WhereDoesAllMyMoneyGo.com

Funny Video: The Greek Economy

Preet — Tue, 21 Feb 2012 17:31:01 +0000

Giveaway Reminder: I’m giving away 10 activation codes for Ufile ONLINE – contest ends Friday. Click here to enter.

While this video is from last summer, I thought it was worth a second look seeing as we’ve kicked the can a little bit further down the road in the Eurozone. Enjoy!

Giveaway: 10 vouchers for UFile Canada online tax preparation

Preet — Tue, 21 Feb 2012 06:22:38 +0000

UFile has offered to give readers of WhereDoesAllMyMoneyGo.com 10 copies (well, coupon codes for free access) to their online tax preparation software. For a description of the software, please visit their product description page for more information.

I have no relationship with UFile (Dr Tax Software) and am not receiving any compensation for running this give-away other than the free access codes to give away.

Contest runs until 12:01 AM (Eastern Standard Time) on Saturday, February 25th. That means that effectively, the contest runs until midnight this upcoming Friday, February 24th. There are multiple ways to increase your odds of winning, which are detailed in the form below. Winners will be announced on this page. You can choose to employ as many or as few methods as you like. Good luck!

For email subscribers, click here to see the entry form.

*Note: You don’t have to login with Facebook, you can enter your name and email address instead by clicking the line below the “Login with Facebook” button.

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Guest Post: While a Greek default may be certain, how it plays out is uncertain

Tusk Trader — Thu, 16 Feb 2012 13:00:28 +0000

NOTE: Today is the last day to enter this week’s giveaway of 10 online copies of TurboTax Canada’s tax preparation software. Odds are still pretty good for winning, so click here if you are interested in throwing your hat in the ring.

This is a guest post on trading from Tusk Trader (check out the newly launched site: www.TuskFund.com), an experienced Bay Street trader who will be writing here until Tusk’s own blog is set up. Tusk had a front row seat to the twists, turns, and almost collapse of our capital market systems a few years ago and provides a unique perspective you won’t find anywhere else. For most people, financial literacy is the elephant in the room. Let Tusk Trader help change that. If you are on twitter, make sure to follow Tusk at @TuskTrader

I think Greece will default. This is not a unique view as many market participants think the same thing. A second common belief right now is that the market has essentially priced in that happening. I am very uncertain that the market has done that. The financial world has not seen a default of this size before and I do not think every permutation of what is going to happen can be extracted and viewed in a financial model.

The markets can do a fair job of pricing in events like a credit crunch, European banks struggles or GDP declines. As a trader, I am most concerned about what we do not see coming. The list of what events occurred in the past when a country defaulted (Russia 1998, Peru 2000, etc.) will not give a solid view of what the financial world will be in for when Greece actually defaults. The complexity of a Euro country defaulting resembles a science experiment and as a trader, I want to have on safety glasses, protective clothing and have access to a study table to duck under when sparks start to fly or when something explodes out of a beaker.

I do not think that every trading day will be crazy and manic as a Greek default works its way through the system, but I do think there will be some big event driven trading days where uncertainty will reign supreme. There are a number of moving parts that will not always move as expected. The currency risk alone is uncharted territory. The currency you hold your assets in could end up be the biggest determining factor of their growth potential. From a trading perspective, the flight to currency safety could be the pathway to chaos for the equity markets.

The size of the Greek problem also gives me shivers. The last major default the world dealt with was Argentina in 2002. It was for about 80 billion dollars. Greece is sitting around 500 Billion Dollars. That is a massive number.

I think the market has miss priced these surprises coming. I have no crystal ball that will tell me what these surprises will be but I do know that they are coming. We are looking at 420 Billion dollars worth of uncertainty.

And just to add some more numbers to your thoughts, if Spain defaults that would be approximately 1.05 Trillion. Italy would be 2.7 Trillion.

Thanks Tusk. Make sure to check out the site: www.TuskFund.com or follow Tusk Trader on twitter: @tusktrader

Guest Post: Tax Deductible Mortgages

Preet — Mon, 13 Feb 2012 23:24:44 +0000

Housekeeping: TurboTax Canada giveaway is running this week. Don’t forget to enter.

Note: This is a guest post by Ross Taylor. His bio is at the end of the post.

Financial planners and mortgage professionals like to trumpet the Smith Manoeuvre, as coined by Fraser Smith in 2002. In a nutshell, this ‘program’ shows you how to free up equity in your home for investment purposes, and to do so in a tax efficient manner.

I hate to burst the bubble – as a matter of fact I am big fan of anyone who has the patience to write a book, but the notion of tax deductible investment loans has been around for decades.

I give full credit to Fraser Smith for popularizing an old concept, and even getting an entire industry and nation to name it after him.

When I started out as a fresh faced stock broker in the mid-eighties, this concept was already de rigeur. The guys at Investors Group, Financial Concept Group, Regal Capital Planners and the Principal Group were into leveraged investing in a big way. Fraser Smith himself was peddling the strategy as a financial planner in Vancouver at that time.

One person who embraced borrowing to invest was The Honourable Michael Lee-Chin, who was making his mark in the Hamilton office of Investors Group in the late seventies, before becoming regional manager of Regal Capital Planners in 1979.

Michael went on to huge success, becoming a self-made billionaire through a series of canny, gutsy business decisions in the eighties and nineties.

I recall irking one particular University of Waterloo professor client, who I had been courting for several months. One day he dumped me and said he was refinancing his home and pouring all the proceeds into mutual funds with Michael.

He said the capital gains potential and tax benefits were simply too good to pass up. I urged caution, suggesting this was a risky venture that could jeopardize his family’s future; after all, there was no guarantee the stock market would continue to go up and up. He wanted no part of my conservatism, and parted my company with a harrumph.

He had the last laugh as the stock market continued on a raging bull tear for years, and the strategy looked brilliant, and my fears for him groundless (this time).

Today the notion of leveraging your assets to invest is alive and well. True, there were hundreds of long faces in 2008 and 2009 when the markets for stocks and real estate took a bit of a beating, but that was in the past, and Fraser Smith’s ‘legacy’ continues to shine on.

Whatever you want to call it, please understand that borrowing against the equity in your home is a risky move – I said it twenty five years ago, and I still do – probably I will be right one day. What are some of the risks?

The investments you make with the borrowed money could go down in value
The cost of borrowing could increase if interest rates rise
If real estate prices correct, you could end up penned into something uncomfortable – you really need to know your long term living arrangements
Please be very prudent about investing in anything that has a sales commission attached either at the front end or the back end of your purchase
Tax rules can change at any time in the future

If you would like to read others’ opinions on the Smith Manoeuvre, here are a few links:

Ellen Roseman

Canadian Capitalist Blog

Over the years, Ross Taylor has been a stockbroker, fee based financial planner, income tax specialist, mutual funds company executive, retail banking VP, tech company executive, and has raised capital for small to mid-size businesses. These days he is a licensed mortgage broker agent and registered credit counselor, and still provides advice on most personal finance matters. He writes a blog at www.askross.ca

Giveaway: 10 copies of TurboTax Canada Online

Preet — Mon, 13 Feb 2012 16:07:21 +0000

TurboTax Canada has offered to give readers of WhereDoesAllMyMoneyGo.com 10 copies (well, coupon codes for free access) to their online tax preparation software. The coupon codes are good for any version of TurboTax Online, so the value is up to $44.99 + tax each. For a description of the software, please visit their product description page for more information.

I have no relationship with TurboTax (Intuit Canada) and am not receiving any compensation for running this give-away other than the free access codes to give away.

Contest runs until 12:01 AM (Eastern Standard Time) on Friday, February 17th. That means that effectively, the contest runs until midnight this upcoming Thursday, February 16th. There are multiple ways to increase your odds of winning, which are detailed in the form below. Winners will be announced on this page on Friday. You can choose to employ as many or as few methods as you like. Good luck!

For email subscribers, click here to see the entry form.

*Note: You don’t have to login with Facebook, you can enter your name and email address instead by clicking the line below the “Login with Facebook” button.

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Volume and a Valentine’s Day Breakup: It’s you, not me?

Tusk Trader — Thu, 09 Feb 2012 05:35:18 +0000

NOTE: Today is the last day to enter this week’s giveaway of 10 online copies of H&R Block Canada’s tax preparation software. Odds are still pretty good for winning, so click here if you are interested in throwing your hat in the ring.

This is a guest post on trading from Tusk Trader (check out the newly launched site: www.TuskFund.com), an experienced Bay Street trader who will be writing here until Tusk’s own blog is set up. Tusk had a front row seat to the twists, turns, and almost collapse of our capital market systems a few years ago and provides a unique perspective you won’t find anywhere else. For most people, financial literacy is the elephant in the room. Let Tusk Trader help change that. If you are on twitter, make sure to follow Tusk at @TuskTrader

Trading volumes have been down a lot over the last few years. Volume started to disappear in early 2009 and good volume days have been a rarity since then. This trend started off as being viewed as though volume was in a slump and would return soon.That has not happened. The markets have been melting up for the last 5 to 6 months and volume is still scarce.

A common phrase market watchers have been hearing since 2008, about all things financial, is that this is “the new normal”. Since the start of 2012, I can’t help but wonder if low trading volume is the new normal too and if traders need to just stop pining for its comeback. So many aspects of the markets have changed in the last few years. Why do we traders keep thinking that volume will come back to us? Maybe we just can’t seem to realize we have been dumped. It is Single Awareness Day next Tuesday and maybe traders should use that yearly chocolate holiday to close the book on our relationship with volume. It was good while it lasted. Volume made each day better. The sun shined a little brighter when you could get into a trade where you wanted and then be able to exit within a regular market swing.

Trading in a high volume environment has less risk. Traders can plan out a trade by looking at the trading book and volume charts. The entry and exit points can be chosen from the best possible options when there is good volume. When there is bad volume, entry and exit options are limited and an active trader’s volume per trade will also belimited.

The Financial Times has reported the January 2012 volume traded stats in the US and the numbers are startlingly low. The daily average volume for January was at levels not seen since 2005 and the three month average is at its lowest since 2007. A curious fact of this low volume is that the volatility last month was also down. The FT reports that, according to Deutsche Bank, price volatility in the S&P 500 index for the past month has fallen to 8.2 per cent, versus a three-month average of 21.8 per cent.

When volumes are down, volatility is usually up. This could just be a phase or it could be part of the new normal traders need to wake up to. Volume was the best partner a trader could ask for, but it appears to have moved on.

Thanks Tusk. Make sure to check out the site: www.TuskFund.com or follow Tusk Trader on twitter: @tusktrader

I hope you are not waiting for an RRSP refund

Preet — Tue, 07 Feb 2012 06:26:30 +0000

Don’t forget to enter to win 1 of 10 access codes to prepare your tax return at home for free with H&R Block Canada’s online software. Contest ends in three days. Click here to enter.

NOTE: This is a guest post by Ross Taylor.

It never ceases to amaze me how many people gush about their expected income tax refunds; especially those generated by their RRSP contributions. What are they waiting for? Why did they decide it was a good idea to make an interest free loan to the feds over the past year? Why not have that refund coming to you every month you make a contribution, instead of waiting till late spring of the following year?

Back in the eighties, $7,500 was the maximum allowable annual contribution, and even then, it was still important for my clients to have their refund in their hands, rather than in the feds’ pockets. In 2012, the maximum RRSP contribution is $22,970 – that’s serious coin! If your marginal tax rate is say 40%, your contribution is going to generate a refund over $9,000.

If your take home pay is subject to deductions at source, all you have to do is talk to whoever manages payroll for your employer and explain your intentions for the tax year. You can do this at any time, not just during the so called “RRSP Season.” The net result will be your monthly payment will only incur an out of pocket cost of around 60% of the actual amount.

The conversation goes something like this:

You: So I plan to contribute $600 each month to my RRSP, and I want my withholding taxes at source adjusted with each pay check.

Payroll: No problem, let’s fill out this form T1213, and then send it in to CRA, and within a month or two you will see an increase in your take home pay.

You: It’s that easy?

Payroll: Yep. As a matter of fact, you can make the adjustment not just for your RRSP contributions. You can even include child care costs, certain support orders, charitable donations, and carrying charges and interest expenses on investment loans.

Payroll: Before you file the request to reduce source deductions you’ll need to provide proof that you have set up a pre-authorized contribution plan for your RRSP, and my contact info as your employer’s payroll administrator.

It sounds simple because it is. It’s not for everyone though. Some see their expected tax refund as a forced savings plan – they worry they won’t have the discipline to save that much if left to their own devices.

Doing it the old fashioned way, they know they will receive a lump sum of several thousand dollars which they can then use as they see fit – make a TFSA contribution or a lump sum mortgage payment, put it towards a home reno project or maybe even a dream vacation.

Others plan to pay down unsecured debt with their refund – but this means they carried debt at anywhere from 6% to 29.9% interest, while they loaned out their money at 0%.

Back in 1988, a very smart marketing visionary named John Ritchie (who was the coach of the Crazy Canucks ski team during their glory days) loved the Form T1213 so much he decided to give it a name, and he developed an entire financial product strategy around it.

He called it ProAct. And he dubbed it “the greatest innovation since the pay check”

In those days, even humble GIC’s were paying yields of around ten percent, and the highest marginal tax rates were closer to 50%. So the opportunity cost of NOT receiving your tax refund each month was rather high.

It was a brilliant stroke, and John poured a ton of energy into making a product out of a simple administrative process. Alas the financial institution he toiled for was not prepared to back the idea sufficiently to give legs to the product launch, and as a result, ProAct quietly disappeared in a few years.

But this doesn’t mean it was a bad idea – it’s a good one – talk to your tax preparer and financial adviser, and see what she says about whether or not it makes sense to you.

Over the years, Ross Taylor has been a stockbroker, fee based financial planner, income tax specialist, mutual funds company executive, retail banking VP, tech company executive, and has raised capital for small to mid-size businesses. These days he is a licensed mortgage broker agent and registered credit counselor, and still provides advice on most personal finance matters. He writes a blog at www.askross.ca

Give-away: 10 copies of H&R Block “At Home Online Tax Program”

Preet — Mon, 06 Feb 2012 04:34:23 +0000

H&R Block Canada has offered to give readers of WhereDoesAllMyMoneyGo.com 10 copies (well, coupon codes for free access) to their At Home Online Tax Program, valued at $15.95 + tax each. For a description of the software, please visit their product description page for more information.

I have no relationship with H&R Block and am not receiving any compensation for running this give-away other than the free access codes to give away.

Contest runs until 12:01 AM (Eastern Standard Time) on Friday, February 12th. That means that effectively, the contest runs until midnight this upcoming Thursday. There are multiple ways to increase your odds of winning, which are detailed in the form below. You can choose to employ as many or as few methods as you like. Good luck!

*Note: I’m trying out a new piece of software to help me manage give-aways. You don’t have to login with Facebook, you can enter your name and email address instead by clicking the line below the “Login with Facebook” button.

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Also, for those interested: I’ll be on CBC’s The National with Peter Mansbridge on Tuesday night talking about pensions and retirement as part of the monthly “The Bottom Line” panel discussion.

Breaking: Major changes in mortgage market in Canada?

Preet — Thu, 02 Feb 2012 13:22:56 +0000

This is a guest post from Ross Taylor

Today, February 2, will bring even more changes to the Canadian mortgage industry, as one by one, lenders will have no choice but to announce major changes to their lending guidelines.

Why is this happening? In recent months, some financial institutions have been quietly offloading the risk of even their low loan to value mortgages (previously uninsured) by securitizing these mortgages and bulk buying CMHC insurance – thus quickly pushing the amount insured quite close to the threshold of $600 billion set by the federal government. Only three years ago, the cap was $450 billion.

Yesterday, FirstLine Mortgages announced they were no longer offering mortgages for self- employed folks and for investors who have a rental property. Once the darling of the mortgage broker community, this company (interestingly, CIBC’s wholesale mortgage arm) has fallen off many agents’ radar over the past few months as their product line became increasingly uncompetitive.

Today, February 2, Street Capital Financial Corporation, currently the most sought after lender in the mortgage broker community, has also announced major lending guideline changes. Effective immediately, for their conventional product offerings (20% or more down payment) they will not accept rentals, stated income applications or equity based deals. Actually CMHC insures all their mortgages, not just the high ratio ones.

Other lenders will follow suit very quickly, you can be sure.

This is not about the Canadian Government losing faith in self-employed individuals, nor is it about the feds trying to punish people who invest in rental properties. Rather it maybe about lenders trying to decide which socio economic group can take the hit of increasingly tougher lending guidelines, and have the least impact on the lenders’ image.

But according to Industry Canada, some 15.6% of all working Canadians were self-employed as at March 31, 2011, one third of them female. It’s not clear what percentage of all residential homes are rentals, but anyway, lenders have probably decided the public will perceive rental unit owners as wealthy, and again, the majority will be indifferent towards their plight.

But if you take out a significant segment of the population from buying homes, is it not natural that would impact demand? Self-employment is not an automatic high risk, just as a person on payroll is not automatically low risk.

In recent months, the media has done an admirable job of painting a picture of pending doom and gloom for the Canadian real estate market. No one wants to follow our American friends into the abyss of financial chaos, as began in 2008 to 2009, when lax underwriting standards (amongst other things) led to an overly heated national housing market, and the result today, according to Zillow , is 28.6% of all American single family homes with mortgages have negative equity.

The risk today is the whole thing becomes a self-fulfilling prophecy, fuelled by the media, and orchestrated by our chartered banks.

Our banks quite rightly trumpet their financial strength and integrity to the rest of the world – and such moves will be perceived as sane and prudent. Perhaps it is not a coincidence that a byproduct of this move will be to hurt and perhaps squeeze out some of their major competitors for mortgage product offerings who rely heavily on CMHC and other mortgage insurers to ensure their portfolio.

This could just be a much more subtle way of the major banks trying to assert dominance and control of residential mortgage lending in Canada. BMO’s 2.99% five year fixed mortgage rate in January may just have been their opening salvo.

Over the years, Ross Taylor has been a stockbroker, fee based financial planner, income tax specialist, mutual funds company executive, retail banking VP, tech company executive, and has raised capital for small to mid-size businesses. These days he is a licensed mortgage broker agent and registered credit counselor, and still provides advice on most personal finance matters. He writes a blog at www.askross.ca

Facebook IPO: Should you try to buy it?

Tusk Trader — Wed, 01 Feb 2012 05:03:28 +0000

This is a guest post on trading from Tusk Trader (check out the newly launched site: www.TuskFund.com), an experienced Bay Street trader who will be writing here until Tusk’s own blog is set up. Tusk had a front row seat to the twists, turns, and almost collapse of our capital market systems a few years ago and provides a unique perspective you won’t find anywhere else. For most people, financial literacy is the elephant in the room. Let Tusk Trader help change that. If you are on twitter, make sure to follow Tusk at @TuskTrader

All market watchers have been buzzing about the news that Facebook is going public. The upcoming Facebook IPO is going to be different than other tech IPO’s that many traders and investors have been seeing lately.

Overall, companies go public to raise money to expedite growth for their firm. Facebook, however, is actually being forced to go public. Once a private company crosses the threshold of having more than 499 individual investors, they must disclose financials publicly. If firms have to disclose financials publicly, there is no reason to not be a full publicly traded company. It has been reported that Facebook crossed that threshold of investor numbers sometime in December. Facebook knew this was coming so they most likely have a very solid plan in place for how they want to conduct themselves while going public and how they want to arrive at a fair price for their stock.

Many people like to invest or trade stock in companies that they know and where they have a clear understanding of the business the firm is engaged in. This does not apply to the Facebook IPO. Do not try to acquire shares just because you think you know and understand the business well. Avoid thinking, “ I like Facebook, they make a lot of money, they have good management, and therefore I should buy Facebook stock.”

I am a trader and I care very little when someone tells me what stock they own. It is meaningless to a trader. I don’t care that you own Apple unless you tell me where you bought it. There is a big difference between owning Apple at $100 and owning Apple at $450. What is important with a trade or an investment is the price you paid and how long you have had it. With a company like Facebook, the price will be everything. Facebook makes money and has over 800 million users. They have great management and are not afraid to innovate, or to make strategic acquisitions. The issues for investors and traders will be the price of the IPO and what Facebook plans to do with the cash they are raising.

Because Facebook is not raising money for a specific purpose (like what many firms do), trying to get solid answer to what Facebook will do with this money is key. Having a ton of cash is a good thing from a balance sheet perspective but not always from an investing one. Investors want a return on their money, not just the return of their money.

Facebook as a firm has a lot of things going well for it, but that does not always translate into a good trading or investing decision. Facebook has been an investable company for institutions and large individual investors for a while, it’s just the retail investor that has been left out. This Facebook IPO is not the same as most tech IPO’s of the past. Facebook has already passed through the phase of hockey stick style growth. It is an 8 year old company. If you are considering the Facebook IPO for yourself, think of it like buying a car. A lot of people like the 325 BMW. It has good handling, good horsepower, and a healthy selection of luxury features. The key element is that this car also comes at a price that many buyers see as fair value for what is being purchased, even if that price is high. The car would not get as many positive reviews if the price was higher, or let’s say, double. As good as that car is, it is not worth $100,000. It would no longer been seen as good value for money. Investors buy stock to either get a capital gain or income generation. If you choose to dip into the Facebook waters, make sure you are doing so at a price where you are receiving value for your money and a fair return on your investment.

Thanks Tusk. Make sure to check out the site: www.TuskFund.com or follow Tusk Trader on twitter: @tusktrader