Archive for January, 2009

This and That: Budget 2009 Edition

January 30, 2009

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  1. Of course, the budget was big news this week and as you might expect, there was bumper crop of coverage. Jon Chevreau of The Financial Post breaks down the tax goodies in the budget; Ellen Roseman finds that the advertised tax savings comes with a lot of fine print; Derek DeCloet pans the Home Renovation Tax Credit; Larry MacDonald provides some insight into what happens when you lock up a bunch of journalists.
  2. Rob Carrick writes the banks are introducing new fees and raising interest rates and reminds readers to check out the competition.
  3. Jason Zweig writes that we should be sceptical of predictions, including our own.
  4. Peter Schiff has achieved guru status by being very bearish on US stocks. So, he must have made a killing for his clients, right? Well, turns out his clients are not exactly jumping with joy over the past year’s returns.
  5. Four Pillars reports on the BMO dividend reinvestment program. With the scramble for capital, other banks may follow suit.
  6. Canadian Financial Stuff trolls through the National Film Board website and discovers a gem.
  7. Thicken My Wallet provides a road map for turning around your personal finances.
  8. Million Dollar Journey reviews No Hype and is giving away a copy of the book.
  9. Head over to Where Does All My Money Go? website for participating in a big fat book giveaway.
  10. Dividend Growth Investor posted an interesting chart of dividend yield of the S&P 500 versus 10-year treasuries.

Poor 10-year Stock Returns is not Unprecedented

January 29, 2009

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The poor performance of stocks over the past decade has resulted in a lot of columns in the mainstream press questioning if stocks do really provide generous returns over the long-term. Are poor returns over 10-years really unprecedented? It is instructive to look at the long-term record, keeping in mind that there is no law that says that stocks return X% over X years and just because something hasn’t happened in the past, it doesn’t mean it won’t happen in the future.

In Stocks for the Long Run, Jeremy Siegel finds that stocks have outperformed bonds and bills about 80% of the time over 10-year holding periods between 1802 and 2006. In 10-year periods between 1871 and 2006, stocks outperformed bonds and bills about 82% and 85% respectively. Interestingly, even over 20-year holding periods, stocks had better returns than bonds about 96% of the time. The past record indicates that in roughly one out of five 10-year periods bonds do better than stocks. In other words, the recent record is hardly unprecedented.

Notes from Budget 2009

January 27, 2009

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Finance Minister Jim Flaherty tabled his fourth budget in Parliament today wearing steel toed boots in keeping with the theme of massive spending on infrastructure. There is plenty of print, broadcast and online coverage of the budget in the mainstream press, but if you are so inclined, you can read the entire 343-page document here. If you are only interested in the bits that directly affect your pocketbook, feel free to skip to the pages indicated below:

  1. Five Extra Weeks of EI Benefits: EI recipients will now receive five extra weeks of benefits for the next two years. (Page 95)
  2. Personal Income Tax Measures: Increase in basic personal amount to $10,320 and increase in the first two income tax brackets (the 15% bracket is increased to $40,726 and the 22% bracket to $81,452). These measures are retroactive to January 1, 2009. (Page 106) [Note: Check out Jon Chevreau’s column to figure out how much these measures will actually save in tax.]
  3. Home Renovation Tax Credit (HRTC): A temporary 15% tax credit on eligible home renovation expenditures done on a home, cottage or condo, after January 27, 2009 and before February 1, 2010. The tax credit can be claimed on the portion of eligible expenditures exceeding $1,000 but not more than $10,000 (i.e. a maximum tax credit of $1,350). Eligible expenses include renovating a kitchen, bathroom or basement, new carpet or hardwood floors, building a new deck, installing a new furnace or a water heater, painting the interior or exterior of a house, resurfacing the driveway, laying new sod, replacing windows etc. Routine repairs and maintenance does not qualify for the credit. Note to readers: Don’t throw away all those Home Depot or Rona receipts this year! (Page 123)
  4. Withdrawal Limit under the Home Buyers’ Plan Increased: After January 27, 2009, first-time home buyers can withdraw up to $25,000 from their RRSP under the Home Buyers’ Plan. (Page 127)
  5. First-Time Home Buyers’ Tax Credit: A $5,000 non-refundable tax credit for individuals acquiring a qualified home after January 27, 2009. The credit will result in a saving of $750 in taxes. (Page 128)

Other Coverage:
The Globe and Mail
National Post