Canadian Personal Finance Blog

Archive for the ‘Government’ Category

Parity Between US Buck and Loonie?

That is what the CIBC and their analyst Zafar Bhatti thinks. Same reasons as previous Loonie flights but still worth noting:

• Commodity prices, and Canada being the Northern Resource Kingdom to the U.S. (and a lot of the world)
• Potential for higher interest rates in Canada, thus strengthening the dollar (remember targets are June)
• Canada is a good investment in terms of our credit balance. Yes our Government is in debt, but nothing like the Americans, and most of our debt is held by Canadians themselves (i.e. Savings Bonds), so we are a good risk (maybe we can get a Amex Platinum for Nations?)

An excellent quote from the CIBC is:

…This puts the Bank of Canada between a rock and a hard place, if they signal rates are going to rise, the Canadian dollar will make a run for parity or stronger…

A blip over the summer with a subsiding in the fall might be a good thing for Canadian consumers, maybe.

Big Deal!

Well, actually it can be a very big deal if the Canadian dollar gets really strong, it will cause Canadian products to be too expensive for your Yankee cousins (whether the Canadian dollar strengthens against the Chinese currency and the Euro remains to be seen). Many, many small Canadian firms rely on trade with the U.S. and a soaring Loonie will cause that market to dry up, unless the manufacturers slash prices in reaction to this rise.

Reverse cross border shopping will start again. Many things are cheaper in the U.S. if you simply look at the price tag, and if the Canadian Dollar can buy the same as a U.S. dollar, why shop in Canada? For someone in Ottawa you are 55 minutes from Ogdensburg, and not that far from other U.S. towns and cities that will see an influx of “Frost Back” Canadians with their Beaver Bucks in hand. This will help these border towns a great deal, but will have the reverse effect on Canadian border towns.

Is this a permanent thing? I have no bloody idea, but I am now looking at US Index funds (and ETF’s) thinking that if the Canadian dollar goes any higher am I getting a bargain? As is pointed out in the CIBC report, if American Inflation explodes (say because their Government is printing money as fast as they can spend it) and the U.S. Central Bank has to raise interest rates, then this will simply be a “bulge” which will subside quickly and the Canadian Dollar may slide back to where it has been (of course if Canadian Inflation explodes in reaction to American Inflation, the two factors may cancel each other out).

I would encourage you to read over this very interesting report and form your own ideas and opinions about where we are going from here (economically).

Don’t we live in interesting times?

The Budget announced on Thursday did one or two good things, announced some ominous things (for me) and didn’t do much else.

Good: RRSP/RSP to RDSP

The one good thing is that estates of deceased parents and grandparents can transfer money tax-free to a child or grandchild’s RDSP, which helps those with disabled kids, so a very good thing.  The RDSP program will also allow for Carry Forward of the Disability Bonds for up to 10 years, so those who may not have enough to put in one year ,can make it up in the next year (seems a logical step in the program).

OK: Options Victims Saved?

There was a statement about the lucky folks being taxed for money they didn’t make on Stock Options, but the exact logic and methodology is not yet completely understood (as can be seen from this post from Michael James (an admitted victim)). I never had to worry about options ever being worth anything, so I think this doesn’t affect me in any way.

Interesting: Government Cost Controls

This one is directly in my new backyard, with a statement about budget freezes in the public service. What will this mean? Again, not exactly clear, but spending seems to have stopped for now, which might be a good thing for taxpayers (not for us civil servants). Will this mean lay-offs? My guess would be maybe, but a lot of attrition losses due to retirement not being replaced, might be the more logical choice. Will this cut down on bureaucracy and mismanagement? Did it do much in Nortel? Again, the answer is maybe, but I doubt it. Whatever bureaucracy that is there, will stay there, and anybody mis-managing things, are most likely going to stay where they are too, but we shall see.

No mention of the Public Service pension plan, but many ominous statements about it coming from the “side sources” of the government, so another area to watch closely.

Why Not Back to the Past?

So how is it that 4 years ago we were running surpluses and now we are running massive deficits? A couple of reasons come to mind, but they don’t quite add up:

• Massive infrastructure programs to help start up construction and such
• Less Government income, because less folks are working (and those that are, aren’t getting huge raises, and some even took pay cuts).
• More unemployed, so more money going out of the EI “cash cow”, instead of coming in.

But this doesn’t seem to add up to a $50Billion deficit in my mind, but again, maybe it is just not that simple. Anybody think of any other reasons?

The Tories saying they are reviewing the lyrics of O Canada, while the economy is just recovering and the Government has blown more money than Paris Hilton on a shopping spree in Paris, is possibly either the greatest strategy ever, or the dumbest, I am not sure which. How many Canadians are worried that “… in all thy sons command…” is not inclusive, is more important in comparison to where the Economy stands, and the size of the national debt? I am sure there are some that are losing sleep over our National Anthem, but frankly it really doesn’t grease my wheels much (but then again, I have a son, and he is commanding, so maybe I am biased).

With glowing hearts we read many great postings this week written by the financial bloggers, from the true North strong and free. From far and wide we searched to find those posts that stood on guard for us, and here are a few of them:

• Michael James looks a gift horse in the mouth, and finds a few rotten teeth, in his post Overpaying for “Free” Life Insurance. I guess we should figure out whether “free” is too expensive for us.
• Preet sure talks to a lot of interesting folks, and thanks to his chat with Michael Moore he is giving away copies of Capitalism: A Love Story — Giveaway. Remember true love, is always saying you are sorry.
• The Canadian Capitalist has some Tips for your RRSP Contribution which is useful, even with RRSP season being over effectively.
• Larry MacDonald talks about the 2010 Budget and Personal Finance, and he should know he’ll have been locked away learning about it.
• Canadian Financial DIY points out that Canadian Computer prices might not be as big a gouge as they used to be in The Mighty CAD.
• The Quest for Four Pillars takes on a topic near and dear to my heart with Buying an iPhone From Rogers? – Don’t Believe a Word they Say. I’d like an iPhone, but they are just too darn expensive.
• Gail Vaz-Oxlade gives us something to think about with 8 Reasons Why YOU Don’t Save, how did she know?
• Ellen Roseman returns from a nice vacation and gets Back to Work, helping people get refunds. Vacations are refreshing, wish I knew how to go on one.
• To Succeed Financially you must Know Yourself says Million Dollar Journey, which is true. No financial plan works unless it fits how you want or can live.

Remember folks, there is a new budget and maybe soon we’ll have a new, non-descript, non-threatening and boring National Anthem. I suggest that we hire John Tesh or Air Supply to write it! Have a great weekend.

Don’t You Usually Comment on the Budget?

Yes, I’ll wait until Monday to comment on what the budget means to me. It seems I have walked into another cost cutting world, wonder if the Public Sector’s lay-off scares are worse than in the Private Sector?

For parents one cool thing is that your estate can transfer (after your death) from your RRSP to your disabled child (or Grandchild’s) RDSP, which could be a very good thing for those with disabled kids or grandkids.

Dydd Gwyl Dewi Dedwydd!

Yes, I managed to forget that it was Saint David’s Day on March 1st. so to my Welsh brethren a belated Happy Saint David’s Day, wish.

No You Aren’t Married to Him

An amusing story arose from our application for an RDSP for our son. We applied in November and the account was set up (see New Programs are Never Easy for more details on that saga), and we thought all was fine (with the exception of being unable to access it via my TD Waterhouse on line log in), but things are not as they seem ever, when it comes to some interesting programs.

We got a call last week asking for us to resubmit some of our identification documents because there seemed to be a problem with our application with the RDSP (specifically the grant portion from the Government). We resubmitted them, thinking not much more of it, however, we then received a letter saying we were rejected from the grant portion of the program due to identification irregularities.

Welsh Flag

Now, as background to this story, my wife never officially changed her name when we got married, she simply started using my last name, and for the past 22 years it has not been an issue with the CRA, or any other government agency, but, that has changed. We got told that she must go change her SIN card to match her married name (at least) or she was not going to be eligible to receive CPP benefits and our son would not be eligible for the RDSP grant program either.

I am actually chuckling at this whole thing, but it did force my wife to officially take my last name as hers (at least on her SIN card), but I am curious to find out when they are going to make her change her Birth Certificate to match (at an other inopportune moment in our lives no doubt).

Never assume that just because the Government hasn’t complained about something that they are not displeased with you, seems to be the moral of this story.

As Lent begins today, we now have a different world for Mortgages and lending.

The rules seem to be that you must meet the standards for a 5 year fixed term mortgage, even though you might be getting a variable rate mortgage. Rule 2 is the maximum you can refinance your home is now 90% down from 95%, and finally you’ll need a minimum of 20% down payment for your non-primary home, to make it harder to speculate on homes.

This set of rules may be a good thing, but I am kind of torn.

The bleeding heart liberal side of me thinks this is a great idea, stopping folks from getting in over their heads and then having to give up there homes when (note I say when not if)interest rates go up 3-4% this summer. The banks tend to try to get you to buy more house than you can afford normally, but with micro interest rates, this is a very dangerous thing, so I applaud Count Floyd (Jim Flaherty) the Finance Minister for bringing in these new rules (including an actual formula for figuring out whether someone can afford a mortgage, wow, not just a heuristic that no one will follow, an actual rule).

My Civil Libertarian side is worried about yet another Government intervention into our lives. In the immortal words of Pierre Elliot Trudeau:

“…there’s no place for the state in the bedrooms of the nation…”

Yes Mr. Trudeau was talking about Homosexuality laws at the time, but whenever a government agency comes up with yet another rule to help us live happy lives, I get worried. The business side of the argument is, that with more folks able to buy houses by having easier rules for getting mortgages, the market thrives and there is real value set for properties.

I think in the end this will be a good thing, but I am curious, dear reader, what your opinion of these rules are?

Remember Lent begins today too!

Earl Jones only 11 Years?

Earl Jones received an 11 year sentence for his shady financial dealings, defrauding over $50 Million. The down side of the sentence is that he could be out of prison Autumn of next year? Wow, that does not really seem to be a fair term, if that is the case. Spend a year in prison for a $50 Million fraud, and ruin countless retirements?