Want to earn $50,000, no tax? Stay with me.
I don’t know how many people buy real estate because they’re afraid of everything else, but it’s probably a big number. Since 2008 house prices have hit historic highs, along with mortgage debt and the home ownership ratio. It’s all related.
Same with GICs and high-interest savings accounts. Billions collect dust there because most folks are financially illiterate, or had the poop scared out of them. Or both.
Too bad. Ignorance and fear are infectious. Every time I mention the long-term historical average returns of balanced and diversified portfolios (around 7% over the last decade), I can count on incredulous comments like this:
I always chuckle at the 7% “well balanced portfolio” No risk, like picking up a block of cheese at the grocery store. Compete crap. Garth, how can you post day in day out this 7% growth and believe it? NOBODY get 7% annual return year in year out. NOBODY. — T
That’s quite right. No portfolio yields the same every twelve months. Last year, for example, a balanced portfolio (60% equity index, 40% bond index) delivered 9.3%. But the year before it was 0%. The year before that, about 8.5%. And so on. The ten-year average is just shy of 7%. If you’re saving for retirement, it strikes me that a good annualized return is more important than yearly swings. But then, I have confidence. T doesn’t. He sounds like a GIC guy, which means he collects 2% every 12 months, sees it dissolved by inflation and pays tax at the full marginal rate. No wonder he’s pissed.
Others come to this pathetic blog to blow over lower values in the last few months for real estate trusts or preferred shares, both of which hold minority positions in a balanced account. True enough – given the US Fed’s ambition to reduce its bond-buying program, bond yields have risen and income-generating assets have fallen. Now you can buy REITs and preferreds about 10% or 15% less than at their peak last spring.
But most people aren’t contrarian. They grab stuff at its zenith and come here to bitch when it’s on sale. So predictable. Just like houses. As prices rise, so do sales. Sigh.
Let’s talk about preferreds, and why you might want to own some. These assets are called ‘fixed-income’ because that’s what they do – pay you to own them. They’re not purchased for the same reason common stocks are owned, which is for a capital gain. In fact, preferred shares (in big, profitable companies like banks) are notoriously stable in their pricing, reacting to moves in interest rates, not profits of the issuing corporation. Buy the right ones, and they pay a fixed dividend while also having a par value (like a bond) at which they will be redeemed, often giving you a gain as well as income.
Today, thanks to recent dips (temporary, it seems) in fixed-income prices, bank preferreds are churning out more than 5% in dividend income, which also allows you to collect the dividend tax credit. For higher-income investors that boosts the effective yield closer to 7%. In fact, if you owned only preferreds, or other assets paying dividends, you could create a $50,000 annual income stream and pay no tax at all. Ziltch.
This is thanks to the basic personal credit plus the tax treatment of dividend income. In case you don’t realize it, the money you earn going to work, collect in GIC interest or as rent from income property is taxed at the highest rate. Profits made from capital gains when you sell a stock or ETF for more than you paid, are 50% tax-free. And dividend income comes with that fat tax credit that cuts tax in half or can even wipe it out.
Why? Because dividends are paid to you by companies from their after-tax income. It wouldn’t be fair to tax it fully again in your hands. So on your tax return you gross-up dividend income then deduct the credit – and it’s all good.
For example if you owned a million in bank preferreds (hardly balanced, but illustrative) the roughly $50,000 income paid to you annually would attract about $16,000 in tax, all of which is wiped out by the basic personal credit plus the dividend tax credit. You get to keep it all. Sweet.
This is why people buy things like preferreds shares and real estate investment trusts – distributions which currently range from 4% to 7% from assets whose returns are fixed, or based on the strong cash flow of underlying assets. So, what happens when interest rates creep higher and the capital values of these things erodes, as has happened over the last four months?
In practical terms, nothing. You still receive your income. You collect the tax credits. Your income’s not affected. And if you don’t plan on cashing in your investments when they are 10% lower, then you lose nothing – which is exactly the point of having a fixed-income stream of cash. Interest rates have shot up dramatically since May, a situation likely to reverse a little, since the bond market flipped out. Meanwhile demand for preferreds remains very strong, for obvious reasons – a factor mitigating the gradual ascent of rates over coming years.
Of course, that same movement will be devastating to those who bought houses with lots of leverage.
What a surprise that will be.
165 comments ↓
Who will people believe the banks or a website like this.
Hint the banks made record profits last year
Actually some are making record profits now. And I have no idea what that question means. — Garth
Garth,
About that fixed income portion of portfolio. Considering an allocation of 40% to it. Do you think its a good idea to have 15% preffereds and 25% bonds. Or a standard 10% adn 30% is more reasonable?
One size does not fit all. And the bond component is typically comprised of four different security types. — Garth
I will give my humble interpretation on the above noted picture, as Key West is a party place, and there is this old woman that is worth $millions that owns the best place, and wants me to come back to party soon. She owns the best and forget the rest, as holds daily beside the pool free booze for all in her two mansions across the street from each other to party. Check out the Curry Mansion Inn, and this accommodation which is vast will blow your mind away, as is just around the corner from Duval; she holds open parties on occasion for all with 700 people coming for food and drink. She even has a huge parking lot for bikers, as her motto is lets party the night away.
Yep, Garth is right in this article (as always), I wanted to add though something about REIT’s and taxes in Canada. Well, imagine you had $100,000,000 invested in canadian REIT’S that give you 7% return of $700,000 annual income, paid in monthly installments of $58,333.33 on the 15th of every month – and guess what ???
YOU PAY NO TAX AT ALL – because REIT’s will issue this money as a “return of capital” and therefore it is tax free. For the first 10 years ! Then, if you really hate CRA, transfer it slowly to RRSP’s to make it totally tax free, to your spouse, to TFSA and… Live long and prosper !
If you have been in Uncle Sam country or filed Income Tax Return there with IRS, you must appreciate how generous Canada is in this respect. We Canadians must be smoking some GOOOOOD stuff.
Actually we do everyday legally. In Vancouver, BC.
Nobody said First yet….
an advice needed: i have 26000 in my tfsa (rbc; am getting less than 1%; and will not be touching that money for the next ten years; am actually hoping to add aditional 5500 a year); shall i purchase bank preferred shares with that money? with rbc? i am aware that the advice i am asking for is the kind of an advice one has to pay for but please do help me out this time. thank you.
Within a TFSA you lose the dividend tax credit. — Garth
I’m in a fund that pays out 6.5% dividend consistently for years now. The dips don’t even matter. The crashes let me get more on the cheap.
The trick is to be patient and have some play money on the side to lose thinking you know how to invest.
Mr. R.
Garth, what’s your fav Preferreds ETF?
How’s XPF?
Wow, this sounds great.
Oh wait, where do I get the million to invest from?
Garth-
I admire you for preaching the “diversified portfolio” mantra here, and also the high cost -and DANGER- of buying RE right now.
Still, some people buy now. Some sell now (or try their best to).
So, how has a diversified portfolio done this year? I will give you my personal experience, but my portfolio is not so diversified just now. I am light on bonds, heavy in stock funds of all caps. So far this year, I have “harvested” profits of $99,999.11 “Harvested” means took profits.
Most were from funds, but there is about 15% of portfolio in individual stocks most bought in 2011/2012 and sold earlier this year. You know when the market was setting those new highs. Some of that “harvested” money will be cashed out & spent, all of it could be.
Bonds are looking a bit more attractive, short or intermediate term.
CAN one earn your 7%? YES!!! YES!!! YES!!! Even more, but let’s not get too nuts and there are NO guarantees.
2014 will be my wife’s lst year of retirement, my 3rd. We will not likely harvest our social security yet, rather wait until full retirement age.
I DO like Dividend streams more so than bonds. Dividends tend to grow, bonds do not. I like REITs too.
Investing. It’s not for everybody.
Someone has to say it. What have returns on real estate been in the last 10 years?
It would be interesting to see the comparison over a longer period of time – I think that would make the argument stronger.
Any guesses on what F is going to announce tomorrow?
It’s at a place of business so I guess it is going to be a good news announcement or a new policy to help businesses.
Of course, maybe he is going to announce that housing in Canada is perfectly affordable if everyone just lowers their expectations and lives in a tent-trailer.
Re #10 Retired Boomer – WI
2014 will be my wife’s lst year of retirement
Don’t send her back to work. That’s cruel.
I know Garth and others here don’t believe in HAM, but it’s worth watching this video:
http://www.youtube.com/watch?v=5mKKgvoxjZ4
It’s a vid about China, not capital invested in Canada. — Garth
It’s a vid about China, not capital invested in Canada. — Garth
___
Maybe Garth will believe this one about Chinese ex pat capital buying up farms.
http://www.producer.com/2013/09/chinese-entrepreneurs-plan-new-wave-of-settlers/
That’s a story about residents of Chinese origin investing in Manitoba farmland. I think they’re called ‘Canadians.’ — Garth
Garth, very good post today, simple and easy to understand financial principles about having a balanced, diversified, and liquid portfolio. As a matter of fact, I believe the advice you have given over the years to be fool proof.
Having only one asset, paid for, or leveraged, be it a house, gold, bond, RE, stock, ETF, etc. is the action of a fool. No exception.
There is a reason that Canadians are holding record debt levels at a time 70% of Canadians are home owners(debtors), when RE prices are at record prices, Canadians have very little savings of any kinds, and the majority of Canadians also have no work pensions.
There is a saying going back centuries: “If you correct fools you will only make them angry, but if you correct a wise person, they will come to thank you.
I am glad to see the people who write you to thank you for saving their @$$ Garth, and feel sad that so many Canadians are screwed. You know, the ones who come and argue their house horny philosophy on a daily basis who are financial illiterates.
Nobody gets 7% annual return…Nobody.
This must be Big Rider who gets his block
of cheese and eats it at his grandmother
basement.
China was set up years ago by the Banksters etc. to be this Golden Goose to give people a combination of false sense security and credit based economy.
It has had zero autonomy since the Opium Wars and Hong Kong was established as a colony.
China is being set up to fail…. and fail BIG time ….and result in a global economic tsunami.
China is still a Communist Country, aka a neo -con Valhalla.
Well, I was thinking the same like GT but I was wrong. I went to open houses today, not looking for a house, I just wanted to kill some time in Toronto….huge surprise, many people in each of those open houses, now I question if any correction will happen, more incline to won’t.
Yup. Got some of my preferred dividends just the other day. I like that.
Old man just had a heart attack…
#125 Smoking Man on 09.08.13 at 2:18 am — “America goes libertarian. Look what’s happening, your control slipping rapidly.”
— and —
#128 Westcdn on 09.08.13 at 7:31 am — “His death proves there are people you don’t say ‘no’. Sometimes it is easier to see the light from the darkside.”
Was it not The Wreck of the Edmund Fitzgerald who once said that everyone has their fifteen minutes of fame, then all things shall and must pass away (or words to that effect)?
It appears The Elite are fading away, ‘tho it might take awhile for the Rothchilds to disappear. They are currently worth north of US$500 trillion.
‘Owzaboud changing all the world’s private-for-profit central banking systems into public non-profit ones, just like Iran, Libya and others have (or had)? That should speed their downfall up rapidly!
BTW, Matt Drudge of The Sludge Report quit the right half (Republican) of the foot and apparently has joined the Libertarian Party. More cannons for the fodder!
Hoax, The Great Train Robbery Pt. II, Not James Bond (goes with previous).
If SArabia has given the OK to bomb Syria (apparently they have), let SArabia fight their own goddamn wars. America don’t need no more stinkin’ wars, esp. with SArabia, Israel and America being the axis of evil.
#12 ILoveCharts — Don’t send her back to work. That’s cruel.
It’s cruel to make fun of people old enough to have gotten their start on an Underwood. But carry on.
Does it matter Garth?
http://www.presstv.ir/detail/2013/09/06/322306/us-deployed-nuke-force-before-syria-crisis/
Once the Americans go from defcon 3 to defcon1 and the nukes start flying all paper and electronic assets won’t be worth Jack. Real estate contaminated by fallout or burnt to the ground won’t be worth Jack either. In times of peace with sane governments may be your arguement is a good one but not now.
The lunatic assylum has been hijacked by crazies with big debts and big nuclear stock piles. They are trying to pick a fight over some nut jobs economic, religious and political agenda. Having faith in paper promises is not appropriate at this time.
‘The trick is to be patient’
that is why most ‘investors’ fail
this is the insta-gratification 2 days is a long time world now
waiting decades is not in the vernacular of most anymore
good post Mr Turner
WHERE TO FIND A $ MILLION FOR THE MARGIN ACCOUNT
We all view the world from our own perspective.
From my perspective, I wonder who would have money in a taxable margin account?
By the time people max out tax advantaged plans like TFSA, RRSP and RESP how many would have anything left for a fully taxed investment account?
Business owners can shelter income by keeping it in the business and investing for capital gains (but not selling so there is no tax).
So who has money in taxable accounts? Maybe those few people who make very large salary income and can save over and above the RRSP, TSFA, RESP amounts…
Realistically if a family has kids you are looking at people with family incomes of maybe $200k per year from salary. In fact most at $200k will find that TSFA, RRSP and RESP will soak up all the savings they do. Keep in mind they will pay $60k in income tax, $4k in payroll deductions and maybe $20k in pension contributions. There are just not that many situations that allow people to soak away $10k or more per year in taxable accounts.
Are there?
But there are indeed SOME people in Canada who have big money in taxable accounts and no other income and can therefore benefit big time the dividend tax credit strategy. And I certainly hope that both of them read this blog.
Boomers gotta get used to the new normal: Decks, Rugs, and Sock-n-roll.
Garth how about the year when this portfolio will go back 50% like March 2009 how many of your weak readers will not sell on March 9, 2009. It is very easy to count profits in retrospect… The guy is very correct, it is immensely difficult to achieve 7% annual compounded rate of return over a long period of time in the current economic environment. If you keep on with this ypu make yourself ridiculous.
Average return of a balanced, diversified portfolio over 9 years (including 2008-9) is 7%. If you sell in a crisis, guess who’s to blame? — Garth
I am a “do it yourself” investor. My version of a balanced portfolio over the past 9 years has returned an average of 8.35%. Very consistent with Garth’s numbers. So I guess I didn’t get a 7% return either.
private investors ? vultures… hell no these are predators!
Ear to the Ground
Poor Losing Homes Over Small Tax Liens to Private ‘Investors’
Low-income D.C. residents—many of them
…”One 65-year-old flower shop owner lost his Northwest Washington home of 40 years after a company from Florida paid his back taxes — $1,025 — and then took the house through foreclosure while he was in hospice, dying of cancer. A 95-year-old church choir leader lost her family home to a Maryland investor over a tax debt of $44.79 while she was struggling with Alzheimer’s in a nursing home….
http://www.truthdig.com/scott_martelle/
Listings are still very high in Montreal:
http://communications.centris.ca/Tableaux/2013/Tableaux_Communiques_CIGM_2013M08_ENG.pdf
Major correction coming in 2014?
#85 Robbie on 09.07.13 at 4:58 pm
Thanks for your insight, Robbie.
I posted an ad on Kijiji today having realtors bid on being my buying agent. Ended up with an agent giving me a rebate of 1.25% (buying agent commission in ontario is 2.5%). Splitting it down the middle seems reasonable.
I recently read about this ETF: HXS-T.
“Horizons S&P 500 Index (C$ Hedged) ETF, HXS-T, offers Canadians a unique approach to investing in dividend-paying foreign stocks. HXS seeks to replicate the performance of the S&P 500 Canadian Dollar Hedged Total Return Index. This well-known stock market index includes a diverse mix of 500 large, U.S. publicly traded companies, both dividend and non-dividend payers, and is considered a proxy for the U.S. equities market. In reality, the Index provides broad international exposure as the member companies derive a significant portion of their sales (46.1 per cent in 2011) from outside the United States.
HXS is a synthetic ETF that does not actually own the shares in its target index. Rather, it uses a total return swap methodology to replicate the performance of the index. Money from the sale of HXS units goes into a cash account held in safekeeping by custodian financial institutions. Horizons has contracted with the National Bank to swap the specified total return of the ETF units (i.e. the capital gains/losses plus dividends earned by the target index) for a negotiated payment. The interest from the cash account and a swap fee of 0.30 per cent of the ETF’s net asset value finance this payment. The swap fee is on top of a MER of 0.15 per cent.
Because HXS owns no shares, it does not issue or receive any cash distributions and is not subject to U.S. taxes, including dividend withholding tax. There are no trading costs or tracking error and the value of any distributions is reflected immediately in the net asset value of the ETF.
Given the efficiencies of the swap structure, HXS tracks its underlying index more precisely than traditional ETFs such as the iShares S&P 500 Index Fund (CAD-Hedged), XSP-T, which tracks the same index. To wit, as of Feb. 28, 2013 over one year, the return rate (after fees) was 13.46 per cent for HXS, 13.18 per cent for XSP, and the Index itself returned 13.92 per cent.
Since inception, HXS has used financial derivatives to eliminate the impact of the U.S./Canada currency exchange rate on returns. The cost of this hedge creates index tracking error. As of April 1, Horizons has eliminated this error by removing the U.S. currency hedge from HXS.
According to Horizons Exchange Traded Funds Inc., swap-based ETFs do not exist in the United States and his firm is the only Canadian swap-based ETF provider. For the average Canadian investor, HXS is likely the only practical way to gain exposure to dividend-paying foreign stocks in a TFSA without the drag of foreign dividend withholding tax.”
#26 Shawn on 09.08.13 at 7:24 pm
“By the time people max out tax advantaged plans like TFSA, RRSP and RESP how many would have anything left for a fully taxed investment account?”
====================================
RRSP’s are beneficial for high income earners only. Why would you be recommending to people to max out their RRSP without knowing their financial bacground?
Somebody making 35K has zero tax advantage by maxing out a useless RRSP.
Picked up the weekly community paper Friday morning & there it was… The RE ‘Christmas Wish Book’ – the first of the fall RE listings. Mixed picture – lots of stale listings stubbornly holding prices they’ve had posted for months – owners aren’t budging. Others – lots of these – listed as ‘NEW PRICE’ which I translate as: “Yeah, we wanted too much to begin with”. Among the new listings – about half seem to be a fair price for this area & the specific neighbourhoods. Others – I suspect they’ve just come off the wrong end of a Smoking Man road trip.
A new listing 3 blocks from me. It’s been owned by an older couple, pretty meticulous when it comes to externals & judging by the lsiting photos – as careful about the inside of their home. But I figure they’re a good 10% over what people will pay for the place. And the first thing a home inspector will note – from a half block out is that the roof shingles are starting to curl – that’s been an issue with homes by this builder. Corner lot. No back yard.
After a couple of weeks break – lots of open houses today. Lovely day for tire kicking houses, sunny & a tad brisk. Very little traffic on the listings around here & the few new ones of which I’m aware, (I haven’t gone through the RE insert yet), haven’t even put signs up.
I’m also noticing a growing trend to ‘sale by owner’. Let’s see if that works.
Anyone who thinks the average family income in BC is around 68k is on the kool aid. It’s called not paying tax on your income
http://www.theprovince.com/business/Vanishing+Vancouver+Original+houses+being+demolished/8884091/story.html
I could care less about dividends at this stage when all that matters is price action.
NYSE Margin Debt RSI
Indicators are glowing red. Everything else is hope.
Zero connection to preferred yields. — Garth
Hey Garth
Lets say you borrowed $1 million @ 3.5% interest and invested In dividend paying stocks paying lets say 4.5% on average in dividends. Is the interest still deductible if i am not paying tax on the dividends anyways?
Yes. — Garth
7% returns might seem difficult, but in years like 2013, they are easy as pie. near-20% returns on U.S. equities (plus 10% currency gains), 25%+ on Berkshire Hathaway, a few % plus dividends on Canadian equities, and some good values and trading opportunities in international equities have made for a great year overall if you’re primarily in equities.
My biggest regret in 2013 is selling some penny stocks like BioSyent (RX.V on the Venture) too early… that sucker is up 100% over the past 1 year, but I sold out after some modest gains.
One pick for the rest of 2013 is Michael Kors… looking at some Call options right now (or, might just by the stock, even though it is a bit rich).
Driving through much of the downtown of Toronto over the weekend, I really noticed for the first time two very common words posted in front of numerous new condo buildings:
“Immediate Occupancy”
I had dinner the other day at a restaurant across from “The Rushton” on St. Clair West, a stylin’ low rise condo with a burger joint on the main floor. About $450K for a smallish 2 bdrm.
As night fell, the units in the building never lit up, almost a year after completion. We debated just how empty it might be.
It still has a yellow flag sign on a balcony advertising “$25,000 off, 1 week only” or words to that effect” The sign has been there for all of 2013. Guess condo salespeople are having some very long weeks……
Why doesn’t an etf company just create a balanced etf? There are some that have multi asset or multi security, but no real balanced ones.
Balance is dynamic, requiring a manager. That’s called a mutual fund. — Garth
HOW TO WIN AT FINANCES…
Danny at 38 said:
Hey Garth
Lets say you borrowed $1 million @ 3.5% interest and invested In dividend paying stocks paying lets say 4.5% on average in dividends. Is the interest still deductible if i am not paying tax on the dividends anyways?
Yes. — Garth
******************************************
Now THAT has possibilities but only for a few people.
Let’s take those lucky teachers and government workers and others that have two incomes and two pensions and can retire well before 55. Or someone with a mega RRSP.
People like this might retire but defer collecting any RRSP or pension for a few years. During those years they would have dividend income only generated by investing the $1 million borrowed money.
Let’s see they make 4.5% tax free (due to dividend tax credit.) But they pay 3.5% interest. Oh crap they are down to $10k in income here…
They take out some from RRSP to use the tax deduction of the 3.5% interest. At 25% tax rate they take out can take out $140,000 in RRSP between the two of them tax free due to the $35k in interest they paid.
But wait with the RRSP the dividends now are no longer tax free.
It all hurts my head.
Few if anyone is going to borrow a million like this.
China
I think Bob’s China video link is signalling economic tsunami on its way… (much like the rabid reselling of the mortgage-backed paper in early/mid 2000s). What is happening IN China will have blowback all over the place.
Open Houses
Crazy busy at the two near me today. (Unionville/Markham)
What’s under the hood? Two years on the market…
September and perfect weather ‘splain these ones.
1st open house question… “Are you a neighbor”… Guess they get lots of those.
Less is more. This is my philosophy when open house shopping. Say as little as possible…. Ok second favorite realtor comment.
“Oh you don’t want to live on THAT street”… Apparently street is really that important in a multimillion dollar neighborhood? I guess it depends which house they are the listing agent for.
Yes I know they are sales people its their job.
Last and third favorite… “The market is really hot. Fall will be a hot market. Houses are selling over asking”
Sigh… Ok let me know when the market is NOT hot … Thanks :)
Garth, If you have $1 million and invest it to get dividends of 4.5 %, then what is a good rent to pay for a house?
Garth,
You should read the article posted in post#14 again. It states flat out that he is marketing farm land directly to Chinese investors. This is legal and he’s doing nothing wrong but it will once again drive up prices of land in this country which is not ethical of our government to allow. The article also implies that some or maybe even all of the beef will be sent back to china.
So we have Chinese-owned farms on Canadian land, worked exclusively by Chinese people(read it) which will ship the product back to china. Once again, not illegal, but cause for concern, and definitely worthy of discussion, especially if this practice inflates land prices to the point that other Canadians cannot afford to buy farm land to supply our own country with beef in the most extreme example.
Do you want an open and free country, or not? If not, what freedoms would you deny? — Garth
Today’s post is so very clearly explained. Each person invests in their own “style” and experiences different results.
An analogy to growth investing vs. dividend investing; With a piece of ground available for planting, some would plant timber trees and wait to ultimately harvest the growth just one time— when those trees are cut down and sold to the mill! Others will choose to plant an orchard with fruit trees and regularly harvest the fruit. Occasionally a tree may wither and die, but, given enough time, others will slowly grow larger and stronger producing ever more fruit. Patience is required.
Results of one household’s portfolio over the past three years; Annual compounded growth; 10.5%
Annual dividend yield against original investment vale; 6.9%
Annual dividend yield against current portfolio value; 5.1%
This would support Garth’s assertions (7% annual returns are possible) rather convincingly.
@ #41 lee “Why doesn’t an etf company just create a balanced etf?”
What you are looking for exists. It is called a wrap, or, a fund of funds. Look up any of the major etf houses like ishares and check out their portfolios.
They stick to a certain asset allocation and periodically rebalance. Not my cup of tea, but good for those that are willing to pay higher MER to avoid having to rebalance their own funds twice a year.
Re:
Do you want an open and free country, or not? If not, what freedoms would you deny? — Garth
For starters, how about a bilateral agreement between China and Canada on foreign land ownership.
In China (from a CBC article):
” Foreigners can own only one residential property for their own use (permanent residents are restricted to two properties).
Foreigners must reside in the country for one year before they can buy property.”
There is a difference between being a country that promotes freedom and allowing anyone to buy unlimited amounts of land. What if the Chinese government said they’d like to buy the Northwest Territories and Nunavut. Should we just sell it to them?
Good idea. Let’s be China. — Garth
@ #26 Shawn, I am making $80,000/year and have been able to “soak up” all my RRSP, TFSA and RESP contribution room and have some of my diversified portfolio in a taxable account. Mind you I don’t have car payments or mortgage.
Do you want an open and free country, or not. If not, then what freedoms would you deny? — Garth
I would like to deny the foreign ownership of land in Canada from citizens of countries that a Canadian cant purchase land in.
Why? — Garth
@#41 lee,
check out CBD and CBN on the TSE. There are many more if you look.
@#41 lee
or XGR, XTR, XCP, XAL, AGC
[…] Incredulous […]
Just as I thought, REITs and preferred shares are on sale and have been for the last 3 months. Of course it doesn’t take someone with an MBA to see that, just plain old bore you to tears common sense. With these assets on sale I thought there would be a massive flood of buyers, with 1000 or more buy orders for every sell order on the stock exchanges.
Life is short.
If you are not ready to buy, going to
open houses = dog licking window of butcher shop
There is so much else to do and see.
For those killing time in Toronto this weekend there was TIFF (even the UK Observer/Guardian has a bigger spread than the local rags on this event) and La Tragedie de Carmen (top class opera for $25).
Don’t let life pass you by while you’re waiting.
” Do you want an open and free country, or not? If not, what freedoms would you deny? ”
====================================
U R kidding right?…….this is Free 4 all …at comedy club….improv”free beer” night….(please please PUHLEEZE!!!!!!!!)
(Reuters) – A Polish central bank policymaker has defended the government’s decision to transfer more than half of private pension fund assets to the state, saying the move would give the economy a vital investment boost.
Polish central banker says pension changes can boost economy
You must be Polish. Or why care? — Garth
#55 Edmonton_Man
I would like to deny the foreign ownership of land in Canada from citizens of countries that a Canadian cant purchase land in.
Nobody is allowed to own land in China other then the government, but if Canadians are lucky, in exchange for land, they may receive bank accounts denominated in yuan. A pilot program has already started.
Realtors are looking pretty good nowadays — compared to certain war mongers and tryrannists walking the halls of power in Washington.
When a realtor lies people who have no business buying a house, do so. When a warmonger politician lies, innocent men women and children get mutilated and killed.
Fear mongering about Al Queda and the war against terror is the pretext for turning our homeland into a police state, yet these throat cutters are our allies waging proxy wars against legitimate sovereign governments/nations overseas. It’s as evil as the day is long.
How nice for the Obama, Kerrys, Grahams and their ilk. Al Queda and terrorism is working very well for the “tyrannists’ and especially for their geopolitical chess master handlers.
If they strike Syria unilaterally against the UN and international law, then they’ve officially gone rogue. And Harper supports this endeavour of the rogue bully. Is he speaking for Canadians? One thing is for certain, he’s putting a target on our backs. For those of us who support the USA going in, would we be so supportive if it was guaranteed that sooner or later, bombs will be falling on our cities? We’ve got to stop enabling these creatures with their wars.
First comes “if I contribute enough to my RRSP every February, maybe I’ll have enough to retire.”
Then “If I put $2,500 into the RESP, it gets another $500.”
Then “I should see if I can put money into my TFSA, too.”
Then “Now that I’ve got extra for an unregistered account, what investments do I put where to minimize tax this year?”
– “How much am I likely to inherit?”
– “What is my retirement income going to look like, and where from? How will it be taxed? Can I avoid the OAS clawback?”
– “What’s my planned RRSP withdrawal schedule? Ack! How can I withdraw it so as to pay the least overall tax?”
– “How much am I going to leave to my heirs? Is it time to consider an intervivos trust?”
– “Should I move to Alberta?”
Once you clear the “die broke” threshold, tax planning gets more interesting. If you’re anticipating intergenerational wealth transfer, to or from you, doubly so.
And of course if only one spouse has earned income (thus RRSP contribution room) the spousal loan comes into play.
@#41 lee,
check out CBD and CBN on the TSE. There are many more if you look.
or XGR, XTR, XCP, XAL, AGC
___
You are recommending ETFs that trade a few hundred shares a day? These are totally illiquid and shouldn’t be touched until they are at least trading 10-20,000 shares a day and have a wide following. Beware of hucksters.
hogtownIndebted: Guess condo salespeople are having some very long weeks
Penny Henny yesterday gave a link to a very interesting article by David Fleming.
http://www.torontorealtyblog.com/archives/condominium-financing/9775
basically the bankers call the shots. They provide financing only after the developer has sold the required number of units. They get to look at the contracts. If one buyer has bought 4 condos, it only counts as 1 sale. If the person buying looks like a poor credit risk, it doesn’t count.
here’s a quote from the article:
Not all deals are contingent upon sales of 80% of the units, but many are. It’s often said that the developers make their money by selling the final 10% of the units, so suffice it to say, the banks are steering this entire process, and they get paid before anybody else.
Economic weight in the global boxing ring:
Canada vs US = mouse to elephant
Canada vs China = single cell amoeba to Betelgeuse (9th brightest star in the sky and distinctly reddish)
Ok, we get economic comparative advantage Garth, but even sunny views regarding benefits of globalization must inevitably acknowledge that there is no true free market in the face of massive sovereign state wealth. There are still national states (last time I checked ‘tho who knows what deals Harper may have signed) and some are ensuring rights of citizenship over external investors.
Sheesh, who would of thought you were an extreme libertarian.
I never invested anything. Knew nothing. Years ago bought some cantex, made enough to pay off crappy truck. So had Action Direct accounts in place.
Recently, Barrick fired Aaron Regent, so I piled RRSP hard into it at $32. I figured Munk would do what he did with Travel Lodge in Australia in the 70’s or 80’s.
Stock went up and I dumped at 41 when things started looking static, they are now downright sour. Next piled into PSX at 42, dumped at 67. Play with it between 58 and 62 now for a few hundred bucks.
I can say I am addicted. Glad I stumbled on this site. I new nothing of Diversification till reading here. Own some VOO now, and XRE. Who would have thought you could get money every month for doing jack all. I like that.
I still keep a large pile of play money and am heavy into COP. Couldn’t ignore those dividends.
Currently moving corporate money to investment accounts to invest in a very diversified plan.
7% is relatively easy to get if you at least monitor things a few minutes every morning.
Wish I knew this when I was eighteen.
So amid of stocks and bonds should yield a 7% annual return. Cool.
Lets do the math. Bonds yield about 3% now. Preferred yield 5%. Somehow this needs to average out to 7%. That would mean that stocks would need to go up by way more than 7%. Trouble is that stocks don’t go up by more than 7% per year, including dividends.
So I don’t get it.
Garth,
Remember the saying “When the USA coughs, Canada catches a cold”.
Now, just replace the word USA with the word CHINA.
@41 lee
$AOM trades ok and may be in all the right places in the near term.
Buying 5 different efts and rebalancing is probably a better bet.
A balanced eft as someone mentioned is partly an eft that holds other efts.
Noticed that this one owns MSCI emerging markets and you could buy that on your own.
Love the conversation tonight. Investing isn’t easy. If it was everyone would do it…..
Coho: For those of us who support the USA going in, would we be so supportive if it was guaranteed that sooner or later, bombs will be falling on our cities?
I would choose the no bombs falling on our cities option but there is no such tick box. I mean anybody in Syria can post on this blog (supposing that he had access to the internet). I mean a “first” from Syria is just as good as anybody else’s. I don’t see how we can throw him under the bus.
I also stick to my earlier weeks ago argument.
If we are openly going to allow anyone to buy our land, then we might as well sell our water as well.
Lets sell our water to the highest bidder..because we are a free society.
This clip from some UK politicians during their recent vote down of going to war against Syria is such a welcome contrast to the war drums beaten on the airwaves here. it made history…the British Parliament actually rejecting a PM’s case to go to war.
http://www.gilad.co.uk/writings/joshua-blakeney-against-war-in-syria-the-great-parliamentary.html
#72 Obvious Truth on 09.08.13 at 11:14 pm
“Investing isn’t easy. If it was everyone would do it…..”
—————————————————————-
Apparently you are in good company……
“Today, according to this report published in Kiplinger’s Personal Finance, the number of index portfolios has more than tripled in the last 10 years. In half that amount of time assets of stock indices have grown 70%, while investment in actively traded stock portfolios has declined by nearly 20%.”
http://www.forbes.com/sites/rexsinquefield/2013/09/05/40-years-later-index-funds-remain-the-best-wealth-management-choice-for-all-investors/
To ceasers entertainment, I destroyed you in July in Vegas, thanks for the jet to Laughlin, f-en hammered,
Obviously these idiots don’t know old smokys been threw the universal consciousness consolidator.
I see shit, just took down there algos for an other, not even going to say the amount.
Machine, my fee just went up again huge.
You dogs ever been on a golf stream jet.
I want one.
A [b]single[/b] balanced portfolio isn’t a good measure of performance for fund managers. Said portfolio could be an outlier or simply have a steeper risk curve than all others in the fund. That’s why GIPS standards ask for an equally-weighted [b]composite[/b] of similar portfolios. This is also covered in CFAI’s Ethics section under performance misrepresentation.
So Garth, how does your firm fare in terms of annualized composite portfolios? (My guess: not a 7% return).
I doubt this would be posted, anyway.
#4 Property Accountant
Really? Show me a REIT, heck, show my ANYthing, that pays its distributions as 100% return of capital, and is actually legitimate and not a scam to separate you from your money. Why would you give someone $100,000,000, just to have it returned to you piecemeal over 10 years?
I don’t think you have a single clue what you’re talking about.
Anything paying more than a couple percent as return of capital on a consistent basis, you gotta look at their books, while pushing the SELL button. Return of capital means the company has too much capital, and nothing to do with it, so they return it to investors so they can re-invest it as they see fit and generate a return which the company cannot. Does that sound like a good business proposition to you?
There are some Balanced (asset allocated) ETFs from iShares – Blackrocks.
Also, another one, it is a mutual fund, but search BMO ETF balanced funds, those are low cost ETF based funds of funds, in-house EFTs from BMO.
iShares is better ETF brand though
http://www.cfainstitute.org/ethics/Documents/Codes%20Documents/redraft_aimrpps.pdf
Page 13.
Looking to buy a home, but worried about interest rates rising. We are an average family and have annual earnings of about $275,000 and have about $350,000 in a balanced portfolio. We would like to get into our first home by the time we are 30. Looking at something in the $800,000 starter range and using the $350,000 as a down payment.
We have stable jobs and would have a mortgage of about $450,000. Should we do it Garth? or wait….
I’m going to get banished from the casinos soon, I better give some back.
Screw them, they like gambling to.
Re#50 in other countries foreigners cannot even own property–it is against the law. In Canada, our politicians are to spineless to stop it, as a matter of fact they encourage it, selling and marketing heavily to the Chinese, thereby disenfranchising people who were born here. It is short, sighted, and stupid. They don’t care about the people
Why? Because dividends are paid to you by companies from their after-tax income. It wouldn’t be fair to tax it fully again in your hands.(Garth)
Ok I get it but really???
Work make $ 50 000.00 pay $16 000.00 tax it wouldn,t be
fair to take your Friday after tax pay and have it taxed
again when you buy gas at something
like 50% tax on tax paid. Then a box of beer tax on tax.
Then carton of smokes… tax on tax already paid.
Buy a used car first owner already paid sales tax.
You pay again.
Almost $10.00 tax included, for a Bigmac fries and coke.
Some farmland has increased 300% in Canada since 2008. Going to be really rich when the Chinese start going head to head with the Hutterites for the good stuff. It’s really only relevant from where your sitting. I got a little slice of commercial & residential on the west side of Van. Therefore it’s not white flight-it’s cashin in.
#50 Goldie
The same farmland is available to Canadians to buy. Sadly, they would rather sink a million into a rotting bung, rather than own a productive piece of the Canadian economy. No worries though, they’ll have lots of time to post on blogs about how the government is selling off Canada.
4 Property Accountant – is this the first 10 years they are in business or the first ten years you hold it. I would like more information can you recommend a link / website?
Just a personal observation…
If sell/option/derivate-ize…(or really desperate “REIT “) majority of internal organs… worth more than any house/condo East of Rockies…
@ #26 Shawn on 09.08.13 at 7:24 pm
WHERE TO FIND A $ MILLION FOR THE MARGIN ACCOUNT
We all view the world from our own perspective.
From my perspective, I wonder who would have money in a taxable margin account?
By the time people max out tax advantaged plans like TFSA, RRSP and RESP how many would have anything left for a fully taxed investment account?
—————————–
I would argue that having $1M outside of a RRSP should be far more common than $1M inside.
The reason: RRSPs are limited by the contribution room, and the age/earned income of the person.
I’m sure there are plenty Canadians who have seen RE holdings jump significantly over the past 10-15 years. If any of these people sold out, they could easily have $1M outside of vehicles like a RRSP.
Another example would be entrepreneurs, who may choose to put cash back into the business vs. investing in things like RRSPs… then when they eventually sell the business, they have $1M+ outside of these accounts. Some of these business owners would choose to pay themselves low salaries to avoid the tax hit (and therefore not build up RRSP room).
Re: #12 ILoveCharts on 09.08.13 at 5:02 pm
With most of their money in stocks they’ll both be working until they day they die. They’ll learn an invaluable lesson very soon… a fool and their money are soon parted. Anyone long stocks and not hedged will be all but wiped out.
Looking for HAM: Toronto agents go online to reach Chinese buyers http://tgam.ca/Du6H via @globeandmail
Hi Garth,
We are an average family, two children, the wife and I.
We earn about 650,000$ / year and have about 430,000$ in a balanced portfolio.
Thinking about buying a small starter house at around 1,200,000$ in GTA. Should we wait ? My dad could help me with the mortage but I worry about interest rates increase…
Where are all these doubters coming from, saying that in 2013 a return of 7% isn’t reachable.
I’ve got a run-of-the-mill (but not [email protected]) financial planner, and she’s got my money invested in a mix of pretty safe stuff.
A sane blend of stock and bond exposure, a sane blend of Canada, US, International, bit of small cap etc.
I’m up 7.4% in 8 months, year to date. With any luck we’ll do 10% on the year.
But I know one person who is more self directed than me – is up 16% year to date.
It has been a fine year.
#79 Devore — “Really? Show me a REIT, heck, show my ANYthing, that pays its distributions as 100% return of capital, and is actually legitimate and not a scam to separate you from your money. Why would you give someone $100,000,000, just to have it returned to you piecemeal over 10 years?”
http://www.artisreit.com/investor-link/tax-information/
A REIT’s profit is after depreciation, a non-cash expense, just like a private landlord’s. Now as we know, most well maintained buildings typically go UP in value, but that isn’t how tax accounting works. So they mail you your distribution, call it ‘return of capital’ and you reduce your ACB. When you sell, your capital gains (hopefully) are higher because of the reduced ACB. Taxed at 1/2 the marginal rate. And until you sell, no income to be taxed at all, so if you’re an old fart you are still eligible for OAS. And the wage slaves pay for it all…
#78 Gary M
I don’t see Garth as a fund manager. When asked for portfolio construction advice here, he almost always says that it depends on your individual situation. So if he’s running money for 200 different people whose goals range from long term growth all the way through capital preservation with income, what good would a composite portfolio rate of return do?
#82 dividends
We are an average family. That was funny, thanks for the laugh.
#85 meslippery — “Work make $ 50 000.00 pay $16 000.00 tax it wouldn,t be fair to take your Friday after tax pay and have it taxed again when you buy gas […] beer […] smokes”
The government in its wisdom has created two ways for you to pay for your retirement. RRSP/TFSA/Dividend tax credit, or GST, sin taxes and live on OAS.
Don’t know what’s the best news, last months real estate sales figures or the monthly jobs numbers. Good work Canada!
#17 Donald Trump
This is true. China is the perfect
“New World Order” blend of slavery, corporate-govt control, and eugenics (1-child). All the goals of…the 4th time’s the charm, eh.
Gitting ‘er done rite this time.
Bonus question: why were more bombs than used in WW2 dropped on Laos, Cambodia and today-communist Vietnam. (My shirts are made there.)
http://www.amazon.ca/On-China-Henry-Kissinger/dp/0670064653
“In his new book on China, Henry Kissinger turns for the first time at book-length to the country he has known intimately for decades, and whose modern relations with the West he helped shape. Drawing on historical records as well as his conversations with Chinese leaders over the past forty years, Kissinger examines how China has approached diplomacy, strategy, and negotiation throughout its history, and reflects on the consequences for the 21st-century world.”
Try Berkshire Hathaway for almost double the 7% – year in year out.
@#94
You are not an average family with 650K/Y but you could be with a 65K if you forget about the $1.3M house
Wait?!?! What??! Isnt this blog all about the dangers of real estate and now we are supposed to buy REITS?!? When the housing market collapses as you suggest will happen, REITS will get annihilated…. And those owners of said product will be running for the door…
So pick your side. You can’t have it both ways.. Or are we just supposed to buy US Real Estate and REITS?
There is no connection between well-run institutional REITs and the value of a bungalow in Edmonton. Learn, then type. Less embarrassing. — Garth
Didn’t Canada used to GIVE farmland to foreigners?
That’s how my ancestors came to the Ottawa Valley along with a free pass to immigrate.
To be honest it hasn’t even gone up that much in relative value, perhaps even lost ground . (No pun intended)
Maybe we should be happy that people are interested in using the Saskabush land for something.
RE: # 4, RE: #80, DEVORE
Ok buddy. You want me to show it to you because you dont’ know what GOOGLE is?
Dundee REIT (D.UN) – 43.9 % Return of Capital
http://www.dundeereit.com/InvestInfo-Tax.html
Canadian Apartments REIT (CAR.UN) – 64.72% ROC
http://phx.corporate-ir.net/phoenix.zhtml?c=124438&p=irol-tax
Partners REIT (PAR.UN) – 100% ROC
http://www.partnersreit.com/
All data as of 2012 distributions history. Satisfied ?
#142 Maxx Sept 5th – on exchange between bigrider and sciencemonkey with regard to diplomacy.
If you think that was good ,you should see the communications between myself and Nonno Nicola. All done with a language barrier as an additional challenge and no translator to boot ! LOL
Now what were you saying about residential construction in Canada?
http://www.bnn.ca/News/2013/9/9/July-building-permits-hit-record-housing-tame.aspx
#16 Amazon Girl.
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MKULTRA saw Smoking Man at Fresh Market Square Buffet yesterday in Harrah’s Casino. He was face down in the crab salad bowl. Have a good flight home on your Gulfstream jet, “if you remember” by then the drugs should wear off. BTW The NSA says thanks for investing in our Casinos.
26 Shawn on 09.08.13 at 7:24 pm
It’s strange to me that you wonder who would have investments in a non-registered account because it’s so hard to max out, and then say “realistically if a family has kids you are looking at people with family incomes of maybe $200k per year.” Very few families earn $200K per year. Ones who do, and who can not save enough to max out RRSP ($44,000), TFSA ($11,000), and RESPs ($2,500 per child, for about twelve years), have really big problems. If they have pension contributions as you say, then they should be rapidly accumulating holdings in taxable accounts, because their RRSP contributions are adjusted.
The people who could benefit from the dividend tax credit and holding dividend-paying instruments in taxable accounts are actually very close to the average: middle income Canadians who will not be in a lower tax bracket in retirement (and might experience higher taxation rates in their same bracket in the future), and who therefore do not use RRSPs. RRSPs are less than useless to them (even though that is the only option they hear about): they should max out their TFSAs, but probably need to save more than that, and taking advantage of the ways dividends are taxed makes perfect sense.
You need new friends: it’s inexcusable to earn $200K and not save. The advice here is very applicable to Canadians earning, say, $40-$60K a year. They have to fund their own retirement, so a 10% savings rate is not good enough. If they need to save 20%, let’s say there’s $5,000 a year left over after maxing out the TFSA. Understanding how the proceeds of that will be taxed could mean the difference between negative real returns, or setting yourself up for a nice retirement, tax-free.
#42: “The amount mentioned was $1 million. Those making under $35k or probably under $100k need not apply.”
Huh? Someone making “under $100k” can’t save $1 million? Why not? $10,000 every year for 30, at 8%, means a million and a quarter. You can’t save 10%?
Your other posts are also laced with negativity and defeatism. Most people can not benefit from your “perspective.”
That’s a story about residents of Chinese origin investing in Manitoba farmland. I think they’re called ‘Canadians.’ — Garth
========================
Whats the problem ?
A perogy stuffed with Chow Mein is called an egg roll.
rosie “moving forward” in the knowledge that, “this won’t end well” #82 dividends
We are an average family. That was funny, thanks for the laugh.
***************
And how about #94 John Smith? :-)
Off topic, but do any bloggers have experience with Implicity credit union in Manitoba-
https://www.implicity.ca/
@#83 Dividend
“…Looking to buy a home, but worried about interest rates rising……”
“….Looking at something in the $800,000 starter range and using the $350,000 as a down payment….”
++++++++++++++++++++++++++++++++++++
Wow!
Apparently your reading/ comprehension skills are in the low percentile rankings.
Have you been paying attention to ANYTHING on this blog for the past year?
@#78 Smoking Nam
You want a Gulf Stream G650?
Got $65,000,000.00 ?
A further comment — I had a quick scan and note that most of the bank issues lately are NON-CUMULATIVE. Ben Graham said in the 1930’s:
“The drawback of not being able to compel the payment of dividends on preferred stocks generally is almost matched by the handicap in the case of noncumulative issues of not being able to receive in the future the dividends withheld in the past. This latter arrangement is so patently inequitable that new security buyers (who will stand for almost anything) object to noncumulative issues, and for many years new offerings of straight preferred stocks have almost invariably had the cumulative feature.”(Graham, Security Analysis, p.197)
I wouldn’t want to invest in bank preferred shares where the dividend could be clipped. If you play the videotape (e.g. Bank of America, WAMU, etc) I wouldn’t trust the banks to ever make up these missed payments on preferred shares.
You can’t get something for nothing, and non-cumulative preferreds should be avoided, even in banks, in my opinion.
The access to the dividend tax credit is attractive, but not at the risk of ceased or pared payments. Given the amount of business that has been borrowed (npi) forward by the banks in the retail mortgage sectors, there is a lot of risk in the canadian bank sector that these non-cumulative payments could very well be missed at some point in the future. The value of the preferred capital stock would _plummet_ if the coupon is pared/eliminated, even moreso with upward movement in BOC interest rates.
If I am wrong, I would genuinely love to be corrected and learn something new today.
You are wrong. No Canadian bank dividend has ever been withheld. — Garth
#YouCan’tMakeUpThisS**t
“Experts interested in goat trading said the animal had unique features and is a rare breed.”
[AlArabiya] – No kidding: Goat sells for $3 million in Saudi Arabia
http://english.alarabiya.net/en/variety/2013/09/09/Goat-goes-on-sale-for-3Million-in-Saudi-.html
BonusZen: http://youtu.be/DWbU0x0NVh0
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#101 TurnerNation on 09.09.13 at 8:37 am
Rather long and convoluted tale re 20th Century geo-politically and of course economics wags the entire dog.
“All wars are bankers wars”.
Most wars , if you peel back the layers, are attacks against the Middle Class…and especially nationhood. THE last thing banksters want is a nation that can stand alone without tentacles of a foreign central bank.
WW1 and WW2 ..upon a lot of reading…can be summarized as an agenda means to create a little sh*t disturbing country in occupied Palestine.
The Cold War was a fraud, a charade. The West greatly assisted USSR in setting up industry there. Japan had surrendered , but the US was intent on testing the (2) H bombs.
This the freaked out the entire world,a major psy-opp and the military industrial complex took off via this boogeyman threat.
Around this time…China went Communist..and again, the usual suspects supported Mao in the late 1940’s.
Late 1950’s and 1960’s more psy-opps….the cultural revolutions and space program , a black hole where a lot of $$$ went.
Now, the 1970’s get interesting. Nixon made overtures to China as a staged slap in face to Russia. Lots of turmoil..OPEC…Inflation was rampant . Japan was rising as an economic power.
Within 20 years, big bad Russia collapsed. In fact, the collapse of Russia was due to currency manipulation again, via banksters, not via war. This is documented.
FTA were being promoted. Ross Perot was warning of the big $ucking sound. Hong Kong , which again was created after the Opium Wars, was being given back to Communist China.
As I said earlier, since the Opium wars, the banksters ran China, Mao was their puppett
IMHO, Hong Kong was strategically planned to be a seed, a base for neo – con expansion into mainland (still COMMUNIST) China…or the true manifestation of the charade. Japan was used, then chewed up and spat out. The plan always was for China to be a Godzilla for global economic turmoil.
If one understands that the (i)Communist system and the (ii) Neo Cons(super rich) are sides of the same coin….and the middle class is the target, then one has a grasp of what the hell is really going on.
The middle class is an anomaly in history, a threat to those elites that run the world.
As it stands, the final bankster wars of bloody conflict are in the Middle East, while they wage a stealth fiscal coup elsewhere.
#107 Big Rider
“If you think that was good ,you should see the communications between myself and Nonno Nicola.”
Dat is correcto Bigga Ridero. You gotta remembera dat I only gotta da grada 5 but I hava more moneta den da smart young fellas wid da universita educaziones. Remember two tings caro figlio. One is da green belta she maka sure dat da houses in Toronto keep going uppa, uppa and uppa. Second ting is dis. When a marcato, real estata or any other typa of marcato supposed to go down according to da so called expertos like da mangia caka who writa dis blog, Garth Turnero, and she no go down den dat marcato is a very strong marcato. I gotta go now, I am making vino and pomodora salza. You gotta come over one of dese days and visit Nonno. You gonna lika my vino!
CrowdedElevator Post 115:
I have been reading the blog for 2 years and the time is now. Hopefully we can get a raise to around $350,000 income per year so we can buy that starter detached home. It will be tight on $275,000 per year.
@fisherman, post #87:
I don’t know about the Hutterites in the west, but the Mennonites in Ontario know a good opportunity when they see one. Some have been selling their over priced land in Midwestern Ontario and buying much cheaper land in the North Shore area (Bruce Mines, Thessalon, Blind River) east of Sault Ste. Marie.
Imagine that, these old fashioned people who don’t live in the modern world understand better the idea of buy low, sell high better than many who are in the modern world!
There was a good article in The Globe recently on this topic of expensive farm land. In the long haul, prices WILL go up as population increases and it becomes more of a challenge than ever before feeding all those people. However prices have probably gotten too far ahead of themselves, driven by low extremely interest rates. Did I hear someone say the “B” word?
#116 CrowdedElevatorfartz on 09.09.13 at 11:22 am
It’s my buddy’s, a time share plane, want to sub out his contact,
Obviously not going to do it with out kicking the tires.
Sweet ride all the sane
#123 Doug London
You are so right. The only thing that you don’t mention is that the soft commodity price boom is over for now. Land prices keep rising; but don’t reflect the actual profit/loss is corn, soybeans etc. Down 40% in one year. All because of low interest rates, just like housing.
http://www.bloomberg.com/quote/ZCA:CN/chart
# 80 Devore
HNY, HGO Etf’s pay 100% return of capital. No tax until you sell. You are welcome.
#118 Nemesis – knew this woman in Vermont who bred the top line of Russian wolfhound or the Borzoi, as negotiated a deal for a reject with a small tooth flaw if you will for a friend of mine. They were a breeding line of top prize winners worldwide. A good puppy would sell for $25,000 on the world market for a future dog show or breeding line for the new owner.
#117 Vince — “A further comment — I had a quick scan and note that most of the bank issues lately are NON-CUMULATIVE.”
That’s a Basel thing.
http://en.wikipedia.org/wiki/Tier_1_capital
for anybody still watching tsla i think this may be it.
POP
still time to buy puts.
#121 Nonno Nicola to Bigrider.
Ima gonna comaover to trya you vino, but nonno, no drinka to mucha de vino yourself nonno per piacere.
It clouding your judgement ona dis realastata marcato.
The fog of da vino making miss the mountain ofa da mortgage debt ina dis city.
#78 Smoking Man – there was a time that had that opportunity for a private jet to pick me up, and two others for a week in Vegas as the guest of the Old Man aka Morris Shenker who controlled the Dunes in the mid 1980’s. We were all being picked up in Toronto with all expenses paid, but chickened out at the last minute when I discovered that Morris used to be Jimmy Hoffa’s personal attorney. :) Not my gig!
Garth,
I am an average single guy, in my late twenties. Like most guys in their late 20s, in my oh 4th year of work, I earn just shy of a quarter-mil a year.
I’d love to buy my own home. A high rise home of course, and am looking at a nice one bedroom plus den near work. It is listed for $699k. I am less bearish on RE than many on this blog, but I am not so naive that I think this property will appreciate to over $1mil within the time I want to live there.
Do you think i should buy? I think it is a reasonable purchase, even if this is near the top of the marke, because within five years, when I am in my early thirties, I should be making between $400 and 500k per year.
Please advise.
#122CrowdedElevator Post 115:
I have been reading the blog for 2 years and the time is now. Hopefully we can get a raise to around $350,000 income per year so we can buy that starter detached home. It will be tight on $275,000 per year.
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Hilarious response. I have to agree. Although I thought that there were just a smaller minority in this income bracket… I have recently been thinking that everyone I know makes at least this amount of money. Times are seriously nuts. People must not be declaring income left and right if $275K gets you into a starter home. Starter being $800K
B.C. condo owners want better municipal oversight of temporary occupancy permits
The Terrane townhouse development on the corner of Scott Road and 68th Avenue was granted a temporary occupancy permit upon completion in 2006, allowing buyers to move in. However, the 191-unit complex was never issued a permanent occupancy permit and, because of that, banks have refused mortgages to prospective homeowners.
“I feel like a hostage in my home,” says Lisa Helin of her inability to sell her townhouse.
“We had the perfect buyer. The purchasers had 40-per-cent down, which is above and beyond to make it secure — and the bank turned it down,” she said.
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Now yous can't leave.
#32 Realtor Strategy
Glad to have been of some help. Hopefully a few other Buyers do the same thing now that they’ve seen how well it works.
@#122 Dividend.
“…..the time is now…..”
++++++++++++++++++++++++++++++++++++
The time is now to buy a house for $800,000.00 ?
Ummm, not according to Garth.
Please refer to my previous post re: reading and comprehension
#129
…
Rats. I bought 10 shares last week…TSLA looks pretty bad today.
@ #94 John Smith on 09.09.13 at 6:55 am
Hi Garth,
We are an average family, two children, the wife and I.
We earn about 650,000$ / year and have about 430,000$ in a balanced portfolio.
Thinking about buying a small starter house at around 1,200,000$ in GTA. Should we wait ? My dad could help me with the mortage but I worry about interest rates increase…
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I’m still confused: is this sarcasm?
If not – you don’t need this blog (with $650k/year), and you need to save more (should be saving $300k-400k a year, not have that saved as the total for your lifetime).
#130 Big Rider
“Ima gonna comaover to trya you vino, but nonno, no drinka to mucha de vino yourself nonno per piacere.
It clouding your judgement ona dis realastata marcato.”
Ah, dat is good to heara Big Ridero. We gonna hava some good laughs and you gonna lova my vino. Nonna, she maka da best pasta you ever tasta and da salsa, she freshly made from da giardino. Now on da real estate, figlio miglio, mortgage debito is no gonna trumpa da belt verde that surrounda Toronto. Garth Turnerno he keepa a saying since 08 dat da debts, they gonna maka da real estate marcato go downa in Toronto but what happened? She keep a going uppa, uppa and uppa. You no gonna see a bigga correction in da GTA. I betta you a whole a whole damigiana of Nonno’s delizion vino on dis. I even throw in a case of home made salsa to show you how confidento I am. For all da mangia caka’s on dis blog including dat guy with da barba, Garth Turnerno, this is what a damigiana is:
http://it.wikipedia.org/wiki/Damigiana
@ Dividend
Garth’s comment from waaaaay back on Sept.6th “Longevitis’.
And I quote.
“Meanwhile housing numbers swell as newbies scramble to deploy their fat 2.79% mortgages buying houses whose prices will never be greater……”
Focus on the last seven words in that statement.
There will be a test on comprehension sometime in the future.
In life always remember in Real Estate, car purchases, buy one get one free, buy now and pay 24 months later, or mortgages rates too good to be true, perhaps a change in a credit card, or whatever the shell game in life – THERE IS NO FREE LUNCH. Always watch out for the carrot and the con, as they are out there to fool you into a bargain that might become costly in the end.
This all reminds me of Caesar and his gang of fools, as they blow more smoke than any of the above. Ask yourself one question for the next Federal election. In all these years what has been accomplished? I say pay attention, and nothing material has been done to advance Canada, but they brag about this and that which is all BS; all deception so wake-up. They have done nothing for the betterment of Canada, as all is deception.
Ya know Nonno , dis obsession with a da house ina dis country nota very good.
I hear, only througha da grapevine mind you ,dat having granite anda da stainless steel ina da house not enough now in Woodbridgea, da Hollywood of Canada.
Now in your house in a da Woodbridga, the Hollywood ofa da Canada, you have to hava disa toileto called ‘Toto’ for maka da caca. Dis toilet ,she washa and dry your culo for you after you maka caca. No needa to get your hands dirty anymore.
Des same people, do a caca ina da bush, as a kids, and cleana der culo with a da rock somatime, whena de live back ina da old country, ona da farm.
You a go figure.
I’m certainly not a tax Lawyer but I’ve had some experience with ‘return of capital’ (ROC) as it applies in Canada. ROC is not exactly tax-free. It is essentially ‘potential capital gain’ that is not taxed until the year it is actually realized.
Let’s use a round number example. You have $1000 in an investment trust. You are paid $100 ROC in each the first three years (nice!). That money is not taxed in any of those years.
Then, in the fourth year you decide to sell. Your ‘adjusted cost base’ ACB for the asset is the original cost of the asset minus all returns of capital:
1000 – (3 * 100) = $700
As far as Revenue Canada is concerned you only paid $700 for the asset. Let’s say you sold your trust for exactly what you paid for it: $1000. You must then subtract the ACB from the proceeds and treat the difference as capital gain. Of course, capital gain is only 50% exposed so you would be taxed on $150 in that year.
If your investment had fallen to $700 in the year you sold your capital gain would be zero and the tax owing would also be zero. Of course, neither would you have made any money.
My illustrative example is rather trivial. Often, the calculation of ACB is not so trivial. Especially if the trust is added to, or partially sold over the years. If you have an investment advisor who does all your buying and selling via his back office (financial institution) you will hopefully receive proper ACB numbers from them at tax time.
It has been my experience that some institutions are better than others at getting this right. But virtually all of then make a disclaimer that they are not responsible for the accuracy of ACB information if push comes to shove with the Canada Revenue Agency. As always, the onus is squarely on the taxpayer to file accurate information.
#139 Nonno -on the greenbelt.
Maybe ‘youssse guys’ who talka about da greenbelt isa right. I find a very interesting dat a our mangia caka host ,he never once comment ona da greenbelt as an issue for maka da price ofa da house go uppa Uppa!
But, more troubling to me Nonno ,is the whole crowd of people who tinka dat da house price she can only go Uppa Uppa.
What do they say abouta da heard mentalitta ?
@COW MAN, post #125:
Yes, I agree. What we’ve seen with the price of soft commodities (or any commodities for that matter) could happen to farm land prices. When you go into Tim Horton’s and hear people bellyaching about how land prices have dropped (actually normalized to long term trend) that’s when it will be time to buy. Sound familiar? It seems the more things change the more they stay the same.
#134 Canadian Watchdog on 09.09.13 at 1:32 pm
QUOTE:
The Terrane townhouse development on the corner of Scott Road and 68th Avenue was granted a temporary occupancy permit upon completion in 2006, allowing buyers to move in. However, the 191-unit complex was never issued a permanent occupancy permit and, because of that, banks have refused mortgages to prospective homeowners.
“I feel like a hostage in my home,” says Lisa Helin of her inability to sell her townhouse.
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(Try not to say any Surrey jokes…..)
However, as stated again…multi – family/strata is THE best in Stalin-esque living !
If its not one thing it is another….legal ,fiscal, structural, etc. etc.
Since BC had its’ first stratas almost 50 years ago….one would expect they would have finished with the growing pains and have a fine- tuned process but instead seems to need a bigger enema each year.
No doubt that there will be another big wave of condo problems as time goes on.
#144 Doug in London – there is no way that the Amish are selling out to move into the north, as the soil and climate will not grow crops like before, so look for another equation, as know them well. They have big money, and came to the TD Centre during the 1970’s for trading on the market to invest, and the Nuns as well from big Orders especially from Hamilton.
“There is no connection between well-run institutional REITs and the value of a bungalow in Edmonton. Learn, then type. Less embarrassing. — Garth”
Fair on some points… My scarcastic alarmist tone was intended and you could say it is a step too far…
fact – in a US style Kaboom REITS will be destroyed. Trading on a liquid market means it will be hard to resist hitting the bid. If you are buying REITs and the “Kaboom” hits you will feel pain… More than an owner of a bungalow in Edmonton?
Do REITS offer more protection because of their reliance on commercial anchor tenants and the like? Yes they do but pushing someone to invest in REITs while preaching the dangers of real estate is very contradictory… Perhaps a growth portfolio of other stocks is a step too far to recommend here… I get it… trying to prove 7% is attainable… but I bet we can find a calculation where someone can attain 7% yield on a privately held real estate investment.
Safety in diversifcation does exist but the same could be said for any large enterprise… framing is key…
Residential and commercial real estate are separate asset classes. You have no point. — Garth
I am seeing a lot of garbage posted on this blog. Some italian mocking posters are spreading on this blog something that probably abounds in their brains.
The caca word http://en.wiktionary.org/wiki/caca is freely posted like nobody is censoring this blog.
It looks like frustrated realtors have decided the vent their mental bowels here.
It’s over. — Garth
#143 Bigga Rider
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Why are there a bunch of yahoos coming on this site and bragging about how much they make?
My daddy always told me “People who tell you how much they make are always broke”
Give it up morons
#130 Old Man on 09.09.13 at 1:16 pm
#78 Smoking Man – there was a time that had that opportunity for a private jet to pick me up, and two others for a week in Vegas as the guest of the Old Man aka Morris Shenker who controlled the Dunes in the mid 1980′s. We were all being picked up in Toronto with all expenses paid, but chickened out at the last minute when I discovered that Morris used to be Jimmy Hoffa’s personal attorney. :) Not my gig!
Old Man you were very wise. It was alleged that Shenker controlled the massive $700 million Teamsters Union Pension Fund and its investments. We have relatives in San Diego whom knew this guy well. Best decision you ever made not to board that jet. “I’m gonna make you an offer that you can’t refuse.” Old man you must be in the same age group as myself to remember Shenker. His days ended in a hospital bed due to pneumonia not cement shoes.
The recommended investments look good when the monetary system is sound and leveraging is reasonable.
But with global debt to gdp ratios, 440 trillion in interest rate derivatives alone and the USA dollar being increasingly dumped by nations globally, the recommended investments are merely digital in street name of large systemically integrated institutions ready for vaporization via bail in.
No bail-in here, dude. — Garth
BBRY on its way again?
Did the Blackberry thing last year with a group of old guy investors. Jumped in @7.19 in September of 2012. Watched it crash to 6.31 in October (Bad feeling about this), then my buddy used to work there at BBRY said wait just wait. I Chicken$hitted out at 17.35 in February while my friends all stayed in. I took my profit and ran with it to safe solid investments. My same buddy said don’t get out you will regret it. Just touched base with all of them again and he says its on a roll again to head up. I goggled the charts and its getting that Bat wings look as Smoking Man would say. Can’t jump in now it looks to uncertain with buyouts looming. I think I’ll pass on this one. Then again my old guys investment fund group are all full retired and quite wealthy to boot. I am semi-retired still running a company but not quite done with working. Will keep investing wisely.
I own some IPL on the TSE and was wondering if someone can provide input.
Looks like the stock jumped 12% today (perhaps on one transaction) then dropped back for a gain of 3%. Did someone just have some fat fingers when putting in their order or is there another explanation?
No bail-in here, dude. — Garth
Yup, it’s different here….
You bet. No bail-ins. — Garth
# 148 either Garth is away or something is wrong.
LMAO I can’t stop laughing long enough at your response to post.
I’m not a realtor.
Laughter is the best medicine. You made my day !!
Dividend income is good but buying bank stocks at historic highs, when their earnings are fuelled by record cheap money and consumer debt is questionable at best. It won’t feel too good when bank earnings miss expectations and the value of the stocks plunges.
Dividend income doesn’t make capital losses ok. Plus, the dividends are more likely to be cut than grow from this point forwards.
In addition, you have soon to be broke, desparate and foolish provincial governments that will increase their efforts to confiscate our wealth. Particularly on the “rich”. Which in Quebec is anyone making over $60,000. I don’t know if they specifically raised the dividend tax but in Communist Manitoba, the NDP jacked up the tax rates for eligible dividends across all brackets.
I love this comment: “But most people aren’t contrarian. They grab stuff at its zenith and come here to bitch when it’s on sale. So predictable. ”
Interesting how it never applies to things like gold, silver, mining shares, base metals, and oil and gas producers. No money to be made there. Garth said so.
Preferred shares in banks are not the same as common shares. Your comment is therefore off base. As for gold, its wild swings, zero income and steep decline since 2011 make it wholly unsuitable for most investors. — Garth
M .Poloz, Carney and Flaherthy , sorry to report, that their is, right now, no hard, medium or soft landing, in the real estate biz.
As a matter of fact, their is no landing at all.
It fly’s like a eagle!
#24 That’s the problem with the world today. Too many idiots believe what Syria, Iran, Russia and China claim.
If you want to do that, hey, there’s four countries you can move to. You even have a choice.
#70 Wally
Making a good return on your investments aren’t entirely based on bond yield & stock growth! It just seems that way at times.
The DOW & S&P 500 are up roughly 20% in the last year. And REITS have been on fire since 2009.
Did you take some profit? Probably not, most don’t. Taking some gains from ‘risky’ to ‘safer'(undervalued) is a free lunch. All the while enjoying the yield and the effect of compounding, like thats not important?
Re-balancing is tough, enough to make one drink. Good Luck!
Full frontal pic. Of the Smoking Man
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http://www.bloomberg.com/news/2013-09-06/canadian-job-creation-triples-forecasts-in-august.html
First, mortgage brokers, then, realtors, finally, crane operators.
Say, wasn’t August a great month for real estate?
#41 Lee
Yeah, seen those ETF’s. You can create your own balanced scenario with say some XWD & bond ETF’s like CBO or CLF as an example. No biggy!
As you contribute to your portfolio, this provides you with the opportunity to rebalance. When it grows into a monster, start taking profit!
http://ca.ishares.com/product_info/fund/overview/XWD.htm
Hi Garth,
Thank-you for your blog, you are a national treasure. My question is life insurance vs savings. I wonder if i am wasting my $. Is it wiser for me to put the $500 per month i spend on life insurance, into tfsa? me 51, husband 53 (he is a smoker). we would get $300,000 if the other dies before 85.
We are just recovering from bankruptcy and have very little savings. So i thought insurance would at least provide the other with a base for retirement should one of us die in the next 20 years (the least amount of time it is likely to take to save $300,000).
Invest the money and take his smokes away. — Garth
#156 Big Rider: “I’m not a realtor. Laughter is the best medicine. You made my day !!”
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Well, you didn’t make mine.
“Residential and commercial real estate are separate asset classes. You have no point. — Garth”
US Dow Jones REIT index chart 2008… seems to be pretty strongly correlated to me. And the kicker. 2008 was a period of falling yields and increased stimulus
Everything fell in 2008. Temporarily. Luckily, it’s not coming back. — Garth
@Old Man, post #146:
Have you actually been to the North Shore area of Ontario lately? There actually ARE Mennonites or Amish (or whatever you call them) settling there. I don’t recall seeing them in the area in the 1990’s, it’s a new occurrence. I don’t know how suitable the soil is for agriculture (although there has been farming there for at least 100 years) but with the climate warming the growing season is bound to get longer. Strange how they understand this idea (as well as buy low, sell high) better than we do in the modern world.
Still don’t believe me? Take a drive there, or fly to Sault Ste. Marie (I think you can get good air fares with Porter), rent a car, and go sightseeing around the area.
[…] No portfolio yields the same every twelve months. Last year, for example, a balanced portfolio (60% equity index, 40% bond index) delivered 9.3%. But the year before it was 0%. The year before that, about 8.5%. And so on. The ten-year average is just shy of 7%. If you’re saving for retirement, it strikes me that a good annualized return is more important than yearly swings. Continue reading. […]