Show us the money

stick-people

On a sleepy Friday in Ottawa the feds signaled they intend to overhaul the plan that protects Canadian bank accounts. About time, eh?

As you may know, you have coverage of up to $100,000 for you, your spouse plus with a joint account. In general, coverage is restricted to savings accounts, braindead GICs and moribund term deposits, all with a shelf life of under 5 years. The insurance is per institution, so if you have a million saved and want coverage, you must deal with multiple banks. Some provinces have unlimited coverage of deposits at credit unions, but good luck with that.

Well, is this adequate? Are the feds finally about to raise that paltry limit, the way governments did in Europe and the US during the 2008-9 crisis? After all, investors who have their net worth in accounts covered by CIPF (Canadian Investor Protection Fund) enjoy insurance of $1 million each for cash in registered accounts, and up to another million for non-registered ones. Does it make any sense that a dude with  brokerage investment savings accounts or cash gets $2 million in coverage in case of insolvency and the schmuck with $200,000 in CIBC GICs is only 50% protected?

Meanwhile, to the south, coverage is vastly higher – $250,000 per person, per bank, protecting not only cashable savings but registered retirement accounts and a few other key vehicles. The increase to that level was a dramatic response to the credit crisis which resulted in the shiving of a few high-profile banks.

Well, guess what? Ottawa is launching a review of CDIC and asking for input, but there are zero plans to increase the insurance, says finance guy Bill Morneau. So much for consultation. Says his department:

“The review indicates that major changes to the framework are not required and that the current $100,000 limit remains appropriate. The analysis undertaken for the review indicates that raising the deposit insurance limit would not enhance protection to the savings of the vast majority of individuals in Canada, whose deposit accounts are currently covered under the framework. In line with international best practices, Canada’s framework covers the large majority of depositors but leaves a substantial amount of deposits exposed to the possibility of loss in the event of a bank failure. Therefore, uncovered depositors have an interest in the risk management practices of the member institution.

“Increasing the limit would provide a proportionally higher benefit to corporate depositors, while increasing CDIC exposure which would need to be offset through additional premiums paid by CDIC member institutions.”

If this logic sounds vaguely familiar, you must have a TFSA. It echoes the T2 decision to gut the tax-free account contribution limit because ‘average people’ aren’t making maximum use of the tax shelter since they’re too busy pickling themselves in debt and buying slanty semis on dodgy streets. Therefore it’s perfectly logical to penalize others who are saving and investing for their futures. Apparently we should all have the same future.

Here’s something else interesting: of the $2.7 trillion Canadians have on deposit with the banks, a shocking 73% of it isn’t covered by any kind of insurance. This is money people and companies have given the banks in excess of the CDIC limit, which is locked into vehicles with maturities of five years or longer, or in foreign currencies. It means that in the event of a bank collapse (ain’t gonna happen), a whole mess of cash could be burned.

So what’s this review all about?

Not much. Morneau plans to eliminate coverage for accounts that banks use to pay taxes on behalf of homeowners, add RESPs and registered disability accounts, cover deposits of more than five years, insure temporarily-high deposits (like when you sell your houses and get a big lawyer’s cheque) and maybe deposits in selected foreign currencies.

Two observations: first, our low level of deposit insurance is a reflection of the dismal state of most people’s affairs. Remember – this is a country where household debt (as of this year) exceeds the size of the total economy. Also, as the Ontario Securities Commission just found out in a poll, 56% of Canadians over the age of 50 have no retirement savings plan, and 22% haven’t even started saving.

gdp-and-debt

So there ya go. Record, epic, historic debt. And most people have no plan. No wonder the feds can say a hundred grand coverage is plenty – since millions will never, ever have that kind of cash, despite the fact they can buy a $1.2 million house. This is the legacy of the cheap-rate, lax-lending policies T2 inherited, and is happy to maintain.

Meanwhile here’s an interesting thought: if you had a million in savings to give the bank, only $100,000 would be covered and you’d get 0.55% from its high-interest account. If you opened an account with the bank’s full-service brokerage arm, your investment savings account would pay 1.2%, and every single dime would be insured against collapse.

Don’t tell Bill.

123 comments ↓

#1 Banker on 09.16.16 at 6:32 pm

So are you saying Banks are going to fail and we should be worried about how much insurance we have?

I said the opposite. Sheesh. Open your eyes. — Garth

#2 ILoveCharts on 09.16.16 at 6:32 pm

Serious question: Since this blog has suggested many times that the Canadian banks will never fail – why are we even thinking about insurance?

#3 Bram on 09.16.16 at 6:41 pm

I have little use for insurance indeed.
My surplus money goes either towards mortgage debt, or preferably, to the stock exchange.

Could I lose it? Sure, if one of my holdings goes bankrupt.
But for every stock that goes to zero, there will be two that double in price, so no biggie.

Insured cash? Don’t need it.

#4 Self Directed on 09.16.16 at 6:42 pm

Garth, possible link error… From ‘Merciless’ I was able to click ‘Book Updates’ and got today’s blog posting… even before Jimmy!

Good read today!

#5 Bytor the Snow Dog on 09.16.16 at 6:47 pm

If the banks are never going to fail who cares what the insurance cap is?

PS- Morneau is right.

PPS- It appears the Butthurt have won the Battle for the Comments Section.

Does that make me butthurt?

#6 Anne Moore on 09.16.16 at 6:48 pm

Garth, do you have advice for any of the individuals seeking/considering leadership of the CPC or NDP? Serious question, because many ideas expressed here could be important in formulating an effective Opposition in Ottawa, something sadly lacking right now.

#7 A Yank in BC on 09.16.16 at 6:52 pm

A Bank account? How 1994 can one get?

#8 Jimmy on 09.16.16 at 6:52 pm

So, you’re saying cash just sitting in an RBC brokerage investment savings account pays me 1.2%? Simple as that?

I said an investment savings account, or a money market fund. — Garth

#9 Nodebt on 09.16.16 at 6:53 pm

Does anyone have any rentals up in Prince George? If so how’s it going with them?
Thx

#10 china money on 09.16.16 at 6:57 pm

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#11 Suede on 09.16.16 at 7:00 pm

So speaking of this…

got a mortgage broker to find a lender with a solid rate and other goodies that comes with the package.

Wife and me make solid household income to carry lofty mortgage if need be.

Are putting a solid down payment down (50%+) on a place. (don’t worry, fully diversified rule of 90).

Non stop questions from lender…

‘where did you get the money from’
‘what jobs have you done in the past’
‘any bonuses or windfalls contribute to this down payment’?

i felt more violated than when i go through YVR airport security with a belt on.

I asked the mortgage broker, what’s up with the 20 questions? We have the money. And sold into the mania in the spring.

Mortgage broker told us that if we had a Chinese last name, they wouldn’t even bother checking.

This is similar to what the Globe and Mail investigation uncovered.

Kind of messed up.

Makes me worry about all the people that have tiny downpayments, tons of mortgage debt and just a steady corporate pay check.

The lenders seem to favour the employee type that make a fixed wage that doesn’t go anywhere and bestow a lot of debt on them.

Oh Canada..

#12 Mark on 09.16.16 at 7:03 pm

I’m a big fan of the idea of reducing deposit insurance to significantly beneath the current limits.

Why? Because the whole idea of deposit insurance has incented Canadians to “invest” way too much in loans to banks (sometimes called ‘deposits’), and not enough in actual at-risk business. The RE bubble has largely been created through excess amounts of credit available in the economy. We know that banks must borrow every dime they lend out. Hence, if deposit insurance is reduced, if not substantially eliminated, this will attack the debt bubble at its source — the lenders.

Also, with deposit insurance reduced/eliminated, more funds will flow to banks that can show the market that they’re making prudent loans in support of legitimate and useful industrial development.

My proposal: deposit insurance be only available on deposits “owned” by a single beneficial owner (not joint accounts or trusts). Deposit insurance be limited to $100k per SIN across all insured banks.

#13 Francis on 09.16.16 at 7:05 pm

Just curious where you find a saving account at RBC direct investing at 1.2%?

Where did I say RBC Direct? The brokerage arm. — Garth

#14 Ben on 09.16.16 at 7:12 pm

If banks will never fail and this insurance only applies to federally legislated institution, why are we worried? Why should they increase this? I fail to see the relevance. Or it is possible that I missed something.

#15 bigtowne on 09.16.16 at 7:14 pm

Is the 1.2% on savings account good at the RBC Discount Brokerage? This is one of the reasons I get my money’s worth on this blog. Muchas Gracias muchacha Garth.

#16 Rexx Rock on 09.16.16 at 7:14 pm

A lot of people moved their money to Tangerine because of the 2.4% for 6 months.As for debt,we all know interest rates are going down so money will be even cheaper.
One thing Canada has going is the big banks will do everything they can do to launder your money to invest in real estate.

#17 Doghouse Dweller on 09.16.16 at 7:18 pm

I think we are down to .75% now since the last Polozo pillage.

RBC Investment Savings Account (RBF2010)
TD Investment Savings Account (TDB8150)

http://canadiancouchpotato.com/2010/10/12/parking-cash-in-your-portfolio/

#18 mark r on 09.16.16 at 7:27 pm

All my money is in tulip bulbs.
They’re gonna make a comeback. Just you wait.

#19 Sheane Wallace on 09.16.16 at 7:33 pm

#12 Mark

————————-

Apparently you did not get the memo.

Money loaned is not money saved. Period.
Stats Canada just told you that nobody has savings (savings rate decline), but vast majority has debts that is growing.

There is no savings glut that justifies low/zero interest rates.

100 k in a bank is nothing. 1/15 of a crappy shack in To/Van.

Government’s role is to provide just rules for everyone, not to look at majorities, averages etc. These are excused by weak politicians and incompetents. Plenty of them out there.

If we have majority or idiots, look at the results…

Titanic was unsinkable and no investment bank in the history of Wall street ever failed unless caught in criminal activity (the Big Short, 1:53:12, re: Bear Stearns). ya, right.

#20 Smoking Man on 09.16.16 at 7:37 pm

This is why it’s good to spread your loot to as many trading insured corps as posable. Never leave more than a million in one account. That’s called being diversified.

#21 Chris on 09.16.16 at 7:45 pm

I haven’t seen it mentioned, but most banks have additional $100,000 CDIC limits that they can expand through some of their subsidiaries (Bank A trust co, Bank A mortgage co, etc.) to expand the overall CDIC coverage–under the same account number.

This was really only for issuing GICs/CDs/term deposits so you couldn’t have a high interest savings account issued by all 4 in order to expand your coverage. But, you could get by that hurdle with flexible/cashable term deposits. Most middle-of-the-road-term-deposit-only folks were covered that way.

Source: Worked at the big blue machine and the flying red “S”. Both could expand coverage to $400,000 per depositor account this way. From what I remember, they’re not permitted to advertise it at all other than listing which of their companies are CDIC member companies.

#22 JSS on 09.16.16 at 7:46 pm

If the government is making it useless for Canadians to save and invest, yet making it easier for the masses to buy million dollar houses…then what’s the point? Why be a responsible saver/investor? Why not join the masses? Personally I’m losing steam…

#23 Metaxa on 09.16.16 at 7:46 pm

# 5 Bytor the Snow Dog writes:
PPS- It appears the Butthurt have won the Battle for the Comments Section.

I don’t think its about winners and losers.
I doubt that anyone has been banned or otherwise silenced, rather some are simply not posting until they figure out the lay of the land.

What I can see is if this new civility prevails then actual questions will be asked and answered, opinions will be shared even among those who do not self identify as 1%. The lurkers, if you will, now maybe can feel able to participate. Without ad hominem.

Plenty of times I felt I had a helpful answer or opinion to a post but didn’t make it because I am wary of once again being called a libtard or whatever.

So…don’t be butthurt be happy!

I am…life is good.

#24 Self Directed on 09.16.16 at 7:48 pm

Did everyone watch this Government video on Budget 2016? We are simple people to govern, aren’t we?

http://www.budget.gc.ca/2016/home-accueil-en.html

It’s called: “Restoring Hope for the Middle Class”

I love that the artist even included some vacant apartment windows… very accurate for the times.

Garth, do not watch this video. Your head will explode.

#25 LowRent of Arabia on 09.16.16 at 7:48 pm

Exactly GT…people with no car or driving license don’t need vehicle insurance.

Nothing to see here. Move along sheeple. Baaa baaa.

#26 Timmy on 09.16.16 at 7:49 pm

From the Financial Post
“The Pacific coast province, which imposed a 15 per cent tax on foreign homebuyers in July to cool Canada’s most expensive property market, expects overseas investors to scoop up about $4.5 billion in real estate through March 2019, according to new estimates from the provincial government. “

#27 Oot of the Hoos on 09.16.16 at 7:50 pm

I missed the drama day, but I see I can still be commiephobic and hate my Trudeau-liberal and Harper-liberal and Tommy-Douglas-commie neighbours for contributing to the death of my wife in the commie hospital, infested with 1/3 incompetent nurses and doctors who would not be in business in the old diverse medical system.

Also, I am sure Garth meant he fired one shot, was the second shooter, and he yelled first while doing so. Then he is correct. It is irony.

I had to read it a few times to assure myself it was irony and not some other literary device.

#28 LowRent of Arabia on 09.16.16 at 7:54 pm

BTW…anyone notice that Harper is living the Vida Loca. Great new job, flush with private cash and chilling with people who don’t bark at him like snowflake social justice warriors.

Good for him. He deserves a break.

Meanwhile back in Snottawa…Selfie the Feminotsofast PM goes to a segregated place of worship to celebrate Canadian values of treating women as second class members of society.

FUBAR my friends. Waiting to get my vote back.

#29 Timmy on 09.16.16 at 7:59 pm

Make housing fix a top Priority Minister Says…
Is that why Trudeau is doubling the number of visa offices in China? The %&%% idiot

http://www.theglobeandmail.com/news/politics/ottawa-making-housing-fix-a-top-priority-minister-says/article31924658/

#30 Mark on 09.16.16 at 8:02 pm

“There is no savings glut that justifies low/zero interest rates.”

Just what exactly is funding the housing bubble then? Every loan ultimately comes from someone’s savings. For every liability of highly indebted Canadians, there’s someone who has claim to such as an asset.

#31 Dave on 09.16.16 at 8:07 pm

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#32 #hugAmillennial on 09.16.16 at 8:08 pm

I agree with Mark on this one. Maybe we can encourage all the old wealthy people to do something productive with their cash.

#33 Timmy on 09.16.16 at 8:08 pm

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#34 where2go on 09.16.16 at 8:14 pm

#9 response to NODEBT
I assume your a bit of a youngster and want to get into the rental market?
PG from what i can see, has one of the highest returns in bc. my sisters friend owns a 3 plex there and brings in 2800 a month. She paid around 173k for it in 2012….so something to think about.

#35 ShawnG in TO on 09.16.16 at 8:15 pm

puny 1.2% interest got so many excited. sheeeesh

#36 Wrk.dover on 09.16.16 at 8:15 pm

Same guy, respectfully new name-Rule #1

My old name came about the first time I responded on this site I was wailing about how I was the last person on earth wanting higher interest rates. No mortgage holder, budget director, business owner, etc. nobody at all is going to lobby with me to raise interest rates.

Tonight’s post, the same thing, very few will lobby for CDIC, when they are in the record depths of a debt hole.

As I signed on that post too, I am Wrk.dover, and respectful of the new way of life on this blog

#37 Timmy on 09.16.16 at 8:21 pm

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#38 Timmy on 09.16.16 at 8:22 pm

57 million in Vancouver real estate owned by students with no income:

http://globalnews.ca/news/2942224/57-million-in-vancouvers-point-grey-real-estate-owned-by-students-ndp-housing-critic/

Of course the high prices are not due to foreigners lol

You are obsessed. — Garth

#39 John in TO on 09.16.16 at 8:27 pm

Canada’s “Minsky Moment” is approaching http://dir.richardsongmp.com/web/MacBeth.Team/canadas-minsky-moment

#40 Mishuko on 09.16.16 at 8:29 pm

I’m sort of confused… isn’t this why we have custodians because of Murdock?

Plus if I own 100 shares of apple, my broker goes under wouldn’t I still be the beneficial owner of those shares at the registrar/transfer agent?

#41 LowRent of Arabia on 09.16.16 at 8:34 pm

#30 Mark

“Every loan ultimately comes from someone’s savings.”

Sorry, I beg to differ on that. Perhaps it just your wording.

Banks only need retain a percentage and can lend more than deposited funds thus adding to the overall money supply. So a 100K deposit does not equal 100K in loans. Loans are much higher than the guy’s 100K. So not every loan comes from savings.

Fractional banking.

#42 J0N on 09.16.16 at 8:36 pm

Looking at the debt vs GDP is just too depressing. But this is just made my day. Sorry if this has been posted before.

https://www.youtube.com/watch?v=0YM9Ereg2Zo

#43 wicked as it seems on 09.16.16 at 8:40 pm

RBC direct investing has the mother of all web sites for where your money goes, how it goes, what research and it is fully covered as G said….leaving 99,900 in my RBC bank account making dick is still part of a financial strategy, sudden forex buying, emergency cash.
Your funds can all be in one place with a little planning and totally mail free!

#44 Darry on 09.16.16 at 8:53 pm

DELETED 2 (No matter how many names you use…)

#45 Interstellar star stuff on 09.16.16 at 8:59 pm

#20 Smoking Man on 09.16.16 at 7:37 pm
This is why it’s good to spread your loot to as many trading insured corps as posable. Never leave more than a million in one account. That’s called being diversified.

That was funny!! I feel the pain it took you to type that without violating the 12 rules… You’ll never make it!

#46 Mark on 09.16.16 at 9:00 pm

“Fractional banking.”

Fractional banking only means that it is possible to leverage (ie: borrow to fund the purchase of an asset such as a loan). It doesn’t mean that assets != liabilities at the banks. Hence, a bank cannot fund an asset (ie: a loan) without first taking on a liability (ie: a deposit, or an issuance of equity). They call it a ‘balance sheet’ for a reason — it has to balance.

Many people are confused about what ‘fractional reserve’ banking really means, and think that it implies some exorbitant privilege. But in reality, banks do nothing that the general public cannot. They just do it on a scale and in a manner that brings public confidence to their institution.

#47 another option on 09.16.16 at 9:08 pm

#44 Darry on 09.16.16 at 8:53 pm

DELETED 2 (No matter how many names you use…)
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would it still work if your using smart browser, like Tor. lol.

#48 45north on 09.16.16 at 9:13 pm

Shared Services Canada: Canada’s chief statistician, Wayne R. Smith, has unexpectedly resigned, saying the federal government’s new tech support agency, Shared Services Canada, could gain “substantial control over Statistics Canada’s program.”

http://ottawacitizen.com/news/local-news/canadas-chief-statistician-quits-statistic-canada

remember that the raison d’être for Shared Services was cost savings. For example each Department had its own separate email system. Shared Services was going to save all kinds of money by having just one. What a joke! Cost of Shared Services is $1.4 billion a year plus $383 additional cash.

http://ottawacitizen.com/news/politics/why-an-extra-384m-may-not-get-shared-services-over-the-hump

i worked 10 years at Stats Canada. People there were dedicated. They did good work.

The obvious solution is let the departments run their own IT. That doesn’t mean that cannot be co-operation among departments or they cannot share best practices.

#49 For those about to flop... on 09.16.16 at 9:18 pm

The goings on occurring on this blog the last couple of days had me reflecting today at work today how far I have come in the last two years.

When I first come here I had no Tfsa ,nor did my wife.
I still don’t have a RRSP but my wife was concentrating on hers.

We both now have maxed out TFSAs ,I gifted my wife some money which I learnt on here and recommend to my wife that she lower her amount of exposure to Canadian investments in her RRSP.

By slowly switching money from my savings account to my tfsa and non registered accounts I am in better shape for the future and don’t have to worry about insurance as much as well.

I also tried to educate my Father in law about how he could defer his property taxes as they have a lot of house but not a lot of money.

Also stopped looking at condos and accept that we will be renting for the foreseeable future and will travel and invest the rest.

It will take a while for me see any difference financially from these changes but at least a base has been layed.

So many other things I have changed as well,I might come across as a fool but with the help of you guys I doubt that I will be the greater fool…

Peace,Flopper

M42BC

#50 Freedom First on 09.16.16 at 9:19 pm

Yes. Interesting. $Trillion not insured. I did not know that. Of course, I am not surprised.

Bought more of the ETF CPD today before I heard of the # of $ uninsured. For some reason it makes me feel even happier.

Getting to like the new rules. I am being attacked much less frequently now. And none of my Impersonators have posted since the new rules. And while I enjoyed their comments, several of my fan club members were way over the top. I could end up being banned if they resume commenting. Garth knows all of my comments have come from the same address, and I have only used my real name and my Freedom name. I accept whatever happens, as I am out of anyone’s control. Freedom First.

#51 nonplused on 09.16.16 at 9:19 pm

The problem with the CIPF is that it is not a government guarantee of any kind, it is a not for profit private company funded by the member institutions. In the case of a big default I am not sure they have much money to back their program and none will be forthcoming from the government.

RRSP’s are a good way to protect your investments because your broker cannot lend them out and has to take possession of the stocks or whatever is in there. They are also not considered company assets in bankruptcy so in theory you eventually get them all back (but it could be a while). Cash accounts are also better because your broker cannot lend out your holdings. However anything in your margin account is fair game and you may never see it again.

#46 Mark – you are mostly correct.

https://en.wikipedia.org/wiki/Fractional-reserve_banking

However it is still the case that when the loans go bad the money isn’t there anymore. And they aren’t limited to loaning out deposits, they can issue bonds, borrow from the Fed, all kinds of things. It is the Fed (or central bank) that can issue currency against assets.

“Anything in your margin account is fair game and you may never see it again,” is an untrue statement. This is exactly what the CIPF is in place to protect. — Garth

#52 YVRtechGuy on 09.16.16 at 9:24 pm

Garth – on the subject of the TFSA – the Income Tax Act (http://laws-lois.justice.gc.ca/eng/acts/i-3.3/page-232.html#h-134) still states that the dollar limit for 2016 is $10,000.

Considering that Canada is governed by Acts of Parliament, and not political party press releases, does this mean I can stuff $10,000 in my TFSA this year? It seems a very grey area … the legislation says one thing …. but Government policy says another.

Not grey at all. The budget changed the legislation, retroactive to the first of the year. — Garth

#53 Andrew Woburn on 09.16.16 at 9:25 pm

Canadian governments would to make housing affordable but they can’t afford to.

“British Columbia will haul in more tax revenue from the sale of homes this year than its combined revenues from the province’s historical economic foundation of mining, energy, forestry, Crown land tenures and natural gas.”

http://www.theglobeandmail.com/news/british-columbia/hot-real-estate-market-lifts-bc-budget-into-billions/article31901625/

#54 Ret on 09.16.16 at 9:27 pm

My understanding is that my US$ accounts in Canada are not covered by CDIC but my US$ accounts in the US are covered by FDIC even though I am an alien. I fill out US forms every 2 years to keep my alien status. Who knows, maybe they’ll offer me citizenship.

It’s awful living in a third world country led by financial leaders like Morneau. He needs to get out more.

When I go to any of the big Canadian banks or trust companies, they have three or four financial bank entities or subsidiary banks connected to them.

Each sub-bank will offer $100,000 of CDIC insurance to an individual and $300,000 to a couple. They have a work around the $100,000 limit so why not just go to a $250,000 limit and stop trying to micro-manage Canadians?

By the way, no one should ever insure to the $100,000 CDIC limit anyway unless they want to kiss their interest goodbye if there is a bank/trust company default but that will never happen. Right?

#55 Smoking Man on 09.16.16 at 9:31 pm

#45 Interstellar star stuff on 09.16.16 at 8:59 pm
#20 Smoking Man on 09.16.16 at 7:37 pm
This is why it’s good to spread your loot to as many trading insured corps as posable. Never leave more than a million in one account. That’s called being diversified.

That was funny!! I feel the pain it took you to type that without violating the 12 rules… You’ll never make it!
……

My fear is, with the 12 commandments we will all be typing Mark style soon. The horror.

#56 hope & ruin on 09.16.16 at 9:33 pm

Fractional banking comes up so much around here, I’m now thoroughly confused.

On the one hand, what Mark says doesn’t that bad. On the other, I’ve seen him double down on being wrong plenty in the past.

#57 hope & ruin on 09.16.16 at 9:35 pm

*doesn’t SOUND that bad.

I a word

#58 For those about to flop... on 09.16.16 at 9:40 pm

#55 Smoking Man on 09.16.16 at 9:31 pm
#45 Interstellar star stuff on 09.16.16 at 8:59 pm
#20 Smoking Man on 09.16.16 at 7:37 pm
This is why it’s good to spread your loot to as many trading insured corps as posable. Never leave more than a million in one account. That’s called being diversified.

That was funny!! I feel the pain it took you to type that without violating the 12 rules… You’ll never make it!
……

My fear is, with the 12 commandments we will all be typing Mark style soon. The horror.

/////////////////////////////////

After I invest my money in my tfsa each year whatever is left over I am going to spend on buying 3 syllable words from Mark…

M42BC

#59 Some Perspective on 09.16.16 at 9:41 pm

Hi Garth,

In reference to post 29, could we please have a little perspective on the new Visa offices in China. Most Canadian Chinese believe the new system will reduce the number of Chinese coming as immigrants and perhaps significantly. Currently, a Canadian Visa (for any purpose) is the HARDEST visa to get in the world. We did a visitor’s visa application for my in-laws in China this summer, and the dossier was an inch and a half thick and took 40 hours to complete. A Chinese citizen must provide (fully translated) proof that they have a significant educational background, own property, own cars and have a significant amount of money in the bank. Permission letters have to be given from all employers and significant information is collected about all first degree family members. This is only about half of the paperwork.

This is for a three week vacation next summer.
My brother-in-law was only given a two year Visa. His family has assets greater than 500k Canadian, and they have zero interest in immigrating here. I was recently given a ten year Chinese Visa after submitting two pieces of paperwork.

Currently, the actual Visa application process is somewhat lax. The applicant in China can provide their information to an agency that can process all of the paperwork. The paperwork can be embellished, but it is hard to fabricate. As of 2018, the system is changing. Nobody knows exactly what will happen, but it is known that applicants will HAVE to go to the new Canadian Visa offices to make the application and Biometric data will be taken. It also appears that applicants will have to do the ENTIRE application process at the Canadian office instead of mailing it in. In the purpose of truthfulness, the latter requirement has not been announced, but speculation about it is rampant.

The change in application is process appears to be the real reason for the increase in offices. Tudou (Chinese name for the PM Trudeau meaning Little Potato) is really just trying to save face with the Chinese authorities and Chinese Canadians with the announcement of the increased offices. The Canadian Chinese community mostly believes that fewer Chinese will be given immigrant Visas to Canada as a result of the changes.

#60 ww1 on 09.16.16 at 9:41 pm

#44 Darry on 09.16.16 at 8:53 pm
DELETED 2 (No matter how many names you use…)

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I’m sort of hoping the same smart guys that wrote the browser plugin that auto-removes SmokingMan’s posts will also release something that translates deleted codes (1-12) to English (1=Language, 2=Slur, 3=Ad hominem, etc ).

Or maybe just removes the Deleted posts entirely.

#61 Sheane Wallace on 09.16.16 at 9:54 pm

#30 Mark

http://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp

#62 AfterTheHouseSold on 09.16.16 at 10:10 pm

#56 hope & ruin
“Fractional banking comes up so much around here, I’m now thoroughly confused.”

Shhh. Be very, very quiet or you might awaken Shawn.

#63 Nodebt on 09.16.16 at 10:14 pm

#34 where2go
Great return for her that’s nice…42 live in the interior with a few rentals, returns are wicked but stuff is getting expensive, pg there still cheap but in 10 years they gotta go up, I’m looking for cash flow, nothing’s better than the 1st of the month
Nodebt

#64 45north on 09.16.16 at 10:18 pm

Timmy: from your link: The minister responsible for drawing up a national housing strategy says he and other senior cabinet members are having extensive discussions about how Ottawa should act to bring Canada’s housing market under control.

Damn right they’re having extensive discussions! They are watching as Vancouver housing market freezes over. Thousands of sales which don’t happen. Nothing much they can do! Last thing they should do is restrict foreign sales. Garth’s line: there used to be three hot housing markets in Canada and now there’s only one.

For the Federal Government , Vancouver is small beer: they’re only 17 Liberal seats in BC but they’re 80 in Ontario! So whatever is happening in Vancouver cannot spread to Toronto but the issue is the same: no fundamentals! The average family cannot afford the average house.

Here’s what I said before: the Federal Government should disallow the BC legislation taxing foreign buyers. Then call an election. I know this is a radical risky course. Yes and controversial. I know but the Liberals may just be able to ride it out.

#65 Mark on 09.16.16 at 10:19 pm

“#30 Mark
http://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp

The banks need somebody’s money to make loans. Maybe not *your* money. They can make loans out of retained earnings or contributed capital. They can make loans from funds acquired through borrowing in the capital markets. Whether it be commercial paper, bonds, or preferred shares. But the point being, if you want the housing bubble to go away, one way of accomplishing it is to reduce the funding available to housing. Reducing “deposit insurance” will make the people funding the banks (and hence the loans of the banks) think twice before lending to banks that devote an excess of their balance sheet to housing loans, versus loans to other sectors/entities.

The Investopedia article you cited is fundamentally flawed. When a bank makes a mortgage loan, it does not, despite the claims in the article, simultaneously create both an asset and a liability on its balance sheet. It merely creates an asset, and decrements its cash balance. A bank *cannot* make a loan if its cash balance is less than the proposed loan. The bank’s cheque (note) will be dishonoured when the debtor attempts to negotiate it, if the bank does not have the resources. Therefore, the bank must go into the marketplace, and borrow additional funds to fund every new loan it makes in excess of its balance sheet resources.

Interest rates are based on, amongst other things, the quality of the bank’s balance sheet, including the amount of assets relative to liabilities (the difference being defined as the equity of the firm).

Deposit insurance, unfortunately, short-circuits public scrutiny of such, as people are willing to blindly shovel money into loans to banks (“deposits”) with very little scrutiny. And unfortunately, with the demand of very little interest. This is why Canadian banks are basically, from an equity owners’ point of view, a very lucrative proposition and likely will continue being so until Canadian savers smarten up.

#66 Entrepreneur on 09.16.16 at 10:22 pm

Oh so quite here today, even the great Smoking Man. Actually nice, the streaky clean comment section.

It is telling when 56% of over 50 do not have a savings plan; it is tough to make a living out there in the trenches. Is that why less youth think of having families? The dreams are shot.

Growing the middle class stronger is in the Budget 2016 but, but, but where are the jobs? Not here.

#67 Smoking Man on 09.16.16 at 10:24 pm

Just modified chapter 10, I didn’t like it. It’s perfect now, my book is going to be priceless now that my creativity is being forced where it should always been.

Garth in my delusional mind is impatiently waiting for the book like everyone else is.

He knows I have to vent my insanity somewhere.

The 12 commands are the best thing he has done for my writing. I might say screw the London airshow and visit the store at the forks this weekend to thank him.

Garth, what do you drink… Chapter 10… Thank you.

Feeling you got some hybrid Nictonite in you. You have too. You love dogs just as much as my people do.

#68 Mark on 09.16.16 at 10:26 pm

“Currently, a Canadian Visa (for any purpose) is the HARDEST visa to get in the world. “

Oh please… Really? The neighbor married a nice Chinese girl, and they brought the in-laws 2 years ago to help them manage for about a year. Obtaining the visa was trivial. They’re doing it again for the latest pregnancy, again, relatively trivial. There’s even a special process, a “family visitor visa”, specifically designed to expedite/simplify this process for Canadian citizens whose folks are Chinese nationals.

Circumstances arose that they wanted to stay longer last time. The government only required medical exams, and “grandma” actually failed but they were still granted an exemption regardless. They finally left as they had business back in China, but the Canadian system is very accommodating to Chinese citizen nationals who are being hosted by their Canadian families.

#69 Sheane Wallace on 09.16.16 at 10:33 pm

65 Mark on 09.16.16 at 10:19 pm
“#30 Mark
http://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp“
——————

The banks need somebody’s money to make loans…

———————

Oh boy, don’t you refuse to learn?

How can you have increase in loans when savings decline and money velocity is going down?

You are defining new meaning of the word ‘stupid’, literally.

#70 Smoking Man on 09.16.16 at 10:35 pm

I just took a peek into the future. Sorry swaps and Bond traders. This one’s not about you.

It was scary, SJW win if I don’t take action. The horrid result, we punt the dogs and worship cats.

I know I’m not allowed to say I’m hammered so I won’t. But the mind twisters (twisters, notice I didn’t use an acronym for f) I’m evolving with new rules.

Imagen a world controlled by cat people. Garth snap out of this insanity. Let the dogs bark..

#71 Eks dee Sipal on 09.16.16 at 10:43 pm

The dark side of capitalism: Monopolies….

Eyewear industry controlled by just one company, Luxotica: Check out what they did to Oakley

https://www.youtube.com/watch?v=h7H-_8UkmFU

Garth, who insures your million and why? Have there ever been any claims?

#72 Sheane Wallace on 09.16.16 at 10:46 pm

“#30 Mark

How about the following:

Bank writes a mortgage for 1 million on a crappy shack and immediately packages the ‘insured’ mortgage as MBS and sells it to you pension fund with income stream, guaranteed by government for 1.2 millions which come to their balance sheets to cover the ‘temporary/1 day/1 weeks ‘ liability of 1 million.

If somebody needs money (e.g that cheque for 1 million is actually required in cash by the seller) for that 1 day/1 week then as there are no deposit reserves (oops) we have BOC in handy to give you loans at the overnight window rate e.g. 0.5 %.

So voila, you magically make 200 k without getting exposed to risk (due to CMHC and their insurance’) and having no liabilities on their balance sheet as they are not holder of the loan any more.

So you understand now why underwriting mortgages is much more profitable than actually loaning to Businesses?

#73 BS on 09.16.16 at 10:48 pm

Meanwhile here’s an interesting thought: if you had a million in savings to give RBC, only $100,000 would be covered and you’d get 0.55% from its high-interest account. If you opened an account with RBC’s brokerage arm, your investment savings account would pay 1.2%, and every single dime would be insured.

I am not sure which RBC brokerage arm you are referring to that pays 1.2% but RBC Direct pays zero interest on cash balances.

https://www.rbcdirectinvesting.com/pricing/cash-margin-rates.html#cash-balances-credit

RBC Direct is not a full-service brokerage. — Garth

#74 Jason only on 09.16.16 at 10:48 pm

No debt, where in the interior do you live?
Do you have any rentals? I’m also looking for a lucrative cash flow property. I owe 18k on my current mortgage and also am looking in PG. the returns seem catchy Forsure. It amazes me what is forsale up
In the pg area as far as multi family. Happy hunting, jay

#75 Old Dog on 09.16.16 at 11:04 pm

One does not need to keep much cash in a bank other than to pay your bills. You can keep all your cash at your brokerage firm in either Canadian or American cash accounts. As Canadians we have all these ways of saving money, RRSP’s, TFSA’s, and investment accounts where we get a tax break on dividends and capital gains. We just have to get in the habit of spending less than we make. Be careful on the RRSP. if you think your income in retirement will be greater than your working income. Remember you’ll pay full tax on those, but you can always donate it to a charity.

#76 Smoking Man on 09.16.16 at 11:24 pm

DELETED 5

#77 waiting on the westcoast on 09.16.16 at 11:32 pm

I am so happy that others are spending their hard earned knowledge and time on educating Mark… I have given up on that task…

For all of you Millennial cry babies, help me but a home… Waaah…

http://m.metronews.ca/#/article/news/vancouver/2016/09/16/housing-crisis-rally-in-vancouver-on-saturday.html

#78 Stupesing in Cabbagetown on 09.16.16 at 11:41 pm

Maybe I am mistaken, but I understand that CIPF and MFDA IPC cover the dealers in the event of fraud or insolvency. If the fund manufacturers, bond issuers, stock issuers, etc. go belly-up, there is no coverage.

#79 account with RBC’s brokerage arm on 09.16.16 at 11:43 pm

If you opened an account with RBC’s brokerage arm, your investment savings account would pay 1.2%, and every single dime would be insured.

Where did I say RBC Direct? The brokerage arm. — Garth

RBC Direct is not a full-service brokerage. — Garth

===

Would it hurt to spell out what you are referring to, instead of keep hinting?

#80 Ace Goodheart on 09.16.16 at 11:54 pm

The way that money is “created” through interaction between the Chartered Banks, the Central Bank (BoC) and the Provincial and Federal Governments, is very similar to a Ponzi scheme.

Best bet is don’t hold your savings in cash. You want to own the means of production of the products consumed by the masses. Thanks to Capitalism, you can……

#81 $250,000 limit on 09.16.16 at 11:58 pm

Each sub-bank will offer $100,000 of CDIC insurance to an individual and $300,000 to a couple. They have a work around the $100,000 limit so why not just go to a $250,000 limit

====

Forcing people to open multiple accounts at different banks as a work around is effectively a form of government subsidy for the financial industry.

#82 Mark on 09.17.16 at 12:00 am

Bank writes a mortgage for 1 million on a crappy shack and immediately packages the ‘insured’ mortgage as MBS and sells it to you pension fund with income stream, guaranteed by government for 1.2 millions which come to their balance sheets to cover the ‘temporary/1 day/1 weeks ‘ liability of 1 million.

I’m not sure why a pension fund would pay $1.2M for a $1M mortgage. But if they did, the pension fund would be using savings to purchase the $1M mortgage sold by the bank. The bank would thus delete the ‘asset’ of the mortgage from its balance sheet, and would replace such with an asset of $1.2M in cash.

“If somebody needs money (e.g that cheque for 1 million is actually required in cash by the seller) for that 1 day/1 week then as there are no deposit reserves (oops) we have BOC in handy to give you loans at the overnight window rate e.g. 0.5 %.”

If a bank experienced a shortfall of that nature, and needed BoC emergency support, they would have to take assets to the BoC to pledge them for collateral for that loan. The BoC has the ability to conjure money into existence, out of thin air, in exchange for bonds. A mortgage bond would be subject to a significant haircut. And the market would proceed to short RY common equity and other securities as much as possible as being forced to the BoC discount window is a sign of profound weakness. The BoC is “the lender of last resort”.

“So voila, you magically make 200 k without getting exposed to risk (due to CMHC and their insurance’) and having no liabilities on their balance sheet as they are not holder of the loan any more.”

No Canadian loan has an interest rate guarantee for more than 5 years per the Canada Interest Act. And 5-year mortgages yield, what, 2-3% these days at best, net of brokerage commissions/fees/outlays?

So hawking a $1M loan for $1.2M is complete exaggeration and hyperbole. Sure, Canadian banks are making a small amount of money on originating and packaging loans into MBS, as well as servicing. But its nowhere near 20% up-front. The borrower isn’t even paying a cumulative 20% interest on the obligation, so 20% doesn’t even begin to remotely pass the smell test.

I do agree with your sentiment though that the current ‘system’ has been rigged by government in favour of writing too many housing loans, and not enough loans to legitimately productive business. When I first got started about writing about the Canadian housing market, I was astonished to learn that “Joe Sixpack” retail borrowers were paying less to borrow, net of fees, than even major/large corporations with fairly high quality economically critical long-term infrastructure. No wonder the Canadian economy, ex-housing, is in such poor shape! Credit for business should generally be less expensive than housing credit. Credit secured by liquid marked-to-market investments, such as margin accounts, should always be less expensive than credit secured by illiquid collateral such as a residential mortgage. The economic distortions created by government policy at the CMHC have been profoundly damaging to the Canadian economy and Canadian employment.

#83 Nodebt on 09.17.16 at 12:03 am

#74-Jay- I’m in Kamloops, yes I have rentals here. There great cash flow easy 12%, I own them all with my little cousin. Was my cousins idea and we loaded up. Pg looks very interesting. Heading to Vegas next week so when I get back were heading to pg to actually look at rentals and see the real deal. Honestly it’s a know brainer but gotta have balls to do it. Do you have rentals and if you do where abouts? Nodebt

#84 slumKing on 09.17.16 at 12:07 am

DELETED 2

#85 Smoking Man on 09.17.16 at 12:23 am

When Gog Messrs with you

This song works

https://youtu.be/tAGnKpE4NCI

#86 Smoking Man on 09.17.16 at 12:46 am

Music How Nictonites roll

So close, no matter how far
Couldn’t be much more from the heart
Forever trust in who we are
And nothing else matters

Never opened myself this way
Life is ours, we live it our way
All these words, I don’t just say
And nothing else matters

Trust I seek and I find in you
Every day for us something new
Open mind for a different view
And nothing else matters

Never cared for what they do
Never cared for what they know
And I know

So close, no matter how far
Couldn’t be much more from the heart
Forever trusting who we are
And nothing else matters

Never cared for what they do
Never cared for what they know
And I know, yeah

I never opened myself this way
Life is ours, we live it our way
All these words, I don’t just say
And nothing else matters

Trust I seek and I find in you
Every day for us something new
Open mind for a different view
And nothing else matters

Never cared for what they say
Never cared for games they play
Never cared for what they do
Never cared for what they know
And I know, ooh, yeah

So close, no matter how far
Couldn’t be much more from the heart
Forever trust in who we are
No, nothing else matters

#87 SAIT Student on 09.17.16 at 1:03 am

I was having a beer with a fellow student today. He was laid off from the oil patch (26yo) and I advised him to be financing his education thru his RSP as opposed to his savings. Tax rates for withdrawing are rockbottom, and his tax deduct from tuition and books will more than offset his withholding. While his LLP would be an alternative, he would still have to pay it back for 10 years.
And of course I told him about the greaterfool.com website.
I am so proud that I as a 55 year old could advise a 26 year old about tax advice and the tax advantages of maxing a TFSA for tax free investing and still maintaining liquidity while utilizing an rrsp with its lower tax rates due to no income. He is mortgage free and debt free and will be able to pursue employment where it is available (labour mobility).
Thank you Garth for enlightening me to enlighten someone else, the greatest gift to give to someone younger.

#88 Entrepreneur on 09.17.16 at 1:24 am

Just saw a video on Joseph Stiglitz, Nobel Prize-winning economist, on Making Sense of the TPP, Trans-Pacific Partnership. Good one to watch.

A nation cannot be built on a house economy. Time to think of the people within that nation.

And when you think of it, not too many people realize it, but when the people’s voices are recognized and honoured then a step toward respecting the earth’s environment.

#89 PeterfromCalgary on 09.17.16 at 1:31 am

The idea of deposit insurance is to prevent a run on the banks. It has done a excellent job of preventing bank runs.

#90 Nick on 09.17.16 at 4:20 am

“Also, as the Ontario Securities Commission just found out in a poll, 56% of Canadians over the age of 50 have no retirement savings plan, and 22% haven’t even started saving.”

Damn. What’s going to happen as these boomers are pushed into retirement? We only need so many Walmart greeters. Are my taxes going to jump because the government is going to try and support them?

#91 maxx on 09.17.16 at 6:58 am

#12 Mark on 09.16.16 at 7:03 pm

“My proposal: deposit insurance be only available on deposits “owned” by a single beneficial owner (not joint accounts or trusts). Deposit insurance be limited to $100k per SIN across all insured banks.”

Way to promote capital outflows to other jurisdictions.
Little to no protection here? Apart from a source of living expenses, what would be the point?
A crack international tax/fiscal attorney and you’re off to the races.
Globalization, remember?
Hmmm…with a little time, that might begin true tightening and catalyze a return to decent interest rates…
…and reacting by printing more moolah would simply depress the dollarette. Further.
Especially as other global economies get traction.

#92 maxx on 09.17.16 at 7:10 am

#21 Chris on 09.16.16 at 7:45 pm

That’s exact.
A couple placing funds in GICs, for example, can get 1.2 MM CDIC coverage (2 individual, 1 joint) at the blue, red and green banks due to four possible “umbrella” subsidiaries.
In order to comply with CDIC limits, have the interest income spit out periodically.

#93 maxx on 09.17.16 at 7:13 am

#22 JSS on 09.16.16 at 7:46 pm

“If the government is making it useless for Canadians to save and invest, yet making it easier for the masses to buy million dollar houses…then what’s the point? Why be a responsible saver/investor? Why not join the masses? Personally I’m losing steam…”

If in doubt, save more.

#94 WallOfWorry on 09.17.16 at 7:32 am

I am not sure why the reaction to Canadian consumer debt to GDP ratio? In the US the government debt now exceeds GDP? The US can’t afford to invest in fiscal policy (infrastructure to stimulate economy) as social entitlements tie up all of government payments so they are stuck with QE infinity etc. Bottom line is the same however, globally, established economies simply can’t afford to raise interest rates as we are stuck in 2% or less growth. Thus, it is virtually guaranteed that the Fed can only raise rates once in the next 12 months if at all. Anyone who suggests that the Fed, even with full employment and inflation scratching at their target rate, doesn’t understand the structural problems that exist.

#95 maxx on 09.17.16 at 7:52 am

#32 #hugAmillennial on 09.16.16 at 8:08 pm

“I agree with Mark on this one. Maybe we can encourage all the old wealthy people to do something productive with their cash.”

Fuggedaboudit.
They may do precisely as they please, whether it’s slow-mo or faster investing.
“Productive” is running from terrible investment (ie. overpriced re, mutual funds) or avoiding any waste of this precious resource.

#96 Zen Headspace on 09.17.16 at 8:56 am

#88 Nick

“What’s going to happen as these boomers are pushed into retirement? We only need so many Walmart greeters. Are my taxes going to jump because the government is going to try and support them?”
——————————————————————

BINGO!

Now you are catching on buddy.

Your taxes will also go up to support all the rest of the idiots who have amassed monumental debt to finance their shacks and McMansions and cars, and will eventually go bankrupt.

They all have their heads in the sand. They are all in denial. They don’t believe it will ever happen. They don’t see it coming.

Once the tsunami hits, it will be too late.

Those that were responsible, prudent, debt free, frugal savers and investors will shoulder the cost of the bailout of the century. After all, T2 dictates that we must support the middle class. They are entitled.

Get some heavy duty corrosion proof 50 gallon drums and start burying your cash. Then you can claim: “Me poor too!”

#97 Zen Headspace on 09.17.16 at 9:03 am

SAVE YOUR MONEY! Tax Free Savings Accounts:

https://www.youtube.com/watch?v=PP30_UGUSYI

http://abc7.com/news/$600000-found-buried-in-backyard-of-fontana-home/1022183/

#98 Harry Saunders on 09.17.16 at 9:14 am

What everyone is missing the point is that CIPF at $1 million coverage was that amount since 1999. The last change.

CDIC was $100,000 since 2005. The last change. What about inflation for the last 17 and 11 years respectively.

The deposit insurance coverage and coverage for CDIC and CIPF are at least 30% to 40% less protection, coverage for Canadian depositors and investors than 11 to 17 years ago.

It does not matter how much Canadians have in investments, GIC’s and net worth deposited, invested. This is irrelevant.

It is the fact that CDIC, CIPF and other provincial deposit coverage, insurance, protection are protecting much less than meets the eye. Purchasing power today in 2016 is much less 11 and 17 years later.

This is what really matters and most Canadians have no clue about. No matter they are mostly all in debt.

#99 Smoking Man on 09.17.16 at 9:45 am

The new catch phrase everyone on Twitter is proudly putting before their name. Deplorable.

Lets try it. Deplorable Smoking Man. Huh. Yeah.
Deplorable Freedom First. Yeah that works too.
Deplorable James. Nope doesn’t have the same feel.

Things are moving fast down south. Get ready to rebalance those portfolios. Trump in a land slide.

Dr. Deplorable Smoking Mam
PhD Herdonomics.
Ordained Dudest Preast.

#100 Brian on 09.17.16 at 10:02 am

Mr. Turner

Is there any difference in CDIC / CIPF coverage in respect to TFSA deposits?

I presume that TFSA GIC’s are limited to $100K under CDIC while TFSA Equities and bonds are insured to $1m under CDIF.

Do I understand correctly?

Thanks

TFSAs have CIPF protection only if hosted by a member institution (brokerage company). — Garth

#101 Keith in Calgary on 09.17.16 at 10:16 am

It is all a part of the long term “war on cash”.

Governments know that they must find subtle ways to discriminate against it, so not increasing the CDIC limit is a start, along with NIRP, FINTRAC policies, safe deposit box regulations, and individual bank policies making it onerous to withdraw same.

No surprise there.

Now having said that, anyone with more than 6 figures in cash is either a believer in the markets (I am not) or has there money out of the country, spread around in different jurisdictions in varying buckets of hard to trace assets.

#102 TurnerNation on 09.17.16 at 10:38 am

A nightmare scenario could be Costco offering GICs and mortgages to its zombified aisle shufflers.
Don’t laugh Canadian Tire has a bank.

#103 Bank of Millenial on 09.17.16 at 10:43 am

#88 Nick-

The writing is on the wall Nick, there will be an asset liquidation leading to a deleveraging. Some woefully unprepared will live in a relative squalor but there are nets in place to catch these folks.

Never forget that the people aged 50, need to create income and returns into the latter part of 2040, and that any inflation along the way will weaken whatever present dollars they do have saved, or consider “saved” in their house equity.

Pooched.

#104 dogman01 on 09.17.16 at 11:05 am

50 Freedom First on 09.16.16 at 9:19 pm

Why CPD over ZPR; I have both but does one have an advantage or flaw?

#66 Entrepreneur on 09.16.16 at 10:22 pm

“It is tough to make a living out there in the trenches. Is that why less youth think of having families? The dreams are shot.
Growing the middle class stronger is in the Budget 2016 but, but, but where are the jobs? Not here.”

Automation, outsourcing – I just do not see a path for the middle class. We are heading to a structure of inequality:
– 0.1% Plutocrats (or Oligarchs)
– 1% – Wealthy
– 10% The Expert Class on the way to Wealthy
– 15% Government (Police, Fire the services to stave off anarchy)
– Then the Rest.
Government Programs to “help the middle class” will do nothing to slow the trend.
They simply don’t need a middle class anymore.

#105 Ace Goodheart on 09.17.16 at 11:21 am

Here it comes, folks:

http://www.theglobeandmail.com/news/politics/ottawa-making-housing-fix-a-top-priority-minister-says/article31924658/

More government market diddling.

To predict what this will all look like, it is important to keep the following in mind:

1. The purpose of any action taken by any democratically elected government, at any time, is to GET RE-ELECTED. That is it. The action must appeal to their elector base (or perceived elector base) in order to ensure they win the next election.

2. We have left wing governments in power, in both Ontario and Ottawa. These governments cannot get re-elected by either supporting, or appearing to support, the 1% or the small sliver of wealthy folks in our society.

3. Once house prices get past the “goldilocks zone” where they are affordable to the middle class, using every means of purchasing including mortgages, loans, savings, lines of credit, they become a “toy” or an “investment” for the 1%. Vancouver already hit that point, and Toronto is edging up there (but we still have about $500,000 aggregate to go).

Left wing governments cannot be re-elected by appealing to the 1%. Conservative governments can (through quite a bit of Orwellian-type double speak and subterfuge, but they can do it).

#106 crossbordershopper on 09.17.16 at 11:29 am

A lovely weekend in most parts of the country, stop counting your money and go out and enjoy the weather. Money, Money, Money, just like my buddy who only talks about sports, 100%, and another buddy, 100% only talks about women, and not least, 100% about politics, and immigration and the last one about hollywood people.
life is a balance, someone will always be healthier, happier, wealthier and better looking. enjoy your life, its all you got.

#107 Denise#1 on 09.17.16 at 12:06 pm

This post got me researching and thinking about our retirement savings Garth, thanks for that. We’ve been too complacent.

No hope for the Feds to raise CIDC insurance from $100,000 to $250,000 heh? Let’s just disregard the savers who SAVED for their retirement says old Billy. I am so very, very angry; partly at myself for not checking into this before. So, once again, thanks Garth.

Getting my husband to read my research links, then we’ll be transferring some funds to a new/different bank.

#108 OffshoreObserver on 09.17.16 at 12:14 pm

#96 Zen Headspace on 09.17.16 at 8:56 am
#88 Nick

“What’s going to happen as these boomers are pushed into retirement? We only need so many Walmart greeters. Are my taxes going to jump because the government is going to try and support them?”
——————————————————————

BINGO!

Now you are catching on buddy.

Your taxes will also go up to support all the rest of the idiots who have amassed monumental debt to finance their shacks and McMansions and cars, and will eventually go bankrupt.

They all have their heads in the sand. They are all in denial. They don’t believe it will ever happen. They don’t see it coming.

Once the tsunami hits, it will be too late.

Those that were responsible, prudent, debt free, frugal savers and investors will shoulder the cost of the bailout of the century. After all, T2 dictates that we must support the middle class. They are entitled.

Get some heavy duty corrosion proof 50 gallon drums and start burying your cash. Then you can claim: “Me poor too!”

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

I refer to the impending doom as: “Democracy vs. Demographics”.

My solution: go non-resident and, well, observe.

#109 2012 Census on Retirement Income Not So Bad... on 09.17.16 at 12:56 pm

Data below from StatsCan and 4 yrs old (2012 – Income Distribution by Age).

When you look at Gross Income of the 65 yrs or older age group, it’s no so bad (5.29 MM of them in 2012, 20.2% of the total Cdn. population then):

% of 65 yrs and older/Gross Income per yr:

50.5%/>$25,000
34.5%/>$35,000
19.1%/>$50,000
7.6%/>$75,000

The 1% of that age group had Gross Income of >$200,000 (51,350 Canadians).

So unless something hideously bad financially is happening to the > 50 yr olds in 2016, their predecessors 4 years prior managed to create significant retirement income.

I cannot believe > 50 yr olds in 2016 are more catatonic than their predecessors from a mere 4 years ago.

It would have been nice if the Ontario Securities Commission could have provided a baseline from 4 years ago to compare to their 2016 data so we can determine if financially retirement income efforts have deteriorated (after all, the comparison data they could have used has been in the public domain for 4 years and prior census data as well).

Until they do that, we cannot say one way or the other that the > 50 yr olds in 2016 are doing worse/better/the same than their predecessors…a non sequitur pronouncement, in other words.

bsant54

#110 Chris Townsen on 09.17.16 at 1:13 pm

Actually, CDIC counting for C.P.I., consumer inflation since 1967 when CDIC was first put in place should be around currently $145,000 in 2016 not the $100,000 it is stuck since 2005.

The original amount for CDIC deposit insurance back in 1967 was $20,000.

This means that if there is no increase in 2016 and the next few years the $45,000 CDIC shortfall continues to grow everyday.

Checking back at last increases to CDIC deposit insurance, it takes them at least 20+ years to do anything.

#111 2 Ways the Minsky Moment Happens... on 09.17.16 at 1:19 pm

1st is Garth’s way: rates go up and people will have to advance money…that will happen over the next 5 years as people remortgage properties that are under water…we are approaching that in YVR RE, but not there yet in YVR or the rest of the country…price drops are happening in YVR but not to that extent…yet.

2nd is My Way: we are at the precipice of a job sucking recession and that will be the severe recession the Minsky Moment requires. First 6 months 2016 job creation abysmal. Last month 50K Public Sector jobs vs. 8K Private Sector jobs and every other major indicator you wish to choose a la carte is negative and going south as I type.

My money is on both (why I remain liquid for now).

Recession will hasten the ability of Cdns to service their epic debt. Resulting RE price crashes and rising rates (even minor per TransUnion) will exacerbate this over the next 5 years.

I’m with Lewinsky, lots of opportunities by year end…but not for the reasons he gives.

Garth’s “sentiment” I believe will take hold by October and then the above will begin. Heaven help Canada if today’s stats from Garth are even half truths.

bsant54

#112 Metaxa on 09.17.16 at 2:13 pm

All of you folks who are talking rental homes in Prince George and especially those who respond with “its easy cash flow” should do some pondering.

Its not easy, certainly not in the beginning.

My brother and I began our landlord career 40+ years ago with a couple of shoddy trailers in a mobile home park.
In that 40 years we moved through condos, crap houses until finally we had real homes (7), strata commercial units (2) and a couple of what are called executive short term rental homes on retainer to the UofC.

I know what I’m talking about here, please do your due diligence, please don’t be swayed by someone saying its easy…its not.

I wouldn’t own a rental in PG unless I lived there…paying a property management firm maybe in budget but remember they look after tenant concerns as well as landlord interests. Its expensive bringing a deck up to code especially if the deck is way up there and you are way down here.

Plus you are up there with Northview Apartment REIT and Northern Property reit…if they don’t already have the property under control you have to ask yourself why and do I want it if they don’t?

#113 Barb on 09.17.16 at 2:14 pm

“… in the event of a bank collapse (ain’t gonna happen), a whole mess of cash could be burned.”

——————————————–

the end of wealth.
(ain’t gonna happen).

#114 Tony on 09.17.16 at 2:23 pm

With a limit as low as a hundred grand it gives Canadians an incentive to park money overseas or in tax havens. This time around credit unions and second and third tier lenders will go bankrupt. The real question is will any of the 5 major banks lock up your money not if but when there’s a run on the banks?

#115 Tony on 09.17.16 at 2:25 pm

Re: #113 Barb on 09.17.16 at 2:14 pm

More like it ain’t going to happen ’til it happens and it will happen. The major banks will be the last casualties. That’s the only difference.

#116 TCContrarian on 09.17.16 at 3:58 pm

Question:

Does it matter (in terms of the amount insured), whether you have an account at RBC Direct, vs an account with RBC Management?

I think not, but not 100% sure.

#117 Mel in Victoria on 09.17.16 at 8:31 pm

Well Doug seems you’re a great supporter of Central Banks, the Fed in particular. Tell me, what’s your opinion on negative interest rates and how they are beneficial to seniors who rely on interest income from savings. Or, being a stock broker, would you suggest that they put their money in the stock market instead?

Tell us Doug how low/negative interest rates ,due to central bank manipulation, are making pension funds, life insurance companies happy. And Doug, do you think any of the bankers responsible for the mortgage crises and housing collapse in the US in 2007-9 should have gone to jail? If not why not?

Have you read Griffin’s “The Creature from Jekyll Island” and do you have any comments?

Like most stock brokers you’re probably death against people holding gold, not because it’s not been an excellent long term investment, but because as a broker you can’t make any ongoing fees from clients holding it. Garth gets quite apoplectic when a poster even mentions gold on this site. Any thoughts though on your clients buying precious metal shares? Two major European banks been buying millions of dollars of precious metal stocks the last while. Many others are also considering precious metal stocks Are they foolish in your opinion?

Many global central banks have taken huge positions in US equities and that’s the main reason the SPX and other markets have kept from correcting as would normally be expected when valuations get as nutty as they now are. I guess you approve of this?

We also know that commercial Bullion banks have manipulated the precious metals PAPER markets for a couple decades now in order to support the US dollar. Presently, more paper silver is traded in one day than is mined in a year! I’m sure you probably didn’t know this nor any of the viewers on this site but it’s true.This is due to huge commercial banks shorts. Do you think this is right Doug?

Hell, I could keep going on and I sure don’t expect a reply from you but just had to get a few things off my chest after reading you commentary today. Maybe I’ll get deleted!! Wouldn’t surprise me because as Garth often says, it’s a pathetic blog… Cheers…

#118 Also in Cowtown on 09.17.16 at 8:47 pm

#23, Vern in Cowtown

Unfortunately, Mike Fotiou’s site is currently defunct…..

I noticed a couple weeks ago that his “Real Estate Statistics” page was listing a fraction of the information that he previously posted.

Disappointing indeed.

#119 Jim on 09.17.16 at 9:54 pm

Deposit insurance claim payments are usually spread over many years if not decades, depending on the damage.

#120 you and me on 09.18.16 at 3:00 am

DELETED 5

#121 westcdn on 09.18.16 at 3:09 am

#18 mark r on 09.16.16 at 7:27 pm

All my money is in tulip bulbs.
They’re gonna make a comeback. Just you wait.
———————————————————–
I had to laugh. Good on you.

#122 you and me on 09.18.16 at 3:16 am

DELETED 5

#123 Sc on 09.18.16 at 4:08 am

Hey Garth, the cipf guarantees against the insolvency of the firm, not a guarantee on the deposit itself. I work as an investment advisor and you are dead wrong on this one. Consider amending today’s post for your own good.

Wow. An investment advisor. All insurance – CDIC or CIPF – is in place to restore clients in the event of a financial institution collapse. CDIC tops out at $100K per client per bank while CIPF is many multiples of that. This is not insurance of assets. Nor did I say that. — Garth