Jerome Bitun

The Cost Of Education

2011-06-07T15:46:00.001-07:00

I've been talking to a lot of my clients about education savings lately that I thought I should write some information about the cost of education.

First let's look at education cost.

How much does it cost?

The average cost of University education in BC is around $4,300 a year. Here's a list of average cost of Universities around BC for 2010/2011 from the Province of British Columbia website.

I also found this calculator from the University of British Columbia to estimate the cost of going to UBC.

Including books and student fees, it currently cost around $7,200 a year for a science major. It's cheaper as a Fine Arts major at $6,500. Engineering major is around $8,500. But a law major would need $13,100 a year and to be a doctor will cost almost $20,000 a year.

Luckily for British Columbians, tuition fee increases has been limited to just 2% per year which is pretty manageable for most families. Whether this trend continues in the future, we'll have to wait and see.

On average, a four year education would cost a total of $17,200 including books but not including any other miscellaneous fees like travel, personal expenses, board and lodging (if living away from home).

So depending on what course your child will take and which University they're going to, we can assume that your child will need between $20,000 to $50,000 for a four year course.

So how will the child pay for his or her University? There's several options:

The parents can pay for it.
The child can work part time to help pay for part or all of the cost
They can get a student loan, or
The parents can save money in an RESP.

There's not much to discuss on the first two options, so let's go to the third option, getting a student loan.

Student Loans

If the student qualifies for a student loan, according to the Canada Student Loan Act, they won't have to repay the loan while they are a full time student. Once they cease to be a full time student, either by graduating or just dropping out of college, they have to start repaying the loan before the last day of the 7th month after ceasing to be a full time student.

For the months between graduating and the 7th month, interest will be applied to the student loan but the student is not required to pay yet. They will be required to start paying off the loan on the last day of the 7th month of graduating. So there are accrued interest in the loan for the first six months from graduating or ceasing to be a full time student.

I know it's a little hard to understand, but let's just put it this way. If the child graduates on June 15, 2011. From July 2011 to December 2011, interest will be charged on the loan but the child is not required to pay for it. However, the child is required to start paying off the student loan before the end of January 31, 2012.

Canada Student Loans carries a maximum fixed interest rate of the prime rate + 5% or a maximum floating rate of the prime rate + 2.5%. Provincial student loans have different interest rates varying from province to province.

Here's a link explaining how to pay off a student loan.

RESP

The other option is to set up an RESP or a Registered Education Savings Plan for the child.

For example, the parents can setup an RESP and contribute money into the plan. They will then be eligible for the following:

Canada Education Savings Grant (CESG)

A grant that equals 20% of the first $2,500 of their annual contribution up to a maximum of $500 a year.
Grant is given until the end of the calendar year the child turns 17.
Lifetime amount of $7,200.

Canada Learning Bond (CLB)

For parents who's child is born after December 31, 2003 and the parents qualify for the National Child Benefit Supplement
One time contribution of $500 to an eligible RESP.
Additional $100 for each year of eligibility until the child turns 15.
Up to $2,000 in total.

The parents may qualify for additional CESG depending on their income.

Those living in Alberta and Quebec may qualify for additional benefits.

Basically, everyone qualifies for the Basic CESG of 20% on the first $2,500 of annual contributions. The other grants are based on when the child is born and income of the parents.

So if your child is going to University in the next 5 years, the aim is to save between $20,000 to $50,000 to cover a child's education.

There are special rules to follow when you want to start an RESP for a child that is between 15 to 17 years old.

In order to continue receiving the Canada Education Savings Grant after age 15, certain contributions must have been made to the RESP (and not withdrawn) by December 31 of the calendar year in which your child turns 15.

They are:

Total contributions of at least $2,000, or
Contributions of at least $100 a year or more in any 4 previous years.

Let’s say your child turns 15 on July 2011. That means by December 31, 2011, you must have either contributed at least $2,000 in total to your child's RESPs, or you must have put in at least $100 annually in any of 4 previous years (they don't have to be consecutive years).

In Summary

The cost of education in BC at this time is manageable. The child can work part-time, get a student loan or the parents can contribute into an RESP.

Some parents who can't save for the full cost of education either because of their income or don't have enough time to save because they have older children may still want to contribute as much as they can into an RESP. The 20% grant and helping your child pay for their University education is the best return on investment you can get.

Why Are My Insurance Rates Going Up? May 2011 Newsletter

2011-05-13T16:14:00.001-07:00

A question I've been asked a lot lately is why are their home insurance rates going up?

Home insurance rates are based on several factors. The factors that affect your rates directly are:

Location of your home
Cost to rebuild in your area
Materials used
House features
Dollar amount of coverage

Your location is usually the first place companies will use to determine the cost of your insurance premiums. If you live in an area where there has been a lot of claims, then your premiums will be higher compared to a similar home two blocks away from you if there has been no claims in that neighborhood.

If you live in an are where the cost to rebuild is higher like on the islands with limited access or materials has to be shipped by ferry. Then the cost to rebuild is higher than one in the city.

If your home uses high end materials like hardwood floors, solid oak wood cabinets, etc. Then naturally, the cost of materials to rebuild your home is more expensive than those which uses vinyl carpet or laminate floors.

Having features like stained glass windows, skylights, two kitchens, a huge bathroom will bump up the cost to rebuild your home

All these factors determine what is called the replacement cost for the building or the house structure.

With the cost of raw materials going up as well as gas prices. It is costing more and more to insure your home and keep the insurance companies profitable in the event of a claim.

You may be asking yourself, I live in a strata condo/townhouse. I'm only insuring my contents, so why is my insurance premiums still going up?

There are other factors that affect insurance premiums other than those mentioned above. These are determined by the insurance companies and it is their internal basis for factoring the premiums they charge. These are:

Inflation
Replacement Cost
Capital reserve requirements
Investment returns

Inflation rates determine if your coverage increases a little or a lot. Every year, your insurance coverage goes up by a few percent called the "inflation factor" or "inflation index". Just like your groceries, the cost of your groceries goes up every year by a few percent.

For example, if you are insuring your personal property (contents) for $50,000. It is logical to assume that next year, the cost to replace your property is going to be higher than $50,000. It may cost $50,200. Since your insurance coverage is higher, your insurance premiums also go up.

You may be asking yourself, "but my stuff is old, why are the insurance companies increasing my coverage?" The reason is, when the insurance company replaces your property in the event of a claim., they don't buy you used property. They buy you brand new furniture, TV, clothes, couch, etc.

Since it may be 10 years after you first insure your property before you have any claim. Naturally, prices 10 years from now are going to be higher than today. The only properties that usually go down in prices are TVs and computers. But 10 years from now, they will no longer have the same model TV that you currently have. So the company has to replace it with a newer TV. But they will replace it with the same brand, size and the model closes to what you had before you had the claim. That's why your insurance coverage goes up every year.

One thing you have to remember though, the percentage increase in your insurance coverage is not proportional to the increase in your insurance premiums because there are other factors affecting the premiums.

The company's capital reserve requirements can affect the rates you pay as well. Insurance companies are required by regulators to prove they have enough capital reserve to pay claims. Meaning, their assets must exceed their liabilities (risks insured). If they experience a year or two with a lot of claims or they have one really large claim, those claims may eat up their capital reserve which in turns reduces their assets.

When their assets are reduced, they have to bring it back up to the reserve requirements. This is similar to your condo corporation's reserve funds. If your condo corporation's fund are low, expect your strata/condo fees to go up to build up the reserve.

Insurance companies also invest the premiums they collect until a claim is paid. Because these premiums are expected to be paid out, the insurance companies cannot invest in high risk investments like stocks. They are limited to liquid investments like bonds.

Because we are in such a low interest rate environment, insurance companies have a hard time making money from these investments. This low return makes it harder for companies to maintain their reserve requirements so they have to make this up by increasing their premiums.

Normally, a year or two of low interest rates won't affect your premiums by much. But we've had low interest for over 2 years now and the insurance companies don't expect the interest rates to go up by much in the near future.

These are just a few of the factors that affects your insurance rates. You should review your coverage regularly to see that it still fit your needs and whether any changes needs to be done.

April 2011 Newsletter

2011-04-18T13:23:00.003-07:00

2011 Tax Deadline

Just a reminder, you have to file your taxes by April 30, 2011.

U.S. Outlook

The rating agency S&P 500 issued a warning Monday, April 18, 2011 on US government debt. It said that there is a 33% chance it would lower the United States credit rating from AAA in the next two years if Washington failed to manage the country's debt.

This sent the Dow Jones, S&P500 and the TSX lower.

S&P said it has little confidence that the White House and Congress will agree on a deficit-reduction plan before the fall 2012 elections. By that time, the measures won't go into effect until the fiscal year 2014.

This does not look good for the U.S. The ratings done by the three major ratings agency is very important and the AAA rating is one most sought after rating by both investors and debt issuers.

The reason this is important is because most big pension funds, hedge funds and mutual funds have in their mandate to only buy "AAA" rated bonds. If the U.S. loses its "AAA" rating, that means these fund companies will have to sell all their bond holdings which amounts to billions of dollars. This will immediately crash the U.S. bond market and who knows which other countries will be affected by this.

This has been pretty much my concern over the last year. While the U.S. stock market recovery has been very good and a lot of U.S. corporations have been reporting record earnings, the problem still lies with the U.S. government.

Even if the company does well, a major news that affects the U.S. market like this one will eventually affect the individual companies.

In short, investors are still jittery about the U.S. recovery. They know that the U.S. has been printing money recklessly and that is never a sustainable way to improve an economy.

Now what?

So where do we go from here? Depending on how bad the market reacts to this news. It may be a good time to start moving some money into the U.S. again. It's always better to buy when the market goes down, as long as the fundamentals are strong (strong US company balance sheets).

If the U.S. rating does get cut, the U.S. dollar could also fall hard. This may send gold prices up.

These are of course just speculation on my part and is not meant as investment advice. It is just my way of thinking as a learning process about economic history.

What is currently happening may or may not affect you and your investment situation should be assessed individually according to your investor profile.

Eric Sprott: There is No More Silver

2011-03-11T16:58:00.001-08:00

Speaking at the Casey Research Gold and Resource Summit, Eric Sprott told investors that there is no more silver left to go around, "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left."

Emergency Preparedness

2011-03-11T10:46:00.001-08:00

I'm sure you're heard of the recent earthquake that hit Japan yesterday. Here are some useful links on how to prepare for an emergency.

Please check these websites:

http://choicez.biz/FraserValleyEmergencyResources.htm

http://www.pep.bc.ca/hazard_preparedness/earthquake_preparedness.html

http://www.getprepared.gc.ca/index-eng.aspx

http://vancouver.ca/emerg/

http://www.cooperators.ca/static/pdf/en/Prepare-for-the-unexpected.pdf
　

How to survive a major Earthquake:

http://www.victoria.ca/cityhall/pdfs/departments_vepnei_ind_prepare.pdf

http://www.taekwondo.bc.ca/Emergency%20Preparedness.pdf

Check this PDF file:

http://www.getprepared.gc.ca/_fl/guide/national-eng.pdf

March 2011 Newsletter

2011-03-02T11:57:00.005-08:00

Retirement

This year, 2011, marks the year the first of the baby boomers turn 65. Baby boomers are those who were born between 1946 to 1964. So in this edition of the newsletter, I thought it would be good to talk about retirement since we’ve just finished the RRSP season.

When you retire, you qualify for some government pension or benefits like CPP, OAS and GIS. So what are they and how do they work? Here’s a summary.

CPP – Canada Pension Plan

A CPP retirement pension is a monthly benefit paid to people who have contributed to the Canada Pension Plan. The pension is designed to replace about 25% of a person's earnings from employment, up to a maximum amount. For 2010, the maximum amount it was $934.17. Not very much is it?

But there’s good news! CPP has increased their maximum benefit. For 2011, the maximum CPP benefit you can get is $960.00. Woohoo!

And if you qualify, you can get Old Age Security (OAS) benefit as well, up to $524.23 and Guaranteed Income Supplement (GIS) of $661.69 for a total of $2,145.92.

If you have no mortgage and no debts, you can probably live comfortably on $2,145.92 per month today.

But wait! Before you think that your retirement is taken care of, consider this; if you are living in the Greater Vancouver Area. You are living in the city that has highest cost of living across all provinces.

If you also think you qualify for the maximum for CPP, OAS and GIS. Consider this as well. To be eligible to receive the maximum CPP, there are 2 criterias: Time and Contribution.

Time
The first criterion is that you must contribute at least 40 years between 18 to 65 years old. If you migrated here after you are 18 or started working only after you finished college, then you won’t get the maximum.

Contribution
Every year you work and contribute to CPP between ages 18 to 65, you add to your benefit. To qualify for the maximum, you must not only contribute to CPP for 40 years but you must contribute enough based on what CPP calls the Yearly Maximum Pensionable Earnings (YMPE). For 2010, the YMPE is $47,200.

If you make less than $47,200, you don’t qualify for the maximum because you haven’t contributed the maximum CPP.

You only qualify for the maximum if you retire at age 65. If you decide to retire earlier and get your CPP, your benefits are reduced by 0.5% for each month before age 65 to a maximum of 30%.

So if you decide to retire at age 60, you get 30% less CPP or if you retire at age 63, you get 12% less (0.5% x 24 months).

On the other hand, if you retire after age 65, you get 0.5% more for each month after age 65 to a maximum of 30% or age 70.

Here is a link on how your CPP is calculated.

http://www.servicecanada.gc.ca/eng/isp/cpp/soc/50-70/yourcpp.shtml

If you took some time off work due to pregnancy, you can apply for the child rearing drop out to increase your benefit.

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/chidropout.shtml

If you were not working or you just happen to migrate to Canada after 18 years old, CPP takes off the low earning years in their calculation to help increase your qualified CPP benefit.

The CPP protects your pension by making certain adjustments before calculating 25% of the earnings you contributed over your working life. For example, some low-earning periods during your career may be "dropped out," so they do not reduce the amount of your pension.

OAS – Old Age Security

The Old Age Security program provides you with a modest pension at age 65 if you have lived in Canada for at least 10 years.

The Old Age Security program is financed from Government of Canada general tax revenues.

You may be able to collect OAS indefinitely outside Canada if your OAS has been approved and you’ve lived in Canada for at least 20 years after age 18. Otherwise, payment may be made only for the month of a pensioner's departure from Canada and for six additional months, after which payment is suspended. The benefit may be reinstated if the pensioner returns to live in Canada and meets all conditions of eligibility.

http://www.servicecanada.gc.ca/eng/isp/oas/oasoverview.shtml

GIS – Guaranteed Income Supplement

The Guaranteed Income Supplement provides additional money, on top of the Old Age Security pension, to low-income seniors living in Canada. To be eligible for the GIS benefit, you must be receiving the Old Age Security pension and meet the income requirements.

http://www.servicecanada.gc.ca/eng/isp/pub/oas/gismain.shtml

Payment Rates

Here are something interesting facts to know.

The average CPP benefit in 2010 is $504.50. The average OAS is $490.47 and the average GIS is $452.04 for a total of$1,447.01.

That’s a far cry from $2,145.92. I’m not even sure if you can live off $1,447.01 a month even without a mortgage.

But…

The CPP benefit is indexed to the Consumer Price Index (CPI) and is adjusted once a year.

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/cpicpp.shtml

OAS is indexed to the Consumer Price Index (CPI) and is adjusted four times a year.

http://www.servicecanada.gc.ca/eng/isp/oas/tabrates/cpioas.shtml

Here are the current rates for CPP and OAS

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/rates.shtml

http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml

Qualifications

GIS is intended for low-income seniors living in Canada. (The link is based on 2006 rates)

http://www.servicecanada.gc.ca/eng/isp/pub/oas/lis/qualify.shtml

For 2011, if you make over $15,888 a year, you don’t qualify for GIS.

http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml

If your income is over $67,668, your OAS is going to be reduced or “clawed back”. You will have to pay back 15% of the excess of this amount. Here’s a sample calculation.

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/oasrepay.shtml

Taxes

Like most retirement income, your CPP benefit is considered a taxable income.

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/retire.shtml#taxation_cpp_benefits

OAS is also taxable

http://www.servicecanada.gc.ca/eng/isp/pub/oas/oas.shtml#five

GIS is not taxable, but must be reported in your tax return.

http://www.servicecanada.gc.ca/eng/isp/pub/oas/gismain.shtml#f

It’s funny that when you get CPP and OAS which is already low, it is also subject to tax. And when you have more income, your OAS is “clawed back” and you don’t get GIS.

RRSP withdrawal is considered an income and is taxed. Any income you receive from your RRSP affects your OAS and GIS if you go over a certain income level.

Why is it that the government penalizes (taxes) you on your savings and then cuts your benefit (OAS and GIS) if you have a lot of savings? That makes it less attractive to actually save right? Yes and no.

Does it make you wonder if it’s even wise to contribute to your RRSP?

The answer is…it depends.

It depends on how much you’ve saved and your individual situation. You may want to contribute to an RRSP to reduce the taxes you pay today. Sometimes, it may not even be advantageous to contribute to an RRSP if you have low income.

Because of this, a new savings plan came out called the Tax Free Savings Account or TFSA.

The TFSA is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs.

There are several investment options in a TFSA such as mutual funds, GICs, stocks and bonds. But remember, when you invest in stocks in a TFSA, like you cannot use capital losses inside a TFSA to offset future capital gains.

Income and withdrawals from a TFSA is tax free and does not reduce any of your government benefits like OAS, GIS and the Canada Child Tax Benefit.

So the final question is, will CPP be there when you retire? Here’s a link to the CPP Investment Board explaining the status of CPP.

http://www.cppib.ca/News_Room/News_Releases/nr_01200401.html

If you like to know more, talk to your financial advisor.

Eric Sprott on BNN Talking About Gold and Silver

2011-02-02T17:03:00.000-08:00

Here's a video interview with Eric Sprott of Sprott Asset Management regarding his views on gold and silver.

January 2011 - Newsletter

2011-01-19T13:08:00.019-08:00

It's RRSP Season Again!

Yep, it's that time of the year again. Make sure you have your T4 ready and have calculated your maximum contribution. The deadline to contribute to your RRSP is March 1, 2011.

Investment Landscape

People have been asking me what's the best place to invest right now? Are we out of the recession yet? Is the U.S. back on track?

Here's my own view and my views are not necessarily the same as what you hear or read in the media or from portfolio managers.

Let me answer the first one as that is the easiest one to answer. The best place to invest is worldwide, always. You cannot have a portfolio concentrated into one country like Canada. Canada only represents a small percentage of the world market. Adding just 20% foreign equities into your portfolio would expose you a lot of potential growth from China, Europe, India, etc. But how much to invest in foreign equities will depend on what stage you are in your life. If you are nearing retirement or you are retired, you may want to add no more than 5% in your portfolio as this type of investment tend to be very volatile.

Are we our of the recession yet? For Canada, it seems like we are, real estate prices has been steady and in some cases going up. Have you seen your property assessment lately? In cities like Richmond, property assessment has gone up 17.14% which is the highest in B.C. as reported in the Richmond News. New condos and townhouses continue to be built around the Greater Vancouver Area. So I think people feel safer buying homes now compared to 2 years ago.

How about the U.S.? If you've been following the news, you know that last November, the Republicans took over the Senate and Congress. Obama being a Democrat is now effectively a lame duck President. I doubt he will have any significant piece of legislation that will get passed in his last two years of office. And if my history is correct, only one President won re-election with both houses as majority in the history of the United States, and that's Bill Clinton who was re-elected in 1996 when both the Senate and Congress was controlled by the Republicans.

So what does this all mean? In my opinion, I think the US economy would be flat in the coming year or two. Of course there will be some companies who will shine, but overall, the US Dollar and general economy doesn't look like it's going to recover much more than it has now. The politicians will try to outspend each other as they cannot make a decision on their health care and tax cuts. While they both criticize each other for overspending, whoever is the majority, whether they are Democrats or Republicans will still outspend each other since it is easier to print money to give away to the citizens than to face the music and reduce their deficit which may create a depression.

In 2010, China has produced more than 18 million cars while India has produced 2.6 milion cars. That's 20 millions cars in 2010 and is expected to rise in the coming years. Do you know what you need to build cars? The top 5 raw materials are steel, rubber, plastic, aluminum and glass. To reduce the pollution in cars, you need a catalytic converter. Guess what's required to build a catalytic converter? Palladium, platinum, rhodium, cesium, iron, manganese and nickel. Zinc is also used to rust-proof steel in a process called galvanizing.

China is projected to import from 198,000 tons in 2011 to over 5 million tons of aluminum by 2015 according to an article from China Daily. Australia is the world's largest supplier of aluminum and Canada is the world's largest supplier of zinc and uranium.

Guess what, in the next 5 years, more cars are going to be built and more electricity is needed. We will see a surge in demand for raw materials so commodities are going to be very important in the next 5 to 10 years. If we are investing for the future, I believe that commodities is an important part in your portfolio. Foreign equities is important because it is mostly Asian, Australian and Canadian companies that is supplying the raw materials. The U.S. is a major importer and currently does not export any significant resources to China to make money. China's industry is booming even though it is reported to be slowing down. But compared to the U.S. it is still growing a whole lot more.

Just to give you some perspective, here's the calendar return of the various market indices.

Data source Mackenzie Insight newsletter.

Compared to Canada, the U.S. is certainly lagging and precious metals has certainly been a good performer.

Canada will be an important component in any portfolio in the near future but putting some foreign equities and commodities in your portfolio is a good way to boost your returns. There are of course, risks involved and investing in these markets will depend entirely on your tolerance for risk.

A proper review your portfolio can determine whether these investments are right for you.

Past returns of course is not indicative of future performance.

Feel free to forward this to your friends and family if you think their portfolio might be in need of a review or second opinion.

Note: these views and opinions are mine and mine alone, they do not represent the views of any of the company or companies I represent. This newsletter is not an offer or a solicitation.

Men Are Better At Getting Their Needs Met

2011-01-13T14:46:00.002-08:00

Holiday Greeting

2010-12-23T16:18:00.002-08:00

What is this? It's called a QR Code. A QR Code is a barcode that can contain text, a URL or other data.

These images are becoming popular for sharing data with mobile users.

Point your cellphone camera on this code and if you have the apps to read this QR code. It will reveal the information.

November 2010 Newsletter

2010-11-10T13:52:00.000-08:00

Welcome to another newsletter. As you've probably noticed, there's new format to my newsletter which makes it easier to share with your friends and hopefully, easier to read as well. or to unsubscribe from my newsletter (I hope not).

$6 Million Office Party
I want to share some information with you which would be of particular benefit to business owners. It's with regards to liability, especially employer liability. We are now approaching the holiday season and a lot of employers are having Christmas parties.

The following information is a summary taken from the Elliot Special Risk LLP News Board Fall 2010 Newsletter.

This particular case comes from one of the company's we insure and it involves an articling student (studying to be a lawyer), a lawyer, an office party and a night club.

In 2001, a 32-year-old articling student was dancing behind her colleague at a law firm at a Vancouver nightclub after a firm-sponsored dinner at a different location.

Her colleague, 6'2" and 220 pounds man, stumbled backward and fell onto her, 5'4" and 110 pounds. She hit the back of her head against the floor and had her chin pinned between Poole’s shoulder blades. She lost consciousness briefly, witnesses said. Both had been drinking at the dinner and at the nightclub.

She claimed that after the fall she experienced ongoing problems, including nausea, vomiting, persistent and severe headaches, and cognitive defects such as poor memory and illegible handwriting. After eight months’ leave, she returned to work but had to take up to 30 pain-relief tablets a day to cope with her headaches.

Then in 2002, her car was hit from behind on the Lions Gate Bridge. Although she didn’t take any time off work after the accident, her lawyers argued that she was on the road to a full recovery at the time and that the collision exacerbated her injuries, resulting in chronic and debilitating headaches. She ultimately left the firm in 2004, unable to work.
She filed one claim for $285,400 against her colleague and one for more than $8 million against the owner and operator of the car.

She reached an agreement with her colleague that decreased his liability and increased the liability the law firm, against which he made a third-party claim.

The two accidents were consolidated for trial.

Despite taking issue with her credibility, Justice Kelleher awarded her $559,220 in past income loss, $185,000 in non-pecuniary damages and nearly $70,000 more in special damages and cost of future care in relation to the nightclub accident. Following witnesses’ testimony that she was an incredibly promising young lawyer who excelled at both handling existing clients and finding new ones, he also awarded her more than $5 million in loss of earning capacity.

In relation to the motor vehicle accident, he awarded her $10,000 in non-pecuniary damages and $595 in special damages.

The trial will enter a second phase in November to determine whether the law firm, as host of the party, was liable.

The Supreme Court of British Columbia judgment can be found at http://www.courts.gov.bc.ca/jdb-txt/ SC/10/11/2010BCSC1111.htm.

Lesson

The trial in November will determine whether the law firm is liable as host of the party. Although this incident happened after the dinner, if it can be proven that the party at the nightclub was an extension of the dinner, then the law firm will be liable for the $5 million in loss of earning capacity.

So what lesson can we learn about this incident? If you are setting up any office parties, make sure you draw the line when it starts and when it ends. Make sure you that you also get Special Event Liabiltiy or Party Alchohol Liability Insurance if you are serving alcohol.

We are not asking people not to have fun or to be too paranoid that they cancel their office parties. Just make sure you have enough liability coverage on your business insurance or get special coverage for certain events.

This is not just for office parties but also applies to private/house/birthday parties. There have been cases where alcohol was served in parties and the host was sued and found liable when the guest went home and got into an accident. The reason? Why didn't the host provide a designated driver or get a cab for the guest.

Read this article for more information and guidelines on how to host a safe party.

Mortgage Insurance

2010-09-28T13:17:00.003-07:00

Saw this video from CBC Marketplace with the following description.

"Mortgage insurance is meant to offer peace of mind. Most people pay the premiums and think they're covered. But some have discovered - when it's too late - that they aren't."

Be sure you understand what you're signing. Talk to a licensed insurance professional before you buy any insurance.

Market Plunge

2010-05-07T11:12:00.004-07:00

Whew! What a week we've been having!

We got a really wild market yesterday. Oil was at $75 from $80 earlier in the week. The Canadian dollar dropped 4 cents to 0.95 and it was just over par a week ago. Gold is now almost $1,200 from trading sideways near $1,100 for last month or so and yesterday the Dow Jones went as down as much as 1,075 points and recovered by closing down 341.90 points.

A lot of people as asking what happened? Why did the Dow drop so much yesterday? Was it the potential bankruptcy and street riots in Greece? No, it's been happening for almost a month now. The market has already factored that in. Was it bad earnings or jobs report? No, it wasn't any worse or better than the previous reports. In fact, some of the reports were better. So what happened?

Well, a CNBC news report that came out late afternoon yesterday said that Dow Jones went down as much as 1,000 yesterday because it was, get this, due to a typo. A typo! Can you believe that? They said a trader typed in a "b" for Billions instead of "m" for millions. The trader sold billions of dollars worth of Procter and Gamble stocks making that stock plunge 37% in one day! Procter and Gamble is one of the most solid and slow moving stocks. There is no way that stock is going to drop 37% in one day unless it's suddenly filing for bankruptcy.

Reports today said, that drop by the Dow Jones caused combined losses of almost a trillion dollars. We're not talking pennies anymore are we?

So what have we learned from this markets over the last year? One, markets are unpredictable. There is no way anyone could have predicted what happened. We can always try to predict how the market will perform. But that's just what it is, a prediction.

I always tell my clients that the best way to make money in the market is to stay invested and do monthly contributions to smooth out the ride. It avoids market timing and if you're lucky, get in while the market is low.

If you were able to get in when the Dow Jones was down 1,075 points and rode it back up to when it closed to 341.90. You didn't actually lose money, you made money; 733.91 points to be exact. But nobody is that lucky and you certainly can't do that in a mutual fund.

Another thing I do for my client is to do a proper risk profile to determine how their investments should be allocated. It helps you sleep better at night knowing that you are not putting your investment at risk unnecessarily.

So keep a level head and stay invested. Even if the market crashes, the sun continues to shine, we still have to go back to work and make a living. The market will do what the market will do and we just have to realize we cannot do anything about it.

Happy Halloween!

2009-10-30T16:24:00.000-07:00

Happy Halloween!

Here's a scary story.

The 2005 Statistics Canada report says that a man today will live to age 78 and women will live to age 83. Married men tend to live longer than unmarried men. Thanks ladies! So men, be good to your wife.

Not only that, we are also living longer and may actually live past 100 years old in the next 30 years.

Anyway, imagine yourself being age 65 today. Your $500,000 RRSP last year is now down to $250,000 because of the market drop. During that drop in the market, you panicked and moved all your RRSP into a GIC. So you just realized all the losses and since the market recovered somewhat since March, you did not participate in the recovery.

Assuming you live on $25,000 a year, would your $250,000 last? That means there will be 3 years for men and 8 years for women with no other source of income other than the $830 a month of CPP if you qualify for the whole amount and maybe some OAS.

What if your income needs is $30,000 a year? Can you imagine yourself depending on the government for financial support? Can your $30,000 a year retirement income pay for your medical needs or home repairs in the future?

Can you afford to drive when gas eventually hits $2 or more a litre?

Scary thought isn't it?

They say 50 years old is the new 40, 40 is the new 30, 30 is the new 20. What happens if you're 10?

Fact is, people are starting later to save for retirement.

If you started working at 20 and retired at 60, you worked 40 years. But you are expected to live to age 80. So you will be spending 20 years in retirement. Did you save enough in your 40 years of work to live on for the next 20 years?

If your retirement savings is not on track to support your retirement, maybe you should start looking to increase your retirement savings. If you are worried about the market dropping, there are investments that guarantee your principal at maturity.

There are also new Guaranteed Minimum Withdrawal Benefit from insurance companies that acts like an individual pension plans that guarantees you will never receive less than a certain amount for life and they start with as little as $25,000 to start the plan.

If you and your friends or family are worried about your retirement, give me a call. I'll be happy to do an evaluation for you.

========================

I was in a seminar yesterday with Michael Levy who is a well known speaker about finance and currencies and has been featured in Global and CTV News. He presented an economic overview of the US and Canadian markets.

Here's the summary.

The bad news is, he thinks the US will be in a recession for a long time. The US is currently in a secular bear market. meaning, the whole US investment horizon is in a bear market. There will be some bull market moves, but it would be a long time before the US gets out of the "real" bear market.

While China and the UN is talking about having a global currency and detach from the US dollar. He doesn't see that happening anytime soon. At least not in the next 5 years. Why? China is too dependent on the US. If they sell all their US Treasuries and makes the US Dollar go into a free fall. China will only hurt their exports.

While the US says they want a strong US Dollar, that's probably not going to happen since they want a weaker US Dollar so their exports will be cheaper. Also, a weaker US Dollar means their debt repayments to US, Japan, Australia and other countries will be cheaper. Since these are paid in US Dollars and not in the currency of the said countries.

China is doubling their spending on their military every year. This is not to invade any country but historically, the currency of the country with the biggest army becomes the reserve currency. This happened in Roman times, Spanish times, during the British Empire and the US. We may eventually have the Yuan as the reserve currency. But that would be 15 to 20 years from now. It won't be happening soon.

By 2050, there will be 42% more oil consumption than today. 3 billion people will be using oil. There is no more easy oil to drill. While we won't run out of oil, it will be harder, deeper and more expensive to get oil. Don't be surprised if oil hits $200 a barrel. That would be around $3 to $4/litre, maybe more.

While Canada may say they want the Canadian Dollar to be at 80 cents to the US Dollar. Canada cannot stop market forces. the Canadian government always say that we need the Canadian Dollar to be at 80 cents so we can be competitive in our manufacturing. But manufacturing is a dying industry and the exchange rate is only one of the factors that influences export prices.

In the 1970s, the Canadian Dollar was at par and more compared to the US Dollar. Canada survived. Manufacturing died, but Canada found other means to make income. Canada is in a better position now because even if manufacturing died, Canada has oil and other resources to export which will be in great demand.

We may see a weakening of the Canadian Dollar in the meantime, but he sees the Canadian Dollar to be around $1.25 in the next 5 to 10 years. So convert your US Dollar when the Canadian Dollar is cheap.

Gold is another story, gold prices is high now because the US Dollar is losing value. But in terms of Canadian Dollar, gold is cheap because the Canadian Dollar is so strong.

Here's some good news.

On Oct 9, 2009, Canada created 31,000 new jobs. The majority of those jobs are in BC, particularly, the lower mainland. The Provinces that is going to get better is BC, AB, SK and MB. These Provinces are the epicenter of growth in Canada. Ontario isn't part of it because it relies heavily on manufacturing.

As of yesterday, there have been 109 bank failures in the US. In Canada...zero, none, zilch.

Housing prices is strong in Canada, specially in Vancouver. Prices are crazy, but Canadian banks have been very conservative in their lending practices. Meaning, you cannot have zero downpayment when you buy a house and you have to have an income. There are no more 40 year mortgages available and I haven't seen any promotion for Prime minus mortgages.

========================

Here's an observation that I learned from Robert Prechter who popularized the Elliot Wave Theory. Some of these are just my assumptions.

Did you know that during a recession or a depression, the top grossing movies are usually horror/suspense movies? There's also a lot more horror/suspense movies in times of depression, especially at the bottom. Possibly due to Hollywood mirroring the moods of the population.

During the great depression of 1929 to late 1930s. The top grossing movie were Frankenstein (1931) and King Kong (1933).

During the recession between 1970 to 1980. The top films were The Exorcist (1973), Jaws (1975), Jaws 2 (1978). The bottom of the market during that decade was Sept 23, 1974. When the market started recovering or when the population has had enough of the gloom and doom, the top movies were Saturday Night Fever (1977), Star Wars (1977), Grease (1978), Superman (1978) and Moonraker (1979).

During the 1980s boom with Reaganomics, no horror or suspense movies were top grossers. We have ET, Return of the Jedi, The Empire Strikes Back, Indiana Jones, Rain Man, Raiders of the Lost Ark, Batman, Back to The Future, Who Framed Roger Rabbit and Top Gun.

How about as recent as the 1990s?

From 1991 to 1997 there were no horror/suspense movies that were top grossers. Interestingly enough, during the Asian Crisis, the top movie was Armageddon (1998) and the Sixth Sense in (1999).

I haven't seen the same result in this decade yet. But you do see lot more horror movies coming out even though they were not top grossers. But if we go by the gross earnings of the Saw movie franchise, we can see it grossed $55M in the US in 2004 and $87M in 2005 for Saw II. If you remember, 2000 was when the Internet bubble popped and bottomed on Oct 21, 2002. The market went up from there.

So in 2006 when the market was in full recovery, Saw III only made $80M. Still high, but in 2007 when the good times were back again, Saw IV only made $63M, Saw V in 2008 made $56M and Saw VI made $21M in 2009 so far. It only opened on Oct 23, 2009 so it's still early to tell.

Let's see what the upcoming horror movies in November. The Box, Endgame and Fourth Kind on Nov 6. The big one they're promoting is 2012 about the end of the world which is coming out Nov 13 (Friday the 13th by the way).

There no other horror movies to coming out after mid-November since nobody probably wants to be depressed during the holiday season.

It would be interesting to see how much money these movies make though.

Interesting bit of info isn't it?

Article by Warren Buffett

2008-10-17T12:02:00.000-07:00

I thought I'd share this article by Warren Buffett he wrote in the New York Times on Oct 16, 2008.

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?partner=permalink&exprod=permalink

Newsletter September 2008

2008-09-17T16:34:00.004-07:00

*Warning, this is a long newsletter, but will be quite informative if you have the patience to read it.*

I'm sure that by now, you've heard what has been happening to the market. Both the Dow Jones and S&P/TSX index dropped more than 500 points Monday due to Lehman Brothers filing for bankruptcy. In short, it was a slaughter.

But is it really?

Let me give you a background of what happened before I go into the details on how your investments may be affected.

Let's start with Lehman Brothers. Lehman Brothers is one of the largest investment banks in the US if not the world. I was established in 1850, it is an innovator in global finance and serves the financial needs of corporations, governments, municipalities, institutional clients and high net worth individuals worldwide.

It does financing, asset management, investment management, fixed income sales, trading and research.

So what went wrong?

Well, the best way I can explain it is this, it innovated itself in to a hole. As you may or may not know, stock prices goes up because of good earnings reported by companies. Sure, speculation is part of it, but a good deal of why a stock goes up is because the company reports good earnings. One way of reporting good earnings is to continually earn money of course.

The way they bumped up their earnings is by buying mortgage backed securities. These are the sub-prime loans that's been repackaged and sold like equities or stocks. Of course, because they didn't report this as a bond holding or a debt holding, it was reported as an asset. Being an asset, it was reported as an earnings. As their earnings goup, their stock is rewarded by the market so their stock price goes up. As their stock price goes up, everybody who works at Lehman gets a bonus since their bonus is tied to earnings and the CEO's earnings are based on the performance of the stock.

The problem lies in that these mortgage backed securities are based onthe assumption that the mortgagee will be able to pay the monthly dues. Here's an example on how these work.

Say for example you use your credit card or you have a mortgage. You borrow from it and you pay just the minimum or whatever the ammortization is on that loan. As long as you are able to pay that loan, that counts as an asset to the bank.

In the old days, banks are allowed to lend 10:1. Meaning, for every$100 they have in reserve, they can lend up to $1,000. For them to be able to lend more money, they need to have more reserve. This is a problem because there's only so much money a bank can raise and as youknow, banks make money from lending money and not from your bank fees.

So how do they circumvent these restrictions? Well, the magic of modern finance has allowed banks to navigate around these reserve requirements. Here's what they did.

Say you have a mortgage of $100,000. That means, the only reason the bank is able to lend you $100,000 is because they have $10,000 in reserve. If they already lent you $100,000, they can't lend to anyone anymore because that will violate their reserve requirements. So what they do is, they package your mortgage and sell it as a security or stock. They sell it to another entity which could be a corporation, a finance company or an individual investor. The investor buys the securities and makes money from the interest payments. So the banks are basically passing their loan risk (you) to another entity. The banks still makes money off of that because the majority of the interest you pay, around 60% is still paid to the bank and the balance is paid to the other entity.

Since the bank has sold off the mortgage and got cash back, the loan is off the books and they are free to give out another $100,000 loan. So effectively, they have just circumvented the 10:1 restriction without really raising any reserve requirements.

Now, multiply this my millions of mortgage borrowers and lenders, and you have what we call a bloated credit market which is over leveraged. So from a 10:1 leverage, they're now possibly into 200:1 to 1000:1 leverage.

This is fine as long as the mortgagee are of good credit and are gainfully employed. The problem is, because of greed and a real estate bubble. Every bank wanted to capitalize on this growth so they started lending to people who have bad credit. This is where the sub-prime term comes in. The borrowers are less then prime borrowers, meaning, they are more high risk because either they have bad credit, no creditor at not gainfully employed.

Think of it this way, who would you rather lend your money to? Your brother who is a doctor and gainfully employed or to your uncle who's a bum? I'm not saying your uncle is a bum, it's just an example. :)

What the banks did is they started lending money to their uncle who's a bum because they ran out of doctors who they can lend money to. They tried to offset the risk of lending to their uncles by charging higher interest rates than what they charge the doctors.

Of course, they offset the risk even further by packaging these mortgage to their uncles and calling them "mortgage backed securities"and selling to another entity. And the cycle goes on and on.

You would be thinking now, why would anyone buy these risky mortgages and why are they willing to get 40% of the interest if they're holding the risk and not the banks? What the banks did is they partnered with rating agencies, manipulated the ratings and rated these securities as AA or AAA. How did they do that? They just said that these are very secure instruments because they are backed by collateral, which is the properties and homes of these mortgagees. Hence it's called "mortgage backed securities" or securities collateralize by mortgages.

As long as the real estate market is going up, these mortgages are worth a lot of money. Of course, we call know that the real estate market in the US is in the sewer, so they are not even worth anything now since even if they seize these properties, they can't get back what they bought it for because the property market is down some 20%or more. So they ended up at a loss.
Going back to Lehman Brothers, what Lehman did was "innovate" and marketed all these mortgage back securities. They purposely exposed themselves to over leverage by purchasing securities backed by residential and commercial real estate loans. Sub-prime to prime mortgage. Since the real estate market in the US collapsed, so did these securities.

Their debt exposure is US$613 Billion dollars. To put this in perspective, the US National debt is US$9.69 Trillion dollars, the Canadian national debt is CAD$3.2 Trillion, the Philippine national debt is US$80.77 Billion.

The debt of Lehman brother is 7.6 times that of a small country and 20% of the the Canadian national debt!

How could a company have this much debt? Simple, over leverage. Scary isn't it?

If you're interested, here's a list of companies that Lehman Brothers owes money to.

http://www.reuters.com/article/marketsNews/idINLF73920080915?rpc=44

So the big question is, how is this going to affect your portfolio?

If your invested 100% in Lehman Brothers, say goodbye to your retirement. But of course, I don't do that to your portfolio. I always put you in a well diversified basket of stocks and bonds diversified by asset classes, countries, industries, sectors and market cap.

Yes, these bankruptcies are going to affect the overall market. But it is going to affect a certain sector more than others. It will also affect world stock market as well as Canadian markets. I think we're going to see a flat to down market until the end of the year so don't expect to make money this year. I would expect to just hopefully break even or stay with a small loss.

Here's some data YTD (Year-To-Date) meaning, from January 1, 2008 to today, 17 September 2008.

Dow Jones down (-20.02%)
S&P500 (-21.25%)
S&P/TSX Comp (-14.14%)
FTSE100 (-23.92%)
Hang Seng (HK) (-36.59%)
Nikkei (-23.24%)
SENSEX (India) (-34.67%)

My portfolio, consist of 100% equities, high risk, resources, dividends, international and small caps. It is down (-30.86%) ouch!

I'm crazy, I know. I'm doing worst than the market. But some of the reasons I have that kind of portfolio is to also learn about the companies so I know what to expect before I recommend them to my clients. I do not recommend funds or companies that I don't have money in or have not done my research. But I still continue to put money in monthly to take advantage of this low market. I'm actually excited this happened. Like I said, I'm crazy or maybe I'm just smart. Only time will tell. :)

But as you may know, I don't do that to your portfolios, I usually take a safer route with your portfolios since my objective with your portfolios is to try not to lose you money. Making money is easy, trying not to lose the money is harder especially in a bear market.

Some of my clients who are well diversified are down 7% and some are down just 3% depending on their investment objectives and time horizon. This is less than half of what the market is doing. So is this good? Well, yes and no.

Yes it's good, because you haven't lost as much as the market which means you are doing well. No, because you still lost money.

Log in to your accounts and see what is your return is now.

So what should you do now? Should you withdraw your funds? Should you stay in the market? Should you change your portfolio?

If you're not retiring within the next 3 years, I suggest you stay with what you have. I've personally have been waiting for another market like this to happen again since I see it as an opportunity to look for bargains in the stock market. The last time this happened which was around 2001, I wasn't in a position to invest heavily in the market and have seen opportunities slip from my fingers.

I would hold cash now and start to look for a good time to enter the market. Or, you can start a regular investment plan or increase your monthly or weekly investments to take advantage of a low market.

In my 10 years of investment planning, the most successful investors I have are those who put money regularly whether the market is up or down. They make a lot of their returns when they continue putting money in a down market and take advantage of the low valuations. Once the market goes back to normal, they make positive returns on their portfolio even if the market is just back to even.

I'm in the process of reviewing everyone's portfolio. If I feel that there should be some changes, I will give you a call.

If you need someone to talk to to get a better sense of what you should do, give me a call.
I told you this is going to be a long newsletter, here's some more news.

Merrill Lynch is another large investment bank that was just bought by Bank of America.
AIG, the largest insurer in the world is in financial trouble. Check out this letter from the CEO of AIG Canada to see how this will affect you if you have AIG Canada Insurance.

http://web.aig.com/2008/clf8183/clf8183news_en.pdf

Top 10 U.S. Creditors

2008-08-06T15:23:00.000-07:00

Saw this site today showing the top 10 foreign holders of U.S. Tresuries. In short, the top 10 nations to which the U.S. owes money.

Here's the link to the NY Times with the graphics.

RRSP

2008-01-17T13:12:00.000-08:00

It's RRSP season again and if you haven't started an RRSP or have not fully utilized your RRSP, you better start now. As you may or may not know, the only way you can have a significant amount of retirement money is time. The longer your money is invested, the more time the magic of compounding will work for you.

If your employer matches your contribution, use the maximum you can get. Nowhere else are you going to get a free return on your investment guaranteed. If you don't have enough money, look into getting an RRSP loan. Use it to fund your RRSP and when you get a refund, use the refund to pay off the loan. It's one of the cheapest way to fund your RRSP. Most companies are offering Prime rates (6%) for RRSP loans; some even offer Prime - 1%. Check with your adviser to see where you can get the best rate.

Craigslist Meets Wallstreet

2007-10-05T11:04:00.000-07:00

Here's something I read from Craigslist that's funny but falls right in to economics, time value of money and trading.

--------------------

THIS APPEARED ON CRAIG'S LIST

What am I doing wrong?

Okay, I'm tired of beating around the bush. I'm a beautiful (spectacularly beautiful) 25 year old girl. I'm articulate and classy. I'm not from New York . I'm looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don't think I'm overreaching at all.

Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 - 250. But that's where I seem to hit a roadblock. 250,000 won't get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she's not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?

Here are my questions specifically:

- Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms

-What are you looking for in a mate? Be honest guys, you won't hurt my feelings

-Is there an age range I should be targeting (I'm 25)?

- Why are some of the women living lavish lifestyles on the upper east side so plain? I've seen really 'plain jane' boring types who have nothing to offer married to incredibly wealthy guys. I've seen drop dead gorgeous girls in singles bars in the east village. What's the story there? - Jobs I should look out for? Everyone knows - lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?

- How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY

Please hold your insults - I'm putting myself out there in an honest way. Most beautiful women are superficial; at least I'm being up front about it. I wouldn't be searching for these kind of guys if I wasn't able to match them - in looks, culture, sophistication, and keeping a nice home and hearth.

it's NOT ok to contact this poster with services or other commercial interests
Craig's List PostingID:

THE ANSWER Dear Pers-:

I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament. Firstly, I'm not wasting your time, I qualify as a guy who fits your bill; that is I make more than $500K per year. That said here's how I see it.

Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here's why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here's the rub, your looks will fade and my money will likely continue into perpetuity...in fact, it is very likely that my income increases but it is an absolute certainty that you won't be getting any more beautiful!

So, in economic terms you are a depreciating asset and I am an earning asset . Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you're 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!

So in Wall Street terms, we would call you a trading position, not a buy and hold...hence the rub...marriage. It doesn't make good business sense to "buy you" (which is what you're asking) so I'd rather lease. In case you think I'm being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It's as simple as that. So a deal that makes sense is dating, not marriage.

Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as "articulate, classy and spectacularly beautiful " as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn't found you, if not only for a tryout.

By the way, you could always find a way to make your own money and then we wouldn't need to have this difficult conversation.

With all that said, I must say you're going about it the right way. Classic "pump and dump."
I hope this is helpful, and if you want to enter into some sort of lease, let me know.

____________
Rob Campbell
J.P.Morgan
Diversified Industrials Investment Banking
277 Park Avenue , 16/F, New York, NY 10172

Chinese Factory Worker Can't Believe The S**t He Makes For Americans

2007-09-03T17:53:00.000-07:00

This article pretty much says it all about our Western lives where we want to make everything easy and simpler to the point that we are wasting money buying things that we think will make our lives simpler, but in reality, we are just buying junk that we'll probably use once or twice.

No wonder the Western world is in so much debt.

Warning, lots of explicit language.

Here's the link.

20 Timeless Money Rules

2007-08-22T11:49:00.000-07:00

I saw this on CNN Money and I thought it gives great advice on money.

http://money.cnn.com/galleries/2007/moneymag/0708/gallery.20_rules.moneymag/index.html

More on identity theft

2007-07-03T16:09:00.000-07:00

I was talking to a friend of my last night about how people just put up their information online without a second thought and how easy it would be to steal their identity.

We were talking about the kind of information people put up on sites like Friendster, Facebook, etc. Our friends and other people post their e-mail, birthdates, telephone numbers, pictures, etc.

He mentioned about a friend who put up his info on Friendster and Yahoo, when one day, someone asked to be added to his Yahoo Messenger. He didn't know who it was but just added the person anyway. A few days later, the person sent his friend a link and when he clicked the link, it too him to a website that copied his password and info on his Yahoo Messenger.

Now that the person has his friend's info and contact list, the thief sent a message to his contact list asking them for monetary help saying that he needed to go back to the Philippines and needed money. His friends sent the guy money and I believe that thief got around $600.

Of course, his friend had to get new usernames and e-mails for his Yahoo Messenger and answer his friend why he needed money from them.

That's the danger of not thinking before putting all your information online. Especially for people in the Philippines where kidnapping is prevalent. A lot of my friends put up pictures of their children with them in it. Can you imagine how much easier it is for criminals to know who your family members are?

Be careful what you put on your blogs/website or social networking sites. You never know who's watching.

Crashes and Bubbles

2007-04-23T16:51:00.000-07:00

As I write this, the Dow Jones almost hit 13,000. It was 17 points away from 13,000 before ending the day down 42.58.

The Canadian housing market is on the rise again as the summer weather is coming, where there is more sunshine and more people are able to go outand look at homes.

You've probably heard about the Real Estate market in the US where prices have been going down since last year. And the price of oil looks like its going up again where the morning prices at the pump is around120.99 a litre.

I'm not sure if you also noticed, but shows on TV especially on HGTV have been geared towards housing and selling homes. Shows like "Flip ThisHouse", "Big City Broker", "Designed To Sell" and "House Hunters" just to name a few.

I'm sure you all know, we are looking at a real estate bubble. Although a lot of people would say otherwise and I know people would argue that this time it's different and that the real estate market will not crash because people live in their homes and it's not like the stock market where the stock price can go to zero.

I'm not predicting a real estate market crash, nor do I know when themarket will go down. I don't even know if it will go down. For all I know, the market could just keep going up way past the Vancouver Olympics.

But I do suggest prudence especially with regards to your investments. Here is a like that explains what happened to historical crashes and bubbles. From the Tulip Mania to the Dotcom Crash.

I suggest you read it and make your own judgement.

http://www.taxopedia.com/features/crashes/default.asp

Real Estate Roller Coaster

2007-04-19T15:42:00.000-07:00

Saw something interesting today. With the run up in real estate prices in the last few years in the US. Someone plotted the US home prices adjusted for inflation as a roller coaster ride.

Here's the video.

Credit Cards and Annual Fees

2007-01-26T10:48:00.000-08:00

Almost every one of us has credit cards. But how many of us pay an annual fee on our credit cards? If you're paying an annual fee on your credit card, my question is, why? Are you paying an annual fee to get lower interest rates or it is to get the reward miles and points?

Is it actually worth it to pay $50 to $100 in annual fees for a reward miles card or is it better to save those annual fees and pay your airfare directly instead?

If you're paying an annual fee to get a low interest card. Are you paying off your balance every month? If you are paying off your balance, why do you need to pay a fee to get a low interest?

These are just some things that people take for granted. Card companies make millions a year on these annual fees because they know we just never give a second thought about them.

In the long run, those fees stack up and we end up paying thousands of dollars for something we never really need or use. Just like the extended warranties they sell for computers or on appliances.

It's the new year and it's time to review your budget and expenses and maybe you can find ways to cut $50 to $100 from your monthly expenses and put them into an RRSP or to start that vacation fund you've been planning.

Credit Card and Identity Fraud

2006-11-24T10:56:00.000-08:00

Every month I get a phone call from our clients saying that their credit card has been subjected to fraud. I never used to get these calls but it seems that the number of cases have really gone up in the last six months. It is a big pain in the neck to clear up your account and go through the motions of cancelling your credit card, getting a new one and making sure you don't pay for the items that was purchased on your credit card. The bigger problem is identity theft when someone actually seems to have taken over your life.

Here are eight things you can do to protect yourself from credit card and identity theft.

1. Keep your information private. Memorize your SIN number and don't keep it in your wallet. If your wallet is stolen, so is your SIN number. Keep it in a secure place like a safe at home or a locked drawer. Don't keep it lying around where a thief might break in and steal it.

Don't give out your SIN number to anyone. The banks, insurance companies and other financial institutions will usually require it for tax purposes. There's nothing wrong in asking them how they will use it. But never give out the information over the phone or online.

2. Cover your PIN number whenever you use an ATM machine or punching in your number when you use your debit card. I've seen so many people in the grocery punching their PIN number without covering it and getting everyone to see.

3. Protect your credit cards. Don't give out your credit card number over the phone if someone calls your for that information. If you call them and you know it is the company's number you are calling, then it should be fine. Otherwise, if they call you and ask you for it. Don't give it.

4. Check if your credit card was swiped twice when you make a purchase. It should always be visible when they swipe your card to prevent double swiping. If there was a transaction error, keep a copy of the receipt where it shows there was an error.

5. Be careful when you make an online purchase. If you do it often and find that you only spend a certain amount per month. You can contact your credit card company to put a limit on online purchase with that credit card so it will block any purchases over that limit unless you call them to authorize it.

Some of our clients have this feature on their credit card putting a limit of say $200. Anything over that limit requires the client to call the card company to authorize purchases over that amount.

6. Encrypt your wi-fi. Most people do not set up their wi-fi connection properly allowing anyone to use their wi-fi system. It is a simple set up and most companies have instructions on how to do it online or you can ask your computer retailer how to set it up.

You're allowing hackers to steal your personal information if you do not secure your system. They will be able to access your computer or network where you may have some information stored like credit card numbers and passwords.

7. Do not enter your password or PIN number on public computers. No matter what they say, it will never be secure enough. Use the telephone banking if you need to access your bank account.

8. Beware of phishing scams. Phishing is a when someone sends you via e-mail saying that a certain company or bank is updating their system and that your information may have to be updated. They will send you a link where you are required to enter your credit card or account number and password. It will end up saying that your account has been updated but in reality, they have logged your information and will use it to steal money or use your credit card.

The link on the e-mail will look legitimate, it looks something like this

http://signin.ebay.com/ws/eBayISAPI.dll?SignIn&ssPageName=h_:h:sin:eBayVerification (Warning: DO NOT CLICK OR GO TO SITE)

but when you click it, the URL on your web browswer will look like this

http://mail.teamworks.com.hk/icons/.secure- red/signin.ebay.com/ws/eBayISAPI.dll%253fSignIn&co_partnerId=2&pUserId=&siteid=0&pageType=&pa1=&i1=&bshowgif=&UsingSSL=&ru=&pp=&pa2=&errmsg=& runame=&ruparams=&ruproduct=&sid/(Warning: DO NOT CLICK OR GO TO SITE)

If you look at the domain name it says

http://mail.teamworks.com.hk (Warning: DO NOT CLICK OR GO TO SITE)

Now that is not an eBay address. Why would eBay do that when they have their own domain?

Be smart about it, your card company or bank will not and will never lose your information and require you to re-enter it. They have back-ups in place for that eventuality. In the event they do lose all their data. They will send you information via regular mail to inform you what you should do.

Sometimes common sense works. How can your bank or credit card company know your e-mail if you never gave it to them in the first place?

Here are some sites that has more information about phishing scams and identity theft:

http://www.millersmiles.co.uk/search/eBay - samples of eBay phishing scams.

Anti-Phishing.org - actual samples of phishing scams. The samples will give you an idea on what a phishing scam looks like.

http://www.privacyrights.org/index.htm - information about phishing scams and identity theft. The site is oriented towards the U.S. but has great information.

Personal Information Protection and Electronic Documents Act - a PDF document that sets the ground rules on how organizations may collect, use or disclose information about you in the course of their commercial activities. It also outlines what your rights are if you believe your information is being abused or incorrect and how to file a complaint.

Bank of Montreal Guide on How to Protect Your Account - a guide on how to protect yourself from e-mail or phishing scams as well as how to protect your debit account.

Taxation of Income Trust

2006-11-09T12:07:00.000-08:00

The federal government surprised everyone on Halloween when they announced that income trusts who have been publicly traded before November 1, 2006 will become taxable in 2011, with the exception of certain real estate income trusts. What will happen is income trust will be taxed the same as Canadian corporations.

Trust that haven't started trading in the stock market yet will be taxed using the new rules starting 2007.

This announcement created a huge drop in the S&P/TSX Composite index, down 294.2 points or 2.4 percent to 12,050.39. The TSX Income Trust sector fell more than 12 percent which saw the sector lose about $20 Billion in market value overnight.

What lead to the decision to tax income trust can be read on this article from the Globe and Mail.

Teaching a child the value of money

2006-10-27T16:06:00.000-07:00

Last week, my son wanted to buy the Star Wars Transformer he's been eyeing for the last month. My wife finally relented and they went to Toys 'R Us. My wife called me up and told my son to talk to me to see if I'll allow him to buy it. I told him that he can buy it as long as he pays for it. Being 4 years old, he doesn't really understand the concept of money and exchange yet. But I thought this might be a perfect way to teach him the value of money. So my wife paid for it and I told him that I will take the money he spent for the toy from his piggy bank.

So last night, I sat him down and we counted out the money he spent. At first I took out the the Dollar coins and quarters, but when I counted out $22 worth, it barely reduced the content of his piggy bank. Since he's only beginning to learn how to add, it's a little difficult to get him to understand if I took the actual amount. So I decided to count out the pennies and nickels instead, now we're talking! After counting out $22 in pennies and nickels, 3/4 of his piggy bank is empty.

I told him, "Ok, this money is how much your toy is, I'm taking this now since you said you'll pay for your toy". At first he was ok with it, I realized he didn't understand that it meant the money is gone for good. So I said, "this money is mine now and I'm taking it away". When I started taking away the money, that's the only time he realized that his money will not be returned to him and he started looking sad.

Since he still had some money left in his piggy bank, he was sort of ok with that. I realized that he still didn't get the concept on how money is used and its value. So I asked him, "do you want to buy another toy?" He said,"tomorrow we're going to use this money to buy another Star Wars Transformer". Of course, he was excited, which is not the reaction I wanted. I repeated it and told him, I will take this money to buy your toy and you will not have anything left in your piggy bank. He was still ok with it and said yes, he wants to buy the toy.

Finally, after about 15 minutes of doing this, I finally said, "Ok, we'll use this money to buy your toy, and I will take this money away forever and you will have no money left. Also, you will not be able to buy a bigger toy because you won't have money to buy toy. That means, you'll have no toy for Christmas since you already used up all your money." When it finally sinked in to him that he will be on the losing end of the deal, he started crying and said no, he doesn't want to waste his money. So I asked him one final time, "what do you want to do with your money? Buy toy or save it", he said, "save it". Success!

I told him that was a good decision and that from now on, here is what we're going to do. I gave him another piggy bank and told him, that from now on, he'll have two piggy bank. One for savings and one for buying his stuff. He must always put money in both bank whenever he gets them. When it's full he can use the money for spending to buy anything he wants.

Counting out the money and repeating to him whether to spend or save the money took the better part of an hour, I think though that it was time well spent and I hope it is a lesson he takes to his adult life.Seeing as how many children and some of my friends nowadays seems to have an entitlement mentality. They don't seem to see the value of money as much since they seem spend their parents money any way they want and having everything they want just given to them. I don't think it's a good way of raising a financially responsible child.

My friend and I have been talking about how to teach children on how to be responsible about money and one of his ways was to actually give his son who is 6 years old some money and buy something he wants. On one occassion, his son wanted to buy some juice in the mall that cost P40, seeing as he only had P20, he decided to get a smaller size. Since the smaller one still cost P30 and seeing that he still didn't have enough money. He decided to just keep his money and kept walking, albeit with a frown on his face. They finally decided to buy the juice for their son since what parent can bear seeing their child sad?

But that is an excellent way to teach a child about money and giving them both the satisfaction of saving as well as spending their money so they learn how to budget their finances.

How not to raise a spoiled rotten brat

2006-10-06T15:10:00.000-07:00

Here's an interesting article on CNNmoney.com on how the rich and powerful teach their children about money and not to grow up with the entitlement mentality.

A couple of examples like part of their allowance is expected to be given to charity and to savings. Another where they are given a budget for shopping and a limit is set, if that limit is used up, tough luck.

To read more, visit this site.

Hedge Fund Woes

2006-09-29T12:02:00.000-07:00

Pirate Capital LLC, an activist hedge fund manager said Thursday that its investment staff will be cut in half and its fund will be closed to new investors. Another hedge fund manager, Amaranth Advisors LLC loss a whopping US$6 Billion betting on the wrong side of the market. Add to this several other hedge funds which has either closed down or stopped accepting new investors due to poor returns.

The bull market in commodities created a slew of hedge funds banking on investors wanting to get into the game. A lot of Income Trust and REITs were also established to capitalize on the real estate boom as well as the oil boom.

Most of these funds have a track record of less than 5 years. Yet investors are willing to invest in these funds just because they are the darling of the fund rating companies or they achieved spectacular returns in their first few years, some making over 105% in one year.

It seems to me that people never learn. Don't they remember the recent crash of the stock market due to the Internet Bubble in 2000? How about the crash of 1987? Or maybe the bear market in oil in the early 1990s?

These are fairly recent events and yet people forget about them. They invest in hedge funds without thinking of how this fits in to their overall portfolio or whether these companies have a long enough track record.

Although only qualified investors (those who make at least $200,000 a year or have more than $1 million in assets) are allowed to invest in a hedge fund. It goes to show that the rich are also subject to the crowd mentality.

There is nothing wrong in investing in a hedge fund per se, but investing just because of a recent spectacular return is the wrong way of doing it. There are a couple of great hedge funds out there like those run by Bill Dunn, Ed Seykota, John W. Henry and funds by Man Investments. These funds have over 20 years of history and although they suffer losses from time to time, they have shown they know how to limit their risk and recover from their losses.

Before you invest your money, you should do you homework. This goes for any investment whether stocks, bonds, mutual funds or investing in a new business.

As Warren Buffett says:

Rule 1 - Don't Lose Money
Rule 2 - See Rule 1

Welcome!

2006-09-19T16:37:00.001-07:00

Welcome to my new blog. This site will be a rich source of information regarding insurance and finance for Canadian families.

Feel free to leave comments and questions regarding insurance, investments and other financial matters.