Monthly Archives: January 2016

Odette Morin

What will your next statement reveal? Will you engage in Market Herding?

Odette’s Market commentary a must read to the end.


You will soon be getting your year-end statement in the mail and will immediately feel a sinking sensation. After a stellar 5 year period of market recovery and expansion, we see ourselves in negative territory over the past 12 months. “Here we go again” is what we’re thinking.

It never feels good to see the market value of your account go down. In fact, it is annoying and worrisome. Most of us will be tempted to react, adjust or capitulate. How quickly do we forget that markets are volatile and eventually correct. So, what do the markets know that we don’t? Or do the markets really know? Should we follow or stay the course? Let me go through a few facts first to help you see the big picture before being tempted to participate in Market Herding meaning if other investors sell, it must be because they know something we don’t. Thus, he sells, she sells, you sell, and so down go stock prices. Read more here.

We strongly feel that the markets around the world are currently oversold especially the North American markets. We predict a turnaround in 2016 & 2017. Beyond the “markets always recover” Here is why we feel confident about the year ahead:

• The CDN dollar is very low right now at about 70 cents compared to the US dollar. Canada is predominately an exporting country. A cheap dollar is great for Canada as it makes our products and services inexpensive. The Bank of Canada’s decision not to increase interest rates was a good one. Our main trading partner and buyer of our products is the US. The US economy is actually doing well which is going to be good for our exports.

• The government stimulus initiated last year will start to show results.

• The new Liberal government infrastructure stimulus will help our economy as well.

• The price of oil is ridiculously low. A steel barrel is currently costing more than the barrel of oil in it. Oil is currently at an irrational valuation. Low prices are the key to the market’s rebalancing, and so the latest drop should help accelerate the adjustment. Oil demand is growing and alternative energy, sadly for our environment, is way too expensive to compete. The challenge right now is that several OPEC members are still boosting their production, with Iran set to add yet more in 2016. This is lengthening the journey back to equilibrium for the oil market. Oil prices should gradually find their way higher with the higher demand.

• Concerns regarding China are reducing. While it is true that Chinese GDP is decelerating, the threat of a hard landing for the Chinese economy still seems fairly small. While a sharper devaluation of the currency is not impossible given significant capital outflows and China’s competitiveness challenges, we continue to believe that any further decline will be modest.

• For your investments, we are getting excited about the medium and long term opportunities that are beginning to reveal themselves with the recent declines. We are bullish for the year ahead. It is in fact a great time to make an investment and certainly great timing for those who will make an RRSP top up before the February 29th deadline.

I will close by simply reminding you that negative events like the market volatility we have been experiencing in the past few months create incredible investment opportunities. These TD Bank’s graphs below confirm this. In the past three decades alone, there have been a number of events that may have kept investors on the sidelines. When you look at the big picture, over the last 30 calendar years, the S&P/TSX Composite Index gained approximately 1316% or 9% per year and 22 of the 30 years had positive returns!

Investors who remained focused, invested and diversified have typically benefitted. The following chart illustrates historical downturns in the Canadian equity market and its subsequent recoveries.

All portfolios are not invested 100% in the stock markets. Your portfolio has mixture of fixed income and equities.

Finally, please read the following article from Oaktree capital. It just shows that the market does not know that much. This is the must read! Thank you for your confidence throughout the years. We work hard to stay on top to offer current recommendations and deliver consistent results.

As Terry and I always say, there is one rule that always works, buy quality and diversify.

Common sense is never as sexy as mass hysteria. MUST Read article here.

TD Graphs




Frank Mueller

Have You Paid Yourself Yet?


Bills. We all have them. Mortgage or rent. Cell phone. Internet. Cable. Car loan. The list goes on and on. Bills. They have to be paid, or we lose out on something important to us. Bills. Paying them provides us with the necessities of day-to-day life. Bills. They are seemingly always painful. They are inescapable.

Something else that’s inescapable – and heading toward you faster than you think – is retirement. To many of us, the concept of retirement is somewhat obscure, fuzzy, nebulous; sure, we have a basic idea of what retirement is: the time in our life where we no longer work, and can enjoy our golden years with a nice nest egg that pays us more than enough to cover our base needs, with a little extra so we can enjoy ourselves. But try to be specific. When do YOU plan to retire?

Now, a potentially obvious question you may have is, “How can I take this obscure concept of retirement and turn it into a specific plan”? As a client with us at YOU FIRST, creating this plan is a large part of what we do in your service. We work with you to create a plan that is manageable, is not intimidating, that allows for changes to your life, and that offers room for some rewards to yourself. It is a well-structured road-map, guiding you from today to your destination of retirement and beyond, while avoiding many of the pitfalls that you’ll happen upon along the way.

This brings us back to the beginning of this discussion. One very important “bill” that too few of us keep in mind when balancing our own bankbook is paying ourselves, making sure to follow our road-map and contribute to our RRSP. Consistently putting away money will ensure your nest egg continues to grow. Sure, it’s hard to make that RRSP contribution when you could use that money to do things you want to do today. But try thinking about it like this: every contribution you make into your RRSP is paying yourself at a later date.

It’s no more simple than that. Short-term pain for long-term gain. Of course, there are benefits to contributing to your RRSP: tax relief (and maybe a tax refund), a tax-sheltered haven to grow your money, and ultimately, the satisfaction of knowing you are working for your own benefit instead of just paying seemingly everyone else. So, as the 2015 RRSP Season ramps up toward the February 29th deadline, you may want to ask “Have you paid yourself yet”?

Anthony Sabti

RRSP vs. Mortgage – Where Should I Put My Money?


Clients often ask the following question: “Should I use my excess funds to pay down my mortgage, or to contribute to my RRSP?” It’s a great question, and as with most issues in financial planning, there is no definite answer.

Paying down the mortgage is the “risk-free” option. If $1,000 is applied towards the mortgage, there is a guaranteed savings of the mortgage interest on that amount.

Alternatively, if $1,000 is added to a retirement portfolio, there is no “guaranteed” return. Historically, the Canadian (TSX) and U.S. markets (S&P, Dow Jones) have returned around 8% in the long-run. We project about a 6-8% rate of return for our client’s long-term growth-oriented portfolios.

Mortgage rates are very low these days, somewhere around the 2.5% mark for a five-year fixed rate. This makes the “break-even” point for an investment portfolio to beat mortgage savings fairly low. Without talking about interest compounding or taxes, if the investments return more than 2.5%, then they beat out any mortgage savings strategy.

Our favourite strategy is a hybrid one. Invest long-term money in an RRSP and use the ensuing tax savings to pay down the mortgage. When families can maximize RRSP contributions, they can create significant tax savings which can supplement retirement income plans, as well as reduce mortgage debt. The tax savings created by an RRSP contribution can free up “new money” to be used to pay down mortgage debt. This quickly increases family net worth.

As we say, every situation is unique and depends on your mortgage interest rate and the anticipated return on your investment. Please call or e-mail us and we will be happy to work through the numbers to give you the best advice for your circumstances. We’re here to help you!

Terry Broaders

RRSP – The Swiss Army Knife of Financial Instruments.


The Swiss Army Knife is a tool with one large blade and other multi -purpose functions. Similarly your RRSP is a Financial tool with one large blade; (retirement savings and tax savings) but it too is multi-functional with many other features.  Let’s check out some of the other useful thangs that you can do with your RRSP.

Buy Your First Home – RRSPs give first-time home buyers the ability to co-ordinate their RRSP strategy with their home purchase. Under the Home Buyers’ Plan, you and your spouse can each borrow up to $25,000 from your RRSP to buy your first home. For example if you plan to buy a home in five years you can save about $20,000 for a down payment by putting away $300 per month. Putting $300 per month ($3,600 per year) into an RRSP will get you 36% tax savings based on marginal tax rate, which works out to a tax refund of $1,296 per year. In five years, you will have not only $20,000 in the RRSP to borrow for the purchase of the first home, but also an extra $6,500 from tax savings. Of course, the precise numbers will depend on your specific rate of return and marginal tax rate. When you borrow money from your RRSP under the Home Buyers’ Plan, you must pay the money back over a 15-year period. In the above case, you have to put back $1,333 per year for 15 years. If you miss a payment, you must pay tax on that amount and you will also miss out on 15 years of tax-sheltered growth on that $20,000.

Go Back to School – Your RRSP can also be used to fund your or your spouse’s education under the Lifelong Learning Plan. Similar to the Home Buyer’s Plan, any withdrawals for the purpose of training or education are tax free, provided you use the government form RC96.  You can borrow an annual maximum of $10,000 for two years from your RRSP, for a total of $20,000, You must repay the RRSP over a period of no more than 10 years ($2,000 per year). If you miss an annual payment, that amount will be added to your income for that year and thus be taxed at your marginal tax rate.

Split Income With Your Spouse – Splitting income between yourself and your spouse is a great way to reduce taxes. There are two ways to accomplish this using an RRSP.  First, you can contribute to a spousal RRSP.  For example, Jack has an annual RRSP limit of $10,000. He can contribute that either to his personal RRSP or to that of his wife, Betty (who has a significantly lower income). If he contributes to Betty’s RRSP, he will get the tax deduction at a higher rate than Betty would by contributing to her own. When they take the money out in retirement, they can each withdraw from their own RRSPs, resulting in less tax owing overall than if Jack was to claim the full amount at his higher rate.

The other way to split RRSP income is after the age of 65. Let’s say Jack is 72 and is now starting to create income from his RRSP through a registered retirement income fund (RRIF). For those 65 years of age or older, any RRIF income is considered pension income for tax purposes; if Jack’s spouse is in a lower income bracket, Jack can reduce his income tax bill by moving up to half of that income (but not the RRIF account itself) to his spouse.

Reduce Tax Deductions at Source – Many people who contribute to RRSPs either throughout the year or right before the deadline wait until they file their tax returns to claim their RRSP tax deductions and get their refunds. Although getting that refund feels pretty good, what you’re actually doing is giving the government an interest-free loan with your hard-earned money.  To avoid that, you can contribute via payroll deduction to a workplace plan (if your employer offers one), and the necessary adjustments to the tax deducted will be made at source.  However, this strategy is not for everyone. If you tend to simply spend your extra money at payday rather than reinvest you may simply be better to wait for your lump sum refund in the spring

Use the Over contribution Limit –  In 1995, the government reduced the one-time over-contribution limit to $2,000 from $8,000. The over-contribution limit is really designed to provide a buffer in case you make a mistake in calculating your RRSP contributions. Some people purposely over-contribute up to the limit, however, to get ahead of the game and take advantage of tax-deferred growth and compounding in their RRSPs. But as you get closer to retirement and the need to make withdrawals, you should make sure that you eventually claim that $2,000 as part of your contribution limit to avoid double taxation. Be aware, too, that if you exceed the $2,000 buffer, you will be liable for a 1% per month penalty until you withdraw the excess.

Whether you use any of these tactics above remember to use the big blade in the RRSP tool; to save for retirement in a tax advantaged manner.

Terry Broaders

Weekly Update January 26 2015

“You Can Go to Jail for “Ideological Deviation” ” -Havana Taxi Driver, who prefers to remain anonymous


TSX, Loonie Rebound on Oil Demand & Potential European Easing

The S&P/TSX Composite finished the week up for the first time in 2016, settling at 12,389.58 on the closing bell Friday afternoon, buoyed by a rise in oil back above the $30USD mark. A heavy winter storm on the east coast of Canada and the US sparked demand in oil, contributing to the rebound. South of the border, the Dow Jones Industrial Average, the New York Stock Exchange, the NASDAQ, and the S&P500 all finished the week up. It was a different story in Asia, however, with both the Hang Seng Index and the Nikkei 225 finishing down this week. Europe was mixed, with the FTSE up on the week where the DAX slumped.
Oil finished the week at $32.22USD, up 9% – and 15% in the last 2 days – to recover some of the supply-driven selloff of the past few weeks. In addition to the demand driven by the west coast’s winter storm, prices were also driven up by investors covering short positions. This may be a short bump, however, as worldwide production of oil remains about 1 million barrels per day higher than demand requires.
Oil’s rebound has helped to push the Loonie back up above 70 cents, finishing at 70.79 cents per US Dollar. Speculation is building that the Bank of Canada could cut rates again, which could push the Loonie down even more compared to the U.S. Dollar. However, where last week saw many analysts predicting another rate cut by the Canadian Central Bank, surprising news this week saw a different possibility open up. The decrease in the loonie has been felt at the registers, and inflation unexpectedly came in above the Central Bank’s target. The Bank may have no choice when they next act on the interest rate but to increase it, in hopes of stemming inflation.
Gold once again continues to be seen as a safe investment, closing out the week at $1,098.20, up on the week about $20 per ounce.
European Central Bank President Mario Draghi hinted on Thursday that The Bank may loosen its monetary policy when it meets in March, further helping the markets to close out the week in the black. This is in contrast to the Federal Reserve Board, which is still considering raising interest rates in the near future. However, the low inflation rate in the US, combined with low oil prices indicate the ability of the market to move onward and upward, according to Paul Springmeyer, portfolio manager at US Bank’s Private Client Reserve in Minneapolis.
General sentiment seems to be slowing steering toward cautious optimism, with many analysts now feeling that the worst is likely behind us. Andrew Brenner, head of international fixed income for National Alliance Capital Markets stated things thusly: “I think we’re a heck of a lot closer to the bottom, and I think it’s a better time to put your foot in the water, but don’t back up the truck yet.” Overall, the tide appears to be ever-so-slowly turning, with investors starting to tip-toe back into the market. The end of the slide shouldn’t be too far off in the distance from today. Value investors looking for high-quality equities at discount prices are sensing that buying opportunities are about to open up.


Market Upate as of January 22 2016

North America

The TSX closed at 12370, up 298 points or 2.47% over the past week. YTD the TSX is down -4.76%.
The DOW closed at 16094, up 106 points or 0.66% over the past week. YTD the DOW is down -7.64%.
The S&P closed at 1907, up 27 points or 1.44% over the past week. YTD the S&P is down -6.70%.
The Nasdaq closed at 4591, up -156 points or 2.30% over the past week. YTD the Nasdaq is down -8.31%.
Gold closed at 1098, up -15.00 points or 0.92% over the past week. YTD gold is up 3.68%.
Oil closed at 31.98, up 2.33 points or 7.86% over the past week. YTD oil is down -13.68%.
The USD/CAD closed at 1.414354, down -0.0384 points or -2.64% over the past week. YTD the USD/CAD is up 2.22%.

The MSCI World closed at 1498, down 51.00 Points or -3.30% over the past week.  YTD the MSCI World is down -9.92%.
The Euro Stoxx 50 closed at 3023, up 80.00 points or 2.37% over the past week.  YTD the EuroStoxx 50 is down -7.48%.
The FTSE closed at 5900, up 96.00 points or 1.65% over the past week.  YTD the FTSE is down -5.48%.
The CAC closed at 4337, up 127.00 points or 3.00% over the past week.  YTD the CAC is down -6.48%.
The DAX closed at 9765, up 220.00 points or 2.30% over the past week.  YTD the DAX is down -9.10%.
The Nikkei closed at 16959, down 188.00 points or -1.64% over the past week.  YTD the Nikkei is down -10.90%.
The Shanghai closed at 2917, up 16.00 points or 0.60% over the past week.  YTD the Shanghai is down -17.59%.


Sources: Bloomberg; Investment Executive;,