Canadian Personal Finance Blog

The CBC pointed me at this report from CIBC about Household Credit Analysis some of the numbers really worry me.

I have been commenting that these historically low interest rates are not an excuse to go out and borrow more money, rather it is a great time to start paying down your debt while you aren’t being choked to death by interest rates (of course I had a mortgage at 12% and thought that was cheap at the time).

Some of the highlights mentioned in the report are:

• On an inflation adjusted basis, credit is rising at the fastest rate seen in any economic recession in the post-war era.
• During the first six months of the year, total debt rose by $44 billion but interest payments on debt fell by $3 billion.
  
• Non-mortgage consumer credit is still rising by 7% on a year-over-year basis—very impressive given the overall health of the economy.
• During the first half of the year, overall household debt rose by 3.4% while personal disposable income in fact fell by 0.2%. This led to an increase in the debt-to-income ratio during this period.
  

I would strongly suggest reading the entire report it’s only 10 pages and it is chocked full of really interesting data (but then again I love this kind of data).

There are actual household balance sheets in the report and in there I found two pieces of data that made me worried as well:

1. A 4% drop in Financial Assets from Q1 2008 to Q2 2009 (look at the Q1 2009 numbers it is even lower). Our savings dropped by that much? Wow.
2. A 6% drop in Net Worth Q1 2008 to Q1 2009, again, not something we didn’t know, but still a worry.

What does this data mean? We are still living outside of our means, and are borrowing to live UP to this lifestyle, but some day very soon, the piper will need to be paid, and he may have a much higher interest rate to dance to. Time to think about paying off debt folks.

I was speaking with a friend and heard an interesting change to the normal story I hear about Credit Cards and Credit Limits.

Up, Up, Up (in a puff of smoke)

Typically Credit Cards raise your credit limits, if you pay your bills of quickly AND you put larger purchases on your cards (and pay them off, as I mentioned). I have noticed this many times, that my credit limit has been “bumped” without me even asking for the raise, I simply get a note from AmexMasterVisaClub Card which says, “Congratulations, you can get yourself into deeper debt now…” (or something like that I am paraphrasing).

What do You  Mean You Want to Lower Your Limit?

I heard a story from a friend who said that as part of one of their MBA courses, they were asked to get their banks to lower their Credit Card limits (good precaution if you have gone from High Flying Single with big income, to poor student again) as an exercise for a course. I believe this was to show just how hard a process this can be, but this may be changing.

Retired? No Credit For You Bub!

A friend who has been retired for about a year now got a note from his Credit Card stating that they had LOWERED his credit limit (without him asking, and without his authorization for that matter). No real explanation was given as to why the credit card company had taken this action, but I would assume they would have figured out that he is retired (just by his age alone, but may see by his credit reports too), and decided it might be prudent for them to lower his limit (in case he goes senile and spends too much money, I guess).

Has anyone else heard of this new type of “imposed belt tightening” by the Banks and Credit Card companies? Very interesting if this is becoming a regular policy (i.e. you are getting old, No Money For you! (to paraphrase the Seinfeldian Soup Nazi)).

Days Off

Hey, I am allowed, I have written far too many days I can remember, and frankly I wonder if some of the posts I wrote thinking , “I must write something today” were worth writing (or worth you reading). I may take more days off in the future, I’ll see how things go.

Pope Likes Profits but not At All Costs

Pope Benedict XVI made an interesting statement Tuesday:

“Profit is useful if it serves as a means toward an end,” he wrote. “Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.”

Good to hear his holiness not denounce profits, and stating the obvious that simply getting profits at all costs might not be the best thing for everyone, is still a good thing to point out.  We have lived through decades of “ends justifies the means” profit taking by many companies, and countries and at the end of it all, most of us get screwed by all of this money grubbing.

When is it enough money? That’s an individual decision, but it seems in large firms, the answer is, “Never enough money!”, unfortunately.

Individual Bankruptcies up 31% Year over Year

In a less happy bit of data the Office of the Superintendent of Bankruptcy Canada published data showing personal bankruptcies are up a whopping 31% from last year at this time. The number quoted for personal bankruptcy is big and worrisome too, given the Canadian bankruptcy laws (check out the web site for exact definitions and helpful hints on what other ways you can deal with crushing debt loads).

Rude Dude Canada’s Top Financial Blogger?

It seems iBankCoin Blog is the top Canadian Financial Blogger (by the Globe and Mail at least). His post yesterday about How about a F***ing Stick in Your Eye seems to be standard for his site, so I guess Canadians enjoy a bit of ribald humor and obscenities when it comes to their financial blogs.  I don’t know, it’s pretty easy to write obscenity laced copy, especially given the lousy hand I have been dealt lately, but it’s just too easy.

Way to go, and good luck to all the bloggers.

Happy Birthday Michael James!

Go on over to Michael James on Money and wish him a Happy Birthday!

Now that the largest bankruptcy in history has occurred, it begs the question, is there a bottom here somewhere? I think there is for now, but it does point out that “sure things” should sometimes be questioned. If someone had told a trader or investor that GM and Nortel would be in bankruptcy protection, 10 years ago, that person would have been laughed off as a “nut” or “crack pot” or worse, and now we have seen this happen.

Thanks to all of this the Canadian Government is pouring money into GM, with little hope of recuperating this money or of it making a huge difference. We are in uncharted waters that is for sure, I have little understanding of where this all might lead, and I am pretty sure that I am not the only one with these thoughts.

Stay tuned this could be some very interesting times ahead.

GDP Down, down, down…

Canada’s GDP is down 1.4% in the first quarter of 2009 which is the worst drop since 1991, another bad omen for the economy. 

Lower spending in Canada and the United States, particularly business investment in plant and equipment, led to a sharp decline in Canada’s exports and imports. Business investment in Canada fell at the fastest rate since 1982. Final domestic demand was down 1.5% as personal spending, particularly on durable goods, continued to decline. Corporate and personal income also fell in the quarter.

It is not a surprise that GDP is down, but the size of the drop is concerning, but if Canadians are dropping their spending that might be a good thing in some ways.

GDP Looks Not So Good

Companies and individuals in Canada also had the problem of their purchasing power dropping off steeply as well:

Real gross domestic income (GDI), a measure of Canada’s purchasing power, fell 3.0% in the first quarter (-6.2% year over year). Canada’s terms of trade, a measure of export prices relative to import prices, deteriorated for the third consecutive quarter as commodity prices fell and the Canadian dollar depreciated relative to its US counterpart. As a result, the decline in real GDI was much sharper than real GDP; the third consecutive quarter this has occurred.

Less money to spend, less money being spend, and less purchasing power, not a recipe for a way to spend our way out of this economic downturn (read apocalypse).

If I was having financial problems and went to credit counselling, and told the person helping me that I was overspending how much I made by $10,000 a year, they’d be very upset and tell me I had to change my ways. If I then came back 3 months later and said I miscalculated and that in fact I was going to overspend this year by $50,000 (but that is only an estimate), they’d ask for my credit cards and tell me to seriously think about bankruptcy and/or psychological help on impulse spending.

Record Breaking Deficit!

For the Federal Government take that scenario and multiply it by 1,000,000 and you’ll see where Canada stands now. The Feds announced a slight miscalculation in their deficit and in fact it is $50 Billion not their previous estimates, and they are not sure they are correct now, they’ll tell us in December.

Yes, we are in a Recession and maybe even a Depression, but this will be the largest deficit EVER (even more than the Trudeau and Mulroney Governments did in the 70’s and 80’s), which is astounding. 

Lowering incomes are part of the problems (i.e. deadbeats like me who don’t have income, aren’t paying tax like I did last year), spending MASSIVE money on the auto industry is not helping either, but this is painful. Is it really going to be $50 Billion, my guess is they are sand bagging and will bring it in about $40 Billion and talk about what a great job they did in tough circumstances.

Coughing Up More EI Benefits Too

Stats Canada published their monthly report on Employment Insurance Claims (nope I am not in that stat yet), and those numbers are scarey too. The number of folks collecting EI is up 10.6% from the previous month (not year long, one 30 day period). The number quoted is over 65,000 more claimants in March. 

EI Claims

Remember the government has previously used the EI fund as a buffer for spending using up extra funds, I think they can’t do that any more.

Interesting times in downtown Ottawa.