Jul 272018
 

According to a Fox article, millennials now make up the largest generation in America, and we’re seeing some troubling trends as they are increasingly turning away from capitalism and favouring socialism instead. Based on a study of over 2,000 people, nearly 45% of millennials polled said that they would prefer to live in a socialist country compared to the 42% who said they preferred a capitalist one. Another 7 percent said that the preferred living in a communist country. Oh dear. 🙁

By comparison, most baby boomers polled favor capitalism, compared to 26% who said they prefer a socialist system. Socialism never works in the long run because you eventually run out of other people’s money to spend. For a recent example we can turn to Venezuela, which has a socialist government. Venezuela’s currency has lost 99.9997% of its value in the past 6 years. In the span of a few months, the International Monetary Fund (IMF) has gone from forecasting that Venezuela’s inflation rate would hit 12,875% by the end of the year to now saying that it will get to 1,000,000%. Yikes! The country’s economy is on the verge of collapse for the past year. People often struggle to find food, medicine, and other essential goods.

If socialism is better than capitalism then all the socialists should get together and redistribute their properties fairly among themselves. But that has never happened, lol. As Winston Churchill once said, “Socialism is the philosophy of failure, the creed of ignorance, and the gospel of envy. Its inherent virtue is the equal sharing of misery.”

 

 

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Random Useless Fact:

Eating healthy can cost more money

 

 

Nov 102016
 

What Canadians Need to Know About America’s Next President

People from all around the world were anxious going into the 2016 U.S. presidential election. Sometimes it felt like the two frontrunners were throwing more shade at each other than discussing real issues that actually matter.

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Some pundits warned that if Donald Trump becomes the next president, there will be hell toupee. 😄 In the end, Trump won and will become the 45th U.S. president. And since he is replacing Barack Obama, I guess you can say that orange is the new black. 😀

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But before anyone freaks out, I don’t think Donald Trump will ruin the economy like some critics say he will. It’s important to put things into perspective. So here are some things to consider for Canadians about our finances and investments in the short to medium term. 🙂

Donald Trump on Canada/U.S. Trade

We know that Donald is willing to be protectionist in order to create more jobs for Americans. He also wants to renegotiate NAFTA. But this shouldn’t have any large impact on trade between our 2 countries. Scott Sinclair, a senior researcher with the Canadian Centre for Policy Alternatives says that “most of Canada’s free trade with the United States is locked in through World Trade Organization (WTO) rules, and doesn’t apply to NAFTA. Furthermore, anti-trade policies will also hurt the U.S. economy. Just compare the living standards of insular versus free-trade countries around the world. Since Donald will be judged, at least in part, by the performance of the economy, I don’t expect any drastic changes to Canada/US trade agreements. I also think programs like NEXUS aren’t going anywhere. Cross border shopping has way more benefits than drawbacks for the U.S.

Donald’s anti free-trade position seems to be more about an anti-Mexico sentiment, so I don’t think he’s out to purposefully tarnish the relationship between Americans and Canucks. But if he does impose new tariffs on goods moving across our border, then the impact to Canadians will depend on where we live. About 50% of trade in British Columbia is now done with countries other than the U.S. It has been a deliberate effort of the provincial government over the past 12 years to divest away from Canada’s largest trading partner. However, 80% of Ontario’s trade is with the U.S. so people in Ontario will be hit harder. Alberta’s trade is nearly all dependent on the U.S. The province has diversified its economy over time, but it’s still heavily dependent on oil and gas today. Donald wants to ramp up fossil fuel production in the U.S. which would likely keep energy prices lower for longer. Trade is only a part of the much larger economy. But it would be prudent for Albertans to prepare for an extended recession just in case. 🙁

Currencies and Interest Rates

Our loonie will likely stay lower for longer if the U.S. doesn’t import as much Canadian goods anymore. The value of a country’s currency depends on how productive its people are. Less trade with the U.S. means slower economic growth for Canada. This is also why the Mexican Peso dropped 10% after the election. But a lower Canadian dollar may actually help us gain back some manufacturing jobs, and make it more profitable for exporters to sell their goods. This boost in tourism and exports could make up some losses from any negative anti-trade effects. The FED in the U.S. may also take longer to increase its country’s interest rates.

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Apr 282016
 

A 50 Dollar Lesson in Personal Responsibility

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I’d like to share this joke I found on tumblr.

I recently asked my friend’s little girl what she wanted to be when she grows up. She said she wanted to be President some day. Both of her parents are liberal Democrats who support Bernie Sanders. They were standing there beside her.

So then I asked the little girl, ‘If you were President, what would be the first thing you would do?’

She replied, ‘I’d give food and houses to all the homeless people.’

Her parents beamed with pride.

‘Wow…what a worthy goal.’ I told her. ‘But you don’t have to wait until you’re President to do that. You can come over to my house and mow the lawn, pull weeds, and sweep my yard, and I’ll pay you $50. Then I’ll take you over to the grocery store where the homeless guy hangs out, and you can give him the $50 to use toward food and a new house.’

She thought that over for a few seconds, then she looked me straight in the eye and asked, ‘Why doesn’t the homeless guy come over and do the work, and you can just pay him the $50 directly?’

I said, ‘Welcome to the Republican Party.’ 😛

Her parents still aren’t speaking to me.

The point of this allegory is clear; There’s an untapped market of homeless people who could be doing yard work & making $$$ 🙂

It also addresses the hapless reality of economic inequality even in developed countries. If we want the poor to succeed we need to give them the opportunity to pursue their own dreams instead of enabling them to continue living in poverty. Government run redistribution programs are part of the problem. Giving money to the homeless without any strings attached robs them of their dignity, economic potential, and the chance to develop the internal motivation to succeed. Besides, the government doesn’t have money in the first place so when it gives money to the poor it has to take that money from somewhere else.

Some children think that their parents are all no-ing. Even so, we understand it’s wrong and destructive for parents to do their children’s homework. It undermines their children’s intelligence, sets them up for failure in life, and is not fair to other students. We also understand it’s wrong to feed fauna at the local park.

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It’s hard to say no to a begging squirrel, but we resist the urge to feed it because we don’t want it to be dependent on our generosity. We don’t want to rob these hungry creatures of their ability to be self reliant. So I think we should help the homeless through education rather than simply giving them free money with no obligations.

The ultimate freedom in life comes from being able to internalize personal goals that give us meaning and purpose. 😀

If we are kind enough to offer these gifts of self-discovery, personal accomplishment, and self worth to children and animals, then I think we ought to extend this same offer to financially unfortunate people as well. 🙂

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Random Useless Fact:

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Oct 262015
 

What a Liberal Government Means for Canadian Investors ?

Last week the charismatic Justin Trudeau lead the Liberals to win the 2015 federal election. I’m sure his good looks has nothing to do his popularity and success. 😛

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Justin pledged to make meaningful policy changes to the country that could benefit millions. But will his commitments help you? The jury is still out on the long-term effects, but here’s a TL;DR summary of what Trudeau’s government means for Canadian personal finance and investors in the short term.

The new Liberal majority government will…
HelpHinder
  • spenders
  • low-income seniors
  • stock market investors
  • students
  • most middle-class workers
  • savers
  • high-income households
  • single-income nuclear families

These are only generalizations. The rest of this post will explain individual policies that could affect your pocket book. Keep in mind that just because politicians promised something during their campaign, it doesn’t mean they will always follow through. Any of these policy changes below could be altered or cut completely going forward.

Borrowing To Invest. ? Going back into Deficit. 

According to the federal finance department, Canada’s government had a $1.9 billion surplus in the 2014-2015 fiscal year. 🙂 But the new Liberal government under Trudeau plans to run a $10 billion deficit for each of the next 3 years, before balancing the budget again in 2019.

Going into more debt as a way to expand economic output isn’t necessarily a bad idea. $10 billion is peanuts relative to our $1,827 billion/year economy (0.6%.) Also, our national debt to GDP ratio is quite low by international standards, which means we can borrow money at ridiculously low costs. New 10 year Canadian government bonds are currently yielding 1.5% in annual interest.

After factoring in inflation, there might actually be no real cost to tax-payers, lol. 🙂 Craig Alexander, the Vice President at the C.D. Howe Institute, said that despite digging deeper into debt, the debt to GDP ratio of Canada is still going to decrease over the next three years because our GDP is expected to increase as well. 😀

About a third of the new spending will go towards much-needed public transportation and infrastructure development and repairs. This means building more roads, highways, bridges, etc. This should improve the country’s productivity because gridlock and urban densification are causing major problems right now in large cities such as Toronto, Montreal, and parts of Vancouver. The other two-third of public spending is planned for social housing, seniors centers, and clean energy projects like solar and wind farms.

Due to more deficits and fiscal stimulus the Bank of Canada will be less likely to further cut interest rates for the time being.

What this means for you: Invest your money. Historically the S&P/TSX Composite performed well during times of deficit spending. Below is a graph I put together using stock market returns and government budget information courtesy of the CBC. During the two decades from 1995 to 2014 there have been 9 years where the government ran a deficit budget. And the stock market had positive returns in 8 out of those 9 years.

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Economic stimulus increases employment and grows the economy so people and businesses feel more optimistic about their investments which tend to be bullish for the financial markets. 🙂 In particular I would consider investing in stocks or sectors that have exposure to financials, cannabis, industrial goods, construction, utilities, preferred shares, and green technology (solar panels, wind, etc.)

Goodbye annual $10,000 TFSA contribution limit ?

The Tax-Free Savings Account annual contribution limit will revert back to $5,500 and increase in $500 increments based on inflation. This will make it harder for Canadians to save and won’t benefit the middle class. There’s a rumor that the TFSA only helps the rich get richer. But that’s baloney! The TFSA actually helps anyone who wants to save get richer. Here’s a table courtesy of the National Post which shows that many low and middle-income families still managed to max out their TFSA contribution rooms in 2013 when the limit was still $5,500.

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Aug 172015
 

Donald Trump Reveals His Personal Finances ?

I watched part of the Republican debate earlier this month. Some Americans warn that if Donald Trump becomes the next President then there will be Hell toupĂ©e. ? But he also has a lot of dedicated supporters. He’s quite a polarizing political figure. But what’s even bigger than his brash character and bold hairstyle is his impressive portfolio of material wealth. 🙂

His net worth is not clear as it’s difficult to put an exact value on such intangibles like his brand. Many sources say he is worth about $4.5 billion while Trump himself claims he is worth about $8.7 billion. As a presidential candidate Trump is required by law to disclose his finances to the Federal Election Commission. This opens up his personal finances for the whole world to see. It’s a great opportunity for us to study what makes him so successful in business and how we can possibly do the same. Trump’s financial disclosure documents reveal that over the last 18 months he’s made at least $380 million. This means Donald Trump makes about $250 million a year. Wow! It must be hard for anyone to Trump that kind of income. 😛

If he does somehow over-comb the controversies and become the next U.S. president, I expect he would want to make some changes to the White House. 😉

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? Types of Incomes ⛳ 

Surprisingly only $14,000 of his $380 million income is from a salary, lol. This goes to show that the rich are very tax efficient. Salary and wages are the highest taxed income sources one can earn in both Canada and the U.S. Most of Trump’s income comes from his business and investments. He owns the Trump Tower Chicago, the Trump National Golf Club in N.J. and the Mar-A-Lago resort in Palm Beach, Fla, among many other properties. Roughly half of his income, about $200 million during the 18 month filing period, came from golf courses and resorts. He also earned at least $10 million in royalties for licensing his brand to not only luxury hotels, but also to vodka makers and energy drinks companies.

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