The Toronto stock market has missed an entire trading day because of computer glitches for the first time in its history. The exchange operator will say only that it intends to resume trading tomorrow morning.  “We will be working internally through the night and remain confident all systems will be restored and fully operational for business as usual tomorrow,” Mark Jarrett, director of equity operations said in a statement.

Canadian stocks traded on other exchanges however, but still this type of technical difficulty is not going to help in restoring confidence. 
This isn’t the first time the Toronto market has had to close however.  You might remember that it was shut after September 2001 terrorist attacks. About a year before that, a flood of trading in Networks took the system down for about four hours. The difference this time is that it is created by technical difficulties.  This is totally unacceptable for a country like ours to be experiencing these types of problems.  A lot of investors were not able to make their trades today. 

Fortunately, mutual fund clients, are able to sell and trade your investments even when events like these occur.  Thus, another advantage of investment funds.

Have you made your RESP contribution yet?  Do you need to top it up?  In order to get the maximum annual Grant of $500, you have to contribute $2,500 per child in your RESP account.  We can let you know how much you have contributed this year so far. 

Please note that Odette an Terry will be gone on Holiday from December 18th to January 5th, so please let us know in advance if you wish to make a contribution.  We will prepare the paperwork.  Thank you!

On November 27, 2008, the Federal Government introduce a measure to provide relief to seniors with RRIF who suffer losses due to the market meltdown.  Seniors would get a 25-per-cent reduction in the minimum amount of money they must withdraw from their registered retirement income funds (RRIF) for 2008.  The problem is that it is an administration nightmare for investment companies to make changes to their systems in time.

“All is not lost for seniors if their bank or investment dealer can’t accommodate a reduced RRIF withdrawal for 2008. People who make the full withdrawal for this year will have the opportunity to put 25 per cent of the amount back into their RRIFs until March 1, 2009, or 30 days after the government’s RRIF measure is passed into law.” reported Rob Carrick in the Globe & Mail this morning.

Click here for the full story

To make things easier, you may simply want to take your minimum annual payment (MAP) in kind.  Therefore, you would not sell the investment but have it transfered to your non-registered account instead of taking it in cash.  This would ensure that you do not suffer a permanent loss on your investment.  Just let us know if you want to take advantage of these measures.  We will figure out what is best for you.

Cash is King, especially nowadays.  There is so much values in stock prices that reports show 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 per cent over the next year.  Yes eight times.  Read on this ROB article to find out more.

click here for the full article

Even Prophet of Gloom Nouriel Roubini, the blunt-talking professor of economics at New York University likes stocks.  Really?  Roubini, predicts that the US economy will get worse before it gets better but admits that his 401K plan is invested in equities. 

“You know, I’m not an active investor. I decided for the long haul I’m going to hold equities because over a horizon of 10, 20 years equities outperform any other asset class,” he said.  His surprising disclosure may offer some comfort to investors who have lost a big chunk of their savings in the crash. Read the whole story here.

click here for the full article

The Canadian real estate market is entering a cyclical downturn but should avoid the cataclysmic devaluation seen in the U.S., according to a report from RBC Economics.  “Many of the factors that triggered the collapse in the United States are either absent or of much lower significance on this side of the border,” said Robert Hogue, senior economist, RBC.

The upside to the waning marketplace is that housing affordability is improving. RBC’s affordability index measures the proportion of pre-tax income needed to service the costs of owning a home.

Nationwide, the standard condominium unit remained the most affordable in the third quarter, costing 31.4% of household income to service. The standard townhouse requires 36.9% of income, while a detached bungalow needs 45.7%. A standard two-storey home remains the least affordable, gobbling up 52% of household income.

Using the bungalow as a benchmark, Vancouver remains the least affordable major city, requiring 74.8% of income. Toronto is the second least affordable, at 53.3%.  In a financial planning perspective, 74% is way too high to be sustainable over the long term.  Before buying make sure that you can afford the new housing costs without jeopardizing your lifestyle.  In the meantime, housing is becoming more affordable as prices drop and the overall market enters a healthy correction.

Read more here

The Bank of Canada has slashed its key overnight lending rate by 75 basis points yesterday, to 1.5%.  The Chartered Banks’ new prime rate is 3.50%. Many Bank watchers had been anticipating a cut of just 50 basis points. 

“The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated,” the Bank said in a statement. “Measures taken by major governments are beginning to encourage credit flows, although it will take some time before conditions in financial markets normalize.” The Bank said that the Canadian economy had unfolded as expected through the summer and early fall, and admitted that it is now following the rest of the world’s economies into recession.

Lower borrowing cost is good news if you have debts.  However, you may be surprise d to find out that credit cards have not lowered their interest rates and Home Equity Line of credit have only dropped by a fraction of recent cuts.  The spread banks now make between mortgages / HELOC and GICs is getting thinner.  Major Banks have reported that they can’t pass on the full reduction of recent rate cuts to the consumer.  New HELOC rates now range from prime +.5% to prime +1% currently from 4.25% to 4.75%.

Please note that if you have a HELOC in place you may be grandfathered the Bank’s prime rate of 3.5%.  Make sure to never close that grandfathered HELOC.  You may never be able to get prime rate again. 

Should you consider ethical investing for your portfolio? Can changing the world also make you money?

We ask ourselves the same question every year.  Should we add socially responsible investments to our fund line up for our clients?  Sure, the concept of avoiding “sin” stocks such as purveyors of tobacco and weapon makers gives you an instant feel good reward.  But, as your financial planner, my question is, do these funds make profits and what are the risks?  How are these funds managed and are they diversified enough to preserve capital over the long term?  The face of socially responsible investing has changed dramatically over the past few years. Let’s review what they are today and why you may be interested. 

When SRI was first created, it was a mission or values based approach that often looked at the company for their moral behaviour above their financial potential. However, time and experience have evolved products in this area. Many firms are moving, or have moved, away from negative screening, and are now using positive performance metrics when evaluating a company’s environmental, social and governance performance.

Positive screening is the process of selecting, rather than excluding, securities based on established SRI criteria. Specifically, positive screening looks for companies that provide social justice and environmental accountability. Responsible investors seek to align their investment strategies with their values. They consider the impact of their investments on the world and invest in companies that aim to minimize the negative impacts or produce positive ones. 

In the 1990’s environmental problems came to the forefront of public awareness with issues including ozone depletion, climate change and hazardous waste. As a result corporations began assessing and reporting on a variety of environmental programs to demonstrate their level of commitment and progress in addressing these problems. At the same time some shareholders took responsibility for their ownership in companies and became more active at annual shareholder meetings. They sought improvements in environmental policies and practices, as well as in the level of disclosure and quality of reported information.

Over time, company reporting became more sophisticated and broadened to include other factors and issues that demonstrate corporate social responsibility: employee relations, corporate governance and community relations.

Today responsible investing has evolved as an intentional investment strategy aimed at generating financial returns from responsible companies. A key part of this strategy is shareholder engagement, which encourages and promotes responsibility and helps investors identify companies with the best practices.  In recognition of the importance of responsible investing in financial performance more than 200 international pension funds, including the Canada Pension Plan and other institutional investors, holding more than $9 trillion US in assets have adopted the UN Principles of Responsible Investing. The Principles include:

Incorporating environmental, social and governance issues into financial analysis and decision-making, becoming active shareholders, seeking disclosure on these issues, promoting acceptance of the Principles in the investment industry and reporting on activities and progress towards implementation. Recognition that environmental, social and governance performance can have a profound impact on financial performance, as well as on the small planet we share, has brought responsible investing to the forefront of mainstream investor consciousness.

Responsible investing is the foundation of a few Mutual Funds companies. They rigorously incorporate environmental, social and governance criteria into in-depth financial analysis and portfolio construction.  They identify core corporate responsibilities and ensure they are being appropriately addressed by the companies they invest in.  You may want to read a blog written by Dermot Foley from Inhance Investments on the subject.

Click here to read: Can ESG cure the markets?

We short-listed several leaders in the Responsible Investment space who may be the right fit for your portfolio. Please ask us for more details.