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This and That: “Shoots of Recovery” week edition

April 16th, 2009 · 15 Comments

If you haven’t done so already, you may want to get started on your taxes and avoid the last-minute rush. If you are preparing your own taxes, tax software can make your life much easier. The deadline for filing your return, April 30, 2009, is less than two weeks away.

Canadian Money Forum Highlight: The newly launched Canadian Money Forum is fast developing into a busy forum for free-wheeling discussions on anything related to finances. For instance, check out this thread where members share their experience with saving money on phone, cable and internet service. You can register here and add your two cents to the chatter.

  1. Keeping with the “tax theme” of this week, here are some tips for your 2008 tax return (and getting a head start on 2009 tax planning) from tax expert Jamie Golombek.
  2. Barclays has sold its iShares ETF franchise to a little-known private equity firm. Rob Carrick explains why ETF investors have little to worry from the change in ownership and feels that an increase in fees is “unlikely”.
  3. You may want to check out and subscribe to Larry Swedroe’s blog, Wise Investing, on CBS Marketwatch. In a recent post, he discusses how your investment strategy should consider the existence of “black swans” — rare events that can have a devastating impact.
  4. Million Dollar Journey wrote a thoughtful post on the Pareto principle, popularly known as the 80-20 rule.
  5. Preet considers what would happen if every investor simply tracked the market indices.
  6. If you are using tax software to prepare your taxes, Canadian Financial DIY points out that you should thoroughly check that all the deductions and tax credits are claimed correctly.
  7. Mike fielded a reader question on RESP contributions for teenage children.
  8. Canadian Personal Finance Blog recently reviewed and wrote a favourable review of The Complete Idiot’s Guide to Getting out of Debt.
  9. Michael James explains why the current system of not allowing stock option gains to offset capital losses is broken. To add insult to injury, the Federal Government has chosen to selectively provide relief to certain taxpayers.
  10. When financial advisors go bad… Larry MacDonald reviews some of the shocking allegations in disciplinary proceedings instituted by the Mutual Fund Dealers Association of Canada.

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15 responses so far ↓

  • 1 Big Cajun Man // Apr 16, 2009 at 7:21 pm

    Thanks for the mention, have a great weekend!

  • 2 Four Pillars // Apr 16, 2009 at 7:51 pm

    Thanks for the link – what happened to the “green” shoots of recovery? :)

  • 3 Phil S // Apr 16, 2009 at 9:23 pm

    I find it very difficult to feel sorry for anybody who has a pile of gains from stock options. As a shareholder, I absolutely despise these massive stock options which serve to:

    a) hold down the price of the shares as the stock options are executed.
    b) further dilute the value of my holdings.

    Issuing millions of stock options to already zillionaire executives and senior managers just irks me to no end and I always vote against it in every proxy that I receive. Unfortunately, as my aforementioned shares are diluted to the point where my vote doesn’t count for much, the shareholders who are complicit with the executives push through massive bonuses for their close friends. I find it absolutely sickening.

    And don’t even get me started on the topic of electing board members who aren’t shareholders of the corporation! They don’t have the shareholder’s interests in mind, suck money from the company like leeches and just vote with whatever the executives want to push through regardless of what they think, in order to keep their cushy board seats!

  • 4 Michael James // Apr 16, 2009 at 10:30 pm

    Thanks for the mention, CC.

    Phil S: I agree that stock options have been heavily abused to enrich executives at the expense of investors. However, in some cases, even people making less than $20/hour got screwed by stock options without even knowing they owned stock options. This happened because some company savings plans are structured using stock options. You may not feel sorry for someone who has a pile of gains from options, but how do you feel about someone who buys some shares for $10,000, later sells those shares for $10,000, and is told by CRA that they have to declare $500,000 of income? This situation is so absurd that I have difficulty getting people to understand that the income isn’t real, but the taxes that must be paid on this income is very real.

  • 5 WhereDoesAllMyMoneyGo.com // Apr 16, 2009 at 10:59 pm

    Thanks for the link CC – have a great weekend!

  • 6 Million Dollar Journey // Apr 17, 2009 at 8:03 am

    Thanks for the link CC!

  • 7 Canadian Capitalist // Apr 17, 2009 at 12:32 pm

    The government does recognize the absurdity of the situation; that’s why some of the affected ones (but not all) were provided relief. In fact, I’d say the Government contributed to this situation because if memory serves right, they allowed stock options to be exercised and held as stock and deferring the taxes due until the stock is sold. If they hadn’t allowed deferral, I think almost everyone would have done a cash exercise.

  • 8 Colourful Money // Apr 18, 2009 at 11:07 pm

    Awesome, thanks CC!

  • 9 Phil S // Apr 19, 2009 at 5:41 pm

    I’ve personally never worked anywhere where people below the executive level making millions more than I am received stock options, so I’m still having a hard time feeling sorry for anybody with them… The most I’ll shed is some crocodile tears.

    I’m more often on the detrimental side of stock options, meaning as a shareholder. The stock options back dating to squeeze a few hundred more million dollars out of the company for executives at the same time diluting the value of my shares… That’s the only perspective I’ve ever had with stock options.

    It’s next to impossible for a common shareholder to detect stock option back dating because there is so little disclosure in financial statements on how the board of directors arrived at these compensation packages. The board and the executives are always complicit in scheming ways of ripping off the shareholders. The only times that the stock option back dating issues came to light is from whistle-blowers inside the company because of the complete lack of transparency.

    OK CC, let’s see what pet peeve of mine that you’re going to touch upon next week! ;)

  • 10 Michael James // Apr 19, 2009 at 6:21 pm

    Phil S: OK, let’s replace “stock options” with “job security” and try an analogy. I’ve never worked anywhere where anyone other than the CEO and maybe a few top executives had the kind of job security that government workers have. So, if a guy who empties garbage cans in a government office is fired unfairly and denied any severance, I shouldn’t feel sorry for him because the job security he thought he had is something I’ve only seen the big wigs have.

    Top executives making millions aren’t the ones who have been hurt by the stock options taxation nonsense. It is working level people who were surprised to receive stock options and who have been screwed out of their homes by unfair tax laws. To be taxed on money you never received is unfair. Thousands of Canadians of modest means are getting hit with huge tax bills on phantom income that never existed. I’m guessing that the reason for your crocodile tears is that you don’t really understand what is going on.

  • 11 Phil S // Apr 20, 2009 at 7:57 am

    I’ve never worked anywhere that I can make the assumption that my job is always secure. In fact, I’m off work now which is why I have time to surf the web.

    I know plenty of people who have employee share purchase plans – is that what you’re confusing with stock option plans? Because I don’t know any of these thousands of modest means Canadians who have stock options. Everybody I know who have stock options are so filthy rich that they like to flaunt it in everybody’s face.

  • 12 Michael James // Apr 20, 2009 at 9:10 am

    Phil S: You’re 3 for 3 on missing the point in this thread. Congratulations. Employee share purchase plans are usually structured using stock options, and so many people have run into the same problem with both share purchase plans and stock option plans. I guess since you’ve never heard of people of modest means having stock options, they must not exist. Ever heard of Nortel?

  • 13 Canadian Capitalist // Apr 20, 2009 at 10:11 am

    Phil: Stock options are very common in the high-tech sector… even peons like us get them :) In fact, the most valuable options I ever held were those awarded when I was fresh out of University and was on the bottom rung of the ladder.

  • 14 Phil S // Apr 20, 2009 at 11:06 am

    My neighbourhood is completely chock full of people with stock options – but they’re too busy trying to decide whether they want to use their stock option money to buy the Aston Martin Volante or the Maserati Quattroporte. The only thing keeping them from buying BOTH is that their garage only holds 6 cars and they might have to get rid of one their Benz’s. Or perhaps this year they can use the money to upgrade from their 48′ yacht to nicer 53′ yacht, until next year when their Bimmer finally hits the ripe old age of 3. No, you’re still not going to find me shedding a tear for any of my neighbours.

    CC. Well, then I guess you’re definitely a much more fortunate peon to be in the high tech sector than a peon like me in engineering… ;)

  • 15 Phil S // Apr 20, 2009 at 11:36 am

    Oops. I didn’t mean to make it sound like I hate all rich people. Most of the self-made guys are pretty cool – I smile when I see Howard putzing around the neighbourhood in his Porsche. And some of the people who climbed their way up to the executive ranks seem pretty cool as well.

    It’s mostly those who got to where they are because of who they know that are getting wealthy on the backs of shareholders and like to flaunt their wealth in the face of everybody else that just annoy the heck out of me. They just hold this attitude of entitlement.

    Anyways, changing laws will benefit everybody including these people that annoy the heck out of me. Enough ranting for now. :)

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