The fly

Poor savers. Interest rates have jumped four times in Canada, yet the needle hasn’t budged much for high-interest accounts or those brain-dead GICs. Mortgages cost more. Lines of credit are higher. Credit cards, business loans and consumer borrowings are all dearer, and yet people sitting on cash have seen their wealth wither.

That continues.

The inflation rate, we heard Friday, is now 2.5%, the biggest number in six years. Gas, food, clothing and accommodation all cost more. If the burgeoning trade war gets out of control, US-imposed tariffs will jump the inflation rate further. We can only guess what your next Harley will set you back.

So here’s the point: banks want spreads. That gap between what they pay on deposits and the interest they collect on loans is called profit. It can never be too wide, and these days savers have absolutely no clout. Nobody cares.

By the way, here are the best high-interest savings accounts rate in Canada, as compiled by the nerds at RateSpy:

Notice that none of these offerings equals the inflation rate. Put money in any, and you lose. Of course, outside of a TFSA, all interest earned is 100% taxed at your marginal rate. That means an even bigger loss for savers. Besides, that 2% teaser at the National Bank is temporary, while Alterna Bank is the go-to lender for weed companies – which seem to be wildly overvalued. Sigh. So many conservative, risk-averse people pushed into such a shadowy embrace.

So is there any relief on horizon for those misguided souls who think that avoiding stocks, bonds, trusts, ETFs, funds, preferreds and every other marketable asset means no risk? Can anyone reasonably expect to build a retirement portfolio by stuffing their cash into only interest-bearing investments? No, and no.

Now, Friday’s numbers did raise the odds of a further Bank of Canada increase in October – adding another quarter point to the cost of a variable-rate mortgage and home equity lines of credit. Plus economists expect a couple more in 2019, even with trade wars on the horizon.

But there is a yuge fly in the ointment when it comes to the potential course of monetary policy. This week, fresh off embarrassing himself on the world stage with his Putin-poodle routine, Donald Trump lashed out at the US Federal Reserve, saying he opposes further interest rate increases. They boost the dollar, he argues (correctly), which makes American exports more expensive and less competitive. Higher rates also restrict consumer spending, which accounts for over 70% of the economy. And since Trump’s all about growth, expansion and inflation, higher rates are bad. Furthermore, the guy is adding boodles to the national debt with his corporate tax cut, so Fed hikes just make it more expensive to service that debt. That money could be sued instead to employ hubcap workers in Flint.

Thus, he hates ‘em.

What can Trump do about the Fed other than Twittering it into submission?

Quite a bit, as it turns out. Currently there are three Fed governors and four vacancies. Of the three, two are Trump appointees. Two more are Trump guys waiting for Senate confirmation. After that he can nominate two more – and end up with six of the seven decision-makers in his pocket. Interest rate decisions are made by the Fed’s Open Market Committee, which has 12 seats, the majority of which may soon be Trumpers.

Of course, the Fed was always designed to be fully independent from government, acting (like the Bank of Canada) to set monetary policy in the best interests of the wider economy, and not the leader or the party in power. Throughout history, this has mostly been the case, with presidents (and prime ministers) doing little more than bitching about bank decisions after they were made.

But this prez is different. Unlike all those who went before, he knows everything. Immigration policy. Foreign relations, Military strategy. Fiscal planning. Entertainment biz. Budgeting. And, of course, monetary policy. The odds of him at least trying to take over the Fed seem formidable. The consequences could be incredible.

The Fed’s main role – after saving the economy from the black hole of 2009 – is to corral inflation so things don’t run too hot. Without higher rates, it’s argued, the US will go into an inflationary wage-price spiral weakening the dollar and, if accompanied by highly protectionist policies, propeling America into a growth orgy. In other words, just what the president wants. Debts will get easier to pay, taxes can stay low and incomes jump. For a while – until the piper plays.

But that will be for the kids to worry about. The Donald will be gone.

So if you think the stock market’s rich now, just wait. And may God have mercy on your high-interest savings account.

85 comments ↓

#1 mitzerboy aka Queencity kidd on 07.20.18 at 5:09 pm

I thought I saw a dotard
I did I did see a dotard

#2 nicky on 07.20.18 at 5:12 pm

first. POTUS thinks he knows everything.

#3 Smartalox on 07.20.18 at 5:15 pm

Methinks Trump is hissing at the Fed for raising rates because his real estate businesses (from which Trump STILL has not divested himself) are facing higher payments on billions of dollars worth of debts. Son-in-law Jared also owes billions on his white elephant property at 666 Fifth Ave.

Of course, I may be wrong. Trump may also be ‘servicing’ his debts by playing to his creditors’ (VVPutin’s) behest.

But still, Trump is known to owe billions to the Japanese, based on bailouts he took back in the ’90s. Those 25-year debts are coming due, and I’m sure that Trump is eager to get the best rate he can, on refinancing. IF he spent the last decade looking to re-finance at impossibly low rates, he must be pretty pissed that all of a sudden, he has to pay a lot more.

#4 Bullion Licker on 07.20.18 at 5:25 pm

So if real interest rates are headed negative and Central Bank independence is at risk, does that mean we should diversify some of our 40% bond allocation into shiny stuff?

#5 MSM-Free Zone on 07.20.18 at 5:41 pm

“…..This week, fresh off embarrassing himself on the world stage with his Putin-poodle routine…….”
______________________________________

Or, abbreviated for the Commander in Cheese, who can’t handle more than two syllables….Poutine.

Barack Obama…..the first black male president.

Donald Trump……the first blackmailed president.

#6 djsnuggz on 07.20.18 at 5:42 pm

No love for 2.3% interest at EQ Bank? Of course still below inflation, but seems like a better option that what you’ve presented.

#7 Rate Hold on 07.20.18 at 5:47 pm

So the much anticipated ‘path to normalization’ in rates of 5-6% will potentially be put on hold if Trump has his way, making the spectre of rising rates and their negative impact on real estate moot?

For all those sideliners thinking that there is a bubble based on low rates, and waiting for ever rising rates to correct the market, you might be waiting for many more years. If thats the case, you will have missed out on a decade plus of low emergency rates which have seen real estate increase 100-200% in core areas like Vancouver and Toronto.

Timing the market based on historical ‘rate normalization’ may have just cost you even more….

#8 Mattl on 07.20.18 at 5:47 pm

@#89 Mattl
“and we have 2 acres, lakeview,….”
++++++

How’s the air quality with all the forest fires on both sides of the Lake these days?

Where we are at fine. Yesterday morning was smoky but it blew through and it has been clear since noon yesterday. Bad for the folks on Westside and feeling for people in Peachland. Summer fires are a reality here, like smog is in major cities, hurricanes in florida, etc.

No place is perfect.

Where do you live?

#9 dakkie on 07.20.18 at 5:50 pm

China Taking Action To Cool Housing Prices

http://www.investmentwatchblog.com/china-taking-action-to-cool-housing-prices/

#10 Eightlock90 on 07.20.18 at 5:52 pm

Hey grand pubba, do you think BoC hikes rates too slowly?

Maybe this scheme of doing quarter point raises every 6 months to save the over levered is going to backfire.

#11 ADBD on 07.20.18 at 5:57 pm

Living in Florida now. Morneau’s tax policy made me move business south. No state taxes here. Oh, and a buck a beer. Hurricanes? Sure, but Donald’s place is five miles north and I bet they’ll protect that in a hurricane. No smart move in the market right now – everyone is guessing. Garth is right – unless you are in the game you are losing. But which horse to back……..

#12 Catalyst on 07.20.18 at 6:03 pm

You know what else goes down when rates go up? Real estate, which a certain someone owns a lot of. It has always been about self interest.

#13 Fish on 07.20.18 at 6:09 pm

https://www.google.ca/amp/s/amp.theguardian.com/us-news/2018/mar/10/harley-davidson-tariffs-trump-motorcycles

#14 NoName on 07.20.18 at 6:10 pm

#4 Bullion Licker on 07.20.18 at 5:25 pm
So if real interest rates are headed negative and Central Bank independence is at risk, does that mean we should diversify some of our 40% bond allocation into shiny stuff?

Other day gld was 1year low. you would think that with with world on a brink of zombie apocalypse gld would trade higher, but its not. Maybe all this is just reality show…

Question is it 1050 or 700.
https://imgur.com/a/QFWWYE8

#15 NoName on 07.20.18 at 6:16 pm

#9 dakkie on 07.20.18 at 5:50 pm
China Taking Action To Cool Housing Prices

http://www.investmentwatchblog.com/china-taking-action-to-cool-housing-prices/

—-

a hahaha

plz tell you dont believe that they are trying to cool it, maybe they are trying something else…

https://twitter.com/TihoBrkan/status/1020353279191117825

#16 Paul on 07.20.18 at 6:21 pm

Hey Garth, Simplii is offering 2.75% on new deposits but only for six months. Not sure if the offer is for existing clientele knly or newbies as well.

Six months? Who cares? – Garth

#17 Wrk.dover on 07.20.18 at 6:22 pm

Spread, buy $74.53 USD with $100 CDN at the Royal, change it back instantly to Canadian and go home with $94.76

It’s that easy to give them the spread they crave!

#18 Linda on 07.20.18 at 6:27 pm

I thought I read recently that Congress is planning to introduce bill(s) that would rein in the POTUS ability to affect the markets. The concern being that one person is able to wreak havoc to the detriment of all. Whether Congress can or will actually act to mitigate what the current POTUS does is another matter.

From the lemons to lemonade perspective, for those of us who have market portfolios the move to stack the Fed might end up being a benefit, or at least offset some of the damage if inflation does indeed skyrocket.

As for cash, not a bad plan to have some handy for unexpected events. The key word is ‘some’. Though in this increasing crazy world maybe those who stuff their mattresses will end up having the last laugh.

#19 Dolce Vita on 07.20.18 at 6:27 pm

“Wilbur Ross: ‘Too Early to Say’ Whether National Security Probe Will Bring Auto Tariffs” – June 19 WSJ article (tariffs can be up to 25%).

Trump’s verbal and Twit-ter threats become now an official Probe. If like the others to date, Probe becomes tariffs.

-64% of our GDP is based on trade in 2017 (imports + exports – World Bank), 70% of that in 2015 with the US (StatCan).

-27% of US GDP is based on trade in 2017, much lower than Canada.

-In 2015: $397B of $525B total exports were to the US with a $34B surplus in favor of Canada (all trading partners incl. the US: a $23B deficit – StatCan).

-$87.3B in total motor vehicles and parts exports in 2015, $55B to the US, in 2017 – StatCan.

Hope T2 keeps his mouth shut and does not upset legacy driven and vengeful Trump or we are “pooched” if the supra “Probe” ends up with auto tariffs on Canada.

Trump may get his way on keeping rates low in the US by Fed manipulation. If Canada retaliates, then our rates may go up due to more expensive imports – if we do not keep our tariffs low on US imports.

No justice here for us no matter how you look at it.

Hope reason prevails; otherwise, all the rosy Cdn. GDP and jobs stats thus far…well, you can throw them out the door and add a lot of fear into the mix.

Nothing like an external economic shock to upset the apple cart – just like the early 80’s except this will have been manufactured by 1 person in the US. How sad is that?

#20 MF on 07.20.18 at 6:31 pm

Yup. Another move by Trump I disagree bigly with.

My take: this move is designed to placate the portion of his supporters who are conspiracy theorists and/or anti establishment.

The Fed is almost always an easy target in that regard.

We know who these guys are. They usually mention The Rothschilds, or “elite”, and often cite shady internet sources or youtube videos that are designed to feed off their paranoia and emotional instability as sources.

The ultimate irony is that the only people who really benefit with low rates are the wealthy, “elite”, establishment who own assets already.

Dumb move.

MF

#21 tccontrarian on 07.20.18 at 6:33 pm

#14 NoName on 07.20.18 at 6:10 pm

#4 Bullion Licker on 07.20.18 at 5:25 pm
So if real interest rates are headed negative and Central Bank independence is at risk, does that mean we should diversify some of our 40% bond allocation into shiny stuff?

Other day gld was 1year low. you would think that with with world on a brink of zombie apocalypse gld would trade higher, but its not. Maybe all this is just reality show…

Question is it 1050 or 700.
****************************************

Just bet someone that gold goes to $1,400+ instead of $1,047 (his next target).

The bet? A nice 10-ounce silver coin:
http://www.bordergold.com/ca/silver/10oz-sml.html

I think I’ll be adding to my collection soon – perhaps even before 2018 is out – but we have no time limit in place. Only price.

TCC

#22 Bullion Licker on 07.20.18 at 6:37 pm

@ #14 NoName

Are you saying that gold will drop 20%-40% from here just because it reached a 12 month low, even though fundamentals are in tact?

Also, assuming you transact in Canadian Dollars, gold is down from March but not down on the year and certainly not down from 12 months ago.

#23 Leo Trollstoy on 07.20.18 at 6:39 pm

The inflation rate, we heard Friday, is now 2.5%, the biggest number in six years.

Who has two thumbs and pointed out that deflation was a myth?

You’re welcome!

#24 Sam on 07.20.18 at 6:44 pm

Garth, I have $800,000 saved. $350,000 in mix of WealthBar, Wealthsimple balanced ETFs, TD stock, Tangerine and TD MFs and maxed out my RRSPs and TFSAs. I have $450,000 sitting in mix of Tangerine 2.75% interest rate (they keep renewing the 6 months offer if you’re loyal) and some Oaken/TD/Wealthsimple savings. I need the $450K as down payment for a detached house in GTA. I’ll get a $400K mortgage means and old bungalow in Etobicoke. Maybe rent lower level. I make 6 figures and no debts. I’m 35. Is this a smart portfolio? I was told not to invest money I need for down payment.

#25 Reality is stark on 07.20.18 at 6:52 pm

It’s hilarious that it’s all about tariffs now. All of a sudden gender issues don’t mean much to the government.
We were so far behind the curve of reality as our educators had people focused on nonsensical lunacy.
Sad that most of our politicians are also financially illiterate. I would estimate that 99% of our politicians have no idea how a private equity firm makes money. These are the dopes we elect so why do we expect effective leadership?
We were asleep at the switch and got away with murder.
We invest very little in R&D as a country and our manufacturing base is about to get decimated.
We are complacent and Trump is taking away the punch bowl.
The typical Canadian response is to sell dope at the LCBO. Don’t expect the Canadian government to raise R&D spending anytime soon.
This is the Canadian way.

#26 crowdedelevatorfartz on 07.20.18 at 6:56 pm

@#8 Mattl
“where do you live”
+++++
North Burnaby baby!
Condo country according to “North Burnaby” , where flippers never sleep.
I’m just a stones throw away from the Pipeline protest camp ( and I can verify…I AM a stones throw away.).
I plan on sitting on my deck this weekend and watching the eviction show unfold….Should be amusing watching the RCMP in riot gear melt in the 30 celcius heat.
The smog isnt in Burnaby….the warm ocean breezes send it to the more deserving…. up in the valley in Abbotsford where Jesus is Lord and the bushes occasionally burn.
Burnaby.
Not to be confused with Tsunami Tsawwassen where mega malls are built on prime farmland….”pave paradise put up a parking lot…”
Or Richman where 6 month home ownership is considered “long term”.

#27 JMS on 07.20.18 at 7:12 pm

Any thoughts on re-adding a real return bond ETF to the portfolio? They’ve been duds for years so I sold my small holding last December. How do they perform in a rising rate AND inflationary environment?

Thanks dawgs!

#28 Karl on 07.20.18 at 7:13 pm

I have uncles screaming that a recession is coming in mere months. Co-workers all crazed that a new Great Depression is just around the corner; “the big one”. People who don’t own RE claiming it’s going to crash but stock markets will rise meteorically. People who do own RE saying it’s only going to go up in the long run and now is always the best time to buy (or own).

I do believe rate hikes will stall at some point and I wouldn’t be shocked if what Garth wrote above comes true.

Me thinks the party continues.

#29 the ryguy on 07.20.18 at 7:16 pm

Overhead while getting my hair cut in Edmonton today:

They bought the place in either 07 or 08, paid just under 500k. They have been renting it the last couple years. They were going to sell it in 16, realtor said they would get 560-580k. The renters said they would buy it, but they needed another year to save a down payment. In 17 the renter gave them 5k and said one more year, I need to get to 20%.

Now the renters are moving out in September (turns out they bought a new build), and realtor says market is super slow and price it at 460k and hope for a quick sale.

Good lord Vancouver, Okanagan, and Toronto are gonna be in trouble.

#30 conan on 07.20.18 at 7:16 pm

Hate the Donald, but he deserves credit for a deal he hatched with Putin concerning the Syria situation. Militants near the Syrian border with Israel can leave or swear allegiance to Assad. Avoids a lot of blood shed.

Maybe it was all Putin, and Donald is still a wanker.

#31 theoryAndPractice on 07.20.18 at 7:20 pm

Today’s blog picture is amazing. 1 picture 1000 words, yours to discover.

It also beats me why taxes are not on the label outright in Canada? Perhaps many can’t divide 12/4 , expected not to be able to put additional 13% before buying something.

#32 Oakville is dirty on 07.20.18 at 7:21 pm

Trump needs to abolish the federal reserve!!!! This private entity is strictly run by the money masters!

Watch William stills documentary “the money masters”

#33 Reena Sanderson on 07.20.18 at 7:21 pm

The real story is 5 year GIC rates are up more than 1%, 3.3% to 3.5%.

Also, most people are in a low to moderate tax rate. Most Seniors have their first $18,000 of income tax free, add on disability tax credits than that is another $7,500 a year in tax free income. This means their first $25,500 is not taxed.

The other factor is RRIF, other pensions get a $2,000 tax free status. This another $4,000 per couple. There is pension tax splitting as well. It is possible that with other tax credits and TFSA benefit a couple would make $60,000 a year tax free.

In order to make $60,000 a year at 3.5%, $1.714 million invested. All other pensions would be taxed at 22% at most. This means $100,000 couple income would be $8,800 a year or 8.8% total tax rate. This is pretty low.

The bottomline is most retirees and seniors would pay 10% to 15% total tax rate on their incomes.

By the way, GIC rates and bond rates will soon be 4%. You will see.

With inflation at 2.5%, bonds at 4% would still be an awful choice. And how many senior couples have $1.7 million? Unrealistic comment. – Garth

#34 Ace Goodheart on 07.20.18 at 7:22 pm

Have your finger in a lot of pies.

Then no matter what happens, It’s Christmas.

World is full of powerful people doing stupid things for stupid reasons.

If you are like me and not powerful, well connected or fabulously wealthy, you just diversify.

No matter what happens you win somewhere.

#35 Smelly on 07.20.18 at 7:26 pm

Fed is going to do what they want. Trump has little control over them. Trump is going to howl as China devalues it’s currency.

Wait for it, Trump will use some obscure emergency legislation to devalue the US dollar. When that happens, look out. Interest rates will really have to rise to contain that inflation, meanwhile the currency will be losing value.

Now what sort of investment would do well in a competitive currency devaluation with rising interest rates?

#36 pay your taxes on 07.20.18 at 7:30 pm

The anti globalist thing is here to stay. The rich got richer by giving away the prols’ jobs but they forgot to disenfranchise the malcontents, now it’s payback time. Progressives control the media and the message but look at the results of recent elections across the Western nations. Once Merkel falls it will be the end of an era, and back to the dark ages we go.

Every month that inflation outstrips wage increases more desperate people will turn towards a “Trump” and away from the “Hope and Change” types who just delivered 2 more terms of the status quo.

The Democratic party is undergoing a purge of the corrupt old wrinklies who shafted Sanders so there might be a socialist government running the US before you throw off this mortal coil. Interesting times indeed!

#37 Renter's Revenge! on 07.20.18 at 7:35 pm

Where’s Smoking Man?

Still long USDCAD? It was down 0.8% today.

I assume it was because of inflation in Canada and Trump’s Fed comments.

Can forex be learned without a PhD in herdonomics?

#38 For those about to flop... on 07.20.18 at 7:42 pm

Inspired by the shenanigans of Russian female punk protest band Pussy Riot,I have heard whispers that one of the things discussed in Helsinki, at the recent summit ,was Putin and Trump and maybe even their buddy Kim Jong Un forming a boy band.

Rumour has it they have booked a recording studio later this year in the U.S ,when Putin visits to lay down some tracks.

Details are still a bit sketchy and although Trump normally thinks it’s all about him ,when it comes to Putin he is happy to take a back seat.

They even have a name picked out apparently.

Pootie and The Blowfish…

M44BC

#39 Tina Dannanize on 07.20.18 at 7:42 pm

The way we do it, 5 year GIC’s in $22,000 4 TFSA’s, 5 year GIC’s in $50,000 4 RRSP’s, $40,000 non-registered 5 year GIC’s.

Year after year we do this and by retirement, $7 to $8 million easy. Family is stronger when they work together. Compound interest working everyday.

#40 For those about to flop... on 07.20.18 at 7:49 pm

Hey Dolce Vita,I had my first visit from a person in Italy yesterday on my blog.

Was it you?

Or is someone else from Italy planning on packing it all in and coming back to Vancouver to commit financial suicide…

M44BC

#41 HISA Rates on 07.20.18 at 7:55 pm

When waiting for a correction to put more money back into the stock market, I frequently use high interest savings accounts. Tangerine, Simplii and local credit unions especially have generally given me promotions close to 3% avg. on my cash which is a lot better than the 1.35% that my online brokerage has to offer .

#42 Dave on 07.20.18 at 7:57 pm

Everywhere you look, our wallets are getting hit harder and harder:
– Gas is $100+ per fill up
– Costco grocery is $300 to $500
– Clothing…see how far $100 buys
– Vacation – $5,000 easy
– Restaurant $150 without lobster
The above equates to big bills every month…then add in your housing and auto and try not to drown in debt. This is why there is so much depression and mental health issues. Stress is a killer and money is usually part of the cause. Look around, everyone is an actor and showcasing success and happiness. Truth is left in the shadows and hopefully no one can see.
Your financial decisions will make or break you…Canada is the land of opportunities. Generate enough income thru owning your own business and other external factors can not hurt you.

#43 I'M A STABLE GENIUS! on 07.20.18 at 8:07 pm

When the lies become the truth, everyone seems to believe the fake numbers of 2.5% inflation.

The word Lie is really the correct term to use when inflation is raging at 7% and they tell us it is 2.5%.

But it seems most people don’t want to push back.
They will accept words like not correct or not true. That is, if they can even get to the fact that it isn’t true!

Many are given to believe the frankenumber given regarding inflation is a result of smart people in Stats Canada who are only reporting the real numbers.

Astonishing!

#44 earlybird on 07.20.18 at 8:12 pm

hahahaha…inflation is 2.5% yeah right…

#45 For those about to flop... on 07.20.18 at 8:22 pm

Race to a million.

Not sure when it is going to happen but later this year seems a good bet for livable detached houses to start selling in Vancouver proper for under a million dollars.

The latest contest to enter the ring is 2965 e Georgia St,Vancouver.

Listed at 1.07

https://www.zolo.ca/vancouver-real-estate/2965-east-georgia-street

The house next door at 2959 e Georgia st, sold in February for 1.09 and was assessed at 1.25

https://www.zolo.ca/vancouver-real-estate/2959-e-georgia-street

This house on Nootka st,I already featured in a Race to a million post couldn’t even get any interest at 1.15 and had to lower the asking to 1.05

https://www.zolo.ca/vancouver-real-estate/1843-nootka-street

And this house in the Collingwood neighborhood slashed 150k off recently to get relevant in the marketplace again,and the ask is now 1.05

https://www.zolo.ca/vancouver-real-estate/2496-east-27th-avenue

Still expensive but anyone who tries to tell you that it is just the top end that has the wobbles is talking porkies.

The lowest rung of the Vancouver detached ladder has a crack in it and once the mental hurdle of a million is crossed then the vultures will start to circle.

It’s the final countdown…

M44BC

#46 mike from mtl on 07.20.18 at 8:40 pm

Calling out the FED (yellen) holding low rates which is very true, then proclaiming actually following through of too late too little and raising now too soon is brash.

Criticising China and EU as manipulators then saying FED after a decade of zero is too aggressive?

Talking out both ends.

#47 Ray on 07.20.18 at 8:41 pm

Was it not the Trumpster who bitched about all of the other counties it trades with as being currency manipulators ?Also, that “Tom & Jerry Show” with Putin qualifies Trump for treason, not just impeachment . When are the Republican going to grow a set of stones ?

#48 Yorkville Renter on 07.20.18 at 8:49 pm

That POtuS Trump said the Fed kept rates too low when Obama was President, and now they’re doing what he suggested and he complains.

I can’t wait for this to all be over…

#49 Lina Teaperra on 07.20.18 at 8:54 pm

We don’t have $1.7 million but I understand Reena’s point about taxes. We make $27,000 a year from our interest from bonds 3.7% to 4.7%, GIC’s 3.2% to 3.5% in RRSP’s, TFSA’s.

It is a myth that most people are paying 50% tax rates on their interest made. It is more like 20% to 25% at most.

These days with RRSP’s, RRIF’s, LIRA’s, LRIF’s, LIF’s, TFSA’s, RESP’s, RDSP’s etc., tax benefits of certain annuities, life insurance being tax free, controlling and paying reduced taxes and lower tax rates in retirement is a reality for most retirees, seniors.

Most seniors, retirees are paying at most 10% to 15% on all their income after personal amount, age amount, disability amount, pension tax credit, pension sharing, TFSA interest not included as taxable income etc.

Their $75,000 combined income as a couple is at most costing them $9,000 a year or 12% total annual income taxes.

The point of life is not to live cheap to avoid taxes. No one will put that on your tombstone. – Garth

#50 Rargary on 07.20.18 at 9:04 pm

Till the Donald son or daughter becomes prez

#51 Tony on 07.20.18 at 9:05 pm

Re: #21 tccontrarian on 07.20.18 at 6:33 pm

Like I told Ian the speculators are waiting for the outcome of the counter tariffs from outside of America. Of course most things are rigged and every time the DXY dollar index goes above 95 some magic force smashes it down, same with the 10 year treasury yield every time it pierces the 3 percent mark some magic force smashes it lower. It the meantime gold should trend lower but with major profit taking next week at the very latest at the open on July 27th.

#52 Tony on 07.20.18 at 9:14 pm

Just like all the definitions of corporate accounting change over time to make companies look more profitable the same is true with the definition of inflation. Today in America using the 1990 definition inflation would be north of 6 percent a year. With the early 1980’s definition it would be north of 10 percent today. This is the major reason the middle class is being hollowed out.

#53 georgist on 07.20.18 at 9:30 pm

I think you are overreaching on this Garth.

Trump appointed Powell. Powell has raised rates more than he had to. Trump says all kinds of crap all the time. Watch what he does.

1 he appointed powell

2 powell raised rates

3 trump then said something

the last one isn’t the same as the first two

#54 georgist on 07.20.18 at 9:36 pm

The tactic of using ultra low rates on non-risky returns has a name: financial repression.

If you don’t believe me, ask the FT:

http://lexicon.ft.com/Term?term=financial-repression

It’s policy to tax savers and bail out debtors (which ultimately bails out the bankers).

#55 Trojan House on 07.20.18 at 10:05 pm

“Of course, the Fed was always designed to be fully independent from government…”

That was true until Congress got their hands on them back around the time of WWI.

#56 NoName on 07.20.18 at 10:18 pm

#22 Bullion Licker on 07.20.18 at 6:37 pm
@ #14 NoName

Are you saying that gold will drop 20%-40% from here just because it reached a 12 month low, even though fundamentals are in tact?

Also, assuming you transact in Canadian Dollars, gold is down from March but not down on the year and certainly not down from 12 months ago.


USD

july 20 2018 gold price — 1231.78
july 19 2018 gold price — 1222.76

july 20 2017 gold price — 1244.34
july 19 2017 gold price — 1241.05

i ONLY transact in viza, i get cash back. Will gold lose 20-40% i cant tell but i know that it’s not safe haven as many are made to believe.

gld usd
https://imgur.com/a/jmJhER7
gld cad
https://imgur.com/a/hyYczeb

just because chart gld in cad looks nice its more telling about canadian dollar than gold it self.

#57 Jake Richards on 07.20.18 at 10:29 pm

Who cares what they put on somone’s tombstone. I don’t see the point of this.

The point of life is to work and get it stolen by others. You know everyone is only trying to help everyone.

#58 Spin Doc on 07.20.18 at 10:39 pm

Trump says one thing and means another.

Trump wants higher interest rates. That is why he got Powell in.

If he wanted softer rates he would have stuck with Yellen.

#59 The Real Mark on 07.20.18 at 10:42 pm

Saskatchewan defaults (err…”late payments”) surging, worst since 1992:

http://www.cbc.ca/news/canada/saskatchewan/overdue-mortgages-canadian-bankers-association-1.4755844

“The number of people in Saskatchewan behind on their mortgages is the highest it has been since 1992, according to a new report from the Canadian Bankers Association (CBA).
In a report released this week, the CBA said 0.79 per cent of residential mortgages in Saskatchewan are in arrears — or overdue by three or more months — as of March 2018. This is the highest rate of overdue mortgages in the province since 1992.”

#39 Tina Dannanize on 07.20.18 at 7:42 pm

“past performance may not be indicative of future results”. Especially with Canadian portfolios stuffed to the gills with debt.

#60 Midnights on 07.20.18 at 10:56 pm

Funny, great point.
The point of life is not to live cheap to avoid taxes. No one will put that on your tombstone. – Garth

Very true. It’s what you do in the dash.
19??-20??

#61 Oft deleted much maligned stock picker on 07.20.18 at 10:59 pm

DELETED

#62 Can You Dig It? on 07.21.18 at 1:00 am

A classroom full of first year Veterinary students were participating in their first day of anatomy class. For the lecture, the professor begins by unveiling a dead cow under a white sheet laying on an operating table.

The professor tells the class “In Veterinary Medicine, there are two qualities you must possess as a doctor – the first of which is a strong stomach. You cannot, under any circumstance, be disgusted by anything involving an animal’s body.”

For example, the Professor pulls back the sheet and sticks his finger right up the dead cow’s butt, pulls out his finger and sticks it in his mouth. The students just standthere, paralyzed at what they see. “Now, go ahead and do the same thing, each of you,” the professor says.

Freaked out, the students take several minutes but eventually take turns sticking their fingers up into the anal cavity of the dead cow, and then sucking on them. Once everyone is finished, the Professor continues on with his lesson… “Now, the second important quality you must possess is a keen observation. You see, I stuck in my middle finger up the cow’s butt, and I sucked on my index finger… Now, learn to pay attention.”

The moral: Life’s tough, but it’s even tougher when you’re stupid.

#63 Smoking Man on 07.21.18 at 1:47 am

DELETED

#64 Housing crash rerun on 07.21.18 at 2:12 am

https://www.bloomberg.com/news/articles/2018-07-20/in-new-york-city-even-the-cheapest-homes-are-waiting-for-buyers

#65 Dolce Vita on 07.21.18 at 2:33 am

#40 For those about to flop…

“Or is someone else from Italy planning on packing it all in and coming back to Vancouver to commit financial suicide…”

That was too funny.

You made me laugh this AM while drinking an Espresso Lungo made with my Saeco Incanto, Macchina da Caffè Automatica, €330 or CDN $510 on sale ($1,299 on sale in Canada).

That price divide/chasm example pretty much sums up the cost of living in Italia vs. Canada and Canadian tariffs – and they wonder why Trump gets pissed off at Canada.

I especially liked the “…coming back to Vancouver to commit financial suicide…” part…SO true. Boggles my mind how people w/mortgages are keeping their heads above water financially.

Which WEB SITE of YOURS?

Curious. If it is economy and/or RE related, I try to keep up the best I can much like you do.

Keep chronicling YVR RE as it seems to me destined to implode by 4th Qtr; whereupon, you can write a book titled:

“I told you so”.

Even YVR Realtors starting to post negatively on Twit-ter blaming God and Country for the selling malaise and in fear of what large condo inventories about to hit the market will do (to satiate that former condo supply shortage in YVR).

Meanwhile, RE in Italia continues to go down, then again, who cares…it’s just a place to live and what a place to live Italia is…me, Sandra Oh and Diane Lane concur.

– – – – – – – – – – – – – – – – – – – –

BTW Canada, upper 20’s °C to low 30’s °C and you’re all having a KANIPSHIT with HEAT WAVE warnings…WHAT a BUNCH of PUSSIES…it’s been like that since April when God turns on the heat lamp in Italia (low to mid 30s °C since then, it was 43°C yesterday in my home town in NE Italia).

Why we Italians go to the beach in Summer AND to avoid the tourist hordes that are still plying our streets wreaking of sun tan lotion, half naked in their less than stylish vanilla and boring GAP outfits, with white salted soaked TILLEY HATS, cheap rubber/plastic flip flops and wheeled luggage creating a racket at 0200 hrs on centuries/millennia old cobblestone streets (late flight in).

Ciao d’Italia Flop è Garth!

#66 Dolce Vita on 07.21.18 at 2:56 am

#24 Sam

“Garth, I have $800,000 saved.”

“I’m 35.”
– – – – – – – – – – – – – –

What is it you do?

Assuming you hit the job market at 21, you have been working 14 years.

$800,000/14 = $57,143 dollars per year, on average, saved in AFTER TAX dollars.

Assuming 32% in Fed. + Prov. taxes after working deductions and so forth, that means your GROSSED on average MORE THAN $180 K/year for 14 years (“more than” since presumably you have living expenses).

Quite the accomplishment at your age.

#67 Drew on 07.21.18 at 7:29 am

Future generations will look back at a group of 12~ deciding the cost of money and laugh. The connection between money and state (sure, they’re independent) will be looked back on like how we view the connection between church and state. Anhother great article about bitcoin without ever mentioning it. My favourite as always. It is still only a portion of my portfolio but I sleep well being hedged and diversified. As you always preach. Woof

#68 akashic record on 07.21.18 at 8:36 am

67 Drew on 07.21.18 at 7:29 am

Future generations will look back at a group of 12~ deciding the cost of money and laugh. The connection between money and state (sure, they’re independent) will be looked back on like how we view the connection between church and state.

Good point.

#69 crowdedelevatorfartz on 07.21.18 at 9:22 am

@#65-66 Dolce Vita

Ah yes….
Viva Italia.
You may not excel at fighting wars, forming stable long term govts, balancing budgets, or winning World cups but Italians certainly excel at bragging, govt corruption,olive oil, and shoes…..
When did Rome rule the world? 2000 years ago was it?
And its been down hill from there.
When did Italy finally become a Nation? 1871 or was today’s Italy finally a nation in 1918 after negotiating a piece of the Austro Hungarian empire after WW1?

Your “country” was nothing more than “city states” when Canada was a country and, if the instability of your electoral system is any indication,( 30 Prime Ministers since Mussolini was hanged by his own people from a lamp post? With Silvio Berlesconi serving the longest at 10 years while he had “bunga bunga” parties in his office?) …back to squabbling “city states” you will eventually go.

Retired from colonial, backwater, Canada are you? How did you tolerate living here my smug pisano? Our stable govts and healthy living must have been “H E doublehockeysticks”
Enjoy your retirement sipping African espresso as you recieve your monthly stipend from the taxpayers of Canada of CPP and OAS.

Perhaps , if you get bored, you can visit Lampedusa and watch the inevitable African refugee onslaught that is about to overwhelm your country, your economy and the political process.
Thank the beaurocrats at the EU for continuing to wash its hands of the problem…..
And all the free bus tickets your govt gives to the refugees to get them out of Italy as quickly as possible…..wont help either.
Viva Italia! While it lasts…..

#70 NoName on 07.21.18 at 9:47 am

Interesting read

https://bigthink.com/paul-ratner/34-years-ago-a-kgb-defector-described-america-today

#71 For those about to flop... on 07.21.18 at 10:02 am

Hey Dolce,at the bottom of this post I put the Greaterfool post up with the link to my Pink Snow blog.

I was going to leave Greaterfool ,as people were lobbying for my removal and I thought it was unfair for people to have to stick up for me all the time.

Garth and I had some exchanges off blog and in the end we agreed to post the Pink Posts simultaneously on each blog.

There is no real reason for someone on Greaterfool to visit ,except it is probably a little easier to read not being in the small box.

A also put the odd picture up,not every post,just every now and then I find a pink photo and put it up to correspond with a certain post.

I guess it is a little easier for people to be able to scroll down and have it all in the same place to see if they notice any trends.

In the last 6 weeks I have banged out 89 posts,and so while Garth goes for quality,I concentrate on quantity.

I study the analytics to try and learn certain things,as I said before my favourite is looking at the map of the world and seeing people from all over it interested in Vancouver real estate.

I saw that there was one referral from Greaterfool this morning and I try to mention Garth’s blog a bit and return a bit of traffic.

People somehow find me on places like Bing and I noticed someone had joined me the other day from DuckDuckGo whatever that is.

I don’t do back and forth commentary,I just put them up and people can take the information or leave it.

I get ” Likes” not sure what they are good for ,but I guess it is better than being called a renter loser and that I am f***ing up people’s lives like I have had to endure on here.

Anyway the new people on my blog have been nice and seem greatful for the information.

Instead of the direct link I will put up the post on here that I wrote to Boom’s son on how it all began…

M44BC

Post #79 Pink Snow blog link.

https://www.greaterfool.ca/2018/06/28/no-pants/

#72 crowdedelevatorfartz on 07.21.18 at 10:30 am

@#57 Jake Richards
“Who cares what they put on somone’s tombstone. I don’t see the point of this.”
+++++
Oh, I dont know. Some of the funniest lines are on tombstones.
Spotted in Tombstone Arizona’s “Boot Hill”

Here lies Les Moore
Kilt by four slugs from a 44
No less
No more

https://www.google.ca/search?q=tombstone+az+grave+quotes&rlz=1C1AOHY_enCA793CA797&tbm=isch&tbo=u&source=univ&sa=X&ved=2ahUKEwjouonys7DcAhVkNn0KHa6DAwUQsAR6BAgFEAE

#73 Stan Brooks on 07.21.18 at 10:42 am


#43 I’M A STABLE GENIUS! on 07.20.18 at 8:07 pm
When the lies become the truth, everyone seems to believe the fake numbers of 2.5% inflation.

The word Lie is really the correct term to use when inflation is raging at 7% and they tell us it is 2.5%.

But it seems most people don’t want to push back.
They will accept words like not correct or not true. That is, if they can even get to the fact that it isn’t true!

Many are given to believe the frankenumber given regarding inflation is a result of smart people in Stats Canada who are only reporting the real numbers.

Astonishing!

In my assessment cost of living/real inflation is above of 8-10 %.

Reporting 2.5 % inflation is an insult to everyone’s intelligence, outright lie and a moral crime (legal crime does not apply here as the legal system will never keep up with the true justice) as it results in theft of saving (past labour), including pensions theft (CPP indexed at sub 2 %)

the facts:
1. Housing increased by 10 % yearly for over a decade and a half
2. energy alone increased 20 % + on yearly bases compared to last year.
3. food everywhere increased by at least 30-50 % in the last few years, probably 15-25 % in the last year alone driven by increase of minimum wage.

and to report 2.5 % as ‘inflation’ is absolutely ridiculous.

Keep in mind, with real inflation of 8-10 % and GDP ‘growth’ of 2-3 % we are actually shrinking at an absolutely horrendous rate of 5 + % annually which is actually pretty normal considering the fact that we are coming out of the greatest credit bubble ever.

This has been going for at least 6-8 years and in my humble estimate the average standard of living of the Canadians will shrink in total between 2.5 and 3 times from the heights at the top of the credit bubble.

The sheeple is slowly boiled like a frog as it is indeed that stupid.

With the stupid unfortunately will suffer also the responsible, who live within their means.

Adding insult to injury all your ‘gains’ in real assets and even the ridiculous low interest on savings and GICs are taxed as ‘profit’ as the government deems that you are getting richer.

With people getting poorer and deeper in debt by the day it is not surprising that crime is increasing and Canada from today is becoming very different from the country it used to be 2-3 decades ago

I can only imagine what the situation will look like a decade from now with the current economic policies relying mostly on credit and cheap labour to US and with the pending disintegration of NAFTA.

It seems these are the times to be truly paranoid and defensive in any exposure, limiting your liabilities and protecting your interests as much as you can.

I have a very bad feeling about that, specially about pensions and RRSPs in long run.

#74 Dolce Vita on 07.21.18 at 10:57 am

#69 crowdedelevatorfartz

-We taught you how to eat.

-We taught you how to drink.

-We taught you how to dress.

-We taught you to appreciate the finer things in life.

And that is the thanks we get.

Go back to your:

-Cars, Canucks and Canadian – the 3 C’s of Cdn. Culture (except PQ).

We have horse races older than Canada (Il Palio).

BTW, you forgot to mention we have more World Heritage Sites than the rest of the World and we stopped applying 10 years ago so the rest of the World can catch up…they still haven’t.

And enjoy your WHO ranked plus #30’s Cdn. healthcare system. I like Italia’s #2, esp. as I am retired.

If nothing else, we are not dull.

As for Lampedusa et. al., all shut down thanks to Salvini of Lega.

Beside the Roman Empire, we had these other 2 somewhat famous periods: the Renaissance and the Venetian Republic – the latter’s Constitution used by the American’s (Hancock’s Venetian library card is still there to see for all you Revisionists).

There you go confined spaces farting person.

Besides, +30 MM visiting Venezia alone this year, cannot all be mistaken and needing to be “schooled” by you…then there is Rome, Firenze, Verona…and the list goes on.

#75 Dolce Vita on 07.21.18 at 11:13 am

#71 For those about to flop…

No that wasn’t me (IP Address from Italia…before today).

Nifty web design, I like it.

Now if you see frequent (daily) Italian IP Address visits, know that will be me. Thank you for the URL.

I like your work. The truth matters to me and you deliver.

And thanks Garth for continuing to let Flop post on your Blog – you are as egalitarian as ever.

#76 Doug in London on 07.21.18 at 11:22 am

So Donald Trump can influence The Fed to keep interest rates low. That I understand, but ultimately aren’t interest rates over the long haul set by the bond market? Wouldn’t that sooner or later lead to higher interest rates in response to higher inflation?

#77 Fish on 07.21.18 at 12:01 pm

Try to save even Steven, more please

#78 For those about to flop... on 07.21.18 at 12:29 pm

18 at 11:13 am
#71 For those about to flop…

No that wasn’t me (IP Address from Italia…before today).

Nifty web design, I like it.

Now if you see frequent (daily) Italian IP Address visits, know that will be me. Thank you for the URL.

I like your work. The truth matters to me and you deliver.

And thanks Garth for continuing to let Flop post on your Blog – you are as egalitarian as ever.

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

Hey Dolce, I just checked back and yes there is an Italian flag there now.

I don’t get anyones IP address,just country of origin,I wish it did provinces but it doesn’t.

I get to see which posts attract the most attention and therefore what people are most interested in.

I think people can even comment in anonymity, I’m sure like Greaterfool I attract allsorts.

Garth has always supported my efforts and I never wanted to leave ,I just thought it was unfair on him to have to moderate the posts and the people who complain about nothing.

Now I tick along on two blogs, a bit of extra work but I don’t mind.

It will never be Greaterfool and I view it as a spinoff series just like what happens when Roseanne goes on a racist rant.

Business as usual…

M44BC

#79 BillyBob on 07.21.18 at 2:52 pm

re: Italy.

Constantly bragging about something only gives the impression of being needy. But then, most Italian men live with their parents well into their 30’s. Italians invented the term “mama’s boy”. So I suppose it makes sense to desperately want some validation of your decision to jump aboard a sinking economic ship and soothe your obvious insecurity. I haven’t lived in Canada in years but I highly doubt anyone there misses you.

Italy exports many fine things to the world in many areas but that hardly makes it special. It’s certainly a truism that it’s best days are behind it, not ahead. Resting on the accomplishments of hundreds, if not thousands of years ago has to be the height of lameness. And I speak as someone who absolutely loves Rome.

But really…trying to spin 43C as a positive? Not gonna work. And as far as the weird attempts to belittle the fashion sense of Canadians, I can tell you from extensive travel in Italy that most Italians don’t exactly look like they just strolled off the set of Roman Holiday lol.

But as long as you’ve convinced yourself you’re happy, it’s cool! :-)

#80 Steven Rowlandson on 07.21.18 at 2:54 pm

“But that will be for the kids to worry about.”

What kids?

#81 AGuyInVancouver on 07.21.18 at 9:04 pm

11 ADBD on 07.20.18 at 5:57 pm
Living in Florida now. Morneau’s tax policy made me move business south. No state taxes here. Oh, and a buck a beer. Hurricanes? Sure, but Donald’s place is five miles north and I bet they’ll protect that in a hurricane. No smart move in the market right now – everyone is guessing. Garth is right – unless you are in the game you are losing. But which horse to back……..
_ _ _
Wow, Florida, aim high bro’
Enjoy the trailer park favelas.

#82 Fish on 07.21.18 at 9:52 pm

Yeah what kids?

–“ until the piper plays.”

when the fat lady sings??

#83 I'M A STABLE GENIUS! on 07.22.18 at 1:43 am

Hey where’s my wartime consigliere?

I’ve got a trade War to wage!

Everybody who works for me has to add to hear to the rule of Omerta …silence or death!

Police that’s what swirls in my mind!

#84 Fish on 07.22.18 at 10:42 am

@ #73 Stan Brooks on 07.21.18 at 10:42 am

#43 I’M A STABLE GENIUS! on 07.20.18 at 8:07 pm
When the lies become the truth, everyone seems to believe the fake numbers of 2.5% inflation.

The word Lie is really the correct term to use when inflation is raging at 7% and they tell us it is 2.5%.

But it seems most people don’t want to push back.
They will accept words like not correct or not true. That is, if they can even get to the fact that it isn’t true!

Many are given to believe the frankenumber given regarding inflation is a result of smart people in Stats Canada who are only reporting the real numbers.

Astonishing!

In my assessment cost of living/real inflation is above of 8-10 %.

Reporting 2.5 % inflation is an insult to everyone’s intelligence, outright lie and a moral crime (legal crime does not apply here as the legal system will never keep up with the true justice) as it results in theft of saving (past labour), including pensions theft (CPP indexed at sub 2 %)

the facts:
1. Housing increased by 10 % yearly for over a decade and a half
2. energy alone increased 20 % + on yearly bases compared to last year.
3. food everywhere increased by at least 30-50 % in the last few years, probably 15-25 % in the last year alone driven by increase of minimum wage.

and to report 2.5 % as ‘inflation’ is absolutely ridiculous.

Keep in mind, with real inflation of 8-10 % and GDP ‘growth’ of 2-3 % we are actually shrinking at an absolutely horrendous rate of 5 + % annually which is actually pretty normal considering the fact that we are coming out of the greatest credit bubble ever.

This has been going for at least 6-8 years and in my humble estimate the average standard of living of the Canadians will shrink in total between 2.5 and 3 times from the heights at the top of the credit bubble.

The sheeple is slowly boiled like a frog as it is indeed that stupid.

With the stupid unfortunately will suffer also the responsible, who live within their means.

Adding insult to injury all your ‘gains’ in real assets and even the ridiculous low interest on savings and GICs are taxed as ‘profit’ as the government deems that you are getting richer.

With people getting poorer and deeper in debt by the day it is not surprising that crime is increasing and Canada from today is becoming very different from the country it used to be 2-3 decades ago

I can only imagine what the situation will look like a decade from now with the current economic policies relying mostly on credit and cheap labour to US and with the pending disintegration of NAFTA.

It seems these are the times to be truly paranoid and defensive in any exposure, limiting your liabilities and protecting your interests as much as you can.

I have a very bad feeling about that, specially about pensions and RRSPs in long run.

**************[
well said, I’m am also worried

#85 101N on 07.22.18 at 10:56 pm

Well at least you didn’t try to pretend the “gap” was between interest paid to depositors and the interest charged to customers they lend the deposits to… you know, the lies they taught us in school.
So your dad was in charge of Peel curriculum back then… hmmm.