Monthly Archives: February 2012

Terry Broaders

Weekly Update February 24 2012

“When Everybody Skates Everything Becomes Easier” -Henri (Pocket Rocket) Richard

BC Government Brings Down Budget

On February 21 the BC Government brought down its 2012-2013 budget.
Here are the highlights:

Projected economic growth – 1.8 per cent in 2012-2013; 2.2 per cent in 2013-2014; 2.5 per cent in 2014-2015

Projected deficit – $968-million for 2012-2013; deficit this year, $2.5-billion.
Balanced budget – Budget balanced next year. B.C. projects a $154-million surplus for 2013-2014 and a $250-million surplus for 2014-2015.
MSP – A four per cent increase to medical service premiums in 2013
First-time home buyer tax credit – There will be an income tax credit worth $10,000 for first-time home buyers purchasing newly built homes. The bonus begins phasing out for individuals and families earning a net income of $150,000 and is eliminated completely for individuals earning $200,000 in net income and families earning $250,000 net.
Seniors renovation tax credit – Seniors will qualify for a tax credit worth up to $1,000 a year to renovate their homes to help them to stay living there. It is available to seniors or family members sharing their home. The credit is available regardless of income.
Children’s Fitness Credit and Arts Credit – The Children’s Fitness Credit is a non-refundable tax credit of 5.06% of eligible expenditures up to $500 for each child providing a net benefit of up to $25 per child. The Children’s Art Credit is a non-refundable tax credit of 5.06% of eligible expenditures up to $500 for each child providing a benefit of up to $25 per child.
Rebate Boosted for Newly Built Homes – Effective April 1, 2012, the current HST rebate threshold for home purchases increases to $850,000. More than 90 per cent of newly built homes are below that price. Purchasers will now be eligible for a provincial HST rebate of up to $42,500. And, for the first time, purchasers of new secondary vacation or recreational properties built outside the GVRD and Capital Regional District priced up to $850,000 will be eligible to claim a provincial grant of up to $42,500, effective April 1, 2012.
Full Details at the BC Government Website here –
Market Wrap Up
The TSX closed at 12726, up 268 points or 2.15% over the past week. YTD the TSX is up 6.45%.

The DOW closed at 12983, up 33 points or 0.25% over the past week.YTD the DOW is up 6.26%.

The S&P closed at 1366, up 5 points or 0.37% over the past week.YTD the S&P is up 8.59%.

The Nasdaq closed at 2964, up 12 points or 0.41% over the past week.YTD the Nasdaq is up 13.78%.

Gold closed at 1775, up 51.00 points or 2.96% over the past week.YTD gold is up 13.42%.

Oil closed at 109.68, up 6.11 points or 5.90% over the past week.YTD oil is up 10.90%.

The CAD/USD closed at 1.0002, down -0.0036 points or -0.36% over the past week.YTD the CAD/USD is up 2.08%.


Housing Market: Correction or Soft Landing

2009 Was the Worst Ever RRSP Season  


Sources: BC Government; Bloomberg

Odette Morin

Housing Market: Correction or Soft landing?

The CMHC sees stability in the housing market, forecasting prices to stabilize and correct modestly in 2012.

That has left some industry observers thinking that the CMHC is downplaying the potential drops. “Prices could drop as much as 25 per cent” according to a forecast by Capital Economics. Meanwhile, the International Monetary Fund and the Economist magazine have calculated homes in Canada are about 10 per cent overpriced.

Remember that these figures are averages and may not be a good reflection of your area. Prices are still going up in parts of the country and neighbourhoods but have already dropped in other parts.

If you are a first time home buyer or are looking at upgrading, these forecast mean that there may be no rush for you to buy but don’t try to time it perfectly either. If you are buying for the long-term, it may not make a huge difference overtime anyway and is less risky than waiting for a crash that may never happen.

The time to buy any investment, is when you are ready financially. Use this real estate market breather to assess what is affordable, reasonable, comfortable over the long-term and fits in your big picture. The worst thing that can happen is that you extend yourself financially finding that you are unable to sustain the lifestyle you want and save for emergencies and retirement.

Here are reports on the subject of real estate in Canada
Mark Carney just issued a new warning this morning

Odette Morin

2009 was the worst ever RRSP season at You First ~ Investors Psychology and returns

I was having lunch at a nearby sushi restaurant last week and overheard two ladies talk about their RRSP contributions . One says to the other, “I am not going to be putting my RRSP in my regular mutual fund account this year. I am losing money in this account, this is ridiculous. I am putting my contribution in a GIC”.

How many of us are thinking just the same thing. It has been a tough few years and we all suffer from market loss fatigue. This is a normal reaction to have. But before capitulating and jumping ship, one must understand that there are also risks involved with low risk investments. The biggest risk being not meeting inflation over the long-term.

A recent survey from CIBC suggests our collective risk aversion might be putting our retirement dreams at risk. The survey found that 57% of respondents were most interested in low risk, guaranteed or no-risk investment options. While we are avoiding risk, 45% don’t even know what kind of investment returns they need to achieve their retirement goals.(1)

Interestingly enough, we have our best RRSP seasons at YOU FIRST when the markets are peaking and the worst when the markets have been dropping. 2009 was our absolute worst RRSP season in 20 years. While it would have been the very best year for market opportunity, resulting in the biggest investment gain in our 20 years history at YOU FIRST.

Investor psychology is key to investment success. Seeing the opportunity in the gloomiest times is no easy task.

If fluctuation makes you nervous, speak with us first. It may be best to review your tolerance and adjust your asset allocation when the time is right. Instead of making the mistake of investing when the markets are up and going to GICs when the markets are down, opt for a slightly more balanced asset allocation if it makes you more comfortable. Increase your fixed-income or bond fund exposure slightly and adopt a long-term approach.

If we find that your allocation is right for your objectives, staying the course is the best solution . Consider dollar cost averaging your investments by making monthly contributions. These regular investments will help smooth out volatility and insure that you buy more units when the markets and low and less when they are high.

In all cases, “Be fearful when everyone is greedy and greedy when everyone is fearful” ~ Warren Buffett .
(1) Risk aversion putting retirement at risk.

Terry Broaders

Weekly Update February 17 2012

“Don’t Accept Your Dog’s Admiration As Conclusive Evidence That You Are Wonderful” -Ann Landers


Signals of Strengthening Economies

The outlook for the global economy may be brightening, with the latest composite leading indicators signaling a possible change in momentum to the upside, according to the Organization for Economic Co-operation and Development. The OECD says its composite leading indicators, which are designed to anticipate turning points in economic activity relative to trend, point to a positive change in momentum for the OECD as a whole, driven primarily by the U.S. and Japan. Below trend growth is still indicated for Canada, and the rest of the G7 countries. But, along with the U.S. and Japan, similar signs of a positive turn are also beginning to emerge in a number of other economies, the OECD reports. It notes that the composite leading indicators for India and Russia also show signs of an upward change in growth momentum.

The composite leading indicators for all other major OECD economies, the Euro area and Brazil continue to point to below trend growth. Yet the OECD notes that tentative signs are emerging that the recent deterioration in CLIs is moderating, and the CLIs for seven of the fifteen countries in the Euro area are now pointing towards a positive change in momentum, it says. However, the composite leading indicators for China points more strongly to a slowdown this month than in last month’s assessment.


Market Numbers

The TSX closed at 12458, up 69 points or 0.56% over the past week. YTD the TSX is up 4.21%.

The DOW closed at 12950, up 149 points or 1.16% over the past week.YTD the DOW is up 5.99%.

The S&P closed at 1361, up 18 points or 1.34% over the past week.YTD the S&P is up 8.19%.

The Nasdaq closed at 2952, up 48 points or 1.65% over the past week.YTD the Nasdaq is up 13.32%.

Gold closed at 1724, up 7.00 points or 0.41% over the past week.YTD gold is up 10.16%.

Oil closed at 103.57, up 4.58 points or 4.63% over the past week.YTD oil is up 4.72%.

The CAD/USD closed at 1.0038, up 0.0063 points or 0.63% over the past week.YTD the CAD/USD is up 2.45%.


Odette on Yahoo Finance

Odette on French CBC News

Sources: Bloomberg, Investment Executive, OECD

Odette Morin

My comments on Yahoo Finance this week on the Sandwich Generation

How do Canadians cope and can plan with juggling with retirement, mortgage, kids and aging parents. Read my comments here.

Text reproduced with permission. Story first appreared on Yahoo Finance. The website link shows below.

Sandwich generation: Canadians feeling caught in money wise
by Gail Johnson published on February 15, 2012

Mona Dodd admits that when she thinks about her retirement, she gets anxious. A member of the sandwich generation, her responsibilities are divided between two school-age daughters and parents who are in their late-70s. She also lives in Vancouver, Canada’s most expensive housing market. The financial pressure from multiple generations is enough to keep her up at night.

“When I start thinking about it, I get heart palpitations,” the part-time jewellery-store clerk says of saving for her retirement while trying to put money aside for her kids’ education and her parents’ potential needs. “It just all seems totally overwhelming.”

Dodd’s hardly alone. Balancing financial priorities on the road to retirement seems to fray nerves in younger and older Canadians alike.

In fact, the vast majority of Canadians aged 18 to 34 and 55 to 69 say if they were to outlive their savings in their so-called golden years, the notion of their families stepping in to take care of them “would not be very appealing” (82 per cent and 91 per cent, respectively), according to RBC’s 22nd annual RRSP Poll.

Furthermore, a majority in each age group (78 per cent and 72 per cent) say they worry about how to save for immediate priorities while simultaneously putting money aside for longer-term goals or retirement.

“The idea of having financial independence is extremely important,” says Jason Round, head of financial planning support at RBC. “That’s the challenge, especially for the sandwich generation. Having to rely on your family members for your own needs when you reach a certain age and run out of money is certainly not appealing.”

Retirement savings on the back burner?

Granted, having family members take care of their aging parents isn’t ideal, but it’s happening more and more. Saving for immediate or impending priorities, like caring for loved ones, often takes precedence over saving for retirement.

But that doesn’t mean people shouldn’t try, financial experts agree.

“The best thing people can do is to plan,” Round says. “That’s the first and biggest step.”

Certified financial planner Odette Morin, founder of Vancouver’s You First Financial, says people need to prioritize objectives and plan cash flow.

“People will say, ‘I want to make sure the mortgage is paid off; I may have to renovate or move to a bigger place in case my parents need to move in. I’ll just save later for retirement.’ Unfortunately, it doesn’t work that way,” Morin says. “You have to juggle many balls at the same time.

“It’s a lot better to do a little bit of everything than one thing at a time, especially with retirement because it’s such a big goal,” she adds. “Most people will need between $1 million and $2 million. You need about 20 times your revenue. You can’t start that when you’re 50; it’s too late. You need to start this as soon as you get a job. You really have to work at it slowly but surely.”

Finding balance: The 10-percent rule

There are many steps people can take to keep their retirement secure while taking care of more immediate needs.

Take the 10-percent rule: Put 10 percent of your earnings into a separate, high-interest savings account that you don’t touch.

“It’s just a rule of thumb, but hey, it works,” Morin says.

Having an emergency fund is also crucial for when, say, your roof starts to leak or your furnace dies. Setting aside three to six months’ worth of earnings is a good benchmark.

“You also need to have money dedicated in your budget to replenish it,” Morin notes. “Put $100, $200, $300 a month into a high-interest savings account, something totally liquid and accessible so you’re not tempted to take money out of any long-term investments when something comes up.”

Track your spending

Tracking spending carefully can be an excellent tool for helping people direct their resources to their most important priorities, says Rogers Group financial advisor Anne Hammond.

Paying down debt should also be a priority.

“Focusing on paying off debts as quickly as possible, starting with the highest interest debts like credit card balances, has a couple of major benefits,” Hammond says. “It can dramatically reduce the amount of interest paid, so people can use those funds for other things. Second, once the debt has been paid off, there is more cash flow available for current needs and savings, which makes unexpected expenses much easier to handle.”

Automate your savings

Hammond also suggests seeing up automatic savings plans for RRSP contributions, tax-free savings account contributions, and that emergency fund.

“This takes advantage of an investing strategy called dollar-cost averaging, which lowers the overall cost of investments and helps to get the most mileage out of people’s savings,” she says. “And because the saving is automated, people tend to treat it like a bill, which enforces the discipline of saving. Plus, saving automatically means it happens without requiring constant attention, freeing up busy people to focus more on their family members and less on worrying about their money.”

A family affair

For those feeling the sandwich-generation squeeze, getting the family involved in financial discussions and strategies is one more piece of the puzzle, according to Morin.

If someone’s in a situation where their parents end up moving in, Morin recommends finding ways they can help contribute.

“A lot of parents who sell their home to live their with children help with a lump sum to reduce the mortgage,” she says.

And it’s important to communicate the financial reality to children.

“I see a lot parents who love their children and want to give them everything—and they can’t say no,” she says. “The best thing you can do for your children is to empower them to be responsible and teach them how to manage money. You don’t have to give them exact numbers, but explain how much money comes in, how much goes to the mortgage, and how much is left over. They can help not have you be dependent on them later in life.

“If they know how to manage cash flow early they’ll know for life,” she adds. “That’s a legacy.”

Odette Morin

My participation to the French CBC evening News

Here is the link to the CBC French news report on Retirement and preparing your future. I was asked to review three young Canadians situation and determine how much they needed to save for retirement.

Les jeunes et la retraite – reporter Frédéric Arnould