependable, tax-efficient income you want, these are worthy options in a world which snuffs savers.

Hate risk? Simple. Then don’t run out of money.

183 comments ↓

#1 Ray Skunk on 06.25.13 at 8:29 pm

Got to be first, surely?

The zenith of my existence!

#2 the-unhappy-renter on 06.25.13 at 8:32 pm

Garth, please explain to us WHY so many Canadians love real estate so much ???
Thanks

Mothers-in-law. — Garth

#3 AK on 06.25.13 at 8:36 pm

Since January of 2010, the United States has added 520,000 Manufacturing Jobs , according to the Bureau of Labor Statistics.

#4 tigerbaby on 06.25.13 at 8:38 pm

> … not a dime of net money will flow out of bonds. The money that has been lost in bonds the last few weeks has simply evaporated. Gone to thin air.

All the talk about money getting evaporated and gone into thin air is garbage, since otherwise people would be collecting money vapour from thin air and condense it back. :-O

#5 Montreal_Is_Crashing on 06.25.13 at 8:38 pm

People often forget to talk about Montreal. Montreal is in a crash state.

Developer are currently so desperate that they are giving goodies to make you buy.

Do you want with you new condo or house a car, mortgage payment for a year, free parking, upgraded kitchen or bathroom, free locker, heated floor?

Also, on the used market, I see in every area price drop of 30000$ since a year ago.

So my message to developers, realtors, and Joe that is trying to sell their overpriced properties : we are reading Garth article every day and we are NOT going to buy anytime soon!

We are waiting on the side line because we know that price have NOT bottom out.

It will take time to bottom out and will wait patiently.

=)

#6 baglady on 06.25.13 at 8:39 pm

Garth How do you go about buying ETF of Reit’s and preferred shares in a ETF? I have an BMO investorline account and would like to buy these but don’t know how. Or do you know a fee based advisor in Kitchener who could help me? Enjoy reading your column very much. thanks for the help

#7 screwed on 06.25.13 at 8:40 pm

Garth, have you considered writing for the Onion?

Too vegetative. — Garth

#8 bob on 06.25.13 at 8:45 pm

that last part is a little bit worrying “the underlying asset value can and does fluctuate” like it did in 2007 maybe?

Doubtful. But a preferred owner in 2007 continued to make 6%, and got all their money back. Not so bad. — Garth

#9 GICSsuck on 06.25.13 at 8:50 pm

Garth, given gic’s suck so bad why do people buy them?

#10 Renter's Revenge on 06.25.13 at 8:51 pm

I’ve estimated that there are only $100,000 worth of US stocks per american, $60,000 worth of Canadian stocks per canadian, and $8,000 worth of world stocks per human being. Based on the law of supply and demand, these simple facts should bring comfort to any stock holder. Demand for income producing assets should outstrip supply for a long time to come.

#11 Sebee on 06.25.13 at 8:53 pm

What savers? 76% of Americans have nothing.

http://money.cnn.com/2013/06/24/pf/emergency-savings/index.html

Is this America? — Garth

#12 AisA on 06.25.13 at 8:53 pm

In other news the new Black Sabbath release kicks ass harkening to better days long gone.

YES, don’t run out of money, keep working, stay liquid and shun all the shysters as there is nothing out there at the moment but…..Shysters.

Mothers in Law are sent to collect your soul when Satan has failed. IT’s TRUE!!!

Have a nice rest of the week everyone. :-)

#13 Sebee on 06.25.13 at 8:55 pm

I bet Canadians are just as bad as Americans. 76% probably have no savings. But as you say regularly…strangely 76% have houses.

#14 Savers — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer on 06.25.13 at 9:03 pm

[…] via Savers — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#15 Mikey the Realtor on 06.25.13 at 9:05 pm

#6 baglady

google CPD and XRE or go to ishares canada, ishares probably has the biggest ETF collection for the canadian robmarkets. They can be bought through your investorline broker account by typing in the tickers I gave you.

look, a realtor helping someone who is trying to get into the robmarkets…

…still, better to buy tangible assets.

#16 Mama Bear on 06.25.13 at 9:06 pm

That picture! I sold my home and am now renting a condo. The Board here has a rule that all dogs must be carried in the common areas. I tried carrying her at first (she’s 28lbs) but decided to buy a doggy stroller.

#17 Victor V on 06.25.13 at 9:07 pm

#6 baglady on 06.25.13 at 8:39 pm
Garth How do you go about buying ETF of Reit’s and preferred shares in a ETF? I have an BMO investorline account and would like to buy these but don’t know how. Or do you know a fee based advisor in Kitchener who could help me? Enjoy reading your column very much. thanks for the help

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

Preferreds = CPD
REITs = XRE

Take a look at a recent chart and you’ll see that they are on ‘sale’. Good time to add either of these to one’s portfolios and simple to buy through BMO investorline with a few clicks and low commission.

#18 AK on 06.25.13 at 9:09 pm

10 Stocks for the Second Half of 2013

#19 JimH on 06.25.13 at 9:10 pm

Thanks for another great post, Garth.
Agreed that one day doesn’t make a trend, but it was good to see AGG struggling, but managing to stay afloat today.
For your American readers, note how Pimco Total Return (PHK) did today! Even DHF didn’t do too badly, and ETY EXG made nice moves…

As for the incredibly hi-yielding REITS like AGNC, NYMT and INN, they also took a bounce.

You’re absolutely right: Case-Schiller, new home sales, durable orders, and consumer confidence all point to a straightening trend in the US economy…

I am confused as to why some of your readers perceive this as a bad thing… As Canada’s major trading partner, a growing, strengthening US economy can only work to Canada’s advantage in the future as it has in the past!

As a proud dual citizen (born in Saskatchewan, now living in Missouri and Arizona), I wonder how many of my native countrymen stop to consider how very different life north of the 49th would have been had they shared a southern border for the last 135 years with a neighbor of similar characteristics to Russia, North Korea, Iran, Kazakhstan, &etc.

I know that life down here would now be categorically different had our northern neighbor been any other than a friendly and cooperative Canada!

#20 JimH on 06.25.13 at 9:11 pm

Make that 235 years or so!

#21 Smoking Man on 06.25.13 at 9:17 pm

#2 the-unhappy-renter on 06.25.13 at 8:32 pm

Garth, please explain to us WHY so many Canadians love real estate so much ???Thanks

Mothers-in-law. — Garth

……….

Same reason you want a crash so you can afford one.

Status, making it, no longer a loser renter.

That’s why, Canadians play passive aggressive competition.

You buy a bigger house than your best buddy, he’s wife says to your wife, oh its lovely. Mean while she’s thinking BITCH. I’ll show you.

The house, the, car, the kids education.. All a chance to up one men ship the people closest to you

Hence the Canadian Herd

#22 Mark on 06.25.13 at 9:19 pm

Garth,

Can you share the tickets for some of the 5% monthly you mentioned? The best I have found are 17% yearly, and those are few & far between.

That’s an annual return, paid monthly. If you want 60%, get a gun. — Garth

#23 AK on 06.25.13 at 9:20 pm

Hurting loonie to play havoc with stocks

#24 Mark on 06.25.13 at 9:21 pm

Oh, and everybody should jump on EEM like a fat kid on cheeseburgers.

You just broke two laws in BC. — Garth

#25 detalumis on 06.25.13 at 9:21 pm

Cat food is actually more expensive than human food by the way so not sure why it keeps coming up as an analogy for poverty in old age. Seniors in Canada also have the lowest poverty rate of any demographic so what they get in interest for their GIC is neither here nor there. We don’t expect anybody to sell their house to pay for LTC and hand out senior welfare to people sitting on a big pile of assets unlike any other group in the country.

I know, how about doing a column on say the lifestyle of marginally employed workers in the faux towns that cater to wealthy retirees, the ones who work in fine dining restaurants and go on EI every winter.

#26 Flint on 06.25.13 at 9:23 pm

Garth,

Could you recommend a good next step for looking into some of the things you mention (like bank preferreds)?

As sad as it sounds, some of your readers have likely never invested before, and you speak of buying financial products like I do cheap beer. I only know how to get one of those things.

Please and thank you!

#27 Smoking Man on 06.25.13 at 9:24 pm

#9 GICSsuck on 06.25.13 at 8:50 pm

Garth, given gic’s suck so bad why do people buy them?
……………..

Why don’t you keep asking him.

People due to slave conditioning they receive in school, such up to precived authority, the nice confident dude in the bank with a nice suit and cufflinks is the one they blindly trust.

Remember critical thinking is a no no to central planning and education.

It makes smoking men’s lives easy when hunting prey.

#28 AK on 06.25.13 at 9:25 pm

#15 Mikey the Realtor on 06.25.13 at 9:05 pm
“#6 baglady

google CPD and XRE or go to ishares canada, ishares probably has the biggest ETF collection for the canadian robmarkets. They can be bought through your investorline broker account by typing in the tickers I gave you.

look, a realtor helping someone who is trying to get into the robmarkets…”

——————————————————————-
That’s very kind of you..

#29 dutch4505 on 06.25.13 at 9:32 pm

Up visiting friends in Canada. They were showing me the Abbotsford BC newspaper which had a full page ad to buy a condo. The developer was providing “Guaranteed Rent” in which a carefree investment can be made to buy a revenue condo. The developer would guarantee a condo rent check would be received for 24 months. The rent would be paid even if the condo should become vacant. I thought I seen everything when we went through our real estate crisis in the US. Never did see a “Guaranteed Rent” program though. Wow!

#30 Ben on 06.25.13 at 9:32 pm

Yes – more on Montreal please! Anyone know any good sites for Montreal stats? Besides realtor.ca??

#31 Renter's Revenge on 06.25.13 at 9:33 pm

If you want 60%, get a gun. – Garth

+1

#32 Mr. Burns on 06.25.13 at 9:42 pm

“The returns here have averaged 7% over the past decade”

Couldn’t the same be said of Canadian real-estate? Besides, didn’t “someone” mention that if you need to look at a 10 year chart to justify owning something, then you shouldn’t own it in the first place?

It’s not an either-or question. Smart people have liquid portfolios plus real estate. As for REITs, they hit an historic high six weeks ago. — Garth

#33 Dean Mason on 06.25.13 at 9:42 pm

Mutual funds with MER’s of 1.13% to 2.93% suck more than GIC’s.Don’t forget the 5% to 10 % redemption fees or surrender fees .There are also short term trading fees of 2% traded before 90 days.

Don’t forget year end taxable distributions in most mutual funds that can be worth less end value by year end but you still owe income taxes.Look at the PBS program The Retirement Gamble.It will all make sense.People put money in GIC’s because they used to pay 4.00%,5.00% 4-5 years ago.

They lost a big chunk in their stock or equity mutual funds in 2008,2009 so they rather make 1.90% to 2.85% 5 year GIC’s to 2.85% to 3.15% for TFSA’s,RRSP’s.Putting money in a bank,trust company,credit union was never meant to make you rich anyway.

Now it’s just bankers taking advantage of desperate people.They would rather have your money in mutual funds.This way after 50 years a $100,000 investment at a 2.00% annual MER would eat up 62% of your future investment value.A 5.50% return versus 3.50% return compounded after 50 years.Instead of having $1,454,196.12 you would have $558,492.69.The total fees of $895,703.43=61.59% of the total future investment.They leave you with only 38.41% your future investment.

Most people have no idea how bad fees can tax your future retirement.

No sane person buys mutual funds with high MERs and DSC fees. Low-cost, high-liquidity ETFs are the best option for exposure to growth and income-producing assets. You have made no worthy argument for GICs. — Garth

#34 Smoking Man on 06.25.13 at 9:46 pm

Just found a book while looking for my wedding ring,took it off when I burnt my finger trying to light a smoke in a drunken stupper, have a meeting tomorrow, Wana play the part. trying to unload keys me. for a shit load.

The book, The secret. My wife bought it when I was tax farm slaving in Charlotte back in the hight of the financial melt down.

The books premises, just will it and it will come, at the time it was a best seller… US economy tanked…

So much for that theory.. TRUTH Is you Wana make it, you got to scam, scheme, and plan… Close the deal to a lessor human…. It’s called business…

Only thing that works, and if your really good, the one you bend over, loves you afterwards…

#35 Retired Boomer - WI on 06.25.13 at 9:51 pm

#27 Smoking Man

Recent research shows relying on cell phones, and other hand geld devices deprive the right brain to effective “exercise” needed in critical thinking.

Makes one wonder how much more herd-like this upcoming generation will be.

It is already a major problem, yet perceived by only a few smoking men.

#36 rain8 on 06.25.13 at 9:52 pm

Garth – going back to your column yeterday. Please elaborate on what is likely to happen in Calgary in light of the flooding. I think the ramifications will be significant. I think many thousands of people will walk away from their homes and that many small business will not survive. Also the rental market has to be affected – I personally know a dozen people who are now looking for rental accomodations until their house/condo is habitable. I think this would make for an interesting column.

#37 Smoking Man on 06.25.13 at 9:55 pm

#23 AK on 06.25.13 at 9:20 pm
Hurting loonie to play havoc with stocks

I’m riding on Garths recent amazing calls, my radar is a bit off.

So if garth is right and S and P goes space shuttle, the usd Cad will tank… Put a huge 100 contract sell on it.

I m betting that Garth is due… After years of hit and misses.

IM BETTING GARTHO HUGE

#38 Nemesis on 06.25.13 at 9:57 pm

“Is this America?” — Garth

At best it’s a VeryMixedPicture, AuldPol.

No worries. I’ll be doing more FieldWork in August. Keep y’all posted.

PS – there’ll be lot of ThunderingIron from Wisconsin where I’m going.

#39 Saint Herb on 06.25.13 at 10:01 pm

I have a general idea of how to buy the financial things you refer to, but having been the dumb money before, I don’t have any confidence to try again.

I would love a low, low risk way to invest my saving so it could pay my rent.

Just found a new rental for 2350/mth for a 1 year old 2900 sqft 4bd/4bath house. Much higher then I wanted but it was time to move so I had to go for it. I negotiated it down from 2550. Similar houses are selling for $850,000 and up.

Do the numbers make sense? Should I be renting this?

I could buy this house very easily, so paying this rent, is very difficult for my wife.

Garth, will I save in the long run?

#40 Attempted but failed on 06.25.13 at 10:01 pm

A house virgin friend of mine just bought a condo in the 416.

Will be paying ~$350k plus $600/month maintenance and payments to the taxman. Unsure of how much down, or interest terms.

He declined my advice to rent a lesser unit for $1,600-$1700/month and to read your blog.

Please don’t tell him he’s toast Garth.

OK, you tell him. — Garth

#41 TurnerNation on 06.25.13 at 10:04 pm

ING’s 3-4 yr fixed rated jumped to 2.99, from 2.79, yesterday – a 7% upward move. Don’t get dING-ed.

#42 Alpha Bravo on 06.25.13 at 10:06 pm

#2 the-unhappy-renter

Garth, please explain to us WHY so many Canadians love real estate so much ???
Thanks

Mothers-in-law. — Garth

————————–

And Mothers-in-law from hell.

#43 Smoking Man on 06.25.13 at 10:10 pm

#35 Retired Boomer – WI on 06.25.13 at 9:51 pm#27 Smoking Man
Recent research shows relying on cell phones, and other hand geld devices deprive the right brain to effective “exercise” needed in critical thinking.Makes one wonder how much more herd-like this upcoming generation will be.It is already a major problem, yet perceived by only a few smoking men.

……..

Resent Research, hum, probably done by a university, it’s every one else’s fault but theirs.

Problem is us boomers, we let the young down, we have slowly let the machine emasculate us, we are asleep at the wheel, well not talking about me. But kids are screwed.

Kids will rise inspite of PRISOM

#44 Dean Mason on 06.25.13 at 10:11 pm

Garth,what about all those that invested 10-15,20 years ago.There were no low cost ETF’s in Canada.Back then GIC’s were 9%,8%,7%,6%. I am not making GIC’s worthy of anything but before they were a better potion than now.A more intelligent,savvy investor would of bought longer term government individual bonds,strips in the 1990’s and early 2000’s.

This way they locked in their higher yields of 6%-9.5% for 20,25,30 years.This is a better way than GIC’s to generate sustained long term income.

#45 Dean Mason on 06.25.13 at 10:12 pm

Correction I am not making GIC’s worthy of anything but before they were a better option than now.

#46 Mister Obvious on 06.25.13 at 10:15 pm

#2 the-unhappy-renter

“Garth, please explain to us WHY so many Canadians love real estate so much ???”
—————–

Because there are but two options:

1. You stay safe and snuggly with your loving family in an ever-appreciating four bedroom suburban home, or…

2. You sit alone day-trading derivatives just one risky transaction away from financial ruin.

Those are your choices as a Canadian. Or, so they tell me.

#47 Van guy on 06.25.13 at 10:16 pm

Garth,

Won’t preferreds decline in price when interest rates rise?

#48 not 1st on 06.25.13 at 10:21 pm

A few posts ago, the canadian equity market was doomed doomed doomed, now its just on sale. Garth always leaves some wiggle room for himself.

I did not address Canadian equites in this post, nor reference them as ‘doomed’. Try to be truthful, if not relevant. — Garth

#49 Dean Mason on 06.25.13 at 10:21 pm

The 10 year fixed ING mortgage went up 0.10% from 3.69% to 3.79%.This is a 2.71% increase.They will be raising them more if the bond market and bond yields keep this up.

#50 2CentsCdn on 06.25.13 at 10:24 pm

#34 (guess who)
“So much for that theory.. TRUTH Is you Wana make it, you got to scam, scheme, and plan… Close the deal to a lessor human…. It’s called business…
Only thing that works, and if your really good, the one you bend over, loves you afterwards…”

SM … you crack me up … I think I’m going to try to fit that on my grave stone : ) I agree with 98.6% of your thinking … but man … if you softened the delivery a little others might remove your “crack-pot” lable and listen to some of your idea’s.

#51 not 1st on 06.25.13 at 10:24 pm

Why on earth should savers be rewarded? They are getting exactly the right rate for what their money is doing in the greater economy….nothing.

A strong economy is built on risk and reward and investment and entrepreneurship, not people squirreling their coffee money away in the bank account.

#52 Paully on 06.25.13 at 10:26 pm

“The orange guy’s shorts now have serious ED.”

Love that line!

I guess the Orange Guy needs a Blue Pill!

#53 KommyKim on 06.25.13 at 10:27 pm

RE: #6 baglady on 06.25.13 at 8:39 pm
Garth How do you go about buying ETF of Reit’s and preferred shares in a ETF?

Like others have said, you can buy XRE and CPD. Or if you really like BMO, try ZRE and ZPR which are their own ETFs of REITs and Preferreds. They are slightly different in what they hold compared to the Ishares ones. Check ’em out.

#54 Smoking Man on 06.25.13 at 10:42 pm

#47 2CentsCdn on 06.25.13 at 10:24 pm

Ha, being a proud crack pot is what makes my character interesting.

You know all those goofs that say they skip my post, they lie… They Read every letter and try and dephicer what I make difficult to read. Lmao

I’m like drug, I present the obvious, the thing that the machine has so carefully tried mask to its slaves.

Being insane gives me the green light to offend, you can’t bend what you can’t offend.

A lyric from one of my son’s tunes

#55 Ludmila on 06.25.13 at 10:55 pm

“Behemoth”? You keep surprising me, Mr. Garth.

#56 Grantmi on 06.25.13 at 11:17 pm

#2 the-unhappy-renter on 06.25.13 at 8:32 pm

Garth, please explain to us WHY so many Canadians love real estate so much ???
Thanks

Mothers-in-law. — Garth

Living in the basement no doubt!!!

#57 The Man From Nantucket on 06.25.13 at 11:21 pm

#39 Saint Herb on 06.25.13 at 10:01 pm
….
Do the numbers make sense? Should I be renting this?…….Garth, will I save in the long run?

The property tax alone is probably close to 1/3 of your rent.

A lousy 2% return on the $850K that you say you have would pay for most of the rest……

So, how’d you manage to acquire $850K if you are stuck searching for answers in this peanut gallery? :)

#58 bp21boomer on 06.25.13 at 11:24 pm

#26, good heavens dude, at least read Garth’s blog and look at past posts. He gives you a road map for a balanced, diversified portfolio. If you need to be spoon fed investment advice go to [email protected], she/he will take you down the road of high fees and small returns. It boggles the mind that so many people want to be told what to do and take no ownership of their financial future. Man up dude, do some research, get educated and act!

#59 The Man From Nantucket on 06.25.13 at 11:26 pm

#44 Dean Mason on 06.25.13 at 10:11 pm
……..A more intelligent,savvy investor would of bought longer term government individual bonds,strips in the 1990′s and early 2000′s.

I think I read a book about just that tactic as a key part of the RRSP:

http://www.amazon.ca/dp/155013826X

eerily prophetic in some ways.

#60 Cautious on 06.25.13 at 11:29 pm

Re prefs:
ZPR takes a laddered rate reset bucket approach, which should be beneficial in a rising interest rate environment, but 29% of its holdings are P3. CPD holds about a third in perpetuals.

#61 Harry Wilson on 06.25.13 at 11:39 pm

You’ve been hacking into my Excel again, haven’t you, Mr. Turner. As you were posting today’s entry, I was in the Royal Bank, trying to find out why my GICs, which mature at the end of this year, have such dismal prospects. As ammunition, I brought the Canadian Western Bank’s GIC rates, which have actually had two increases in the shorter term GICs in the last month.

My question, to anyone who wants to wade in, is why would the aforementioned CWB have 1-5 year GIC rates at 1.65%, 1.75%, 1.9%, 2.05%, and 2.2%, but simultaneously offer a ‘TFSA Demand Account’ that is basically a savings account within a TFSA, but pays 2.55%?

I did call CWB this morning to confirm that this is how the numbers stacked up. Why is a TFSA without any time commitment offering a higher interest rate?

(Please don’t take this as a shill-vertisement for CWB; I’ve never been inside their doors. If you prefer, Mr. Turner, replace ‘CWB’ with ‘Some Random Mid-Sized Bank’.)

By the way, #25 detalumis, they do make inexpensive cat food specifically for humans; it’s called Maple Leaf Flakes Of Slow-Moving Animals. The fastest that chicken ever moved was through me.

Well, it’s been forty-five minutes; time to run the wet/dry around my basement apartment again. Sunny Freakin’ Alberta my a..

Thank you.

#62 Mister Obvious on 06.25.13 at 11:53 pm

#39 Saint Herb

“I would love a low, low risk way to invest my saving so it could pay my rent.”
————————-

How low a risk? The Orange Guy is low risk. He pays dick-all. GIC’s are low risk. Same deal, but worse.

You’ve got to take some risk, Herb. That’s all there is to it. It’s the kind of world we’re heading into.

But you need not take unreasonable risk. Regular readers of this blog will know the biggest financial risk is to plow money into Real Estate at its peak. (Hint: the peak is just behind us and the next trough is a quite long way off.)

From your comment it seems you might have about a million to invest. That can easily spin off plenty of rent money.

But you need an advisor. The right advisor. And you need to pay for that. But it’s worth every dime. And its tax-deductable too. Is there anyone you can think of offhand?

#63 Mark on 06.25.13 at 11:58 pm

“Why on earth should savers be rewarded? They are getting exactly the right rate for what their money is doing in the greater economy….nothing.

A strong economy is built on risk and reward and investment and entrepreneurship, not people squirreling their coffee money away in the bank account.

Exactly, if you’re talking about so-called “savings accounts”. But investors and entrepreneurs aren’t exactly doing very well either. The stock markets still haven’t come anywhere near a recovery from levels reached 5-6 years ago. At least those cash savers/investors have done fairly well in comparison. Of course, home owners have cleaned up.

#64 curious_investor on 06.25.13 at 11:58 pm

Garth, can you point us toward a primer (or give us more info) on how to choose preferred bank shares? I’ve spent some time researching but I’m still not clear on which series to look at, etc.

#65 HAWK on 06.26.13 at 12:05 am

#2 the-unhappy-renter on 06.25.13 at 8:32 pm

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

Canadians do not love Real Estate

Human beings love Real Estate………period!

It is part of the human condition to love the land on which they dwell and to want to own a parcel of it. It’s the NORMAL thing for good decent people.

What is perhaps less normal (or atleast desirable anyway) is an assortment of government officials and apparatchiks that want to impose hefty transfer taxes, property taxes and a myriad number of costs and regulations upon a people that make it more difficult to achieve home ownership for everyone.

Is there a reason why you refer to yourself as an “unhappy renter”?

#66 Snowboid on 06.26.13 at 12:15 am

Canadian banks explained…

http://www.ctv.ca/DailyShowwithJonStewart.aspx?vp=135777

Starts at 5:00 – boy do I feel great after seeing this, even though I didn’t see the Orange Guy during the entire segment.

#67 HDJ on 06.26.13 at 12:22 am

#51 not 1st “A strong economy is built on risk and reward and investment and entrepreneurship, not people squirreling their coffee money away in the bank account.”

And what do you think happens to the saver’s money sitting in a bank? The banks pour it back into the economy as loans, which stimulate growth and prosperity. Savers are not getting their share of the returns.

#68 Yellow Rox Rock on 06.26.13 at 12:26 am

yet an other awesome thing about gold:

http://www.sciencedaily.com/releases/2013/06/130625192547.htm

“Scientists in the US have developed a novel vaccination method that uses tiny gold particles to mimic a virus and carry specific proteins to the body’s specialist immune cells…”

#69 Calgary Boomer on 06.26.13 at 1:18 am

I just got a letter from RBC telling me my heloc rate is going from 3% to 3.5%. I called to ask why since the BOC rate hasn’t changed. They said the cost to them is higher. Huh? Does it make any sense that a credit line interest rate should go higher other than wanting more profit? Now I haven’t used it in a few months, but I have over the years regularly.

#70 unpoovvio on 06.26.13 at 1:28 am

For those interested, link below to a G&M chat earlier today with James Hymas regarding preferreds.

http://www.theglobeandmail.com/globe-investor/inside-the-market/qa-how-to-make-preferred-shares-a-valuable-part-of-your-portfolio/article12749651/?cmpid=rss1&utm_source=dlvr.it&_rob_utm_medium=twitter

#71 blobby on 06.26.13 at 2:01 am

i was hearing on news 1130 much celebration tonight about home sales and prices going up.. But they were doing so at same time as talking about US economy.. Did they ‘kinda’ fib to me by passing off US numbers in a way it sounded like canadia was doing well?

#72 B. Wrangler on 06.26.13 at 2:37 am

>>Tuesday felt like one of those, with triple-digit increases for stocks in both Toronto and New York. No fluke, either. Consumer confidence in the States went up. American home prices shot higher by 12%.

So you believe that American home prices went up by 12% on Tuesday? Or that the triple-digit increases weren’t simply rebounds from much larger falls a few days earlier?

The most recent 12-month advance, of course. — Garth

#73 Khoek on 06.26.13 at 3:27 am

Doubling down eh? The thing with these defensive plays is that they tend to go as the bond market does (as we’ve seen these last few weeks). If interest rates are truely set to rise we’ll see the underlying values continue to drop resulting in returns that are quite a bit less than their existing dividend yields. In short, this asset class may be set to underperform.

#74 Onthesidelines on 06.26.13 at 4:22 am

#45Dean Mason on 06.25.13 at 10:12 pm
“Correction I am not making GIC’s worthy of anything but before they were a better option than now.”

I would argue that they are still the least worst option in the current environment. At close to 2% for a two year locked in, a GIC is a viable and safe option if one favors waiting on the sidelines for more clarification on how this whole post 2009 mess is going to play out. If bond interest goes up, the two year time frame is doable. Same goes for if the world economies start showing some real recovery. Neither is a certain at this point in time.

Regardless of the pompous claims of our seemingly all knowing host, a prudent, cautious approach to preserving capital is still warranted IMHO.

#75 Buy? Curious? on 06.26.13 at 4:40 am

Hey Garth! Another fine post!

A buddy’s next door neighbours, this old couple who have trouble going up stairs, are trying to sell their house out in Pickering. They started at $399k but have had to reduce it now to $349k. It’s been on the market for just over 30 days. They aren’t as mobile so they sit in the living room while their real estate agent shows their place. It’s really sad.

And speaking of sad, two friends from school, have moved back home with their parents. These guys weren’t stupid either. Maybe made a wrong decision or two and I don’t mean like crime or pregnancy. They traveled a bit too long and tried a career in journalism, respectively. Now, they’re waiting their turn to have a shower.

Times are getting harder and don’t think you’re immune. It could be health related, loss of employment, divorce, or worst, but soon you’re going hear more stories like this.

https://www.youtube.com/watch?v=82GUjPConiE&feature=player_embedded

#76 Deb on 06.26.13 at 7:22 am

Ditto for ING, after Scotiabank ate it. The orange guy’s shorts now have serious ED.

——————————————————————

It is very rare that I laugh out loud when I am reading at home alone. This lovely Garthism provided the exception.

#77 Jake on 06.26.13 at 7:36 am

What savers? 76% of Americans have nothing.

http://money.cnn.com/2013/06/24/pf/emergency-savings/index.html

Wrong. Read it again.

#78 jess on 06.26.13 at 7:38 am

broker dealers dark pools ….
broker-dealers and investment advisers, are subject to different regulations
http://www.rand.org/pubs/research_briefs/RB9337/index1.html

hidden fees
http://blog.ourfinancialsecurity.org/2013/06/04/raiders-of-the-lost-retirement-account/
http://www.usnews.com/opinion/blogs/economic-intelligence/2013/06/04/wall-streets-deceptive-retirement-account-fees-hurt-savers

“The Dodd-Frank financial reform law also handed an important responsibility to the Securities and Exchange Commission – the task of developing new rules to increase fiduciary protections for advice given by securities brokers. Right now, while investment advisors have a duty to put your best interests first, securities brokers don’t. In practice, the distinction between the two types of investment professionals is blurred and unclear to most investors. The Dodd-Frank law called for securities-broker fiduciary duties to be made stronger, clearer and more like those of true investment advisors.”

…The non-partisan Government Accountability Office has documented numerous instances of such conflicts of interest. The GAO not only found investment managers cross-selling products to 401(k) clients that enriched the manager at the investor’s expense, but also brokers being rewarded for steering investors into high-fee products. One report found that almost a quarter of telephone representatives and half of web sites incorrectly informed investors that no fees would be levied for managing their retirement money if they transferred it into an individual retirement account. In fact, fees are charged on these products, but are usually buried deep in the fine print of the IRA documents….read more

http://www.demos.org/publication/regulator-who-can-stop-next-aig
…”simply allow the exemptive order set to expire july 12 . If that happens, the 56 rules governing swaps will then apply to all entities and transactions that fall within the broad Dodd-Frank provision.”

#79 Buy? Curious? on 06.26.13 at 7:42 am

***NEWS FLASH***

Economist, Gilbert Godfried, speaks about what average can expect over the next 36 months.

https://www.youtube.com/watch?v=1gsZYz0J1_E&feature=player_embedded

#80 Ralph Cramdown on 06.26.13 at 7:51 am

Scotiabank
Guide to Preferred Shares, Winter 2013

N.B. Page 7 Implications of Basel III

There are no implications. A bail-in of a major Canadian bank will never happen in your lifetime. Worry more about CDIC coverage of your GIC or savings account. — Garth

#81 Ralph Cramdown on 06.26.13 at 8:18 am

“Savers are not getting their share of the returns.”

It isn’t hard to find a savings account paying 1.9%. With variable mortgages costing 2.75% and 5 year money at 3.2%, I don’t know how much more of a share you think savers are entitled to. In the last few days, they could’ve bought BMO common paying 5% or CM at 5.15%. Share the risk, share the reward.

#82 Bigrider on 06.26.13 at 8:21 am

Mikey the realtor-

Even though I do not agree with your view of the housing market here in the GTA, the venom spewed your way is proof positive that those who have an opposing view, are questioning their own beliefs.

You realtors have been more correct than the naysayers, even if it is by pure luck alone, and more so than our gracious host on the subject.

#83 What really Happened on 06.26.13 at 8:23 am

RBC ” We know its YOUR money” what exactly do they mean by this?

#84 Ralph Cramdown on 06.26.13 at 8:28 am

Ah geez Garth, take the tinfoil hat off. I’m not part of the bail-in crowd, but Basel means that Canadian banks are going to be calling several of their prefs. Woe betide the fool who pays a wee premium for a nice current yield and subsequently discovers what Yield-to-Worst means.

Recall is always possible, but an investor buying bank perpetuals has done well. Recall, as you know, does not mean loss. I fail to see the risk. — Garth

#85 Squatter on 06.26.13 at 8:37 am

#25 detalumis:
Cat food is actually more expensive than human food by the way so not sure why it keeps coming up as an analogy for poverty in old age.
————————————————–
Bird seed e.g. sunflower seeds and millet (cooked) is very cheap and healthy. The problem is you will live till 100-yrs old.

#86 Adam on 06.26.13 at 8:39 am

How are those gold holdings working out for you? Lost it all yet?

#87 Not 1st on 06.26.13 at 8:57 am

US GDP revised downward from 2.4 to 1.8

Garth what happened? Thought it was all butterflies and rainbows down south. I think you are falling for the biggest dead cat bounce in history. Watch and see what a quarter looks like without QE. You have to go on the ground and talk to people not just watch CNBC. The average joe will tell you nothing’s changed.

US economy is growing. This is a bad thing? You revel in negativity. — Garth

#88 Dupcheck on 06.26.13 at 9:02 am

Hi Garth,

I am going to open an RESP for my kid soon. What do you recommend to keep in it? ETF’s, REIT’s? This is one of those accounts that not too many talk about.
Thanks.

#89 B. Wrangler on 06.26.13 at 9:05 am

>>http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/06-2/GDP%20Q1_1.jpg

Perhaps you stand on your head when you look at graphs.

Given sequestration, looks fine to me. — Garth

#90 Grantmi on 06.26.13 at 9:16 am

WOW! Gold getting whacked again over night.

http://www.bloomberg.com/quote/XAUUSD:CUR

Didn’t the goldies say it was a good time to buy LAST WEEK when it plunged. I wonder if they bought??

#91 bguy1 on 06.26.13 at 9:23 am

WRT to purchasing a bond ETF (gov’t or corp), when should one purchase? Is there a yield or price threshold one should wait for before buying?

#92 Tony Right on 06.26.13 at 9:34 am

Garth, I’m wondering if you can explain your feelings on a couple of things for savers: DRIPS (since you’re all over ETF’s, what do savers do with dividends/interest they receive? How can they automatically re-invest it like mutual funds do?) and Dollar cost averaging vs lump sum (which one do you advocate, or is there another strategy?). Thanks!

#93 Daisy Mae on 06.26.13 at 9:39 am

#16 Mama Bear: “The Board here has a rule that all dogs must be carried in the common areas. I tried carrying her at first (she’s 28lbs) but decided to buy a doggy stroller.”

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

Yeah, as a society we just keep going from the sublime to the ridiculous. In our gated community we must walk our dogs down the middle of the street. Such a natural thing for dogs to do — if they must, they poop on asphalt. I’d be damned if I’d carry a pet…to where? They’re not welcome anywhere.

#94 gladiator on 06.26.13 at 9:39 am

Are you seeing what I’m seeing?

Garth, you’ve mentioned that govt bonds yield increased between 50% to 64%. Now, since mortgage rates are based on the bond market yields, I would expect that they will go up by roughly the same amount, say 50% to be optimistic. This increase most probably will be gradual, but it will happen, because banks will rather lend the money elsewhere than get a lower-than-market rate from mortgage loans.
Next, when you realize that more than 95% of the monthly mortgage payment for the first several years of the mortgage is interest, then it is safe to say that for current house buyers (who didn’t secure a loan at lower rates) the mortgage payments are expected to increase by 40%-45%.
Given that the house ownership is at an all-time high and there are not many buyers left out there, an increase of 40% in the monthly payment is THE killer for the market!
Either I am missing something, or it will hurt big time.

#95 Gerryantics on 06.26.13 at 9:43 am

The taper talk caused some global stock market plunges. Investors realized this was talk, a bluff, so stocks are recovering a bit from those plunges. The FED never actually took any action.

But if USA, the largest economy in the world, was recovering over the last half year then why over the same time period has the continuous commodity index lost 15-20%?

Why is copper at 3 bucks?

Who is buying USA goods when the other major economies are tanking?

When the us economy is70% based on consumer buying, how can it recover when over70% of Americans are living pay check to pay check?

#96 VT on 06.26.13 at 9:46 am

For those who have been posting about Calgary and musing about their flood misery, here is a reality check:

http://youtu.be/m9_Mesv6VBc

#97 Dean Mason on 06.26.13 at 9:48 am

#74 Onthesidelines

Home Trust has a 1 year GIC at 1.90%,18 month year GIC at 1.95%.These are renewal rates and existing GIC customers. If you are a new customer they are giving a 0.25% bonus interest on all terms.So a 1 year GIC would be 2.15%, 18 month GIC 2.20% for new customers or new GIC money.

Their 2,3,4,5 year GIC rates are 2.05%,2.06%,2.20%,2.35% and new money GIC’s 2,3,4,5, years with 0.25% bonus interest are 2.30%,2.31%,2.45%,2.60%.

These are annual pay for GIC’s,RRIF’s but RRSP’,TFSA’s are compound annual interest.Comtech C.U. was a 1 year GIC at 2.15% and 5 year GIC at 2.50%.ICICI bank has a 2 year GIC at 2.05%,3 year GIC at 2.35% and State bank of India(Canada) has a 2 year GIC at 1.90%,3 year GIC at 2.25%.

#98 Dean Mason on 06.26.13 at 9:55 am

To #74 Onthesidelines

I forgot to mention 2,3 year RRSP and TFSA GIC’s only are 2.40%,4 year is 2.65%,5 year is at 3.15%.State bank of India (Canada) TFSA GIC’s only 1,2,3,4,5 years are 1.80%,2.00%,2.55%,2.55%,2,85%.

#99 JohnG on 06.26.13 at 10:03 am

Interesting – a Realtor disagrees with the mothership…

Re/Max claims cottages are selling great in Manitoba (not from what I can tell, many realtors sold ZERO last year) and a local agent says “I don’t know where they get this information from” referring to the new report.

http://www.winnipegfreepress.com/local/bullish-cottage-report-countered-213094801.html

Glad I’m staying liquid…a cottage is mostly “fuzzy” memories anyway; thanks Garth! I just got the cost to build my custom place at $190K, with NO hookups, no foundation, no water tanks, no furnace, a shoddy build quality and only a primer coat.

However, working on the blueprints I can see how appealing it is to want to build something you have designed. I can really understand now how so many peers built new houses. It’s addictive, and I want to see the property transformed with this awesome building. But I know better… These same lots used to cost $75K, WITH cottage 12 years ago.

J

#100 Ralph Cramdown on 06.26.13 at 10:07 am

Blog dawgs, let us take a moment in silent thanks for the goldbugs.

Bravest of ‘investors’ they, for they are willing to buy an asset with absolutely no fundamentals whatsoever. No earnings, an intrinsic value of less than 5% of current prices (I’m assuming that if prices collapsed, some industrial users of copper and silver would find gold to be preferable), and a continuous surplus, with more being dug up all the time.

Why should we be thankful? Because all we have to do is invest in a basket of TSE listed payers, none of which are gold miners (“give a miner a dollar and he’ll dig a hole”), and we’ll outperform the TSX. Look honey, I’m adding alpha!

#101 Holy Crap Where's The Tylenol on 06.26.13 at 10:11 am

The banks are either insane or crazy smart with their lack luster rates. So let me get this straight, I have copious amounts of cash that I want to invest in low risk ventures and have a decent return on investment. Hmmm, so I hand over X amount of cash to these bankers whom in-turn invest my money and make huge percentile returns and they give me what!!!!!!!
Oh yes it makes perfect sense now. The issue is, those of us whom have these copious quantities of cash can not see any decent returns in a save haven as we did say twenty years ago. But then again those of us (younger ones) that have any amount of savings cannot afford to even consider putting their cash in the bank and are forced to go to the market. These poor kids today don’t have a chance unless they have been educated in money management strategies and savvy investing.

TD High Interest Savings Account
Account Balance Interest Rate
$0 to $4,999.99 0.00%
$5,000 to $9,999.99 1.10%
$10,000 to $24,999.99 1.10%
$25,000 to $59,999.99 1.10%
$60,000 to $5,000,000.00 1.10%
$5,000,000.01 and over 0.00%

http://www.tdcanadatrust.com/products-services/banking/accounts/account-rates.jsp#taxfree%27
[sic]

#102 Dean Mason on 06.26.13 at 10:16 am

To Dupcheck #8

I don’t know how old is your kid that you are going to open a RESP soon for but provincial strip bonds maturing in 2029,2030,2031 range from 4.23% to 4.42% depending on the province.

If you are satisfied with this bond yield or rate of return than to give you an idea a $5,000 RESP contribution invested for 18 years would be worth $10,891.22.For those that try to insult me,put me down I am not pumping anything, it is just information he might not know about.

Why would you allow your own fear and insecurity punish your child? That return over two decades is woefully inadequate. — Garth

#103 45north on 06.26.13 at 10:18 am

rain8: Please elaborate on what is likely to happen in Calgary in light of the flooding.

my niece posted some pictures on Facebook. Finished basements are becoming unfinished. With a lot of energy enthusiasm. The people will be fine.

#104 Spiltbongwater on 06.26.13 at 10:25 am

Garth, is it getting close to be a time to rebalence your gold weighting?

Zero for a long time. — Garth

#105 Uneducated on 06.26.13 at 10:28 am

Can one suggest particular ETFs REITs please?

#106 Richard in Kelowna on 06.26.13 at 10:34 am

Garth……Yeah right this is not a gold blog but you allow all negative posts re gold and none of the positives. What are you afraid of? That some of your readers might be exposed to the truth?? The truth being that the PM sector has done better the past ten years to the present than any of the stuff you’ve been promoting??

It’s the next ten years we care about. — Garth

#107 Troy on 06.26.13 at 10:45 am

I like the idea of buying some preferred shares. Although some people on here have named some preferred ETFs, I would like to know how to buy the direct shares.

They seem to have series A, series B, series C… Etc. What does that mean and how do you know what series to buy? Or is it always best to just buy the ETF?

#108 blase on 06.26.13 at 11:01 am

Dean Mason,

Why not coat tail off of Buffett, instead of buying wallpaper.

#109 David Jensen on 06.26.13 at 11:08 am

1.8% Garth.

That’s the revised GDP for the “booming” US economy in Q1.

And DOWN go yields, with the US 10 yr yield in full retreat this AM.
Inflation is non-existent, the Canadian real estate market is teetering on the precipice, and you expect moves UP in the short term rate?
Like you did in 2010, and 2011, and 2012, and 2013?

The former head of Canadian exports wants a $1.10 loonie and 15% unemployment with house prices falling 10% a year?

I think you understand the truly terrible financial position that the people of Canada are in, maybe better than anyone. So, why would you expect strong moves up in rates?

That doesn’t go together, especially when the strongest major economy in the world is printing 1.8% GDP growth. (Who knows what China is actually doing, beyond slowing markedly).

#110 JimH on 06.26.13 at 11:12 am

#92 Tony Right
re: DRIPS

Div reinvestment worked for me in tax-advantaged (my old, old RRSP and later my IRA’s), but I only did it once with several dividend paying stocks in a brokerage margin account, and never did it again.

It was a major pain at tax time, as the monthly contributions resulted in a constantly shifting cost basis and fractional unqualified/qualified dividends taxed at different rates. I also ended up with an odd lot and fraction of a share that made selling the equity a pain.

Even in my IRAs, I ran into an issue with a return on capital portion of a quarterly dividend on a stock I had held for a long time, and had to wrestle with the IRS over the effect that had on the cost basis at roll over time.

Today, my dividends roll into the accounts as cash and I make a decision every quarter on what to do with them. Usually, I have done enough research to have some stocks/ETFs in my cross hairs, and this gives me chance to re-balance my margin accounts. For example, this July, I want more exposure into natural gas, and have allocated $15k per account of the accumulated monthly and quarterly dividends for that purpose.

My brokerage (Schwab) runs a bank sweep overnight on cash in the accounts and I get a return of about 1% on any cash from the dividends sitting ‘idle’ in the accounts, so it’s at least doing something while waiting for me to decide where to put it to work.

Anyway, here’s a link that might help you more…
http://www.investopedia.com/articles/stocks/07/dividend_implications.asp

#111 HD on 06.26.13 at 11:13 am

#92 Tony Right on 06.26.13 at 9:34 am

Garth, I’m wondering if you can explain your feelings on a couple of things for savers: DRIPS (since you’re all over ETF’s, what do savers do with dividends/interest they receive? How can they automatically re-invest it like mutual funds do?) and Dollar cost averaging vs lump sum (which one do you advocate, or is there another strategy?). Thanks!

http://canadiancouchpotato.com/2013/05/31/does-dollar-cost-averaging-work/

http://canadiancouchpotato.com/2013/04/08/why-you-should-avoid-drips-in-taxable-accounts/

http://canadiancouchpotato.com/2013/05/28/ask-the-spud-should-i-buy-in-now/

Best,

HD

#112 maxx on 06.26.13 at 11:20 am

#43 Smoking Man on 06.25.13 at 10:10 pm

S.M., you’re on fire today. Good going.

#113 Old Man on 06.26.13 at 11:27 am

#109 David Jensen – China is in a mess right now in more ways than one.

#114 Macrath on 06.26.13 at 11:28 am

#107 Troy

I would like to know how to buy the direct shares.
———————————————————————

The preferred share market is complicated and similar to a Bosnian mine field for the novice investor. You need a substantial amount of investment capital to retain professional help. That is why I stick with CPD.

http://www.prefblog.com/

#115 maxx on 06.26.13 at 11:31 am

#51 not 1st on 06.25.13 at 10:24 pm

“Why on earth should savers be rewarded? They are getting exactly the right rate for what their money is doing in the greater economy….nothing.

A strong economy is built on risk and reward and investment and entrepreneurship, not people squirreling their coffee money away in the bank account.”

Why? Because savers are just as vital a part of the economy as investors.
Why? Because they stabilize an otherwise mostly unbridled economy where many, who are nowhere near being expertly trained financiers, and perhaps bored stiff with it, wisely prefer a safer path with their money.
Why? Because the more they earn, the more they spend.
Why? Because they spend in the real economy, and that is precisely where a recovery will catch fire.

We need all types of investors, not just a casino mentality. A diverse and inclusive economy is always healthier.

Many savers are hybrid investors anyways, with a foot in fixed and equity. And savers want a good night’s sleep.

#116 JimH on 06.26.13 at 11:33 am

#111 maxx
“#43 Smoking Man on 06.25.13 at 10:10 pm

S.M., you’re on fire today. Good going.”
===================================

Think he’s been to rehab?

#117 jess on 06.26.13 at 11:37 am

leaky things
2012 Treasury report, obtained by La Repubblica, the Italian newspaper

http://www.ft.com/cms/s/0/440007a8-dd9a-11e2-a756-00144feab7de.html#axzz2XKWcWfjg

#118 Grantmi on 06.26.13 at 11:38 am

#106 Richard in Kelowna on 06.26.13 at 10:34 am

Garth……Yeah right this is not a gold blog but you allow all negative posts re gold and none of the positives. What are you afraid of? That some of your readers might be exposed to the truth?? The truth being that the PM sector has done better the past ten years to the present than any of the stuff you’ve been promoting??

Richard… And I guess you sold yours at the $1,900 top back in Sept 2011 to take profits. Correct?

the Markets are FORWARD looking.. not backwards.

#119 Suede on 06.26.13 at 11:48 am

For those that ABSOLUTELY need to have money in a chequing/saving account…..

Manulife Bank is paying 1.55% on deposits (was 1.75% until a little while ago).

It’s not the most convenient and it’s taxed at the full income rate, but if you need a short term spot to park cash and are scared of everything else, this is better than a GIC because you can deposit and withdraw all you want.

Disclaimer: Your deposit may or may not be paying me some dividends :)

#120 45north on 06.26.13 at 11:51 am

JohnG: a cottage is mostly “fuzzy” memories anyway

I’m renting two cottages on the Ottawa. Today it’s cloudy. Even if you own, it’s still cloudy.

#121 Old Man on 06.26.13 at 12:08 pm

#91 bguy1 – why would you consider buying into any bond fund? I just don’t get it, so please educate me, as might be missing something.

#122 vangirl on 06.26.13 at 12:32 pm

Regarding REITs. (negative return for the year)

So if I had bought, say, Riocan at $29 in May, I would have lost 17% of my principal (in 6 weeks! trading at approx 24 today) and got a measly 5.7% yield (annual!) in exchange??? I’m no financial guru, but that doesn’t sound like a good plan for
“….predictable, recurring, steady-eddy, boring, routine, dependable, tax-efficient income ….”

Looking at the long term chart, it would not surprise me if it retraced to its next level of support at $18.

It’s like saying I’ll give you $100 bucks for safekeeping (no guarantees that it would appreciate, maybe even lose a big chunk of it), as long as you give me $1.50 every quarter as boring, dependable, steady eddy income.

Insanity!

If you buy for yield and income, and have confidence (which you lack) that dips are temporary, these are wholly pleasing assets to hold. — Garth

#123 Richard in Kelowna on 06.26.13 at 12:40 pm

“#118 Grantmi

#106 Richard in Kelowna on 06.26.13 at 10:34 am

Garth……Yeah right this is not a gold blog but you allow all negative posts re gold and none of the positives. What are you afraid of? That some of your readers might be exposed to the truth?? The truth being that the PM sector has done better the past ten years to the present than any of the stuff you’ve been promoting??

Richard… And I guess you sold yours at the $1,900 top back in Sept 2011 to take profits. Correct?

the Markets are FORWARD looking.. not backwards.”

No, I didn’t take profits at $1900 and why would I? It’s called holding a core position…..sort of like having an insurance policy. Most Financial Planners recommend a core holding of the metals of 2-5 % and that’s what I have…perhaps a bit more. Overall, my portfolio is very well balanced.

‘Most financial planners’ do not recommend a core gold holding. Those would be the failed ones. — Garth

#124 jess on 06.26.13 at 12:45 pm

The outgoing governor of the Bank of England has accused the Chancellor of lobbying financial regulators to weaken rules for the City.

According to :

John Christensen is an investigating economist. He has advised many government and inter-government agencies as well as NGOs, unions and other civil society organisations. Since 1978 he has specialised in the role of tax havens in the global economy. He is currently executive director of the Tax Justice Network.
http://www.tippingpointfilmfund.com/site/news/city-of-london-tour-8-june-2013/#bank

…”The Bank of England was founded as a private bank in 1694, it was nationalised in 1946, and in 1997 the incoming Labour government gave it independence on monetary policy. But it has never really been a public institution working for public service. It is, in fact, a private bank that has largely served the interests of the “City” of London (For further information on the history of City of London, read the speaker’s essay ‘A Tale of Two Cities’

…”Midland Bank, what was Midland Bank, now part of HSBC, and that deal was to allow Midland Bank to start issuing bonds denominated in dollars. Sometime between 1955 and 1956 this deal was done. There’s no written record of it whatsoever, we’ve been through the archive. But the purpose of this deal was to allow British banks to start collecting deposits from around the world in dollars and other currencies which sat outside the regulatory framework. So the Bank of England was saying you can collect these deposits, we won’t regulate it, you can collect them wherever you wish, and hold them wherever you wish, and this was the creation of the first real, serious offshore market. Because these dollars weren’t regulated. Needless to say they flooded in from around the world, from all over the world, from the Middle East, petrodollars, from Latin America, from Africa, they flooded into London. And this was the start of the emergence, re-emergence of the City of London as the capital of capital.

Because suddenly, we had a totally unregulated market, and a very profitable market for British banks like Midland. So profitable that they decided that rather than hold these dollars and do these activities here in London, it would be better to do it in Bermuda, or in Jersey, or in the Caymans, because then they wouldn’t have to pay tax on the profits. So this was the start of the re-emergence of London as a gigantic tax haven, the preeminent tax haven.”

#125 Smoking Man on 06.26.13 at 1:01 pm

I’m thinking Snowden = CIA

Jon Rappoport has an interesting theory on it. Mind you void of motive.

Perhaps as he points out, CIA lost 4 billion of its budget which went to NSA (hi guys) and wasn’t so long ago head of CIA was bounced for an affair, Did NSA rat him out.

Is this pay back…..

Maybe this was a test on the herd, see how they react to laws broken.

The NSA broke several laws with blanket severance.

Were are the millions of protesters in Washington. No where to be found..

The sheep are focused on the get away… And not the magician

#126 Donald Trump on 06.26.13 at 1:03 pm

#35 Retired Boomer – WI on 06.25.13 at 9:51 pm

#27 Smoking Man

Recent research shows relying on cell phones, and other hand geld devices deprive the right brain to effective “exercise” needed in critical thinking.

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

Smoking Man solves this problem by standing on his head while driving.

#127 Old Man on 06.26.13 at 1:10 pm

#107 Troy – Preferred shares are complex and the other day had no time to do my homework, as time was of the essence which is called panic buying. I recommend you format your own individual basket, as bought a reset at a discount with a capital gain in the future while enjoying dividend tax credits along the way.

The best way to formulate a basket is look at the strength of individual sectors in Canada’s economy, such as banks, food, telecom, drug chains, retail, and utilities. Then look for the giants in each sector with a strong balance sheet going forward, and chose the best one which will have a variety of preferred shares, that suits you.

This involves a lot of homework and patience, but always remember when interest rates rise on a fixed coupon the capital value might decrease, so time to add a buy to dollar average a higher yield, and the general mark is $25.00 for a redemption. This is a very complex way of investing that needs lots of homework, so look for a bargain within the good sectors, and pick a winner with quality.

#128 sciencemonkey on 06.26.13 at 1:11 pm

HD, do I understand the cost-adjusted basis correctly as in the following example?

Let’s say I have an ETF of which I bought 500 shares at $20.00 (cost $10010, including $10 commission). The first month it drips 1 share at a price of $20.10, and the month after at $20.15. If I decide to sell, my adjusted cost basis for 502 shares is $10050.25, and capital gains is calculated against that cost. Is this correct?

#129 Bottoms_Up on 06.26.13 at 1:16 pm

#5 Montreal_Is_Crashing on 06.25.13 at 8:38 pm
————————————————-
And when prices do ‘bottom out’, what then? Will all you lesser fools jump into real estate, creating another real estate bubble. Or…you will be happy buying ‘at the bottom’ and watching the value of your house go nowhere?

Key messages from Garth’s blog are that housing should be affordable for the average family, and that if you do plan to buy right now, know that it comes with risk. And don’t buy right now if you can’t weather invariable ups and downs in the market, that is, buy within your means and within realistic future marketplace changes.

Good luck with your plan to wait it out and ‘get in at the bottom’.

#130 Mister Obvious on 06.26.13 at 1:20 pm

#65 HAWK

“It is part of the human condition to love the land on which they dwell and to want to own a parcel of it. It’s the NORMAL thing for good decent people.”
————————–

How does that apply, in a practical way, to the millions of condo owners who purchase nothing more than a block of air and yet are called owners of “Real Estate”?

#131 Canadian Watchdog on 06.26.13 at 1:24 pm

#100 Ralph Cramdown

Hmmm, let's see. LIBOR is rigged, FX quotes are rigged, oil prices are rigged, gas prices are rigged, even chocolate prices are rigged. But not gold. No no, it's a good honest to God quote. Meanwhile, Q2 world physical demand is about to hit a record of 1/3 of annual production supply.

You're a smart guy. Perhaps you can explain how a seven deviation price drop (a probability equivalent to meeting a seven foot tall man) can reflect fundamental physical demand that has been constantly rising.

It's not just gold. Everything is rigged.

You go along for weeks looking credible, then come up with stuff like this. — Garth

#132 Bottoms_Up on 06.26.13 at 1:28 pm

#88 Dupcheck on 06.26.13 at 9:02 am
—————————————-
Garth (and other people with actual money) wouldn’t advocate it, but I like an interesting method whereby you purchase 100 shares in a solid company, sell covered calls quarterly, and sit back and collect both the dividend and covered call money. It lacks diversification, but if your company never tanks and you rarely get called out, you can expect annual returns around 8% (2% dividend plus 4 times 1.5% covered call proceeds) plus whatever (de)appreciation in the underlying stock value. Keeps me interested.

#133 Bottoms_Up on 06.26.13 at 1:31 pm

#87 Not 1st on 06.26.13 at 8:57 am
————————————–
Sounds like you haven’t been on the ground. Go to any major city in the USA and rush hours are jammed with traffic. That seems fairly bullish to me, unless they’re all trying to get to the local welfare office to pick up that government cheque.

#134 Bottoms_Up on 06.26.13 at 1:44 pm

#39 Saint Herb on 06.25.13 at 10:01 pm
——————————————-
Your price-to-rent ratio is 30 (price divided by annual rent).

That is a high number; typically you want to buy when that ratio is closer to 15.

Therefore, buy the house once it’s worth $425,000. Or, in other words, a rent of $4700/mo would support buying your $850,000 residence.

#135 Stickler on 06.26.13 at 1:46 pm

I’ve been pretty happy with my preferred shares over the past year…until a few weeks ago.

The recent declines have erased a whole year’s worth of dividends.

Won’t they continue to decline more as rates normalize?

The only erasing of value comes if you sell them. Is that your plan? If not, go back and enjoy the dividends. — Garth

#136 Holy Crap Where's The Tylenol on 06.26.13 at 1:49 pm

Just adding fuel to the fire in downtown condo la, la land.
Burn baby burn!

http://www.thestar.com/news/city_hall/2013/06/25/condo_boom_builders_say_doubling_development_charges_threatens_downtown_renaissance.html

#137 VT on 06.26.13 at 1:52 pm

http://www.theglobeandmail.com/globe-investor/inside-the-market/rbc-downgrades-cineplex/article12824893/

The misery at Barrick Gold Corp. is only getting worse, with the stock price this morning sinking to its lowest level in more than two decades as Credit Suisse backed away from an earlier gutsy recommendation to buy its beaten-down shares.

#138 Old Man on 06.26.13 at 1:56 pm

Warning do not try to do any banking on the 26th, as today was a nightmare. I was at the Royal and all these old women took over the tellers, and was standing needing some cash, and they stood there forever chatting about the grandkids or whatever. I was next in line, so the manager came over to me, and said are you ok, as your face is red, and offered me a drink of water.

She never left my side as did not look well, and said wtf just need some cash, and what is going on, as my thing will take two minutes, and she whispered in my ear the old women need to chat a bit at this time of the month, and do not have a heart attack on me, but will try to get them out. It took me two minutes to get some cash, and then off to the TD for a large deposit counter cheque with no problems.

#139 TorontoBull on 06.26.13 at 2:04 pm

The only erasing of value comes if you sell them. Is that your plan? If not, go back and enjoy the dividends. — Garth

interesting argument! I wonder if the same applies for housing?

Housing pays no income in the form of interest or dividends. In contrast, it requires regular cash infusions for insurance, property taxes, maintenance and fees, as well as the frequent use of leverage. You had to ask? — Garth

#140 HD on 06.26.13 at 2:08 pm

@ #128 sciencemonkey on 06.26.13 at 1:11 pm

I’m afraid it’s more complicated than that.

Never personally ventured into calculating it myself…..here’s a step by step guide if you feel up to the challenge:

https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/Justin%20Bender%20Assets/PWL_Bender_As-Easy-as-ACB_2013-April.pdf?ext=.pdf

Or you can use them but they will charge you a fee:

http://www.acbtracking.ca/

Best,

HD

#141 Nemesis on 06.26.13 at 2:26 pm

…”pleasing assets to hold.” — Garth

SayWhat! No LizHurley snaps?…

WatchDog/Taibbi do have a point, you know…

For example, the MapleLeafRepublic’s rather poor showing when it comes to securities fraud:

[CBC] – Securities regulator fails to collect majority of fines

…”CBC News found that only 35.7 per cent of the penalties owed for violating securities laws across the country since 2007 were actually collected by the commissions. The data was collected from the different provincial regulators.

Of the $444 million in penalties levied by Canadian regulators, $285 million has not been paid, according to the analysis.”….

http://tinyurl.com/89k8abs

Few fines are levied for ‘fraud.’ Most are for rules transgressions. Failure to pay means losing the ability to remain in the industry. — Garth

#142 Old Man on 06.26.13 at 2:41 pm

#5 Montreal Is Crashing – I will never forget the day that met my old lover at the Westmount library in 1982, who became a Federal Judge as in our youth that was our meeting place with our cars while going to University. She told me that her brother who was an MD, and her pooled some money to buy Real Estate, and took a bath with loses. Montreal is a big crash center in Canada, and it will go down hard.

#143 Richard in Kelowna on 06.26.13 at 2:42 pm

Garth…..

“No, I didn’t take profits at $1900 and why would I? It’s called holding a core position…..sort of like having an insurance policy. Most Financial Planners recommend a core holding of the metals of 2-5 % and that’s what I have…perhaps a bit more. Overall, my portfolio is very well balanced.

‘Most financial planners’ do not recommend a core gold holding. Those would be the failed ones. — Garth”

I beg to differ. Wonder if any of those ‘failed ones ‘ were planners who recommended Buffet, Paulson, Soros, etc, keep a portion of their wealth in Gold and Silver . Or, perhaps they are just reckless and ill-informed to do so..

Guess so. — Garth

#144 TorontoBull on 06.26.13 at 2:48 pm

“Housing pays no income in the form of interest or dividends. In contrast, it requires regular cash infusions for insurance, property taxes, maintenance and fees, as well as the frequent use of leverage. You had to ask? — Garth”

housing CAN generate income; and owning stocks requires regular infusion of MERs, consultant fees, as well as taxes.
The point that I was alluding to is that REITS are not as risk free as you make them to be.
I have also to agree with Smoking Man re ‘bragging rights’ about owning vs renting which is difficult to quantify

There are no MERs buying stocks. You lost. Man up. — Garth

#145 Penny Henny on 06.26.13 at 2:48 pm

From the Globe and Mail today.
-Wall Street rallies as data show U.S. economy weaker than estimated—
What a headline!
Doesn’t this just say it all.
The market is rallying because the economy is growing at a slower pace than was previously reported and because of this slower rate of growth the implication is that QE will not be tapered back as soon as expected.
Saying the stock market is not directly related to QE is absurd.
http://www.theglobeandmail.com/report-on-business/economy/us-first-quarter-growth-cut-to-18-per-cent/article12822046/

Penny Henny

#146 TorontoBull on 06.26.13 at 3:08 pm

“There are no MERs buying stocks. You lost. Man up. — Garth”
you are da MAN! I am not worthy! BIWINNING!

Finally… — Garth

#147 Donald Trump on 06.26.13 at 3:10 pm

#136 Holy Crap Where’s The Tylenol on 06.26.13 at 1:49 pm

Just adding fuel to the fire in downtown condo la, la land.
Burn baby burn!

====================================
QUOTE:

Toronto’s downtown renaissance will be threatened if the City of Toronto nearly doubles development charges, developers warn.

A plan going before council’s executive committee next month would see charges on the average new two-bedroom condo rise to $23,036 next year, from $12,412 now.

The city’s consultant says in a report that at least part of the cost is passed on to the buyer of the new home.

The proposed higher rates would come closer to those charged by the municipalities bordering Toronto — which average about $32,000 per unit — and increase Toronto’s overall annual take from the charges to $260 million from $150 million.

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

Let this be a warning…

The Mega City literally becomes it own country.

In the US, the Right Wing ie Republicans have been co-opted by the Democrats to irrelevancy. They have realized that the only way to survive is to be at minimum as Left wing as the Dems…or even more so.

In Toronto, what you are seeing is effectively a Communistic- expropriation/cash grab. How can anyone afford for fees in the 5 figure range to be doubled ? Or , it may force a slow down so existing inventory (under the old rules)is snapped up ?

Like in Vancouver, the Leftie Loonie City Hall will be tearing down the Georgia Viaduct. If one looks in Vancouver papers, you will see large ads of properties “For Sale “….owned by the City of Vancouver. The Georgia Viaduct , when demolished, will free up more prime City Real Estate for sale. In conjunction, this will remove a 40 + year old route from the downtown core.

This will make traffic congestion worse…and the Loonies will likely also add more bike lanes. Like most Lefties, when in power they do as much irreparable damage as they can while they have a chance.

I think we have a generation of boomers now in office that actually believe a Golden Goose exists , which does not bode well for the future.

Its a combination of insanity and machiavellian engineering

#148 Iconoclast on 06.26.13 at 3:48 pm

Smoking Man, I thought this was you!

http://gizmodo.com/keyme-store-your-keys-in-the-cloud-never-get-locked-o-586549581

#149 Donald Trump on 06.26.13 at 3:52 pm

BUSTED: Bankers Caught On Tape, Joking About Bailout, And How They’d Never Pay It Back

Read more: http://www.businessinsider.com/anglo-irish-bank-tapes-2013-6#ixzz2XLzhMWsq

QUOTE:

Once again, we have more embarrassing conversations between bankers …

The Irish Independent, a Dublin-based newspaper, has uncovered tapes of an internal phone conversation from September 2008 between two executives at Anglo Irish Bank during its bailout deal and they sound pretty scandalous. The Irish Independent points out that the recordings show they misled the Central Bank.

The executives from the recording have been identified as John Bowe (head of the bank’s capital markets) and Peter Fitzgerald (director of retail banking).

#150 Holy Crap Where's The Tylenol on 06.26.13 at 4:00 pm

#147 Donald Trump on 06.26.13 at 3:10 pm

I think we have a generation of boomers now in office that actually believe a Golden Goose exists , which does not bode well for the future.

Its a combination of insanity and machiavellian engineering.

When I say burn baby burn I really mean it. Who in their right mind would consider paying all these fees plus, plus, plus. The cash crop in the city has stopped. When was the last time you heard of a major corporation locating in the city bringing much needed employment? Never, taxed too much, crazy commute, not really a world-class city to live in. Just wait until the lefties tear down the Gardener Expressway, Where will all of the commuters go? On to the Lake shore Blvd, What will happen to the already insane commute time? Increase and gobble up more fuel thus adding to the pollution in the city. Oh city council will just impose taxes, tools and fees to compensate for it. Did any of these council people ever have a real job? I would surmise they all were living an artsy little bohemian lifestyles riding their bicycles to and fro with their Cafe Latte’s after finishing university degrees in politics. Can you believe they actually have courses in how to be an idiot!
Done, finished rant for the day!
Going to go lay down now I’m too old for this Crap!

#151 Skeptic on 06.26.13 at 4:03 pm

“Consumer confidence in the States went up. American home prices shot higher by 12%. Sales hit the best level in eight years. And all of a sudden it looked like the 5.8% decline we’ve just had might be, well, a pimple.”

So the GDP figures released earlier today were well short of expectations (because consumer spending was down), and yet the stock market is rallying. Garth, I think it’s time for you to stop pretending that the stock market reflects a a true economic recovery and admit that it is artificially being inflated by the government printing dollars and pumping them into the market. The minute that stops, everything falls apart and stocks will come down to the level they deserve to be at.

Ask gold. — Garth

#152 JM on 06.26.13 at 4:11 pm

Hi Garth,
Why don’t you post this article?

http://www.bloomberg.com/news/2013-06-26/economy-in-u-s-expanded-less-than-projected-in-first-quarter.html

I say the Bernanke increases the stimulus before he decreases it. In his recent address, he did say that was possible. The US is not doing better at all!!! If the stimulus were to stop, the DOW would be under 10k in the heartbeat. The stimulus is now a must… it is like a drug, which cannot stop.
Actions speak louder than words and I clearly remember Bernanke saying on several occasions that there would be no more stimulus before QE’infinity started. Now that is has, it will not stop. He may change it and stop the current bond buying, but don’t kid yourself, as he will have to replace it with something else. The drug will have to continue.

#153 Piccaso on 06.26.13 at 4:26 pm

WOW… Are gold and silver and long ETF’s sure taking a hit lately. Ouch!!

#154 JM on 06.26.13 at 4:46 pm

The almighty, improving US economy…

from CNNMoney.com… “76% of Americans are living paycheck-to-paycheck”… and to go further into this… “Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event”

Just like Canada, only better. Your point? — Garth

#155 Richard in Kelowna on 06.26.13 at 4:53 pm

“#153 Picasso..

WOW… Are gold and silver and long ETF’s sure taking a hit lately. Ouch!!”

……picture perfect Picasso

#156 angela on 06.26.13 at 5:03 pm

First quarter US GDP was revised down from an annual rate of 2.4% to 1.8%. The drop was due to lower personal consumption expenditures than initially forecast.

Irrelevant. — Garth

#157 JM on 06.26.13 at 5:17 pm

so, let’s take bets.
Will Bernanke’s next move be to increase or decrease $85 billion/month?
My money’s on increase…
Thoughts everybody?

#158 Canadian Watchdog on 06.26.13 at 5:21 pm

#153 Piccaso

WOW… Are gold and silver and long ETF’s sure taking a hit lately. Ouch!!

And how is gold and silver suppose to recover during low season? It's like saying home prices fell in January when the market is not active. I'm so amused how many on this blog will buy banks stocks, when the very same banks are now buying PMs. How do you think they make 20-30-40% profit and you get 4-5%? It's because you don't have to balls jump in and buy!

They see value, you see it as losing money. This is why most people don't make money and never will.

#159 Dean Mason on 06.26.13 at 5:21 pm

To Dupcheck #88

If you think that 4.42% is still not high enough return than Bell Canada strip bonds are 5.30% to 5.40% for 2030,2031 maturities.The example of $5,000 RESP contribution in 18 years would be worth $12,885.49.

Unless Bell Canada disappears or gets into financial trouble it should be fine.I am just letting him know some information that he might never heard of.I am not pumping or pushing anything. I say to my critics.

#160 HAWK on 06.26.13 at 5:22 pm

#130 Mister Obvious on 06.26.13 at 1:20 pm

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

Not a block of air, but a physical unit above the ground. Technically I agree with your implied point that they should own the land as well, but then technically even when you own a house you don’t own the earth 6 feet below ground level, thanks to the system that we inherited from the British

#161 Saint Herb on 06.26.13 at 5:28 pm

#134 Bottoms_Up

Your price-to-rent ratio is 30 (price divided by annual rent).

That is a high number; typically you want to buy when that ratio is closer to 15.

Therefore, buy the house once it’s worth $425,000. Or, in other words, a rent of $4700/mo would support buying your $850,000 residence.
_______

So I should be happy to pay that amount for rent, according to that calculation, the house needs to drop %50 to be a good buy assuming rents don’t increase significantly.

The odd thing is that I feel I can afford to buy the house, but I can’t afford to rent it based on income. I am still not use to this renting thing. I have always owned.

Can you explain that 15 factor you referred to. WHY 15?

#162 Ron on 06.26.13 at 5:43 pm

What savers? 76% of Americans have nothing.

http://money.cnn.com/2013/06/24/pf/emergency-savings/index.html

Most people who “own” a $1 million home here in Canada also fall into this category…..

#163 Tyrone on 06.26.13 at 5:55 pm

#132Bottoms_Up on 06.26.13 at 1:28 pm
#88 Dupcheck on 06.26.13 at 9:02 am
—————————————-
Garth (and other people with actual money) wouldn’t advocate it, but I like an interesting method whereby you purchase 100 shares in a solid company, sell covered calls quarterly, and sit back and collect both the dividend and covered call money. ……..

Or, if you’re a lazy bugger like me, you can buy an ETF that does something like this for you.

http://www.theglobeandmail.com/globe-investor/markets/stocks/chart/?q=ZWB-T

Holds bank stock, yields 7%, and if you’re going to trade options, covered calls seem to be as “risk free” as it gets.

Anything not to like? Would love to hear from the real brains in this forum.

#164 Freedom First on 06.26.13 at 5:56 pm

#139 TorontoBull

Congratulations on asking the “Dumbest question of the day!”

#165 Geoff on 06.26.13 at 6:33 pm

Garth,

As I’m reading your recent stuff, I keep coming back to your discussion about the coming flood of cash that is going to come out of government bonds and GICs and buy stocks, REITs and preferreds, thereby buoying these prices.

I suspect I am wasting cyber-ink by pointing this out, but have you considered the impossibility of the scenario you are describing? I don’t know about you, but every time I buy a stock, I buy from a seller of equal size. Likewise, when I sell a stock, I sell to a buyer. Because buyers are always mathematically equal in size to sellers, you will find that the “flows” you describe cannot, in aggregate, actually exist. Yes it is possible for Garth to re-allocate $100K from cash to stocks or vice-versa, but only in the context of someone else doing the opposite.

What actually moves prices is belief of what a fair price should be of the marginal seller and the marginal buyer. If Hudson Bay company announces that its gross margin fell from 15% to 5%, the price of the shares would collapse almost instantly, irrespective of any transactions in the market.

“Rotations” are actually impossible. The cash on the sidelines is always on the sidelines. If you are making any investment decisions based on some expected rotation, then you, indeed, are the greater fool.

#166 Mikey the Realtor on 06.26.13 at 6:48 pm

#82 Bigrider on 06.26.13 at 8:21 am

The flack I take here is no surprise to me, I’m a goldfish swimming in a tank with sharks, but it’s entertaining, maybe I need another hobby.

#167 T.O. Bubble Boy on 06.26.13 at 6:52 pm

STOP FREAKING OUT ABOUT A 5% DROP IN THE MARKETS.

please.

Should have bought CDN preferreds and REITs @ 5%-10% off when you had the chance.

Also – look for the preferreds trading well below par value ($25)… I’ve already flipped USD Preferreds that temporarily fell to $22-$23 and recovered.

#168 Devore on 06.26.13 at 6:59 pm

#107 Troy

Each issuer of a preferred share has an investors relations web page which contains the prospectus for each series and spells out the terms exactly. There are also some sites that track issues, prefinfo.com comes to mind, that may or may not be up-to-date and accurate.

It sounds like you barely have a grasp on the basics, and it is not a good idea for you to be buying individual equities.

#169 Devore on 06.26.13 at 7:12 pm

#115 maxx

Why? Because savers are just as vital a part of the economy as investors.

Savers are receiving rates in line with the risk they take vs the returns higher risk investors receive. There is lots of demand for risk-free returns and not so much demand for capital, thus the share of the pie allocated to risk-free returns will be smaller. When those conditions reverse, savers will get higher rates.

#170 AK on 06.26.13 at 7:22 pm

#153 Piccaso on 06.26.13 at 4:26 pm
“WOW… Are gold and silver and long ETF’s sure taking a hit lately. Ouch!!”
——————————————————————–
#155 Richard in Kelowna on 06.26.13 at 4:53 pm

“……picture perfect Picasso”
——————————————————————–
Get used to it Guys.

Dead money for the next 20 years.

Repeat in history, between 1980 and 2003..

#171 Dienekes on 06.26.13 at 8:10 pm

Gold fascinates me. It does 2 things other elements don’t. Gold always seeks more gold to lump with, other elements usually smash itself apart. It also always finds bottom, displacing all other elements.
Gold bugs are like gold, they always lump together ( misery likes company?) And they always go to the bottom, displacing all common sense.
Only good thing about gold, is it always becomes worthless enough that gold mines shutdown, and we can go in and clean up the refineries, that everyone walked away from and sell the goldcon recovered to a greater fool.

#172 Daisy Mae on 06.26.13 at 8:14 pm

#2 the-unhappy-renter: “Garth, please explain to us WHY so many Canadians love real estate so much ???
Thanks”

Mothers-in-law. — Garth

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

Not ALL of us, Garth. In all fairness, some of us manage to mind our own business. LOL

#173 I'm from Kelowna too...prices crashing here; tons of 4 sale signs on 06.26.13 at 8:16 pm

#106 Richard in Kelowna on 06.26.13 at 10:34 am

Hi Richard, I’m with Garth, but if you want to hold gold in your portfolio, hold it in XIU or XIC… I think XIU is the better of the two. It has a little narrower of a focus.

#174 Devore on 06.26.13 at 8:36 pm

#123 Richard in Kelowna

No, I didn’t take profits at $1900 and why would I? It’s called holding a core position…..sort of like having an insurance policy.

Insurance… against what? And what kind of payout do you expect?

I did take profits @ $1900. Sold nearly all my physical gold and gold stocks about 2 weeks before the top, and also sold all my “paper gold” (CEF mostly), at a nice premium might I add. Something goes parabolic, it’s gone from my portfolio.

FYI, “taking profits” does not mean selling everything, but again, for me, hockey stick chart = sell all.

#175 Richard in Kelowna on 06.26.13 at 9:13 pm

“#174 Devore

#123 Richard in Kelowna

No, I didn’t take profits at $1900 and why would I? It’s called holding a core position…..sort of like having an insurance policy.

Insurance… against what? And what kind of payout do you expect?

I did take profits @ $1900. Sold nearly all my physical gold and gold stocks about 2 weeks before the top, and also sold all my “paper gold” (CEF mostly), at a nice premium might I add. Something goes parabolic, it’s gone from my portfolio.

FYI, “taking profits” does not mean selling everything, but again, for me, hockey stick chart = sell all.”

I guess you probably sold all your stocks just at the peak in ’07 too right?

#176 Smoking Man on 06.26.13 at 9:13 pm

62,479 K so far today.. 100 sell contracts USDCAD I put on yesterday.

Betting with Gartho

#177 MarthaP on 06.27.13 at 2:16 am

Garth: if you look at the comments on your forum you will notice that they are largely from morons. This should be a clue that those people who have a basic understanding of economics and finance look elsewhere for insights.

Gold goes *down* in a recession, not *up*, for obvious reasons.

#178 Ralph Cramdown on 06.27.13 at 5:14 am

#163 Tyrone

The problem with covered call ETFs is that they are mandated to buy covered calls, all the time. I would assume that sometimes the options are priced well, and sometimes they aren’t.

N.B. I don’t trade options. I know just enough about them to know that I’d want to know a lot more before trading. Some day.

#179 Ralph Cramdown on 06.27.13 at 5:32 am

#131 Canadian Watchdog — “Hmmm, let’s see. […] rigged […] rigged […] rigged […] rigged […] rigged”

This is one of the things I find most fascinating about ‘bugs. A lot of them believe that the markets — especially for precious metals — are rigged. Yet they continue to play, because they believe that fundamentals must eventually overcome the manipulation. Don’t get me wrong; I believe that many markets are/have been manipulated, so I’m always looking to own things that are harder to fake. But ‘bugs have this weird dichotomy whereby they believe that their market is manipulated to a greater extent than most others, and at the same time they’re all in.

#180 mike from oakville on 06.27.13 at 1:22 pm

i bought rbc pref shares, and while they’re only down 3% (less than a year’s worth of dividends), apparently i bought rate-reset pref shares and the dividend will go down in 2014. guess next time i’ll have to read thru the actual prospectus…

#181 Doug in London on 06.27.13 at 3:38 pm

Oh, I couldn’t agree more that anyone who invests in GICs (Ontario Savings Bonds aren’t much better) is being ripped off BIG TIME. So what do you do to avoid this terrible injustice? I don’t know about you, but I’ve taken advantage of the on sale prices of REITs, preferred share ETFs, and utility stocks where you get a much more civilized rate of return. Not only that, but they are taxed at a lower rate also.

I see this week all those investments I mentioned are up after their big drop on Monday. If you don’t have any exposure to such investments now may be the time to get some. You could put in some lowball offers if you’re still skittish, but you are risking that the worst price drop may be behind us now. What’s that noise I hear? It sounds like a diesel locomotive revving up, and pulling the train out of the station!

#182 Kent on 06.27.13 at 6:57 pm

So to buy TD Preferred Shares do I just go into my TD Waterhouse account and buy TSE:TD-Q? If not can someone explain how you do it.

#183 Dave on 06.27.13 at 7:01 pm

Garth could you explian why George soros withdrew all his money out of gold ETF and took phyical deilvery?