Archive for June, 2010

This and That: Don’t Buy Stuff You Can’t Afford and more…

June 10, 2010

  1. It’s not just a quaint concept: Don’t buy stuff you cannot afford. But so many seem to have trouble with so simple a concept. (Hat tip to Jon of DRIP Primer for the link).
  2. ING Direct and Ally might get some competition from a new source — Walmart. The world’s biggest retailer has received license to offer banking products here in Canada.
  3. Do you collect Shoppers Drug Mart Optimum Points? If you do, you need to be aware that, starting July 1st, Shoppers is cutting back on the value of merchandise you receive for your points. In this blog post, Ellen Roseman explains that the value of redemptions for someone with a balance of 150,000 Optimum points will drop from $300 to $255.
  4. Canadian Couch Potato is writing an excellent series of posts on the 9 secrets of the empowered investor. Part 1 is available here.
  5. Universities across the country are holding convocation ceremonies. Rick Spence, who writes a column on entrepreneurship for the Financial Post and regularly posts on the long-running Canadian Entreprenuer blog, wrote a recent column on the speech he’ll give to newly-minted graduates.
  6. If you work with a Financial Advisor, it is important to know how she is compensated. Preet wrote an excellent post on the different compensation options they operate under.
  7. In the wake of the “flash crash”, scary ETF stories often appear in the media. Michael James points out that ETFs need not be “scary” for investors trading them a few times every year.
  8. Rachelle’s guest post for the Money Smarts Blog on a tenant from hell simply reinforces my decision to stick to Real Estate Income Trusts.
  9. If you are tempted by 3D TV sets, Larry MacDonald suggests it may be best to wait for a while. After getting a splitting headache watching Avatar, I have little appetite for anything 3D.
  10. Million Dollar Journey answered a question on when to start the Smith Manoeuvre. In my opinion, “never” is a good answer for most people.
  11. Canadian Financial Stuff reminds us to beware of self-insured company disability insurance plans.
  12. Closed-end funds often trade at a discount to net asset value and their illiquid nature may offer profitable opportunities. Gail Vaz-Oxlade posted an introduction to Closed-End Funds.

I’m unable to highlight all the articles worth checking out in my weekly round up but you can check them out through my Twitter feed. Have a great weekend everyone!

Security In An Insecure World: A Benjamin Graham Lecture

June 9, 2010


Jason Zweig recently posted (hat tip to The Stingy Investor for the link) the original typewritten text of a speech delivered by Benjamin Graham at San Francisco in 1963. It is nearly 50 years since that speech was delivered but it amazing how contemporary it sounds even today (though investors were worried about real, not financial, weapons of mass destruction back then). It is a reminder that, despite what you might hear in some circles, stock market uncertainty and investor insecurity isn’t something new and the principles of intelligent investing still remain the same. In the speech, Graham outlines how to estimate value in the stock market, how to create an investment policy, offers a simple prescription for stock selection and talks about some strategies for getting better than average returns.

The investor must recognize that there are uncertain and hence speculative elements inherent in any policy he follows — even an all-Government-bond program. He must deal with these uncertainties by a policy of continuous compromise between bonds and common stocks, and by adequate diversification. (Exception: He may put and keep most of his funds in shares of a promising business with which he is closely connected.) He must make a strong effort to have more money invested in common stocks at lower market levels (at least on the basis of cost) than at what he recognizes to be potentially high levels. Most important, he must maintain a philosophical attitude towards the inescapable variations in his financial position and the inevitable “mistakes” associated with these variations.

How the HST will affect you

June 8, 2010


Starting July 1, 2010, Ontario will replace the Provincial Sales Tax (PST) with a 13 per cent federally administered Harmonized Sales Tax (HST). To ease the transition, Ontario has already cut the tax rate on the lowest income bracket by 1 per cent, will increase transfer payments, will provide an one-time transition benefit payment for most families and will cut corporate income taxes. Though there are some sane voices (see post Not a Tax Grab After All: CCPA report on HST), many in the media insist on depicting the HST as a tax grab. Thankfully, despite the shrill opposition from the Tories and the NDP, Ontarians seem to have no interest in raging against the HST.

Today, the Ontario Government released a report that estimates how much the HST will cost families in various income brackets. The report found that in Year 1, the HST will cost the 16% of families earning between $125,000 and $300,000 an average of $30. Every other income range will see some savings. The 32% of families with an income of between $4,000 and $40,000 will save $510 in Year 1 and $205 in Year 3. The 31% of families earning between $40,000 and $80,000 will save $435 in Year 1 and a more modest $25 in Year 3. The HST will cost an average of $200 for families earning between $80,000 and $125,000 and an average of $405 for those earning $125,000 to $300,000 in Year 3.

The report notes that the analysis uses cautious assumptions on how much savings businesses will pass through to consumers. It also points out that the analysis ignores benefits to Ontarians in terms of higher incomes and more jobs resulting from the HST and corporate income tax cuts.