Monthly Archives: October 2015

Terry Broaders

Weekly Update October 27 2015

“Little Attention Is Paid to People Who Talk Too Much” – Kin Hubbard


TSX Up On Banks and Materials Gain

Canada’s main stock index rose on Friday, helped by gains in financials and materials stocks. The Toronto Stock Exchange’s S&P/TSX composite index closed up 75.55 points, or 0.54 per cent, at 13,953.66. It gained 1.4 per cent on the week. Equities got a further boost Friday as China’s central bank cut its benchmark lending rate, stepping up efforts to cushion a deepening economic slowdown. The move comes ahead of Bank of Japan and Federal Reserve meetings next week, as central banks worldwide seek to revive slowing global growth and lacklustre inflation. The Dow Jones industrial average rose 160.68 points, or 0.92 per cent, to 17,649.84, the S&P 500 gained 22.69 points, or 1.11 per cent, to 2,075.2 and the Nasdaq Composite added 111.81 points, or 2.27 per cent, to 5,031.86.


Retail Sales Rise Higher Than Expected

Canadian retail sales rose for a fourth-consecutive month in August, beating expectations, driven by higher sales of new trucks and alcohol. The value of Canadian retail sales increased 0.5% to a seasonally adjusted 43.62 billion dollars in August, Statistics Canada said October 22. Market expectations were for a 0.1% gain, according to economists at Royal Bank of Canada. Excluding motor-vehicle and parts sales, retail sales were flat in August compared with the previous month, at C$32.59 billion. Retail sales rose in seven provinces in August with Quebec’s gain of 1.2% the largest increase in dollar terms. Sales in B.C. rose 1.4%, while Ontario gained 0.2%.  Economists had expected sales excluding motor-vehicle and parts to rise 0.2% in the month. Retail sales volume, which economists say offers a better gauge of economic activity, rose 0.7% in the month.
The August retail-sales report comes one day after the Bank of Canada downgraded its outlook for economic growth during the next two years but maintained its key interest rate at 0.5%. Recent data suggests that while Canada’s economy is rebounding from an oil-price driven slump in the first half of the year, low commodity prices continue to be a drag on growth.



How the New Trudeau Government Will Affect Your Pocket Book


Market Update as of October 23 2015

North America
The TSX closed at 13954, up 116 points or 0.84% over the past week. YTD the TSX is down -5.42%.
The DOW closed at 17647, up 431 points or 2.50% over the past week. YTD the DOW is down -1.04%.
The S&P closed at 2075, up 42 points or 2.07% over the past week. YTD the S&P is up 0.83%.
The Nasdaq closed at 5032, up 145 points or 2.97% over the past week. YTD the Nasdaq is up 6.45%.
Gold closed at 1164, down -12.00 points or -1.02% over the past week. YTD gold is down -0.68%.
Oil closed at 44.69, down -3.04 points or -6.37% over the past week. YTD oil is down -15.18%.
The USD/CAD closed at 1.31154, up 0.0206 points or 1.59% over the past week. YTD the USD/CAD is up 11.76%.

The MSCI World closed at 1689, up 13.00 Points or 0.81% over the past week.  YTD the MSCI World is down -1.19%.
The Euro Stoxx 50 closed at 3426, up 161.00 points or 4.93% over the past week.  YTD the Euro Stoxx 50 is up 8.88%.
The FTSE closed at 6444, up 66.00 points or 1.04% over the past week.  YTD the FTSE is down -1.86%.
The CAC closed at 4924, up 221.00 points or 4.70% over the past week.  YTD the CAC is up 15.23%.
The DAX closed at 10795, up 691.00 points or 6.83% over the past week.  YTD the DAX is up 10.09%.
The Nikkei closed at 18825, up 533.00 points or 2.92% over the past week.  YTD the Nikkei is up 7.88%.
The Shanghai closed at 3412, up 21.00 points or 0.62% over the past week.  YTD the Shanghai is up 5.50%.


Sources: Bloomberg; Investment Executive;

Odette Morin

How will the new Trudeau government affect your pocket book?


History was made this week with the stronger than expected come back of the Liberals lead by the high value and enthusiastic Justin Trudeau. With a majority government in hand, he has all the political power he needs to implement his party platform unimpeded.

Trudeau and his Cabinet will be sworn in on November 4, and it will likely be months before the new government releases its budget or starts passing legislation.

Here’s what you can expect from the Liberals once Parliament gets into full swing:

How will personal tax rates change, if at all?

  • Middle class tax rate decrease: Rate for taxable income between $44,700 and $89,401 would drop from 22% to 20.5%, for tax savings worth up to $670 a year per person.
  • High income marginal tax rate increase: Marginal tax rate for income above $200,000 would increase from 29% to 33%. On a $250,000 income, this would mean paying up to $1,329.50 more.

Will any tax credits or deductions change?

The Liberals have promised the following changes:

  • TFSA: Return TFSA contribution rates to $5,500 from $10,000.
  • OAS at 65: The Liberals have said they would not go ahead with plans to gradually raise the eligibility age to 67. This will restore eligibility at age 65 for everyone born from 1958.
  • Child benefit: the Universal Child Care Benefit will be replaced with the Canada Child Benefit, a tax-free monthly benefit for the middle class. Families would receive up to $6,400 a year per child under six, and up to $5,400 a year per child aged six to 17. The amount would decrease as family income rises. Families with incomes of $200,000 or above wouldn’t get a benefit.
  • Employment Insurance: Eligibility will be enhanced and premiums reduced.
  • Create a Teachers School Supply Tax Benefit: teachers and educational assistants who buy their own classroom supplies will benefit from a refundable credit worth up to $150.
  • Home buying: Allow Canadians to put RRSP money toward buying a house more than once. The Home Buyers’ Plan currently focuses on first-time buyers; people would additionally be able to use it multiple times when moving for work, after the death of a spouse, after a marital split or to take in an elderly relative.
  • CPP Enhancement: The Liberals have talked about working with the provinces to bolster Canada Pension Plan benefits.
  • Student loans: Grads would not have to repay student loans until they have earned at least $25,000 a year, with interest paid by the federal government during that period; also, the maximum Canada Student Grant for low-income students would rise to $3,000 annually for people studying full time.

How about income splitting?

  • Pension income splitting will be kept.
  • Income splitting for families with children under 18 will be eliminated.

I own a small business. What happens to me?

  • The small business tax rate is expected to drop from 11% to 9% by 2019.

These were promises made. There is no way to know if and when these will be effective. We will continue to keep you up to date through these blog posts. Keep reading us regularly!

Terry Broaders

Weekly Update October 20 2015

“Now and Then an Innocent Person is Sent to the Legislature” – Kin Hubbard


TSX Moves Higher On Financials & Energyl
Financial and energy stocks headed higher Friday helping the main index of the Toronto Stock Exchange to close just higher after losses in the previous session. Oil prices headed higher as the US rig count figures were lower for a 7th straight week. Global stocks were in positive territory beginning with Asian markets which gained on expectation that China may announce additional stimulus. In Europe earnings together with the positive wave from Asia meant a strong finish to the session.

Wall Street managed slim gains amid mixed data; particularly in focus was industrial production slipping slightly. The S&P/TSX Composite Index closed up 9.13 (0.07 per cent). The Dow Jones closed up 74.22 (0.43 per cent). Oil is trending higher (Brent $50.44, WTI $47.22). Gold is trending lower (1177.50). The loonie is valued at US$0.7744.


September Home Sales Down From August
Canadian home sales in September were down from August as some of the country’s hottest real estate markets saw sales cool.  The Canadian Real Estate Association said Thursday that home sales in September through its Multiple Listing Service were down 2.1% compared with August.
The drop came as the number of sales fell in more than half of the local markets led by declines in Vancouver, Calgary and Toronto. Sales in Vancouver were down 3.8% for the month, while Toronto slipped 3.5%. Calgary dropped 7.5%. Compared with a year ago, September sales for the country were up 0.7%. BMO senior economist Sal Guatieri said the Canadian housing market is cooling somewhat. However, prices were “frothy” in the Vancouver and Toronto markets.

The national average price for a home sold in September was $433,649, up 6.1% from the same month a year ago. But, excluding the Vancouver and Toronto markets, the average was $334,705, up 2.9% from September last year. “The story for the Greater Vancouver area and Greater Toronto area is that continued strong demand for a limited supply of detached properties is sending prices through the roof as international migrants, young millennials and an apparent influx of foreign wealth flock to these two areas,” Guatieri said. “The latter could get a significant boost if China further eases foreign investment restrictions on individuals, as proposed later this year in the Qualified Domestic Individual Investor program.”



Market Update as of October 16 2015

North America

The TSX closed at 13838, down -126 points or -0.90% over the past week. YTD the TSX is down -6.21%.
The DOW closed at 17216, up 131 points or 0.77% over the past week. YTD the DOW is down -3.46%.
The S&P closed at 2033, up 18 points or 0.89% over the past week. YTD the S&P is down -1.21%.
The Nasdaq closed at 4887, up 56 points or 1.16% over the past week. YTD the Nasdaq is up 3.38%.
Gold closed at 1176, up 20.00 points or 1.73% over the past week. YTD gold is up 0.34%.
Oil closed at 47.73, down -1.78 points or -3.60% over the past week. YTD oil is down -9.41%.
The USD/CAD closed at 1.29095, down -0.0036 points or -0.28% over the past week. YTD the USD/CAD is up 10.00%.

The MSCI World closed at 1676, up 12.00 Points or 0.73% over the past week.  YTD the MSCI World is down -1.98%.
The Euro Stoxx 50 closed at 3265, up 15.00 points or 0.45% over the past week.  YTD the Euro Stoxx 50 is up 3.77%.
The FTSE closed at 6378, up 38.00 points or -0.59% over the past week.  YTD the FTSE is down -2.86%.
The CAC closed at 4703, up 2.00 points or 0.03% over the past week.  YTD the CAC is up 10.06%.
The DAX closed at 10104, up 7.00 points or 0.08% over the past week.  YTD the DAX is up 3.05%.
The Nikkei closed at 18292, down 147.00 points or -0.08% over the past week.  YTD the Nikkei is up 4.82%.
The Shanghai closed at 3391, up 208.00 points or 6.54% over the past week.  YTD the Shanghai is up 4.84%.

Blog Links

How Is Your Account Doing ? 

Fall Investment Research

Near Year End Tax Tips 

Investment Fees Full Disclosure


Sources: Bloomberg; Investment Executive;

Odette Morin

How is your account doing & Fall Market Outlook

world map

World Markets have been very volatile since the summer. The past week has been a welcome reprieve with 6 straight days of recovery but we are bound to see more ups and downs as global growth uncertainty continues.

Before I give you a brief fall Economic Outlook, I feel the need to remind you that your account results have been quite good compared to the markets. The North American markets have lost about 9% year to date. Most of you hold a combination of fixed income, cash and a healthy dose of International Equities, not just North American Equities. Your account will likely show a small gain or very small loss if any.

We do not anticipate any recessions or long-term downturn. Short-term volatility is a normal and healthy process of financial markets. You should not be alarmed at all.

Here is a quick fall 2015 economic outlook. We look forward to seeing you at your annual review meeting to further discuss these events as they pertain to your personal situation. In the meantime, never hesitate to contact us.

Please see the attached Economic Outlook – Fall 2015 from RBC GAM’s Chief Economist Eric Lascelles.

Key Highlights

– Oil Prices – Estimates indicate that West Texas oil prices can rise moderately, but probably not all the way back to US$60 a barrel in the near term;

– Financial-market weakness and volatility are naturally concerns at present, though we expect the former will fade. Commodity-oriented risks – mostly connected with resource-exporting countries and companies – may linger due to a fundamental supply-demand mismatch;

– Gazing into 2016, most regions should manage faster growth, though we have more conviction about this view for the developed world than emerging nations. In the developed world, North American growth prospects have been reduced, while the outlook for Europe and Japan is little changed. All appear on track for growth next year that is no worse than 2015, consistent with the economic-recovery narrative;

– The U.S. dollar continued to perform very well last quarter, but the greenback has been in a bull market for four years now and we feel confident declaring that the “easy money” has been made. To be clear, we’re still bullish on the U.S. dollar but are more tentative now, recognizing that the pace of the gains has been significant and that the currency is no longer undervalued.

– Global inflation remains very low and is likely to fall even more in the near term as the latest wave of oil-price weakness washes over the economy.

– In our view, the long-term case for stocks remains intact. Equity valuations were broadly fair before the downturn, but the decline has pushed equity markets below equilibrium, potentially providing an attractive entry point for investors. With stable earnings and the potential for rebounding valuations, total-return prospects for equities remain compelling.

Odette Morin

Fall Investment Research (written by Anthony Sabti)

investment research

Each year Odette and I complete a thorough review of the investments we use for You First clients. We cover the entire Canadian mutual fund spectrum and eventually narrow it down to a list we are comfortable recommending. There is much more to a fund then merely its rate of return. Here are some of the metrics we look at when assessing a particular investment:

Manager: Who runs the fund? How long has he/she been in the industry? What is their investment style? Are they by themselves or part of a team? Do they have a repeatable process? Do they have long-term track record of above average returns? A fund’s portfolio manager is one of the most important considerations.

Quartile rankings: Every mutual fund is placed in a category based on the assets inside the fund (ex. Balanced Fund, Global Equity Fund, Canadian Dividend Fund). This allows for a comparison of the fund within its peer list. Each fund in a category is ranked according to return and is assigned in one of four quartiles. A fund with a 1st quartile 5-year return means it has achieved returns in the top 25% of all funds in its category over the past 5 years. We look for funds that consistently achieve top 2 quartile returns.

Standard Deviation: How volatile is a fund? Standard Deviation measures the variation in a mutual fund’s returns. Here are two very basic examples:

• Over three years Fund A has returns of 8%, 10%, 6%. The basic average (I won’t go into the timing of these returns) of these three returns is 8%. The standard deviation would be 1.63%.

• Over three years Fund B has returns of 16%, 0%, 8%. The basic average (ignoring timing) of these three returns is 8%. The standard deviation would be 6.53%.

Fund A and Fund B achieved the same rate of return, but fund B was much more volatile. All other things being equal, fund A has achieved a better risk-adjusted return. We look for funds with low volatility and high risk-adjusted returns.

Fees: All mutual funds have a Management Expense Ratio (MER) which bundles in both the management firm and advisor’s compensation. For an equity fund the MER averages around 2.3% although more expensive funds can near the 3% mark. Although a lower fee won’t guarantee a higher return, there is a correlation between the two and we strive to use funds with average or below average MERs.

Concentration: A mutual fund can hold as few as 10 stocks, but there are also funds that have hundreds of holdings. We generally look for concentrated funds that hold around 20-50 companies. This is usually the sign of an active manager with conviction and studies have shown that mutual funds with concentrated portfolios tend to outperform.

Upside/Downside capture: This metric compares how a fund performs relative to its benchmark index. If Canadian Equity Fund A has a 5-year upside capture of 100% relative to Toronto Stock Exchange (TSX), it means it increased as much as the benchmark in that period. If it has an 85% 5-year downside ratio, it only decreased 85% compared to the TSX. Naturally we look for funds to capture as much of the upside with as little of the downside. This is another way of assessing risk-adjusted return. Successful managers love highlighting a good upside/downside capture ratio during their presentations.

A lot of work goes into our fall analysis.  It is essential to do an in-depth review every year but ongoing monitoring is also part of our regular work. You will be updated at your annual review meeting and contacted should any urgent changes are required during the year.

Terry Broaders

Near Year End Tax Tips

The problem with year- end tax tips is that if you wait until year end it is usually too late to take any action. Now is the time to begin your near year end planning so you are truly set for year- end.  Here are  important points to ponder.

Health Expenses – If you have expensive medical or dental work coming up that you have to pay out of your own pocket consider having it done before December 31. You will be able to claim the credit on your 2015 tax return in spring 2016. If you wait until January you will not be able to use the tax credit until you do your 2016 tax in spring 2017.  A $3,000 dental bill for example will save you approximately $175 to $300 in taxes.

Donations – Donations made before December 31, 2015 can be claimed on your 2015 tax return in the spring of 2016.  A $300 donation saves you about $85 to $130 in taxes.

Tax Loss Selling – Do It Now – If you’ve got investments that have dropped in value, consider selling these to realize the capital losses before year-end (place trades by Dec. 24 if you want them to settle in 2015). This makes the most sense if you reported capital gains on your 2014, 2013 or 2012 tax returns. You’ll be able to carry your capital losses back up to three years to offset gains in those years and recover taxes you paid.

Tax Gain Selling – Do It Later – It’s almost always better to pay tax later, rather than sooner. If you’re thinking of taking some profits on the winners in your portfolio, consider waiting until January to sell. This will push the payment of your tax bill on the sale to the spring of 2016.

If one part of your portfolio is in a gain and another component is in a loss position of the same size you can sell both before year end. The loss can offset the gain leaving you in a neutral tax position.

TFSA  –  If you are planning to make a withdrawal from your tax-free savings account (TFSA), consider doing this now rather than in early 2016. If you delay until the new year, you will not regain the equivalent amount of TFSA contribution room until 2017. This is because amounts withdrawn from a TFSA are not added to your contribution room until the beginning of the year after the withdrawal is made.

Leaving the Province?  Now Or Later? –  If you are planning to move provinces and if your scheduling permits it, then strategically plan your move time.  If you are moving from a low tax province to a high tax province delay your move until 2016. You are taxed in the province where you are resident on December 31, 2015.  If you are moving from a high tax province to a low tax province make your move before December 31, 2015.  For example a single person earning $75,000 per year pays about $15,944 tax  in British Columbia (a low tax province) but would pay about $20,785 tax in Quebec (a high tax province). That’s a difference of $4,841.

Get Organized Now –  Many, many dollars are lost because the taxpayer “could not find the receipt”. It’s never too early to start organizing now.  Running around like a chicken with its head cut off trying to find all your slips the day before the tax deadline is never a good thing. If you haven’t already started an envelope or folder to hold all your tax slips and receipts, then do so now. You can still procrastinate a little, but at least all your slips will be in one spot and you won’t miss claiming anything.

Remember, advance planning is tax dollars saved! Get ready now!  Before you know it people will be joyously greeting each other with cries of “Happy Tax Season! “   Don’t get left out of the party !