Why life’s unfair

RICH 2 modified

Beth owns a paid-off house worth a little over a million and rents it out for four grand a month. “Not bad, right?” she said in a note to me, proving that real estate is a great investment. “I’m making a solid 4% on this investment, which is way better than the bank will pay.”

True enough, even though she forgets about the property tax, insurance and maintenance costs. But Beth and her squeeze also have jobs, with her salary being a little over $70,000. That makes her marginal tax rate 33%, so she takes home $55,000. Then, of course, the rental money must be added, which boosts her income closer to $120,000. The take-home is now $82,000, and Beth’s marginal tax rate is 43.4%.

Whoops. Now the $1 million property is actually delivering only $27,000 to her (after tax), which is a 2.7% return, or about 1% after inflation. Not so hot.

If Beth had invested the $1 million in stocks, or ETFs or investment real estate that increased in value by 4% over a year, then sold, she’d have a $40,000 capital gain – about the same as the rental income. But, in contrast, she’d get to keep almost $35,000 of that money after paying capital gains tax.

How people are taxed is a mystery to most of them. No wonder. It’s byzantine.

When I was asked to be the dude in charge of Canada’s taxation system, I thought I should read the Income Tax Act. So I did. It took me two months and was utterly staggering. By the time I’d finished, new tax rulings and interpretation bulletins had rendered dozens of sections obsolete. This is why God created accountants, stripping their DNA of personalities and hormonal distractions, so they can devote their lives to dross.

However, as you contemplate doing your income tax return this year, know these few things about how you are milked.

Income: What you make largely determines your tax rate. In BC a single woman earning $50,000 pays $8,600 in tax and has a marginal rate of 29%. In fact, most middle-class people are taxed at a combined federal-provincial rate in the 30% range. If you earn $100,000, you keep about three-quarters of that and have a tax rate of 38%. If you make $500,000 in Ontario your tax rate is 46.4%, but in Alberta, it’s 39%. Nobody in this country pays half their income in tax – that is a myth. Just feels like it.

Rent: As Beth knows, if you lease out a house or a condo which you own personally (not through a corporation), then all the rent is added to your other income, and you’re taxed accordingly on the whole thing. Of course, you can deduct from taxable income allowable costs, like mortgage interest and fees. Rental income, like money you make working, generates allowable RRSP room, so that’s one consolation.

Interest: As with rent, you’re taxed as if you earned this money working. No break because it is investment-generated, and all interest is added to your other income. But interest will not earn you any RRSP room and with a multi-year GIC you actually have to pay tax on interest you have not received. That’s why GICs should go into a TFSA or an RRSP or, better still, into oblivion.

Capital gains: Can’t tell you how many times I’ve encountered people who don’t sell things which have gone up in value, even though they need the cash, because they fear paying capital gains tax. That’s dumb, because this is one tax which is a relative bargain.

A capital gain is the increase in the market price of something like a stock or an apartment building. It’s never taxed until it is actually realized (like a capital loss, which can be carried forward forever and used to reduce gains). Half the profit is yours to keep, no questions asked. The other half is taxed at your marginal rate. That means the Ontario dude making $500,000 will pay tax of only 23% when he sells off a stock portfolio with a million-dollar gain. Meanwhile poor Beth is forking over far more of her rent.

Dividends: Sweet deal here, too. The idea is that the dividends companies pay you (though preferred shares, for example) are from after-tax corporate income, so you shouldn’t have to pay full freight when you receive them. Thus, investors can collect a dividend tax credit which provides about the same impact as the treatment of capital gains. The bottom line is investors pay half the tax that employees do.

In fact, you can earn about $50,000 a year in dividends (if this is your only source of income) and pay zero tax.

Return of capital: Another way tax can be avoided. Some REITs, for example, pay investors a regular distribution as ‘return of capital’ which technically means they are getting a little hunk of their own money back – so there’s no tax on the income received. The downside? The adjusted cost base of the REIT is altered each time, which means when you sell the asset and collect your capital gain, it will be larger and attract more tax (unless you sell the REIT at a loss, and pay no tax).

People who retire with big portfolios can also get a monthly cheque in the form of ‘return of capital’ which means they earn lifetime income which attracts no tax. The only tax they pay is on gains the portfolios actually realized, usually in the form of dividends and capital gains.

The bottom line: the rich pay less. And they don’t rent out condos.

188 comments ↓

#1 TurnerNation on 03.04.14 at 8:17 pm

Geez just sat down and here we go again. Blog dogs read to tear to pieces and gum the next post.

Hewers of wood? Time for an IMF loan yet?

http://www.bloomberg.com/news/2014-03-04/grain-boom-busts-canada-farmers-as-rail-lags-commodities.html

Consider Dennis Gallant, 76. He has yet to collect one cent on the wheat, canola, barley and oats harvested last year on the 1,000-acre farm in Warren, Manitoba, he has run since 1960. He has called the local grain elevator every 10 days since October. The answer since is always the same. No thanks. We’re full.

“This is crazy,” said Gallant, who normally has unloaded half his crop by March. The delays mean C$200,000 ($180,000) in lost revenue as prices slumped, and Gallant says he needs a C$100,000 loan to cover expenses. “We’re bloody strapped.”

Four months after the harvest, the crush of new supply is overwhelming a rail system needed to get grain to export depots across Canada, the world’s top canola and oat supplier and No. 2 shipper of wheat

#2 heineken on 03.04.14 at 8:25 pm

Garth
you make a very convincing case as to why I should invest into etfs, stocks and bonds, dividends……
I cant argue with your point of view.

But your viewpoints on inflation, the economy rebounding and your personal distaste for gold or silver makes me wonder about your creditability as a financial advisor.

Gold and silver good for gamblers, not investors. — Garth

#3 Fox on 03.04.14 at 8:30 pm

Nobody gives much, if any, consideration to tax planning or tax avoidance (not to be confused with tax evasion) and this is a huge financial mistake.

Garth, this advice, along with the rest of your recurring commentary, will be largely ignored. All people want to know is when they should buy the overpriced house they lust over. The rest is superfluous.

#4 Jimmy on 03.04.14 at 8:30 pm

Garth is Great

Did you genuflect? — Garth

#5 Trojan House on 03.04.14 at 8:39 pm

For most of us, income is finite so while we may only pay 29% or 39% or 46.4% (may as well be 50%) in marginal tax, add 13% in most provinces for HST (15% in Quebec), and for those that own the dreaded real estate, property taxes. Not to mention inflation which is a way for the government to tax us without us even knowing!

Remember, there are only two things you can’t escape: Death and Taxes.

#6 Human Capital on 03.04.14 at 8:40 pm

Would you recommend that an investor who does not need current income and is holding prefs as a diversifier hold the prefs in an RRSP? The math works out favourably even with the loss of the DTC, since the distributions on pre-tax income compound tax free.

Perhaps the availability of current income should it become necessary is enough to keep the prefs in a non-reg account, even though it nets less in the end?

#7 saskatoon on 03.04.14 at 8:40 pm

wait…so property tax and mortgage interest are deductible?

i thought that stuff only happened in america?

or, is this deal only good for rental property?

what if you rent your primary residence out…while vacationing for a year or two?

do i get to deduct this stuff then?

but do i then lose “tax exemption status” when i sell?

byzantine, like you say.

#8 WTF(Where's Terry Fudge) on 03.04.14 at 8:42 pm

Great post tonight Garth !

#9 Smoking Man's Old Man on 03.04.14 at 8:44 pm

I get the “life isn’t fair” thing. What I don’t get is why so many seem hell bent on making sure to perpetuate this in their own lives by continually making crappy financial decisions.

#10 Paully on 03.04.14 at 8:51 pm

Nobody pays half of their income on income tax; however, add in HST, excise taxes on fuel, booze, smokes, etc., property taxes, vehicle licence fees, registration, other municipal levies like garbage and water and then you can easily get to half or more of your income lost to taxes!

#11 not 1st on 03.04.14 at 8:53 pm

So what i I have $50k in salary and $50k in dividends? What would I pay in total tax?

#12 UHNWI on 03.04.14 at 8:55 pm

Well written and well said, Garth. You just explained the holy grail of building insane wealth in easy to understand language. I walked the same path and went from zero to hero and now living the dream. Everyone should aspire to do the same and Garth just unlocked the secret to success and gave you the keys to the millionaire club at no charge.

#13 pitfield on 03.04.14 at 8:55 pm

HFD double the short on banks. Do we all agree that the banks will be hit in this mortgage crisis or just the CMHC?

#14 Warren Buffet on 03.04.14 at 8:55 pm

So in other words the working middle class that have bulk of their wealth in real estate is screwed royally.

#15 JO on 03.04.14 at 8:56 pm

Great post Garth. I am on the front lines of investing and lending and see this all the time. Those who own rentals and claim 25-30 k/ yr and pay well under $ 3 k in income tax/ year. Those who run small businesses such as consultants from home who earn large incomes but pay very little as a % of their “real” income. The joke is on us salaried and high paid skilled workers who pay high effective tax rates.
No one needs to pay higher tax rates. The top 10% pay the bulk of the tax dollars. Many rich do however need to pay a higher effective tax rate.
Define all income as income ( cap gains, dividends, rental, etc) and eliminate 99% of all credits and deductions and then tax the total income at a lower rate with the first 40-50 k free of income tax. Slowly increase HST after this and shred the joke of a tax code we have. And eliminate one third to one half of the CRA.

Our tax code is grossly inefficient and very unjust. The gov’t can earn more tax dollars and reduce tax rates. The main issue is that spending grows too much. No amount of tax will ever be enough. Must get cost of government down.
JO

#16 Mrs Riverview on 03.04.14 at 8:57 pm

This summary of income tax in Canada should be taught in every high school.

#17 WTF(Where's Terry Fudge) on 03.04.14 at 9:00 pm

#9 Smoking Man
Who cares what happens the “lost”. I know too many that don’t want to listen to sound advice . I’ve stopped offering , look at us ,I’m 57& wife( 56) and have been retired for 2 years.

#18 Uh Oh Canada on 03.04.14 at 9:02 pm

To legally avoid paying taxes- that is one of my favourite topics. I used to work for the government and what I’ve learned is that there is a loophole for almost anything. Gotta love those loopholes.

#19 hohoho on 03.04.14 at 9:03 pm

> … Not to mention inflation which is a way for the government to tax us without us even knowing! …

inflation is a gentle reminder that you, as a portion of the global economy, is continuously shrinking, unless you keep upgrading your skills and improve yourself.

#20 Real Estate asking price vs Municipal Property Assessment on 03.04.14 at 9:03 pm

Any thoughts on comparing real estate listings to property assessments? This is public information by the way.

Example from Hamilton:
House for sale $259,900
2014 Assessment $193,000

#21 straight six on 03.04.14 at 9:08 pm

investment advice..
re recent Marketplace story about Canada’s wild west of financial advisors.
I know a person with a degree in anthropology who became a FA with a bank.. an anthropomorphic connection?

His financial credentials.. He took a 15 week online course and is now pushing financial products!
I guess that makes him an investmewnt ekspert.

Now you know where not to get advice. — Garth

#22 espressobob on 03.04.14 at 9:08 pm

#2 heineken

The thing with ETF’s & a diversified portfolio is that you already own the ‘producers’ and ‘miners’ of many commodities.

Just an example below,

http://ca.ishares.com/product_info/fund/holdings/XIU.htm

#23 Jimmy on 03.04.14 at 9:11 pm

Did you genuflect? — Garth

http://youtu.be/0ccKPSVQcFk

#24 sheane wallace on 03.04.14 at 9:18 pm

Gold and silver good for gamblers, not investors. — Garth
————————————-
Funny, I thought it it good for jewelry we well.
Everything my grandma left was real estate and pair of silver earrings/one of them broken…

Unfortunately Garth hates both real estate, silver and gold.

I might stick with my grandma.

#25 pitfield on 03.04.14 at 9:20 pm

For you guys that don’t understand ETFs, they will go down as the market goes down. Play like the big boys have inverse ETFs in your portfolio as well and create yourself a hedge. It can’t go up forever or can it? I wish I could find an inverse ETF for housing in Canada. Anybody know of one??

#26 waiting on 03.04.14 at 9:21 pm

awesome post!

#27 sheane wallace on 03.04.14 at 9:23 pm

It turns out the Chinese are the biggest gamblers by buying gold, bigger then the ‘western civilized’ hedge funds, derivatives, QE, blatant FX, Libor, Precious metals markets manipulation, banks with no losing trading days in a year.

Oh, I forgot, it is the Russian’s fault.

#28 Chickenlittle on 03.04.14 at 9:24 pm

Wow! This was more like a Couch Potato blog entry. Most of this went right over my head, which is not necessarily a bad thing! These are all things that the average Canadian should know, but sadly doesn’t. I sure don’t…

I think most people find this just too complicated. Being a landlord is much easier albeit less lucrative. A little education would go a long way to improve most peoples view on “income property”.

Thank you for this post!

#29 hohoho on 03.04.14 at 9:24 pm

< … This summary of income tax in Canada should be taught in every high school. …

don't we have an app for that?

#30 hohoho on 03.04.14 at 9:28 pm

> … I might stick with my grandma. …

I suspect you might stick with her even more if she left you some Berkshire shares instead?

#31 Ford Prefect on 03.04.14 at 9:31 pm

I have gratuitously given the almost identical advice on taxation to a number of people over the years. They actively, loudly, grumpily do not want to hear about it. Period. End of story.

#32 UHNWI on 03.04.14 at 9:32 pm

#15 Joe there is no joke on highly skilled workers.
The system is more than fair, it taxes the safest income more such as salaried work, meaning there is zero risk. You exchange your time for money. Investment income by contrast does involve risk so people that choose this method to earn income and put money in harm’s way do rightfully get rewarded in the form of lower tax rate.

#33 Chickenlittle on 03.04.14 at 9:33 pm

#21 straight six:

I watched that too….

2 guys that used to come to my restaurant tried recruiting me to work for Primerica. No thanks!

#34 sheane wallace on 03.04.14 at 9:33 pm

I suspect you might stick with her even more if she left you some Berkshire shares instead?
————————
At least she did not have to leave me some Nortel shares, I got some myself :(

#35 Waterloo Resident on 03.04.14 at 9:35 pm

Beth boasts about how her house is making her a solid 4% on her investment. That’s sad, really sad. My investments in UPRO (S&P 500 ETF) went up 4.24% just today ALONE.

It’s really SWEET to be earning 82% per year. Either that or just Dumb Luck (probably the second one.)

UPRO and SPXL = both 3 times the S&P 500.

(spxu, sdow = shorting the indexes by 3 times = fast way to lose money.)

#36 sheane wallace on 03.04.14 at 9:39 pm

Garth, on the topic:
If you ever decide to run in elections I am contributing 1 k to the cause.

The same if you decide to run internet radio or broadcast/news program.

#37 Mark on 03.04.14 at 9:43 pm

“Do we all agree that the banks will be hit in this mortgage crisis or just the CMHC?”

Just the CMHC. Banks will do fine, actually extremely well as they hold the equivalent of money-good GoC bonds which are great in a deflationary environment. CAD$ will go much higher. BoC will be forced to lower interest rates and engage in US-style QE.

Big risk in Canada’s banks is political. The (voting) public may not take kindly to the banks receiving billions of insurance payouts from the CMHC while taxes are being raised to pay for it. Especially as house prices continue to fall.

#38 Dan from Calgary on 03.04.14 at 9:44 pm

Curious, in TFSA’s are there any such benefits that you mention in this post? Or does the F’s generous tax free status mean that up or down, there is no tax involvement?

BTW, I heard you quoted at work last Friday. Now I am not the only unpopular renter in my office…

#39 Mark on 03.04.14 at 9:45 pm

“Any thoughts on comparing real estate listings to property assessments? ”

Property assessments are based on formulas applied across entire neighbourhoods and make no significant reference to interior conditions, structural integrity, etc., of an individual property. Accordingly they should be looked at as being completely divorced from fair market value of an individual property.

For instance, two identical (at the time of construction) properties next door to each other. One may have been not updated on the interior since the 60s. The other may have had a complete interior reno performed, new carpets, new HVAC, etc. They will assess identically.

#40 pitfield on 03.04.14 at 9:47 pm

#31 Waterloo Resident on 03.04.14 at 9:35 pm
Beth boasts about how her house is making her a solid 4% on her investment. That’s sad, really sad. My investments in UPRO (S&P 500 ETF) went up 4.24% just today ALONE.

It’s really SWEET to be earning 82% per year. Either that or just Dumb Luck (probably the second one.)

UPRO and SPXL = both 3 times the S&P 500.

(spxu, sdow = shorting the indexes by 3 times = fast way to lose money.)
___________________________________________
Hey Waterloo Resident (Did You loose or win the war) I’m looking to go short the housing market but cant find an inverse ETF for housing. The ones you show are bulls not bears. What’s the difference whether you loose money on a house or an ETF it is a loss. I’m in it to make money.

#41 b on 03.04.14 at 9:47 pm

“dross” – another stellar word I had to look up. I learn more reading this blog than I did in a year of undergrad. (Okay, I was at York.)

Great piece tonight about a crucial topic.
Thanks!

#42 Freedom First on 03.04.14 at 9:50 pm

Nicely explained Garth, and for free too!

I like diversified assets, income streams, cash, cash flow, and 0 debt. There is people out there who have been thinking like this since they were very young. I know some. They don’t talk to people who are financially insane, unless asked for advice, as they know most won’t listen, and also, they do not want everyone to know they are the millionaire next door. Garth knows a lot of people like that, and still, freely tries to help people who are financially illiterate. Blessedly, there is people who listen and learn from him. Right on Garth!

#43 DocInWaitingRoom on 03.04.14 at 9:51 pm

Love renting. Its like owning best location property minus extra costs, headaches and stress. Enjoying the sun outside Canada! man people are nuts buying in the tundra and shackling themselves to shoveling snow

#44 Christopher Mewhort, EA on 03.04.14 at 9:53 pm

With a few minutes between tax clients, I checked the size of the tax laws. Canada: Carswell’s Income Tax Act 2013 is 2568 pages, small print. US: CCH’s Tax Code Book is 5,368 pages, small print. You can count yourselves lucky.

#45 Mark on 03.04.14 at 9:54 pm

“Play like the big boys have inverse ETFs in your portfolio as well and create yourself a hedge.”

Inverse ETFs are horrible in a portfolio, especially as ‘hedges’. Mathematically, if you’re long an asset, and hedged with a short position, your returns are effectively the risk free rate minus all the fees and spreads you’re paying.

My advice, pick a thesis, long or short, stocks or bonds, and stick with it. If you really need to hedge, get yourself a futures account and buy (or sell) the minis or even the full contracts if your account is large enough. The inverse and the leveraged ETFs are only good for their managers.

#46 Mike T. on 03.04.14 at 9:54 pm

Good post, but may I request a slight edit?

‘ Nobody in this country pays half their income in tax’

should say ‘Nobody in this country pays half their income in income tax.’

add in HST or GST and PST, gas tax, smoke tax, booze tax, tax tax……we probably pay half our incomes in tax. Maybe more?

#47 Ben on 03.04.14 at 9:57 pm

Life is unfair – some people win, some people loose.

But let’s not forget that the vast majority of young people are loosing with high house prices. Yes renting is better value but it’s still pulled too high by high house prices. Many olds, like the millionaire by dint of house price inflation, fill their boots off the back of the young.

That was useless. — Garth

#48 Not in Fantasy Land on 03.04.14 at 9:58 pm

Vancouver February Detached home prices hit another RECORD HIGH!!!!!!!

When will this blog ever discuss the close to a million people and counting that have come under the Foreign Students and Temporary Workers programs? Oh, tuition and living expenses for students run into about $40-50,000 per year. its not the middle class students that are coming.

#49 toronto landlord on 03.04.14 at 10:06 pm

now you really are confusing everyone with all sorts of math and investment thinking.

but im not so impressed by your “dog and pony” show.
I rolled the dice many years ago.
my first house I put down $10,000 to buy at 250k in 1990.
sold it for 840k 2 years ago.

how this math 840-250= 590 k .
all this money for a $10000 initial investment.
Had to pay rent somewhere, why not pay yourself.
Plus huge leverage power and tax deductions along the way.

Numbers don’t lie.

That was 24 years ago. Irrelevant. — Garth

#50 Mark on 03.04.14 at 10:06 pm

“Vancouver February Detached home prices hit another RECORD HIGH!!!!!!!”

Likely only through funny math and/or the statistical mirage of only the high end units moving. Which is exactly what we’ve seen throughout most of Canada.

Same was seen in the prelude to the widely acknowledged California crash.

And tuition isn’t that much for international students. They live awfully frugally when they’re here as well.

#51 Katie on 03.04.14 at 10:11 pm

The story is missing how much she paid for the house, as the compound annual growth of the value of that house factors into the return.

If minimal or no further growth is expected and it’s all she owns in terms of assets, she should sell the house for the points you raise.

#52 Old Man on 03.04.14 at 10:13 pm

#1 TurnerNation – The farmers say its connected to throwing the wheat board under the bus, and was that not a Caesar decree for the betterment of Canada? I heard someone talking about Caesar and this is what they had to say. Caesar is but a modern day Pharoah with a simple trick at play; to exist in disguise. One day the veil will be removed and there won’t be a rock for him to hide under anymore.

#53 will on 03.04.14 at 10:16 pm

I get it. Great. Thanx again Garth. No genuflection here. But thanx all the same.

#54 Smoking Man on 03.04.14 at 10:17 pm

Why is life un fair?

That’s all a matter of perception and managing expectation.

Never in my life have I felt even close to being wronged. Blamed anyone other than temporary bad luck that will turn, and it always does.

That’s the mind of any successful person.

Learn little grasshoppers.

#55 VanDamnCouver on 03.04.14 at 10:21 pm

“If you make $500,000 in Ontario your tax rate is 46.4%, but in Alberta, it’s 39%. Nobody in this country pays half their income in tax – that is a myth. Just feels like it.”

You’re forgetting the fact that the majority of net income we earn goes towards expenditures that are in term TAXED (i.e. food, gas, groceries, the internet bill so we can read this pathetic blog).

So unless we’re making a high six figure salary, (which most Canadians aren’t) then we are in fact paying close, if not more, than 50% in taxes on our money.

#56 Derc on 03.04.14 at 10:36 pm

You’re right Garth – the rich do pay less tax, and they do not rent out condos…they rent out apartment buildings or shopping malls.

When Nicholson was apologizing today (I’m sorry…so sorry – thanks Patsy) was the dude over his right shoulder tweeting on his bberry?…or was he sleeping? His head never left his hand when everyone applauded Patsy…er…i mean nicholson.

#57 omg on 03.04.14 at 10:36 pm

25 Pitfield – “It can’t go up forever can it”?

Actually the US equities market has gone-up forever – you just need a long-term perspective. Over the long-run its gone up 7 and 8 percent annually including dividends.

And unfortunately, there is nothing close to an inverse ETF for housing in Canada.

13 Pitfield – “will Canadian banks be hard hit by the impending housing correction?”

My Rule of Thumb – Canadian banks never lose money – they just increase fees.

#58 Westcdn on 03.04.14 at 10:47 pm

I read a rumor that Yanukovych (disposed leader of Ukraine) died of a heart attack Monday evening – I can only hope it is true. Putin will have to recognize a new election is necessary as he does have a puppet to wave to justify an invasion. He can always change the time of death to suit his purpose. It is not often I want someone to die. If true, expect more market exuberance with stocks and real estate for a few more months. It’s about time one of the few (rich) dies for the benefit of the many.
Over and out.

#59 Aggregator on 03.04.14 at 10:54 pm

#49 Mark

“Vancouver February Detached home prices hit another RECORD HIGH!!!!!!!”

And so did money laundering in Hong Kong.

Money laundering huge in Hong Kong and Macau: crime survey

Money laundering is more prevalent in Hong Kong and Macau than in most parts of the world, with rates far above the global average, according to an economic crime survey by PwC.

A poll by the accounting firm found 37 per cent of companies in Hong Kong and Macau, mainly banks and casinos, had experienced money laundering in the past two years. That compared with a global average of 11 per cent, the Asia-Pacific average of 11 per cent, Singapore's 5 per cent and mainland China's 4 per cent. Chart (#1 Asset Misappropriation)

#60 Blacksheep on 03.04.14 at 10:58 pm

That’s two Garth.

#61 Toronto_CA on 03.04.14 at 11:01 pm

“This is why God created accountants, stripping their DNA of personalities and hormonal distractions, so they can devote their lives to dross.”

Ouch! That hurt.

#62 OlderbutWiser on 03.04.14 at 11:14 pm

The reason why dividends paid by Canadian corporations are taxed at a lower rate has nothing to do with risk. It is simply because dividends are not deductible in computing the taxable income of the corporation – i.e. they are already after-tax earnings. If they were then taxed in the individuals hands at 46%, the effective rate of tax on the actual earnings would be astronomical.

#63 Shawn on 03.04.14 at 11:19 pm

Life’s Not Fair…

One big reason that the rich get richer and a fact that under pins much of the financial system is the following.

The majority of the population is willing to promise to re-pay the value of two “hamburgers” or houses or cars over a long period of time in order to get one hamburger or house or car right now.

A minority of the population (known as the rich in their later years) live below their means in their young adult years and therefore are able to lend money to the majority (the spenders who live above their means today). By forgoing one hamburger today, they can often have two in ten years, four in 20 years, eight in 30 years, 16 in forty years, 32 in fifty years (using 7% interest rate)

The savers enjoy the extra hamburgers, houses and cars today but then later claim the system is unfair.

It has ever been thus.

#64 Son of Ponzi on 03.04.14 at 11:19 pm

Apple is sitting on 160 billion of cash.
No wonder Putin is angry.
http://ca.finance.yahoo.com/news/apple-cfo-oppenheimer-retire-end-september-135142824–sector.html;_ylc=X3oDMTEwdDlpZzMxBF9TAzExODQ1NTAwMDgEcG9zAzEEc2VjA211c3RyZWFk

#65 OlderbutWiser on 03.04.14 at 11:22 pm

Garth should mention that the preferential Canadian tax rate is only available for dividends paid by Canadian corporations. Dividends paid by foreign corporations are subject to the same rate of tax as salary or interest income.

As a result, it is a good idea to put your US stock investments in your RRSP (no 15% withholding tax due to Treaty), put your UK stock investments in your TFSA (no withholding tax on dividends paid by UK companies) and put your Canadian shares in your taxable account to get the lower tax rate. Just remember Garth’s advice regarding the size of your portfolio if you are going to invest directly in shares.

#66 FTP - First Time Poster on 03.04.14 at 11:39 pm

Nobody in this country pays half their income in tax – that is a myth. – Garth

Did I read this right? So I pay 39% in income tax, then pay taxes and levies on flights, purchases, property, etc and you think I still have half? I doubt it.

#67 Andrew Woburn on 03.04.14 at 11:57 pm

#20 Real Estate asking price vs Municipal Property Assessment on 03.04.14 at 9:03 pm

Any thoughts on comparing real estate listings to property assessments? This is public information by the way.
=============================

I completely agree with the comments by #39 Mark. In my view assessments can be a starting point in a stable market but lose all relevance in one that is rapidly changing.

For instance we sold a nasty but well located teardown in Vancouver in the frothy year 2011. The foundations were crumbling and it was uninhabitable. The next door neighbour had a well maintained house of identical vintage. Our lots were assessed at an equal $800K and but our house was assessed at $130K, $10K higher than the other, because of a bigger floor space. The neighbour listed at $1,180 and sold for $1,130 two months later. We waited for her to get out of the way and then listed for $1,280 and finally got full price in December when there were few comparable properties on the market. So, no, assessments don’t mean much.
Their function is to allocate municipal property taxes between homeowners, not to be a “Blue Book” for buyers.

This is especially important to know when prices are declining because vendors will cling to assessments like a life raft. This is likely what’s happening in Victoria.

By the way, in BC, public information also includes a searchable database of actual selling prices, so this is much more relevant. Not sure about other jurisdictions.

#68 Freebird on 03.04.14 at 11:58 pm

Great post Garth.

This proves what I’ve been saying to friends about the show Income Property (aka CIBC infomercial) and it’s glamorizing real estate investment while glossing over/ excluding real life key financial details. While I’m sure the host Scott McGilvray (CIBCs new sales person) makes good money on HIS income property; he’s a professional with years of experience and now an income well supplemented by HGTV and his partnership with CIBC.

Many are sorely lacking common sense and or just plain misguided/ ill informed and only seeing/ hearing what they want. Get you’re head out of the HGTV channel, do lots of research and run the real numbers (no not the ones given by CIBC’s reps on daytime talk shows). It’s not rocket science. Sadly, the ones who need it most will either not read blogs like this one and or will ignore the insight it gives. So be it. Buy a house to have more stuff, then buy a bigger house to fill with more stuff and impress others with your leveraged to the eyeballs image of wealth. Yeah, that makes sense, huh Garth?

#69 KommyKim on 03.04.14 at 11:58 pm

RE: #11 not 1st on 03.04.14 at 8:53 pm
So what i I have $50k in salary and $50k in dividends? What would I pay in total tax?

Be the 1st on this blog to run your tax scenario through this basic tax calculator:
http://www.taxtips.ca/calculators/basic/basic-tax-calculator.htm
It’s doesn’t do CPP, EI, etc but will give you a general idea….

And here’s one for when you retire:
http://www.taxtips.ca/calculators/invest/investment-income-tax-calculator.htm

#70 Piccaso on 03.05.14 at 12:04 am

The moral of the story…

Have your rentals mortgaged to the max

#71 Freebird on 03.05.14 at 12:07 am

@#28 chicken little – I think most people find this just too complicated. Being a landlord is much easier albeit less lucrative. A little education would go a long way to improve most peoples view on “income property.”

Couldn’t agree more. This is why I always encourage others who ask for advice to educate themselves. The internet has most if what you need to learn the basics, if not more, and requires only time and patience. Do this before you ask the experts so you can ask the right questions and not be swayed by a sales job or BS. A little education is spot on – hint, this doesn’t include HGTV and most talk shows whose purpose is to sell.

#72 Freebird on 03.05.14 at 12:14 am

FYI… LOOSE and LOSE are not the same. Maybe it’s autocorrect but lately I’ve seen a lot comments on blog sites in general using the word loose when it should be LOSE.

No snark, just observation. God knows I’ve made many typos with my iPad and it’s wonderful autocorrect feature.

#73 Coho on 03.05.14 at 12:22 am

Westdcn #58,

If true, maybe Yanukovych was ‘droned’.

It’s amazing to hear Western leaders and these people in think tanks and the MSM laud the overthrow of an elected sitting government. Hasn’t anyone heard of voting someone else in next time? TPTB can’t wait I guess, hence coup d’état all over the place. The West has a higher moral authority and are champions of democracy and democratic principles. Uh huh.

These USA talking heads say the Ukrainian people were just in overthrowing their gov’t in order to secure one that serves them better. Hello! The citizens of most countries would then be justified in overthrowing their governments. Hell, the American congress has less than 10% approval rating. Tack on the Patriot Act, TSA groping children and seniors at airports, the NDAA which can round up people without due process, NSA spying on innocent citizens. Wall Street bail out, too big to fails…

Cripes, the feds suspect everyone as being a potential criminal/terrorist and are so paranoid they’re afraid of their own shadow. Yet, anarchists in foreign countries are cheered on to overthrow democratically elected governments.

I wonder how nice and understanding Obama and Harper would be about protesters, militants, etc marching on Ottawa and Washington DC demanding their overthrow. Hell, why wait till 2016, let’s burn the capital to the ground now. Is that what they’d like in their own back yard? Is that what they’d like happen to them? Of course not, but they like it happening in other nations as long as they get their puppet governments. Talk about flippin double standards and hypocrisy.

Do we really think it was a relative handful of disgruntled citizens that was responsible for the overthrow? A grass roots uprising? Do we know what it takes to overthrow a government? I don’t but I do know that Joe and Mary front porch holding pitchforks and screaming at the top of their lungs outside congress or our parliament buildings wouldn’t cut it. Not even close. No, these people had help from people in high places.

Do we know anything about the group in power now? These have been described as radical ultra-right wing neo nazis who want a ‘clean Ukraine’. Sound familiar? All compliments of NATO knocking on Russia’s door. Putin has been demonized by Western propaganda as ‘misbehaving’ and being the aggressor, but he is only reacting to this affront as any other leader would do to protect his country. Let’s be honest and fair about this.

It’s all about factions wanting to rule the world—the same ones that brought us the world wars. It’s a power struggle. Who’s going to win? It won’t be the people. TPTB are far above governments. They’re way up the ladder of power. They’ve been successful in pitting America against Russia. If they have it their way, these two will do all the dirty work by destroying each other and a new world power will arise which will make Russia and the USA look like Shirley Temple.

I wish people would get educated about the world we live in. Let’s get our collective heads out of our stainless steel ovens! And please, no beating our heads on our nice granite countertops.

#74 DR on 03.05.14 at 12:39 am

That was 24 years ago. Irrelevant. — Garth

that’s his point though, buy and hold worked well.

Plus it can be repeated today. There is always undervalued real estate out there.

#75 Longterm on 03.05.14 at 1:06 am

Just closed a sale on a Calgary duplex for $35k over asking after a bidding war. Got one more house to sell in a few weeks and then only the primary residence, currently under construction, remains.

This new cash will join everything else invested in ETFs and some long held positions in some very hefty dividend payers with a cost base of that puts some of them in 8-12% yield range. Non-taxed / minimally taxed income off investments is now approaching $25,000 and compounding annually.

I’m 43 and have only worked full time in my life for eleven years, maximum income ever was about $90,000 for only one year, plus I had huge student loans. This was done through disciplined saving and investing and a bit of luck, while having a damn good time and travelling to 43 countries.

When I hit $40k per annum in dividends that will be time to call it a day on the work thing and get on with more important and interesting projects.

Anyone can do it. Just focus. Drop your material possession obsession and get with the life experience program. Set up regular, automatic savings that go into a TFSA and any over flow into another suitable trading account and buy, buy, buy quality dividend payers via ETFs on a regular schedule and reinvest all dividends automatically. Keep at it and ignore the noise and naysayers. When the market drops buy more.

Barring the end of the world as we know it [a slim but distinct possibility worth hedging for with good land and better neighbours] by mathematical certainty you WILL become rich. Those who won’t are those who won’t get up tomorrow and take action, and for them there is little hope.

#76 ValleyBoy on 03.05.14 at 1:09 am

So we need Corporations to start paying employees in dividends. And the investors in taxable earnings. Problem solved!

#77 Son of Ponzi on 03.05.14 at 1:19 am

The Village Whisperer in Vancouver brings to you the following:
http://whispersfromtheedgeoftherainforest.blogspot.ca/

#78 Steven on 03.05.14 at 1:26 am

Beth must think all people are made of money.
She is mistaken.

#79 Steven on 03.05.14 at 1:31 am

Most employer only want to pay people minimum wage and it doesn’t rise much from there. What good is a job if you can’t afford to live near it? Gas and food money?

#80 Chaddywack on 03.05.14 at 1:39 am

Wow earning $50,000 in dividend income DOES yield $0 in tax and depending on your province of residence it can be even more.

For fun I put I made $70,000 in eligible dividends in my tax software and paid a grand total of $181 in income tax.

I mean I knew Canadian dividend income was tax advantaged, but wow…….didn’t realize the extent until I actually saw the numbers in black and white in front of my face.

#81 Happy Renting on 03.05.14 at 1:41 am

“I thought I should read the Income Tax Act. So I did. It took me two months and was utterly staggering.”

Oh man. Was that 6-8 hours a day, every day, or 2-3 hours per night?

Once you were done, did you think it was a directionless mishmash (like a house designed by 10 people who never consulted each other), or did the Tax Act mostly get it right in terms of social equity, incentives/disincentives for behaviour, etc.?

#82 KommyKim on 03.05.14 at 2:01 am

RE: #35 Waterloo Resident on 03.04.14 at 9:35 pm
That’s sad, really sad. My investments in UPRO (S&P 500 ETF) went up 4.24% just today ALONE.

You are aware that if the S&P 500 goes from 1800 to 1900 and then back to 1800, then your UPRO will lose money?
I suggest that anyone thinking of holding a leveraged ETF for any length of time read this:

http://www.sec.gov/investor/pubs/leveragedetfs-alert.htm

#83 Tony on 03.05.14 at 2:33 am

The Canadian government is the biggest huckster of them all. Why do you think they offer you a dividend tax credit? To lure you into losing all your money. The Canadian coffers will be well short in the future years and the lure will backfire on them. I’d say you’re even better off buying lottery tickets.

#84 Andrew Woburn on 03.05.14 at 2:50 am

I thought I should read the Income Tax Act. So I did.
===================================

No wonder Garth didn’t last in government. Independent thinking will do that. In my days as a
supervisor at Revenue Canada, it was a given that the Minister knew nothing about taxation and would be
shuffled to another cabinet job before s/he could become dangerous.

Christopher Mewhort, EA noted above that the Income Tax Act 2013 now runs to some 2568 pages in small
print. When the income tax regime was “simplified” in 1971, I don’t think it was bigger than about 500 pages. The act it replaced was tiny. My older team members had it mostly memorized.

So why does taxation today take so much law? The old act was more principle-based like the ten commandments. Thou shalt. Thou shalt not. The revised act is rules-based like so many demented modern bureaucratic initiatives. It is based a lawyer’s conceit that legal wording can be drafted in a precise, mathematical form so that no misunderstanding can occur.

One effect is to strip the field auditor of discretion and common sense. The other effect is to create massive opportunities for people who can devise interpretations of the wording which drive between the rules. These cracks are papered over with new rules which leave new spaces in turn. Sorcerer’s apprentices at Finance plug the new holes and the game rolls on. They finally had to draft an old-style principle which says screw the rules, if we don’t like it, you can’t do it.

I have also been a manager at a national accounting firm and an independent designer of really abusive tax shelters. In my opinion our corporate income tax regime is an expensive waste of time if the purpose is to raise revenue. A transaction tax like HST is a brilliantly effective way of raising cash without tears. Corporation tax is really a political tool. First it calms the loony left who see corporations as cigar-chomping ogres who can be punished by forcing them to pay tax. Actually they just build it into their pricing like a hidden HST. It provides endless work for the sort of professionals who support political parties. It provides a media-proof cover for special deals for connected corporations by way of incomprehensible little lines in the Budget that only mean something to the right people. It keeps the rich happy by providing obscure and expensive vehicles for tax avoidance or deferral. It is utterly anti-democratic, anti-competitive and irrationally distorts corporate decision-making. Any true conservative government would dump it.

Oh, and one last thing. Do you honestly believe your typical CRA auditor takes his 2,500 page Act home with him at weekends so he can study up on the stuff that brings high priced tax lawyers to tears? One law, coast to coast? Yeah, right.

#85 Spectacle on 03.05.14 at 2:52 am

Thanks Garth.

“Whoops. Now the $1 million property is actually delivering only $27,000 to her (after tax), which is a 2.7% return, or about 1% after inflation. Not so hot.”

Very , very well said Sir!

I see this exact error repeated by property investor/clients; reality of their rental investments significantly lower than they anticipate, as you explained it here. (remember All the extra costs)

Excellently phrased.

#86 Exurban on 03.05.14 at 4:21 am

“When will this blog ever discuss the close to a million people and counting that have come under the Foreign Students and Temporary Workers programs?”

I’d like to have that discussion too, but no point singling out this blog. The quasi-entirety of Canadian media resolutely ignores the 600,000+ people arriving every year. Yes, do the numbers — 265,000 immigrants (source), close to 250,000 “temporary foreign workers” (source), 80,000 international students (source) and you know there have got to be some illegals.

But of course that wouldn’t be driving urban real estate prices up or wages down. Only ignorant boobs and rubes phoning in to talk radio would think that.

#87 World According To Garth on 03.05.14 at 4:22 am

The question you need to ask is where is all this 50% plus of taxes going? Because it ain’t healthcare and education as every politician spews. If it were, then why do we rank at the bottom of nearly every OECD ranking?

http://www.ctvnews.ca/health/canada-ranked-last-among-oecd-countries-in-health-care-wait-times-1.1647061

Your tax dollars at work indeed.

#88 Happy Renting on 03.05.14 at 4:59 am

#3 Fox on 03.04.14 at 8:30 pm

Suspect you are right, lament that it is so.

———————————————————
#16 Mrs Riverview on 03.04.14 at 8:57 pm

Yes, agreed. Easy to understand and well laid out. High school might be too late, though, children learn from their parents, and starting from a young age.

———————————————————
#21 straight six on 03.04.14 at 9:08 pm

That five-week online course qualifies you to sell mutual funds. That’s it. Next time you see that guy ask him what he scored on the multiple guess (err, multiple choice) exams. :)

———————————————————
#31 Ford Prefect on 03.04.14 at 9:31 pm

The rich really are different than the rest of us. They’re open to learning (more efficient ways to create wealth), aren’t scared of assets you can’t necessarily hold in your hand (i.e. non RE), and understand that a smaller number on your tax bill really does make a difference (even if you aren’t holding actual $100 bills in your hand.)

———————————————————
#38 Dan from Calgary on 03.04.14 at 9:44 pm

I believe registered accounts don’t allow capital losses. (Anyone – please correct me if I’m wrong.)
———————————————————
#41 b on 03.04.14 at 9:47 pm
Re: York – LOL.
———————————————————
#61 Toronto_CA on 03.04.14 at 11:01 pm

Take heart, I know a couple of fun CAs. :)

#89 Deb on 03.05.14 at 5:26 am

I can recall a friend of mine wondering if I was fluent in each of Canada’s three official languages?
Three, I asked?
Yes, three, she replied: English, French and the Income Tax Act.
Thanks for the translation, Garth.

#90 My Life is a Pile of Shit on 03.05.14 at 5:53 am

I understand Beth’s POV. We are so far into this bull market that memory of the last bear market’s carnage has faded. People today talk only of gains, not losses. But even XRE (TSX REIT index ETF) was cut in half by that bear market. People like Beth make avoiding the stock market one of the pillars of financial mgmt. To understand that logic, you have to accept that XRE may be cut in half yet again in the next bear market, and you won’t know when or if it will recover in your lifetime. Stock market returns are notoriously inconsistent and unpredictable. People write about last year’s stock market return as if the party will never end. But history indicates that the party will always end, and usually in tears.

A year ago, XRE had only a 3.7% yield (today the yield is 4.8%, but only after a price drop). Corporate long bonds can have 5% yield; however, long bonds are no inflation hedge, but her property can be. Securities have no cost of ownership like maintenance fees and municipal taxes, but her rental property can’t go to zero, and stocks and bonds can.

Ultimately, I think Beth is wrong, because if her rent is only 4% of property cost (should be 6%), she paid too much.

#91 >>> Enterprise on 03.05.14 at 8:57 am

CoHo:

Great post but everybody with brain knows that except media war mongers…

Why did all of sudden everybody jumped on Ukrainian side against Russia ( Putin ), including Garth the Great?

Every single one of them want to get Russian build pipelines so that they tax Russian oil and gas !

Can you imagine Garth’s portfolio performance after that dream event? WOW

WOW !!!!

West don’t care about people over there. They will not build them hospitals roads water supply for FREE !

What scares me is German madness that crossed the lines lately with thir comments!
These “demonstrators ” had neo-fashist who are in fact grand kids of Black Shirt Ukrainian Nazis who where sending Jews to Poland during second WW.

I those trains where some distant relatives of my family too !

There you go !

#92 Daisy Mae on 03.05.14 at 9:14 am

#4 Jimmy: “Garth is Great”

Did you genuflect? — Garth

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

As my partner and I were leaving our volunteer shift at KGH, one of the other volunteers snapped to attention and saluted us…and I thought THAT was great. ;-)

#93 DodgedBullet on 03.05.14 at 9:28 am

Hey Garth,

Do DRIPs circumvent the capital gains tax?

Thanks, Ben.

#94 Daisy Mae on 03.05.14 at 9:49 am

#39 Mark: “Accordingly they should be looked at as being completely divorced from fair market value of an individual property.”

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

Assessments are tied to the mill rate each municipality determines they’ll need to cover costs, each year. They fluctuate constantly. And are no real indication of property values and asking prices, as such.

#95 RVP on 03.05.14 at 9:51 am

@ Mark # 50

“And tuition isn’t that much for international students. They live awfully frugally when they’re here as well.”

International students live frugally!!! OMG I almost urinated myself laughing!!! That was a good one. You should check out the cars at the UBC student parking lot. Sure looks like frugal living to me!

#96 Dupcheck on 03.05.14 at 10:03 am

Thanks for this good post Garth, I learned a lot from it.

#97 Shawn on 03.05.14 at 10:08 am

Buffett and Real Estate

Berkshire Hathaway owns very little real estate

Buffett of course owns his own house and a Summer place in California both bought over 50 years ago. Also he personally owns a farm and some New York real estate as revealed in his latest annual letter.

Berkshire itself owns little real estate. Berkshire has rented its head office space in the same office tower for 50 years.

Berkshire owns some retail businesses (See’s candies, Ben Bridge Jewelers, Helzberg’s, Borsheims, the Benjamin Moore locations and some furniture stores.) Most of that is in rented space, although Nebraska Furniture Mart owns its real estate.

Berkshire, I believe, owns not a single REIT.

Buffett did say that if he could manage then he would have bought up thousands of houses at the low prices of a couple of years ago.

So, Buffett is not a big believer in owning rental real estate it seems. (An exception to that favor was made if real estate prices plunged) Basically he finds better returns elsewhere.

He does however believe in owning his own home and said a few years ago that it had not been a great investment but nevertheless as a home it was one of his best purchases ever. I don’t think he would condone selling their house just to grab a capital gain. He would say buy for the long-term if possible.

#98 amazon girl on 03.05.14 at 10:21 am

Thanks , Garth for the post
I would like to get champagen,turn off the lights and read your post over and over again…but…
Life’s unfair and I have to work now

#99 Castaway on 03.05.14 at 10:31 am

Nobody in this country pays half their income in tax – that is a myth. Just feels like it. – Garth

Your spot on Gartho. Once you add in GST, PST, property tax …. its well above 50%.
————————————

#87 World According To Garth on 03.05.14 at 4:22 am
The question you need to ask is where is all this 50% plus of taxes going? Because it ain’t healthcare and education as every politician spews. If it were, then why do we rank at the bottom of nearly every OECD ranking?

Blasphemy! Canada has the greatest, best, most efficient and most universal health care system in the world. Just ask any Canadian who has never left the country or had to use it!

#100 Aggregator on 03.05.14 at 10:37 am

Scuttlebutt is: York Region is proposing the allowance of secondary suites for SFHs. Here comes the slums.

#101 BCD on 03.05.14 at 10:37 am

All the people bitching about taxes should go live in Greece. That country is bankrupt largely because they had a non existent and inefficient tax system. I’ve heard reports of dead people being paid pensions for years–that’s how ineffective their record keeping was.

We pay taxes to live in a civilized world. The HST was a good tax and would have provided much needed revenue…people shot it down thinking it was bad.

I’ve never bitched about taxes. At the end of the day you can choose to save your money or spend it…but stop talking about lowering taxes unless you want to end up like Greece.

#102 Ret on 03.05.14 at 10:43 am

Bank stock dividends 4%.
Savings accounts 0 to 1%.
Why don’t banks buy back their own stock with that 1% money and add 3% to their bottom line?

#103 Dave on 03.05.14 at 10:44 am

“Nobody in this country pays half their income in tax – that is a myth. Just feels like it.”
Actually if you take into account that 13% HST is charged every time a purchase is made, CPP and EI are like a tax, its something we will likely never benefix from (CPP will probably be drained by the boomers by the time I retire). Also property tax, mandatory car insurance (also like a tax cause the gov’t forces you to have it which allows the insurance companys to charge whatever they want). Hydro, water electricity etc…

I said nobody pays half their income in taxes. They don’t. How they spend after-tax income is voluntary. — Garth

#104 Nemesis on 03.05.14 at 10:51 am

#QuantitativeMischief

[SCMP] – Immigration, property prices and Vancouver: An expert’s view

…“Ley, holder of the Canadian Research Chair in Geography, literally wrote the book on the subject. Millionaire Migrants, published in 2010, is the definitive account of latter-day East Asian migration to Vancouver, describing how wealthy newcomers and their migratory patterns moulded the city.

It’s no surprise that he has been closely watching the fallout from the Canadian government’s surprise decision last month to terminate the 28-year-old Immigrant Investor Programme (IIP), which has brought tens of thousands of Chinese millionaires to Vancouver.

Oxford-educated Ley has particularly noted attempts to downplay the impact of the scheme and its closure on Vancouver’s sky-high property prices, which he said represented deliberate “suppression”…

…We are very polite in Canada and if anyone raises the red flag of racism then everyone shuts up. To my mind that is an irrelevance. The issue is investors, wherever they are coming from, creating an issue of affordability in the market.”

Ley’s previous research revealed the exceptional correlation between international immigration to Vancouver and the city’s property prices. He charted this from 1977 to 2002, with the results presented in eye-popping clarity on page 153 of Millionaire Migrants. A graph (above) of the two factors shows them moving in near lockstep.

Ley calculated the correlation at +0.94; that’s about as close to a statistical sure thing as you can get.

By contrast, “made in Canada variables” – interest rates, employment, domestic Canadian migration and rental vacancy rates – proved rather hopeless as price predictors. Interest rates, routinely touted as the most significant factor in Vancouver’s property boom, had a negative correlation, of -0.12.”…

http://www.scmp.com/comment/blogs/article/1440792/immigration-property-prices-and-vancouver-experts-view

#105 economictsunami on 03.05.14 at 10:54 am

For those who continue to believe interest rates will remain low for many years to come, you must also believe there is nothing to allow for real pricing risk on markets which have been largely papered over with excess liquidity since 2008.

Assuming our undisciplined decisions have no real consequences, due to the efficient “invisible hand” of consumer interest rate setting?

Good luck with that…

Canada’s Job Market ‘Sputtered’ In 2013, Chamber Of Commerce Says… http://www.huffingtonpost.ca/2014/03/05/canada-job-market-2013_n_4902975.html

#106 heineken on 03.05.14 at 10:57 am

#49 toronto landlord on 03.04.14 at 10:06 pm
now you really are confusing everyone with all sorts of math and investment thinking.
but im not so impressed by your “dog and pony” show.
I rolled the dice many years ago.
my first house I put down $10,000 to buy at 250k in 1990.
sold it for 840k 2 years ago.
how this math 840-250= 590 k .
all this money for a $10000 initial investment.
Had to pay rent somewhere, why not pay yourself.
Plus huge leverage power and tax deductions along the way.
Numbers don’t lie.
That was 24 years ago. Irrelevant. — Garth
________________________________________
Are you kidding me? That’s your lame response.

Landlord makes $590,000 with only a $10,000 down payment, and you reply “that was 24 years ago. Irrelevant”.

With these types of remarks, it is very clear, that you show either have a lack of understanding and shallowness towards real estate as an investment vehicle, or you are so bias that any profit from real estate is considered petty & minor.

I agree, that deciding to rent and using your money to invest in financial assets can be profitable, but owning property and having a huge gain is equally admirable .

Irrelevant. Different economy. Different demographic pressures. Different rent/income/price ratios. Different inflation. Different prospects. Irrelevant. — Garth

#107 gladiator on 03.05.14 at 11:01 am

Bank of Canada keeps rate at 1%.
The eek-onomy is still a sick puppy.

#108 ponerology on 03.05.14 at 11:09 am

When this myth came about people were looking at their take home pay which was roughly 1/2. However a lot of folks were counting pension contributions as “tax”.
Folks also count CPP and EI as “tax” which technically they aren’t.
@103: Car insurance rates are regulated by whatever province you live in (well the mandatory portion is) so whatever the regulatory arm is of your province is approving those rates.

#109 Holy Crap Wheres The Tylenol on 03.05.14 at 11:13 am

#97 Shawn on 03.05.14 at 10:08 am
Buffett and Real Estate
Buffett of course owns his own house and a Summer place in California both bought over 50 years ago. Also he personally owns a farm and some New York real estate as revealed in his latest annual letter. So, Buffett is not a big believer in owning rental real estate it seems. (An exception to that favor was made if real estate prices plunged) Basically he finds better returns elsewhere. He does however believe in owning his own home and said a few years ago that it had not been a great investment but nevertheless as a home it was one of his best purchases ever. I don’t think he would condone selling their house just to grab a capital gain. He would say buy for the long-term if possible.
_____________________________________________

You are correct sir!
Even though he is recognised as the world’s third richest man with a fortune of $46 billion, investor Warren Buffet, the ‘Wizard of Omaha’ still lives in the same modest home he bought in 1958 for $31,500.
Despite his wealth giving him almost limitless property options, the famously frugal and modest Buffet, 82, lives in a well-kept gray stucco house in the Dundee-Happy Hollow Historic Distrcit of Omaha, Nebraska.
There is no gate, no security guard and no surveillance cameras protecting the home of one of the most powerful men in the world and was last assessed as being worth $700,000 – although the billionaire believes that valuation to be optimistic.
So theres Warrens take on real estate!

#110 Aggregator on 03.05.14 at 11:15 am

2013 Profile of Hunger in the GTA

Key Findings:

– For the 5th year in a row GTA food banks have seen over one million visits, with an increase of nearly 40 per cent in Toronto’s former inner suburbs since 2008.

– Reasons people come for the first time: Lost job (32%), Disability (17%), New to area (17%), Just found out about food bank (16%), Living on savings (12%)

– Food bank clients have similar levels of education to the general population, with 30 per cent having at least a college or university degree if not higher. That number is one third in the Inner Suburbs and 905 regions, where there are more newcomers, including those with landed immigrant status, who often have high levels of education and credentials but face ongoing challenges in the Canadian job market around recognition of these credentials.

Have done any of the following in the past year to pay bills (Survey):

Borrow from friends or family 52%
Use credit card 22%
Sell property (e.g. car, TV, jewelry)  20%
Use line of credit 9%
Other 6%
Cash in RRSP or other financial 5%
None of the above 30%

#111 Holy Crap Wheres The Tylenol on 03.05.14 at 11:28 am

A very smart business associate of mine is in the midst of unloading his McMansion over on Walnut Crescent in Smoking Man territory. This place is done to the nines. I talked to the seller the other day and he has the same mantra as Buffet, he believes that the valuation of his property is way over value and he is leaving Dodge. Hopefully with his $2.2 M cash.

#112 tax evasion anyone? on 03.05.14 at 11:40 am

I wonder how many people who charge rent actually claim the income on their income tax forms????

#113 Olympics distract Ottawa Buyers on 03.05.14 at 11:40 am

Members of the Ottawa Real Estate Board sold 870 residential properties in February through the Board’s Multiple Listing Service® system, compared with 903 in February 2013, a decrease of 3.7 per cent.

“February sales are down slightly year-over-year, despite the less than favourable weather, and possible distraction of the Olympics,”

“The hottest segments of our market in February are sales between $175,000 to $225,000 and $275,000 to $400,000. This could be indicative of first-time homebuyers being active buyers,” explains Oikle.

#114 Nemesis on 03.05.14 at 11:59 am

#MethodologicalMischief

[G&M] – Researchers crowd-source funds to back Ouija board science project

…”Scientists at a University of British Columbia lab examining human unconsciousness using Ouija boards are taking to the Internet to look for research funds.

Docky Duncan, a research assistant with UBC’s Visual Cognition Lab, said in an interview Tuesday that the project is “off the beaten track” and there has been “incredible difficulty” getting even the modest $2,000 in funding it needs.

“The research methodology is so strange, using the Ouija board and all, that it might be a little too controversial for most grant organizations,” he said, further adding, “Still, in view of the REBGV/CREA’s apparent success in implementing this particular technique in the formulation of their MLS® Home Price Index (MLS® HPI) we thought, heck – why not give it a shot?”…

http://www.theglobeandmail.com/news/british-columbia/researchers-crowd-source-funds-to-back-ouija-board-science-project/article17311354/

http://www.rebgv.org/home-price-index

#115 Mr. Frugal on 03.05.14 at 12:05 pm

Ed Beckley used to say;

Watch what the poor people do and then don’t do it.

The corollary is;

Watch what the rich people do and follow along.

#116 4 AM Sunrise on 03.05.14 at 12:07 pm

#72 Freebird on 03.05.14 at 12:14 am
FYI… LOOSE and LOSE are not the same. Maybe it’s autocorrect but lately I’ve seen a lot comments on blog sites in general using the word loose when it should be LOSE.

No snark, just observation. God knows I’ve made many typos with my iPad and it’s wonderful autocorrect feature.

—————————————————-

Says the person whose iPad autocorrects “its” to “it’s”, right?

#117 Ralph Cramdown on 03.05.14 at 12:10 pm

Are there really that many people who don’t understand the difference between their marginal tax rate and their overall (or average) tax rate? Your marginal rate is the rate you pay on your last dollar of income earned, so if you earn one more dollar, that’s the rate it’ll be taxed at. Your overall rate is earnings/tax, including all the tax you paid in the lower brackets and all your deductions.

Pretty much nobody’s overall tax rate is anywhere near their marginal rate. You’d have to be WAY into the top bracket, and too ignorant to be taking advantage of any tax sheltering strategies.

The worst way for a household to live (from a tax accountant’s standpoint) is to earn a big salary (worse still if much or all of it is earned by one person) and to spend most or all of it. I am frankly boggled at how little tax can be paid, with a little planning, by wealthy individuals. And I’m not even talking about exotic tax shelters or offshore accounts or stupid investments sold primarily as a means of reducing tax and ending usually as a reduction of wallet.

#118 dominion on 03.05.14 at 12:12 pm

I have an important question :

This is in regards to you post two days ago about that different group anticipating a 30% decline.

How will we actually know it has begun? I find so much gets lost in statistics, the fact that the real estate boards are in charge of their own numbers (how does that work) and bloody global reporting.

So where do we actually track or own numbers in a way that is ready to read, in your market area? Can I see my street somewhere showing the trend for sales going up and down and prices going up and down? Or do I need to wait for a used house salesmen to finally tell me?

#119 Mark on 03.05.14 at 12:13 pm

“International students live frugally!!! OMG I almost urinated myself laughing!!! That was a good one. You should check out the cars at the UBC student parking lot. Sure looks like frugal living to me!”

Most of those UBC student cars belong to Canadians. Not foreign/international students. Classic rookie mistake, thinking that everyone who looks or speaks “Chinese” is actually a foreigner.

#120 maxx on 03.05.14 at 12:23 pm

“This is why God created accountants, stripping their DNA of personalities and hormonal distractions, so they can devote their lives to dross.”

Brilliant- humour and perspicacity in equal measure.

“Rental income, like money you make working, generates allowable RRSP room, so that’s one consolation.”

Question: If a person rents out their savings to banks, which flow into loans, which then helps propel borrowing, spending and moving the economy as well as RE rental does, why wouldn’t the lender, and not only the landlord, be allowed the same RRSP room?

#121 Nemesis on 03.05.14 at 12:25 pm

#WhyLife’sUnfair #HowTheWorldReallyWorks

[Economist] – Ukraine’s stolen assets: A long, hard slog

…”Ukraine’s investigators have already had a lucky break. Some 200 folders of documents, dumped in a lake (pictured) behind the former residence of Viktor Yanukovych, the deposed president, by his entourage as they fled, stubbornly refused to sink and have been fished out and dried (with help from the presidential sauna). Many can be viewed online. Among the papers are receipts for payment of $115,000 for a shooting range and $2.3m for a tea room.

These documents and others discovered elsewhere suggest that members of the former regime were avid users of foreign shell companies, trusts and foundations­, the time-honoured tools of corrupt politicians, tax evaders, money-laundering drug barons and sanctions-busters. These were sometimes used in combination, a process known as “layering”, to conceal better the ownership of assets and their movement across borders.”…

http://www.economist.com/blogs/easternapproaches/2014/03/ukraine-s-stolen-assets

#122 Dupcheck on 03.05.14 at 12:25 pm

Apparently Aussies are being priced out from the Asians as the housing market is 45% up there in the last 5 years.

#123 Vamanos Pest on 03.05.14 at 12:34 pm

#106 heineken
First of all, you’re lying. A bank lending you 240k with only 10k down did not happen.

Second, even if you weren’t lying, you paid much more than 10k. Are you suggesting you never made a mortgage payment? Never made repairs or spent money on maintenance, never paid property tax, had no transaction costs when selling? Exactly.

Third, it IS irrelevant. Nobody, including Garth, is saying real estate is a bad idea in 1990, we’re saying it’s a bad idea in 2014. Don’t counter an argument that isn’t being made.

Finally, if you rent, take that 10k, continue to contribute saved property tax and other costs, plus any savings in monthly rent vs mortgage, it would be fair to say you would have ~500k (too many assumptions to be more precise, it could be less, but could also be more) and that’s WITHOUT leveraging your investment to make an apples to apples comparison.

#124 Enthalpy on 03.05.14 at 12:36 pm

Sadly the vast majority of people dont have the slightest clue about any of this. I can understand why as I still am learning myself but have obviously been there(in the dark). This should be taught in schools but it isnt nor do I see that happening.

Its taken me years to wrap my brain around trying to “enjoy” reading and learning about this. To most people its way too boring, uninteresting and overly complicated.
I have finally found my own little spark in learning about these tools. But for every other Tom , Dick and Harry.
Forget it. They would rather park there money in a GIC or at best be a landlord(eww).

#125 heineken on 03.05.14 at 12:42 pm

#49 toronto landlord on 03.04.14 at 10:06 pm
now you really are confusing everyone with all sorts of math and investment thinking.
but im not so impressed by your “dog and pony” show.
I rolled the dice many years ago.
my first house I put down $10,000 to buy at 250k in 1990.
sold it for 840k 2 years ago.
how this math 840-250= 590 k .
all this money for a $10000 initial investment.
Had to pay rent somewhere, why not pay yourself.
Plus huge leverage power and tax deductions along the way.
Numbers don’t lie.
That was 24 years ago. Irrelevant. — Garth
________________________________________
Are you kidding me? That’s your lame response.
Landlord makes $590,000 with only a $10,000 down payment, and you reply “that was 24 years ago. Irrelevant”.
With these types of remarks, it is very clear, that you show either have a lack of understanding and shallowness towards real estate as an investment vehicle, or you are so bias that any profit from real estate is considered petty & minor.
I agree, that deciding to rent and using your money to invest in financial assets can be profitable, but owning property and having a huge gain is equally admirable .

Irrelevant. Different economy. Different demographic pressures. Different rent/income/price ratios. Different inflation. Different prospects. Irrelevant. — Garth
___________________________________________
Unbelieveable!
I am shocked.

Yes I agree that everything was different.
But the theme is to make money (hopefully used as a commodity to improve one’s life).

#126 Mark on 03.05.14 at 12:43 pm

“But of course that wouldn’t be driving urban real estate prices up or wages down. Only ignorant boobs and rubes phoning in to talk radio would think that.”

If we build units to accommodate those 600k people, then prices shouldn’t be moving up, nor down. And the evidence is, Canada’s construction industry has been able to more than supply the demand. There are no meaningful land constraints anywhere in Canada either.

#127 Daisy Mae on 03.05.14 at 12:45 pm

#66 FTP: “Did I read this right? So I pay 39% in income tax, then pay taxes and levies on flights, purchases, property, etc and you think I still have half? I doubt it.”

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

Not to mention tax on utilities. We have no choice in the matter — we need heat and light — and we’re paying taxes for this with after-tax dollars.

#128 Spiltbongwater on 03.05.14 at 12:49 pm

Another Bitcoin exchange shuttering up because of a computer hack. I thought I read that there are computer nerds who can track when and where a bitcoin goes via the interwebs? How come people can hack the bitcoin code and the money is gone?

GG Flexcoin https://www.yahoo.com/tech/another-bitcoin-bank-shuts-down-after-hacking-theft-78644434064.html

#129 Kris on 03.05.14 at 12:52 pm

BBC article on how “a generation of Australians have been PRICED OUT of the housing market by Chinese lapping up homes down under.

Prices in Sydney & Melbourne have apparently risen 45% in the last 5years (Sound familiar?)

HAM is not a myth, folks. It’s only logical that there’s a similar line-up of the affluent from OTHER countries, wanting a foothold for their kids in countries like Australia and ours.

http://www.bbc.com/news/business-26445106

#130 ozy -WHEN WILL YOU SEE A DEMONSTRATION IN CANADA, HAHAHA on 03.05.14 at 1:11 pm

THE picture is ridiculous -WHEN WILL YOU SEE A DEMONSTRATION IN CANADA, HAHAHA

sheep does not riot, laughed my bottom off

#131 Bargains everywhere on 03.05.14 at 1:16 pm

#72 Freebird on 03.05.14 at 12:14 am

FYI… LOOSE and LOSE are not the same. Maybe it’s autocorrect but lately I’ve seen a lot comments on blog sites in general using the word loose when it should be LOSE.

No snark, just observation. God knows I’ve made many typos with my iPad and it’s wonderful autocorrect feature.
____

Well, since we’re mentioning typos….. it should be ‘my iPad and “its” wonderful autocorrect’, not “it’s”.

“It’s” is short form for “it is”. If you can’t substitute “it is” in your sentence and have it make sense then it must be the possessive form which is spelled “its” without an apostrophe. Only two ways to spell it.

#132 Son of Ponzi on 03.05.14 at 1:22 pm

# 67

By the way, in BC, public information also includes a searchable database of actual selling prices, so this is much more relevant. Not sure about other jurisdictions.
————————
never heard about this one.
Please provide link.
Thanks.

#133 recharts on 03.05.14 at 1:24 pm

A look at the sales mix for SFH in TO

http://postimg.org/image/tu5r1b7i3/

Conclusion: top end and low end are screwed.
Middle market hot but low inventory ….

Like an year ago I predicted that this will happen.

We shall see what the spring market brings
I am afraid that it will be low inventory.
Nobody can figure out why we have high prices and low inventory and yet we say that these are normal market conditions

#134 Smoking Man on 03.05.14 at 1:34 pm

This is getting interesting.

Apparently a phone call between Victoria Noland & Geoffrey Pratt.

In a nut shell, the riot cops and protesters where shot by snipers.. CIA me thinks…

This Ukraine thing just got a whole lot more interest..

From the Art of War… Putin just given moral authority.

False Flag 101

#135 bdy sktrn on 03.05.14 at 1:35 pm

hornier than ever!!! is this a herd thing?

By The Canadian Press
TORONTO – More Canadians are willing to enter a bidding war and fight it out to secure a property, according to a home buying report released today by Bank of Montreal.
It says 34 per cent of Canadians surveyed are willing to enter a bidding war when it’s time to buy a home, an increase of six points, or 21 per cent, from a year ago.
The survey, conducted by Pollara for BMO, suggests the appetite for competitive bids among major cities is the highest in Toronto, at 44 per cent, and Vancouver, at 41 per cent.
On a provincial basis, prospective buyers in the Prairies and British Columbia are the most willing to compete on the price of a home, with a reading of 38 per cent in both regions.

#136 James on 03.05.14 at 1:48 pm

Even Rosenberg said no crash nor big correction.

http://m.theglobeandmail.com/report-on-business/top-business-stories/bank-of-canada-sees-no-housing-crash-take-that-deutsche-bank/article17312956/?service=mobile

#137 devore on 03.05.14 at 2:12 pm

#7 saskatoon

do i get to deduct this stuff then?

but do i then lose “tax exemption status” when i sell?

byzantine, like you say.

How is it byzantine? If it’s an investment/business, it’s tax treated as such. Otherwise it’s personal stuff. But when you flip your house between the two states, or slice and dice it, you have to prorate and calculate stuff, because you made your life complicated. It’s your house for 10 years, then you rent it out for 2, then you come back for 6 months, then you decide to rent the basement out, then 5 years later you kick the renters out because the inlaws want to move it, then a year later you divorce and sell it, yeah, you better have your paperwork in order.

#138 GTA Engineer on 03.05.14 at 2:13 pm

Garth,

In a rental, wouldn’t the depreciation expense (4-5% per year Capital Cost Allowance, or CCA) bring down her income to zero? Yes, when she ultimately sells the property she’ll have to pay capital gains based on the depreciated value, thus incurring more tax at selling time. But in the end, it’s a wash – either pay capital gains now on your 4% ETF investment return, or pay zero tax on your 4% rental income now, but pay capital gains later on the depreciated cost base of your property when you sell. 6 of one, half a dozen of another? Or is there something I’m missing? If anything, the rental income option is better since the annual cashflow can be reinvested and tax is only paid when the property is sold.

#139 SRV on 03.05.14 at 2:19 pm

Seems those Chinese millionaires are not happy about the end of ‘pay for visa’… that helped us get to 1st place in the race for the biggest R/E bubble on earth (ie… the Steve & Dwarf show)… check out the data table.

http://www.zerohedge.com/news/2014-03-05/chinese-1-threaten-lawsuit-against-canada-shutting-visa-cash-scheme

P.S. Garth Gold & Silver are not for gamblers (gamblers rig the game and buy ‘stawks’… JPMs proprietary trading desk had zero losing days in 2013, which of course is statistically impossible). PMs are the only financial assets with zero counterparty risk (which is why the bankers hate them so much… they can’t skim any profit like they do with every investment you recommend).

* Those that bought at 17 or 18 hundred and are under water are as dumb as those pouring money into a rigged market today… buy FB (at a P/E of 109…lol).

#140 Longterm on 03.05.14 at 2:30 pm

#86 Exurban on 03.05.14 at 4:21 am

What you are probably missing here in your panic over migrants, immigrants and strudenst is the net migration effect and the impermanance.

My wife and I left Vancouver in 2002 for the UK and stayed for ten years, working, paying taxes etc. We are now back but a friend of mine from Vancouver left in 2004 and is still in the UK and another friend left this past October. So two one way and two the other way. The two coming in are counted as migrants or immigrants but I can assure you that when we left we were not chalked up in the other column as emigrants. Nope, we just got on a regular holiday charter flight to London and didn’t come back for a decade.

I met a guy on Monday in Nanaimo who moved here ten years ago with his wife from Linconshire in the UK. I also know a couple who moved permanently to the UK 6 years ago. Again, two out, two in and a zero sum gain.

Most Canadians think the shores are awash with migrants but the reality is people move both ways. Lots of people come here and lots leave to go work in the US, Europe or Asia. Most are temporary and some are permanent but the net effect over time is undoubtedly much less than the panic stations stats of arriving migrants would have you believe.

Furthermore many other countries have a higher rate of migration. The UK for example gets shedloads of migrants from the EU – Poland, Portugal, Spain, Greece, Cyprus. If you speak English as a second language and need a job in Spain you hop on a cheap flight to London.

Or look at Singapore. Close to a million western economic migrants [were they counted leaving Canada, the UK, the US – NO] plus probably that many again or even twice as many from Bangladesh, India and the Phillipines doing all of the heavy lifting for Singaporeans and rich ex-pats who want the streets sweeped and their children looked after.

I doubt the net immigration rate in Canada is even enough to compensate for the aging boomers who are going to start dying in huge numbers over the next 10-20 years. Without a rising domestic birth rate [not likely] or more immigrants, immense tax strain to pay for healthcare for Boomers and real estate deflation are almost a certainty.

#141 Shawn on 03.05.14 at 2:31 pm

Rigged Equity Markets?

Those that bought at 17 or 18 hundred and are under water are as dumb as those pouring money into a rigged market today… buy FB (at a P/E of 109…lol).

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

No one needs to “rig” equity markets for stocks to trade at 100 P/E. Investor stupidity is quite enough.

Anyhow rigged and manipulated markets, where they exist, are 100% advantageous to smarter investors who just cherry pick the better values.

#142 World Traveller on 03.05.14 at 2:34 pm

#120 bdy sktrn on 03.05.14 at 1:35 pm
hornier than ever!!! is this a herd thing?

****

The country has lost its collective minds, and Thank you to the federal government for not reigning in this runaway train when it had the chance. It’s not going to be funny when CHMC starts paying out claims.

#143 kommykim on 03.05.14 at 2:35 pm

RE:#108 ponerology on 03.05.14 at 11:09 am
When this myth came about people were looking at their take home pay which was roughly 1/2. However a lot of folks were counting pension contributions as “tax”.
Folks also count CPP and EI as “tax” which technically they aren’t.

Call it what you will, but any money you are FORCED to pay to the government is a tax.
It’s just that we have some politicians who like to call it a “fee” or something else to make themselves look more CONservative.

#144 604 on 03.05.14 at 2:37 pm

Garth,

Juvenile question perhaps.
Can the banks run away with my invested money?
Can things get so bad my investments go bye bye?

Then everything else would, too. — Garth

#145 eddyo on 03.05.14 at 2:38 pm

“In fact, you can earn about $50,000 a year in dividends (if this is your only source of income) and pay zero tax.”

I currently have a 9-5 gig and also own a small business on side which I’ve been growing for the last few years.

Does that mean if I decide to leave my current job that I can pay myself up to 50K in dividends and pay virtually no tax on the income?

Sounds like a sweet dealt to me!

#146 devore on 03.05.14 at 2:43 pm

#128 Spiltbongwater

Another Bitcoin exchange shuttering up because of a computer hack. I thought I read that there are computer nerds who can track when and where a bitcoin goes via the interwebs? How come people can hack the bitcoin code and the money is gone?

Yes, every bitcoin comes with a history of all previous transactions it was involved in, and when you install bitcoin, the very first thing it does is download ALL previous transactions that took place, and will continue to download all transactions as they take place. So despite claims of anonymity, bitcoin is only pseudo-anonymous, unlike cash. Oh, the irony. It is possible, not just theoretically but in practice, to link up all transactions and assign them all to wallets, only their ownership is missing, which a legal subpoena takes care of.

As to how bitcoins are disappearing from exchanges? The same way money disappears in an accounting scam. The digits displayed on your bank statement, spreadsheet, etc, are just digits, and they are related to actual assets only by way of reference. When an exchange tells you you have 100 bitcoins, the only thing you ACTUALLY have is their word. The actual bitcoins could be anywhere, and you will only know when you try to withdraw your balance. So despite claims to the contrary, for bitcoin to operate in a real economy quite a bit of trust in 3rd parties is required.

#147 liquidincalgary on 03.05.14 at 2:48 pm

so garth, you HAVE met my CA

#148 Son of Ponzi on 03.05.14 at 2:53 pm

#72 Freebird on 03.05.14 at 12:14 am

FYI… LOOSE and LOSE are not the same. Maybe it’s autocorrect but lately I’ve seen a lot comments on blog sites in general using the word loose when it should be LOSE.

No snark, just observation. God knows I’ve made many typos with my iPad and it’s wonderful autocorrect feature.
____

Well, since we’re mentioning typos….. it should be ‘my iPad and “its” wonderful autocorrect’, not “it’s”.

“It’s” is short form for “it is”. If you can’t substitute “it is” in your sentence and have it make sense then it must be the possessive form which is spelled “its” without an apostrophe. Only two ways to spell it.
———————-
Thanks for the spelling advise, SM

#149 Old Man on 03.05.14 at 2:55 pm

#142 World Traveller – our government is a sham and what I would like to know is where did all the taxpayers money go after so many years under the faux leader Caesar and his gang of reformers. What has been accomplished in terms of hard assets for the betterment of Canada? Add up all the promises made and it amounts to over $100 billion in contingent liabilities that are yet to come. This will be piled up on the annual deficits that have accumulated into a growing national debt that is historic. What has been accomplished under this reign of terror?

#150 saskatoon on 03.05.14 at 3:01 pm

#128 Spiltbongwater

no one can ‘hack’ the ‘bitcoin code’, as you say. this is AKA the ‘block chain’.

if there is any ‘theft’, it is the fault of the exchange software, not of bitcoin itself.

if you were correct, don’t you think the price of btc would have crashed to zero by now?

instead, the price has gone up.

#151 Son of Ponzi on 03.05.14 at 3:01 pm

#140
thanks for the clarification.
Immigration as a zero sum game in Canada.
Who’s would have thought?
Fire these people at Statistics Canada who count about 400k of net immigrants.

Immigration has been in the 225,000 range for years. — Garth

#152 saskatoon on 03.05.14 at 3:04 pm

#146 devore

“So despite claims of anonymity, bitcoin is only pseudo-anonymous, unlike cash.”

As far as I know, this is a completely false and misleading statement.

Evidence required. Link?

#153 Ford Prefect on 03.05.14 at 3:07 pm

#132: “Son of Ponzi”. Perhaps he meant evalue. bcassessment etc. This does provide selling price data but only for the previous year, and it is not even clear that it includes the entire year. A very limited window of past sales prices.

#154 Ice Flows on 03.05.14 at 3:20 pm

#132 Son of Ponzi on 03.05.14 at 1:22 pm
# 67
By the way, in BC, public information also includes a searchable database of actual selling prices, so this is much more relevant. Not sure about other jurisdictions.
————————
never heard about this one.
Please provide link.
Thanks.

———————————
I think is what is being referred to.

https://www.bcassessment.ca/Pages/default.aspx

#155 Ralph Cramdown on 03.05.14 at 3:25 pm

#146 devore — “As to how bitcoins are disappearing from exchanges? The same way money disappears in an accounting scam. The digits displayed on your bank statement, spreadsheet, etc, are just digits, and they are related to actual assets only by way of reference. When an exchange tells you you have 100 bitcoins, the only thing you ACTUALLY have is their word.”

Well said.

It’s funny that the goldbug pumpers are trumpeting a scenario where China’s central bank is buying gold in order to introduce a GOLD BACKED CURRENCY (causing the US dollar to collapse, etc…). In reality, the currency would be backed by the Chinese government’s PROMISE to redeem it for gold, which is a rather different thing.

#156 Pope Snugglebums the 666st (aka Nosty) on 03.05.14 at 3:36 pm

#74 DR on 03.05.14 at 12:39 am — “That was 24 years ago. Irrelevant. — Garth”
— and —
#63 Shawn on 03.04.14 at 11:19 pm — “By forgoing one hamburger today, they can often have two in ten years, four in 20 years, eight in 30 years, 16 in forty years, 32 in fifty years (using 7% interest rate).”
— plus —
#75 Longterm on 03.05.14 at 1:06 am — “Anyone can do it. Just focus.”

On the front of the business section today in the Kelowna Daily Courier, Odlum Brown’s investment advisers give their year-to-date portfolio, from investing $250,000 in Dec. 1994 in a balanced portfolio (50% Cdn., 50% other areas of the globe.

Total to date: $3.9 million, just shy of two decades. That is using DRIPs plus whatever the percentage amounts year pver year includes.

I wouldn’t hedge my bets on RE giving that kind of return!

#73 Coho on 03.05.14 at 12:22 am — “It’s amazing to hear Western leaders and these people in think tanks and the MSM laud the overthrow of an elected sitting government.”

It’s better known as regime change, ‘tho there never was a regime to change. Of note, the new govt. has a few oligarchs in now, pro-IMF / west and are there to screw the citizens royally via austerity. However, what goes around must come around again. Maybe not in our lifecycles, but it will return to haunt the west.

#157 Longterm on 03.05.14 at 3:43 pm

#151 Son of Ponzi on 03.05.14 at 3:01 pm

I didn’t say immigration was a zero sum game. I said that the raw numbers of immigants versus the net in and out [not to mention the deaths] are rarely looked at by people who panic that this immigrant built country is being over run by immigrants.

#158 Old Man on 03.05.14 at 3:43 pm

Now for those that are going into the bidding war in Toronto; do not follow the herd over the cliff, as this bubble will break in time. Its going to become a big event with a race of selling to the bottom which will be sharp at first, and a continual melt down for several years. Keep your powder dry; rent; save your money; stalk out your future area home location; and when the time is right buy then if you will.

This is not the time to buy any real estate in Toronto, so never follow the herd out of passion; its the time to sell to the greater fools. Ok, in the immediate years to come CMHC will be forced to take properties back from the banks. Not sure how they will handle this all as will they be acting as agent or principal? Years ago they acted as the principal with regional offices, whereby,
you could hoop the bargains from them. They wanted this inventory off the books, and would makes deals that were out of this world.

#159 James on 03.05.14 at 3:53 pm

So the CEO of Scotia Bank was just on bloomberg. He was asked a point blank question about the doom and gloom about RE. And I paraphrase ….there needs a huge spike in unemployment and interest rate to make a dent in the business and price. All in all RE is healthy.

Move along folks.

And what did you expect? — Garth

#160 Smoking Man on 03.05.14 at 3:57 pm

W06
Days on market 14
% of listing price 107%
Ave price 620.720

And nothing for sale.

Longbranch dogs…..

#161 Nemesis on 03.05.14 at 4:03 pm

#ComicRelief #CouldBeWorse

[UK Telegraph] – Army commander bans sandwiches in attack on ‘barbaric habits’

…”Major General James Cowan issued the note after he noticed officers were eating sandwiches with their hands and failing to stand when commanders entered the room.

His three-page letter criticised standards at Bulford Camp in Wiltshire where he said he had seen many “frankly barbaric” techniques and habits displayed by soldiers and officers.”…

http://www.telegraph.co.uk/news/uknews/defence/10677230/Army-commander-bans-sandwiches-in-attack-on-barbaric-habits.html

[UK Telegraph] – ‘Too many quitting Forces’ MPs warn

…Philip Hammond, Defence Secretary, acknowledged at the weekend that 2013 “was not a good year for recruitment”… [QuelleSurprise]

http://www.telegraph.co.uk/news/uknews/defence/10568955/Too-many-quitting-Forces-MPs-warn.html

#BonusZen #4thEarlOfSandwich

http://upload.wikimedia.org/wikipedia/commons/b/b8/John_Montagu%2C_4th_Earl_of_Sandwich.jpg

#162 happity on 03.05.14 at 4:13 pm

The rich have enough money to hire tax experts, move their assets offshore where they don’t pay taxes on gains, buy vehicle and real estate in their corporate name, etc.

Just look at Martin and his yacht club.

The common folk don’t have any of that….

Get real.

The voice of inexperience. — Garth

#163 Old Man on 03.05.14 at 4:18 pm

Today the markets were active with too many trades which is rare indeed, so suspect a panic of sorts. I sat on the phone for 30 minutes listening to a recording that for $9.95 can now make trades online. I will never use the net as am afraid of being hacked, as just needed to transfer some cash into a personal bank account that is broke beyond the pale, as have bills to be paid, but they will overdraft me. Guy comes on the line, and says all done, but wanted to know why I was not using the preferred phone number. I said use your line to keep you all employed, and he laughed.

#164 Calgary Rip Off on 03.05.14 at 4:18 pm

If anyone noted the sonic boom yesterday in Calgary like I had noted on this blog before it happened, that was me on my Marshall stack in the NW of Calgary, my domain: Booom.

Now the latest from the Herald, says Calgary people are willing to pay more, as if they have a choice. If you live in Calgary, expect to take the shaft as a renter or mortgage owner. Remember: He who leads from the rear, takes it in the rear. This is certainly the case in Calgary post 2005 big time rip off when prices skyrocketed and have stayed ridiculous.http://www.calgaryherald.com/business/Calgary+homebuyers+return+housing+market+bidding+wars/9581101/story.html

Take note that the realtor in the picture lives in my neighbourhood. She mostly heard the sonic boom from my Fender Stratocaster yesterday afternoon. Notes Robyn Moser: “As time has passed, the sellers’ market has become increasingly aggressive. This has caused buyers to see lower and lower levels of inventory, placed into competing offers and homes selling in days if not hours. This cause is speculated to be the lack of available new home inventory due to Calgary sewer lines that are needing to be upgraded. This has placed metro Calgary real estate values into statistical unsustainable levels until the sewer line upgrade is complete.”
All due to excessive layers of farmland, you cannot get more shacks until you figure out how to pipe the crap out.

#165 jess on 03.05.14 at 4:25 pm

why life is unfair …justice takes tooo long

“General Abacha was one of the most notorious kleptocrats in memory, who embezzled billions from the people of Nigeria while millions lived in poverty,” said Acting Assistant Attorney General Raman. “This is the largest civil forfeiture action to recover the proceeds of foreign official corruption ever brought by the department. Through our Kleptocracy Initiative, we are seizing the assets of foreign leaders who steal funds that properly belong to the citizens they serve. Today’s action sends a clear message: we are determined and equipped to confiscate the ill-gotten riches of corrupt leaders who drain the resources of their countries.”

The over $458 million in frozen funds and the additional assets named in the complaint represent the proceeds of corruption during and after the military regime of General Abacha, who assumed the office of the president of the Federal Republic of Nigeria through a military coup on Nov. 17, 1993, and held that position until his death on June 8, 1998. The complaint alleges that General Abacha, his son Mohammed Sani Abacha, their associate Abubakar Atiku Bagudu and others embezzled, misappropriated and extorted billions from the government of Nigeria and others, then laundered their criminal proceeds through the purchase of bonds backed by the United States using U.S. financial institutions.

http://www.justice.gov/opa/pr/2014/March/14-crm-230.html

#166 jess on 03.05.14 at 4:42 pm

when quantity overtakes quality

An unprecedented international police campaign across Europe and the U.S. has led to 110 arrests of “boiler room masterminds” believed to be responsible for millions of dollars of investment fraud.

The City of London Police and Spain’s Policía Nacional launched the investigation in 2012 after a number of reports emerged of investors worldwide being sold bogus shares in carbon credits, gold, renewable energy, forestry, eco projects, wine and land.

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

How ‘synthetic’ identity fraud costs Canada $1B a year
http://www.cbc.ca/news/canada/how-synthetic-identity-fraud-costs-canada-1b-a-year-1.2554429

fake paper generators =FAKE productivity
Canada for instance, have laws against false or misleading news
A Law Against Lying on the News
Why Canada has one and the U.S. doesn’t.
Document Actions Email Feed Share by Dave Saldana
posted Mar 17, 2011
==================
which paper is real?
http://snarxiv.org/vs-arxiv/
=====================
which person is real
Fake Tweet Builder. Make your own Twitter conversations
A site called ” Lemme Tweet That For You” lets you create fake tweets
False Tweets Lie Detector Could Sort Through BS

– a medical tourist returning back to canada with a botched operation/resistant bacteria

http://blogs.justice.gov/main/?s=medical+fraud

#167 jess on 03.05.14 at 4:52 pm

bitcoin

Head of virtual currency exchange found dead in Singapore
Published: Wednesday, 5 Mar 2014 | 11:37 AM ET
http://www.cnbc.com/id/101468694

#168 Son of Ponzi on 03.05.14 at 5:04 pm

72 weekly flights to China out of YVR.
And growing.
http://www.richmondreview.com/news/248421501.html

#169 angela on 03.05.14 at 5:23 pm

If you make $500,000 in Ontario your tax rate is 46.4%, but in Alberta, it’s 39%. Nobody in this country pays half their income in tax – that is a myth. Just feels like it. ~Garth~
so if its a 46.4% tax then add 13%HST on all purchases that is 59.4% tax going to various governments thats more than 50%tax and you did what in parliament

I referred to tax on income. Not consumption. Duh. — Garth

#170 angela on 03.05.14 at 5:29 pm

I referred to tax on income. Not consumption. Duh. — Garth
you are correct just wanted to highlight the fact that well over 50 % of our money goes for taxes

You could do it without insult. It diminishes you, not me. — Garth

#171 Exurban on 03.05.14 at 5:37 pm

Whenever anyone discusses the facts about Canadian immigration/worker/student arrivals, condescension and insults follow as sure as the sun comes up.

As for the net population change described by Longterm #140, yes any serious demographic inquiry must consider emigration and deaths, but the population of the B.C. Lower Mainland has almost doubled since the 1980s, and is up 9.2 percent from the 2006 census. This is among the highest growth rates in the continent.

As for the perfect invisible hand world described by Mark #126, SFH values in the Lower Mainland have tripled since the 1990s. Rents have also gone up — certainly not as much as SFH values, but observe that they have definitely not gone down in spite of the manic condo building. This is one of our serious problems — the Canadian economy can go up and down, but shelter costs have only gone up in Greater Vancouver since a brief blip in the early 1980s — before the era of massive immigration kicked off by Brian Mulroney after 1987. There are significant land restraints in the Lower Mainland, such as the Agricultural Land Reserve, the swarms of NIMBY and BANANA greens, and the traffic congestion caused by their opposition to road-building in general and freeways in particular. The close-in-to-Vancouver areas are in the process of being totally infilled, something you can observe by driving/walking/biking around any neighborhood in Vancouver or Burnaby.

While we’re at it, in my own job I observe and meet with international students regularly, and I can assure you that many of them are quite affluent. They have to be to afford the jacked-up fees charged them by our educational institutions. Many indeed drive luxury cars and live in condos bought for them by their parents. The existence of some affluent Chinese-Canadian students in no way nullifies this reality. BTW if I had made a typo like “strudenst” I’m sure that would have occasioned some extra snark.

#172 jean on 03.05.14 at 5:57 pm

Ouch, check out number 1.

Vancouver condo bought for 840k in June 2007. Now listed for 630k.

http://vancouverpricedrop.wordpress.com/2014/03/05/weekly-drop-metro-vancouver-attached-march-4-2014/

#173 Adrian on 03.05.14 at 6:03 pm

Where are these $1M houses that rent for $4000. In Toronto where any decent crackshack is close to a mil, a comparable house would rent for $2500, $3000 tops.

I’m not trying to be a wise ass, just wondering. Do houses is smaller cities have a better cap rate… that much better?

#174 Carpicker on 03.05.14 at 6:14 pm

HAMis fighting back….

http://www.zerohedge.com/news/2014-03-05/chinese-1-threaten-lawsuit-against-canada-shutting-visa-cash-scheme

#175 mark on 03.05.14 at 6:18 pm

I expect CREA will be joining the rich Chinese lawsuit against the Canadian government!

Global National probably speaking to Greg Klump tonight!

#176 bguy1 on 03.05.14 at 6:36 pm

#169 & #170 Angela

1) HST is not collected on all transactions
2) GST/HST collected by the Feds as a percent of GDP is ~1.7% (http://fin.gc.ca/afr-rfa/2013/report-rapport-eng.asp#a3 & http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ50-eng.htm)
3) Your calculation does not make any sense, and is not even possible in reality

#177 espressobob on 03.05.14 at 6:38 pm

#163 Old Man

Hacking is always a concern! Maybe the link below might help?

http://www.rbcdirectinvesting.com/guide-to-online-security.html

#178 GUY GADBOIS on 03.05.14 at 6:38 pm

Gold and silver good for gamblers, not investors. — Garth

in serious portfolio, it’s good to have about 5% invest in precious metals. It’s called : diversification!

1% is pushing it. — Garth

#179 Second Hand Smoke on 03.05.14 at 6:49 pm

The Post City Magazine Real Estate (Circle J$%#) Roundtable was just posted online.

http://www.postcity.com/Eat-Shop-Do/Do/March-2014/Post-Citys-Seventh-Annual-Real-Estate-Roundtable-Looking-ahead-to-the-2014-spring-market/

Nauseating on so many levels. I think that the Kardashian family is more grounded in reality than some of the people on that panel.

Please note my absence. — Garth

#180 Pounding sand in Peachland on 03.05.14 at 6:49 pm

The five-year fixed-rate mortgage has dropped as low as 3.09% with discounters and the major banks aren’t too far off that rate, most of them offering special deals. All this comes as yields in the bond market have dropped, sending fixed rates down.

Food 4 thought

#181 Longterm on 03.05.14 at 6:49 pm

#171 Exurban on 03.05.14 at 5:37 pm

I don’t believe and insults originated in my email though I note the backahnded typo one flung at me.

Sure in-migration in the Lower Mainland is high and above most places.

Some of this could be immigration, some foreign students, some in-migration from elsewhere in BC and Canada. You can control economic migration and immigration into the country but movement of those migrants and immigrants within the country is more difficult, probably impossible. And you can’t control internal movement of other people. If people want to live where it’s not ball breakingly cold so be it.

As for the ALR, sure, remove all that rich alluvial land from the ALR and build more houses and freeways. Who needs food when you can have sprawl.

More to the point, since you seem very concerned about this issue, I’m curious how you would handle immigation, migration, net movement of people internally and pay for an aging boomer population with a low internal birthrate? Give us your policy.

#182 gladiator on 03.05.14 at 6:58 pm

Garth, do I care if the tax I pay is on income or it’s HST or it’s excise tax, or gas tax, or property tax or etc.?
The taxes we pay are in excess of 50% of our gross income and that’s for sure. I know you meant just the income tax that we pay, well, on income. But if we bundle all of them into one category called “tax”, then it’s quite a bit over 50%.

#183 sciencemonkey on 03.05.14 at 7:21 pm

Let the boomers suffer poor services in retirement. They borrowed from the future to have too much, so it’s only fair.

It won’t be any big change, just fewer and fewer nurses in the hospital, lower and lower CPP payments.

#184 Pounding sand in Peachland on 03.05.14 at 7:22 pm

read #169 and failed to see insult

#185 Exurban on 03.05.14 at 9:36 pm

#171 Longterm

What you are probably missing here in your panic over migrants…

“Panic” is a loaded term intended to belittle a person expressing an “unacceptable” point of view and thereby shut down discussion. This is an example of both insult and condescension.

What would my plan be? For the general idea, I’ll quote James Goldsmith from when he was trying to oppose destructive policies in the 1990s:

…nations need new blood and new ideas. But they can only absorb a limited amount at a time.

600,000 a year, mostly to Vancouver and Toronto, is over that limit. It’s not just the quantity but the quality. We don’t need to import either an overclass or an underclass, but that is what we’re doing. Let’s start with the underclass. The so-called Temporary Foreign Workers program, as that article I linked describes, is primarily bringing in workers for employers like Tim Horton’s, Subway, food processing plants, and convenience stores. This program should be scaled way way down, and restricted to highly skilled workers who are so hard to find that the employer is willing to pay a substantial yearly fee to bring them in. The quarter-million temporary workers who have been arriving each year aren’t buying many houses, but they’re occupying a lot of rental units and keeping wages down in jobs that unemployed Canadians could be doing. BTW, if our federal government changes, how difficult is it to imagine Justin Trudeau granting those “temporary workers” permanent residency with a stroke of the pen?

The 265,000 regular immigrants a year should be reduced by about a third, and the focus should be on skilled workers. Yes, that’s what the present government says they’re doing, but it isn’t true. “Family reunification” is still the biggest part of it, and this could be dealt with by having a yearly quota and waiting list. Oh, and as for the overclass, we’ve now been running the Mulroney experiment of letting rich people buy their way in for over 20 years. Is there anybody other than RE agents and BMW dealers who would claim this has worked to the benefit of Canadians?

Internal migration of Canadians to B.C. has decreased to an insignificant amount. There aren’t that many jobs, and Vancouver is too expensive. Since the 1990s there has been outmigration of young educated people from the Vancouver area, precisely the kind of people most needed for the future. The impact of the newcomers has most likely suppressed the population growth of the native residents. Google “affordable family formation”. Of course bad local government has played a role here, but having a million people move here from other countries doesn’t seem to be having a positive effect on politics.

As for the farmland and freeways thing, first I was replying to another poster who claimed there were no real constraints on land, and second the infrastructure problems would be nowhere near as bad if growth had been, say, about half of what it has been for the last 20 years. The ideological opposition to freeways hasn’t stopped people from commuting to work; they just do it more slowly. What traffic congestion does do is drive up the price of centrally-located real estate. And speaking of centrally-located, downtown Vancouver is now a freaking cement beehive. It’s hard to believe that the people who restricted farmland actually wanted this, although I may be giving them too much credit.

#186 Mike in Germany on 03.06.14 at 12:38 pm

“The adjusted cost base of the REIT is altered each time, ”

“(unless you sell the REIT at a loss, and pay no tax)”

This goes against my own understanding. Is there something special about REITs?

From what you describe, for something like XTR, which has a return of capital component and mostly looks flat in price, if the price is the same when you sell it, you shouldn’t get dinged.

But I understand that the return on capital lowers the “price” you bought it at, meaning that when you sell it, even at the “same” price you bought it at, you’ll be paying the difference as capital gains.

I was considering dumping XTR as too much voodoo for an ETF, but now I’m going to have to do more reading and thinking.

If this is different for REITs than income ETFs, then I’ve really got a lot of reading to do.

Thanks for the self-doubt.

#187 IgnoranceIsBliss on 03.06.14 at 1:18 pm

@184: Insult from 169 is here (I added all caps for you, but left the poor spelling and questionable math intact):

“that is 59.4% tax going to various governments thats more than 50%tax AND YOU DID WHAT IN PARLIAMENT”

#188 confused says on 03.06.14 at 6:45 pm

Was the word reprobate?