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This and That

March 6th, 2008 · 11 Comments

  1. You’ll be paying less interest on variable-rate mortgages and personal loans after the Bank of Canada cut interest rates by fifty basis points (0.5%). The Bank also sent a clear signal that further rate cuts should be expected by noting, “further monetary stimulus is likely to be required in the near term”. The major banks cut the prime rate by a similar amount to 5.25%.
  2. How likely it is that a private member bill to provide a tax deduction for RESP contributions would be implemented? Also, how would it work? As it stands now, contributions to a RESP are not taxed upon withdrawal (since no tax deduction was allowed on contributions) and would the new bill mean that contributions would now be taxed in the hands of the beneficiary? What would happen to contributions already made to existing RESP accounts?
  3. Why do we find it so hard to delay gratification and save money? Jason Zweig reports on new research that sheds some light on the issue.
  4. Jeremy Siegel thinks that the current market decline could throw up “the buying opportunity of the decade for investors”.

What Bloggers are saying about the TFSA:

  1. SteadyHand’s Tom Bradley calls the new TFSA “the RRSP for the Facebook generation”.
  2. Canadian Financial DIY says “Hooray” for TFSAs. As does Growth in Value.
  3. Canadian Dream tackles the RRSP or TFSA or Mortgage question.
  4. Canadian Money Blogs Reviewer calls the TFSA a huge gift for investors.
  5. Canadian Mortgage Trends compares saving for a downpayment in a TFSA with a RRSP Home Buyers Plan.
  6. Michael James compares TFSAs with RRSPs, how TFSAs can be used for income splitting and even his grandma’s take on the TFSA.
  7. Preet Banerjee sketches out some initial strategies that can be employed with TFSA.
  8. The Financial Blogger compares TFSA with RRSPs.
  9. Other reaction from Million Dollar Journey, Four Pillars, Thicken My Wallet and Financial Jungle.

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11 responses so far ↓

  • 1 Four Pillars // Mar 6, 2008 at 10:31 pm

    Thanks for the link.

    I really hope they don’t change the RESP to be more like the RRSP - it’s complicated enough as it is. I guess I would benefit however…

    Mike

  • 2 The Financial Blogger // Mar 6, 2008 at 11:06 pm

    thx for the mention!!

  • 3 WhereDoesAllMyMoneyGo // Mar 6, 2008 at 11:11 pm

    Thanks for the mention CC - have a great weekend.

    Preet

  • 4 Michael James // Mar 7, 2008 at 9:41 am

    Thanks for the links. If my grandmother has any more good financial analysis, I’ll be sure to pass it along :-)

  • 5 Phil S // Mar 7, 2008 at 1:26 pm

    Actually, after today’s outstanding Canadian jobs report, the markets aren’t quite so certain that the Bank of Canada is going to keep cutting rates. We might have found at least a short term bottom on Canadian interest rates. It seems as though predicting BoC’s interest rate policy is like predicting where the stock market indfex is going to go… Nobody really knows, but if you have enough people out there guessing, then somebody’s going to be right.

  • 6 pessimist // Mar 7, 2008 at 1:27 pm

    CC,
    I have a question. I understand that Canada has no inheritance tax (am a new Canuck so this is all very new to me). If I inherit a bunch of equities (non TFSA), then I pay capital gains on them even if I want to hold on to them? Thanks.

    pessimist

  • 7 FourPillars // Mar 7, 2008 at 1:44 pm

    Phil - everytime you leave a comment here saying that you don’t think we are at the bottom - the market falls more. Maybe you could let us know when you don’t think it will fall more?? :)

    pessimist - I am not an expert on this but I believe that in Canada, the estate of the deceased is taxed so any equities that have capital gains will be taxed before you get them.

    Given this fact it doesn’t matter if the stocks are transferred “as is” to you (or “in kind” as we like to say) or if you just get the cash…

    Hopefully someone else will clarify this.

    Mike

  • 8 Traciatim // Mar 7, 2008 at 1:50 pm

    Hey Phil S, I agree with the BoC thing. I don’t understand why they are cutting rates since jobs are up, wages are up, inflation is looming unless you take out everything people buy. Unless we see some serious job slashing I don’t think even this cut was needed, we may see higher rates around the corner.

  • 9 Canadian Capitalist // Mar 7, 2008 at 3:39 pm

    Phil, Traciatim: The BoC statement mentions that the economy is operating above capacity which would normally mean an interest rate increase or neutral stance. But, the Bank is worried about the US slowdown and it sees inflation on target at around 2%. That’s why the Bank says further easing is in the cards. Of course, they might change their stance between now and the next meeting.

    pessimist: My understanding is the same as Mike. Capital gains are owed on taxable portfolios and RRSPs are assumed to be melted down.

  • 10 Phil S // Mar 7, 2008 at 9:04 pm

    Hi Traciatim. Unfortunately, my fairly recent investment thesis concerning protecting against inflation has proved me wrong… I thought it would be a wise move to invest in the stock of businesses which cause inflation, such as rent (real estate), food, utilities, etc. But so far, those positions I took have been absolutely pummelled along with everything else, so I’m totally wrong on that investment thesis. And my real return bonds are based upon the “core CPI” which is some ridiculously low percentage. Inflation is the enemy of traditional bonds, as it eats into your total returns. So… I’m totally stumped as to where to put my “new” money. As a result, so all my new money is just sitting around gathering dust in GICs until I figure out where I should be putting it to work…

  • 11 Phil S // Mar 8, 2008 at 2:23 pm

    Hi FP. My first comment was regarding a temporary bottom on Bank of Canada interest rates, not the stock markets.

    Regarding the TSX index, I have no idea if we’re at the bottom or not… We might be at or near the bottom if the US economy starts showing signs of a turnaround when they next report in June-ish. On the other hand, if their economy continues to slow down, then “look out below”! The complete irony is that I am pessimistic enough about the market to be fearful of putting more money into equities - but at the same time, I’m not pessimistic enough to short the market! What a dilemna!

    I don’t know if you play much Texas Hold’em Poker but investing in the current market conditions is very much like guessing whether your opponent (the broader market) has a stronger hand or not - you can see some of what’s sitting on the table, but the key to everything is very well hidden! So far in 2008, I’ve lost every hand I’ve bet on, so you should definitely take my opinion with a grain of salt! Hahaha… Luckily I don’t reach retirement for another 25 yrs, so the cards that I’m holding (ie. the stocks I bought in Q1 2008) may still be useful in the coming 25 years.

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