Canadian Personal Finance Blog

As can be seen from this actual photo my daughter took this weekend, it’s always good to see what is behind you. The T-Rex looks quite vicious doesn’t it? If you are driving on Highway 6 near Hamilton you’ll know which T-Rex I mean.

Financially, you need to remember the very important advice once given me, about when a predator is chasing you. You don’t have to be the fastest, you just have to be faster than the slowest prey. Getting back into the equity markets the fastest may not be what your goal should be, maybe you should aim to be in before MOST of the folks get back in, or else you might end up someones lunch.

Go faster it is catching up!

The Market is like a T-Rex

It’s fast, it eats anything it can catch and it has really short arms, well, maybe that last one isn’t quite correct, but right now investors must feel like the T-Rex prey, because a lot of us are being chewed up, but then again, maybe if we just stand there, the T-Rex might run by us (if you don’t understand that reference, re-read Jurassic Park by the late Michael Crichton)?

For folks that are investing for the long term, continue not watching what is coming behind you, you shouldn’t be worrying, you are in the market for the long term, relax and it will all settle down, eventually. 

Just another pitiful analogy by the Big Cajun Man so he can include a funny picture his daughter made on the weekend? Maybe, but I like it.

My opinion is this will be another very volatile week with  some very bad news from some companies (like Nortel) and maybe some heartening news for a few others, but tighten your safety belts the ride is bound to get a lot more bumpy before it finally calms down.

TFSA Advertising In All Financial Institutions

If you haven’t received something from your bank about a TFSA account, be prepared to be barraged soon. Each bank or Insurance company is trying to get you back into their doors by offering this savings vehicle in some fashion or another. Many want you to buy Mutual Funds, others are setting up straight savings accounts and others will let you create a full service trading account. Which TFSA set up is right for you? Go find out, there is a lot of info out there about it, come January 1, you should be ready to get going on this.

Carnivals

This week I am mentioned in:

• The Digerati Life is hosting the Fierce Financial Tips: The Carnival of Personal Finance #178, Struwwelpeter Edition where my post about Pensions and Severance is featured.
• Weight Loss Journal is hosting Carnival of Weight Loss — Barack Obama Edition #3 where my article on Debt is Like Fat is featured as well.
• Greener Pastures is hosting the Carnival of Debt Reduction #165: A History of the National Debt where my article I Should Divorce My Wife is featured

There was hopeful statements from analysts that there might be a “honeymoon” for the new president elect and that the death spiral that the Stock Exchanges have been doing might slow down or stop, but that does not seem to be the case, as stocks continued to drop for another day. Looks like the president elect will be handed the rancid entrails that is the U.S. economy and that will be his first job to clean up. I get the feeling that the “good will” from the election is not going to last long if there is an extended downturn in the economy (who said recession?).

More Given by Less

Stats Canada reported an increase in the total amount that tax-filers reported as charitable donations, however, fewer people actually gave that money.

Canadian taxfilers reported making charitable donations surpassing $8.6 billion in 2007, up 1.4% from 2006. At the same time, the number of donors fell 0.9% to just under 5.7 million. Data are based on income tax returns filed for 2007.

I am happy to see that I am above the Median of $250 for givers (i.e. I am in the upper half), remember with the holiday season coming, that means your fiscal end of year is coming for charitable donations and you might want to think about giving a little more?

More Given by More

When we look at the Stats Canada data on RRSP contributions by Tax-filers you see a different picture.

Just under 6.3 million taxfilers contributed to registered retirement savings plans (RRSP) in 2007, up 1.6% from 2006. Their contributions rose by 5.3% to $34.1 billion. These data are based on tax returns filed for 2007.

More money going into Mutual Funds and such, the data for this year will be very interesting, given the stories of Mutual Fund flush outs (i.e. folks selling big time), what this might show in the RRSP world. I actually have given more than any other year this year, but that has more to do with my lay off than any other reason.

The RRSP silly season doesn’t really start until February, but you could put more money in now and it would have longer to start growing? Just a thought.

End of Year Financial Plan

Do you have an end of year plan for your finances? Might be time to figure out what needs to get done before December 31st, since it is usually hard to get anything done after December the 15th. I have pointed out RRSP, but remember the TFSA is coming too, how will that change next year’s plans? The TFSA may well cause a big change in how Canadians save, let’s hope.

Buy Low and Sell High is the trite advice that any moron will give you about the stock market or any other major purchase, but the more important question is “What is the Bottom?“.

The better question is, “Is now the bottom?”, and as usual my non-committal answer is, “It depends”.

Is it the bottom for IBM? Most likely it is near the bottom for them, they have announced good numbers, have a sound business model and look like they have a plan for the next five years, and the same can be said for companies like Cisco too, since they have such a large monopoly in their area of high tech.

Is Google at the bottom? I have no idea, since I still have no idea how Google can be worth that much, but that is my opinion as a High Tech Skeptic (maybe an honorary title, but well deserved). I don’t believe there business model and I have no confidence in how they make money, aside from Advertising. 

Is Nortel at the bottom? I asked that same question when the stock was at $90 in 2000, so you can guess what my answer might be today as well (given they are at $0.19 compared to that $90, today). Remember what Garth Turner said in my post “And He’s An Expert?”

Are Canadian Banks at the bottom? Hard to tell, some seem to be, TD Canada Trust and RBC seem to be near bottom, as does BMO, but CIBC’s continued exposure to the mess in the states makes them a little more interesting too. I have invested in banks in the past week, just for disclosure sake as well.

Please do not take these opinions as advice, they are simply me stating my opinion, you should (as always) make your decisions with as much information as you can and should consult reputable sources for this information as well.

Hopefully these depressed stock prices will hang around ’til the new year, that would be a great time to open a TFSA and then take advantage of lots of growth in a sheltered account like that (wouldn’t it?).

Buy Equities, Warren Buffet Says So

Is that reason enough to go out and buy equities? I have no idea, however it is interesting that Warren Buffet is saying in an article in the New York Times “Buy American I am” that he is putting his personal money into U.S. equities now. 

The article does have a Canadian Financial Angle as Mr. Buffet points out here:

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

Anybody who quotes Wayne Gretzky can’t be wrong, can they?

Then again, some might say “Equity Investment is the Devil’s Work!“, only time will tell who is right.

Being Saturday we can look back on this past week and see a few of the burning issues that have bubbled out of the Financial Cauldron:

• A recovery may be on the horizon for equities, but this is only good news if you were out of the market, if you stayed in, this just means you might get some value back.
• Much talk of doom and gloom in terms of jobs and lay offs coming in all industries.
• Governments at all levels in Canada talking about deficit financing again, and how the downturn may force governments to start running deficit budgets.
• The RBC brain trust commenting that there most likely will be another 1/2 point interest rate drop next week from the Bank of Canada. Can we reach a negative interest position?
• An interesting posting talking about how only 45% of Canadians are thinking of getting TFSA accounts in the new year.
• Mutual Fund redemption at almost a “run” rate with funds being sold off at a very high rate.
• The Canadian Loonie which was at $1.10 in the early spring is now down to 84 cents to the American Greenback, due to commodity price drops.

On the positive side of things, lower interest rates is always a good thing if you are a debtor like me. Lower gas prices are very good (in Ottawa below 95 cents a liter has been seen), but what will this do to the consumer price index? Will we have a negative CPI soon? Deflation coming?

All interesting questions to think about in the coming week.