rb

Sure but then why bother using an RRSP in the first place? By that mentality, if I have enough money to live, pay taxes now, pay taxes later, who cares....

You're right the big difference is leverage. I'd add a little to that. Everyone ignores second order effects and assumes that you can still live in your house. But in reality, house price declines come with long and bone crushing recessions. So if the house price drops you get wiped out financially and you loose your house because you can't afford the huge mortgage payments anymore because you're suddenly out of a job.

I'm now cwericb but I do have some issues with the analysis. 1. 30K non house living expenses in Toronto? That's really optimistic but ok. 2. You assume that all the other funds (30k) goes to mortgage payment. That ignores carry costs: property tax, insurance, maintenance, repairs, etc. Everyone who owns a house knows that those add up to a surprisingly large amount. 3. Only 5 years of retirement savings. So at retirement the couple has a house and 150k (30x5) in savings.

To build a little on my previous RRSP post. The biggest drawback of an RRSP is not a situation when you draw a lot of money from the RRSP and loose some relatively small amount of OAS. The biggest drawback is the opposite. When you draw too little out of an RRSP and then upon death the whole amount becomes part of the terminal tax return and gets taxed all at once under a progressive tax system. Now of anyone has any ideas of how to defray that risk I'm really, really interested.

I agree with most of what Cardboard said. RRSP can be very useful. Just to add a little bit to it. Through different tax treaties that Canada has, generally you don't pay withholding tax on income/dividends coming into the RRSP but you pay it for cash accounts and TFSAs. So there's another tax deferral benefit of RRSPs. In addition, it's been a while since i looked at it but as I remember the OAS clawback starts in the 70s. So a married couple can have 150k worth of income before any OAS claw back. Not exactly the stuff of horrors and probably affects very few people. The way I look at them RRSPs and TFSAs are like 2 different tools in a toolkit like hammer and pliers. They have different features and they do different things. Both are helpful tools. SD, I like you commentary about long runways and having an old experienced person investing for a young one. There's one little problem with that: For a bunch of really annoying legal reasons in Canada you can't own equity if you're under 18 years of age.

That's why all of you should just go out there and buy a house. Don't look at the price and don't think. Price doesn't matter in real estate.

I'd say that one reason why Facebook isn't the Valeant of the internet is the absence of debt. On top of that they have real cash earnings. Not adjusted cash EBITDA or whatever nonsense Valeant was calling it. The valuation is another matter altogether. They now have a 400+ B market cap that's 15x sales and 40x earnings. That's really rich. I don't think that Google is cheap. But their valuation is 6x sales and 29x earnings and I think that google is a much more superior company/platform. On top of it Facebook's money is linked to advertising. That is very different from a company like Apple that can invent deices and take greater share of the wallet as people go from owning a PC to a PC, smartphones, laptop, tablet and a retail operation supporting the whole ecosystem. The global pool of advertising dollars isn't expanding a lot. So for them to be worth their valuation they need to pull some really serious market share. Now they may be able to do it but a whole lot of things need to go their way for that to happen. So the way I see it is that best case scenario you make a normal rate of return. Otherwise it's worse. Or maybe I'm wrong ad something brilliant happens. Either way, it doesn't have that ring of a fat pitch.

http://www.theglobeandmail.com/real-estate/toronto/investors-super-heating-the-toronto-market/article34380897/ You know you've got something special when even realtors start calling it a bubble driven by speculators. I've attached the report they mention in the article. It's definitely worth a read. InvestorDemandHouses.pdf

Ha! CMHC also rates Saskatoon and Regina as ridiculously overpriced. When it happens to Red Deer we'll know that we're truly fucked. Actually if there are any members from Saskatoon or Regina I'd be really curious to hear what are the reasons realtors are giving there why prices are ok and it's a good time to buy. Shortage of land? Immigrants?

On the other hand, wouldn't it be truly a top when 5 out of 5 banks rate real estate a buy? That's when you really know everyone's bought the story and there are no skeptics.. ::) Nah man.... they wouldn't be CIBC if they got one of these things right.

I don't think anybody is going to take out HCG. I'd say that foreigner are probably gonna sit this one out and it's too small for Canadian FIs to matter. Since 4 of the 5 banks called the real estate situation a bubble I doubt they'd spring for a sub prime lender. But who knows Lauratian has done dumb things before.

Hahaha!! You know why they don't sell. They think this is going much higher (because real estate never goes down) and they will be mega gazzillionaires. The money they loose on the negative carry is insignificant in their mind compared to the future gains. Just a minor penalty of doing business. If I had investment real estate in this market. I would thank my lucky gods, sell and never look back. Of course if one were a rational investor, one would have sold a good while back.

Banking is fractional reserve almost by definition. If you don't have fractional reserve then what would you have?

Dude I have no idea what you're talking about. "Half the claims are denied?" What claims? The only user fees I pay are for car license, driver's license, and passport and they're reasonable. When I go to the doctor I wait about 15-20 minutes in line. For a specialist there is a waiting period of around 5-6 weeks (less if your condition is serious) - I recently went through this with a family member. In addition very few people pay 50% income tax. In 2013 people in the top 1% made an average of 455k and paid an average of 152k in income tax. That's 33% for the 1%. To get to 50% you have to be a serious 1 percenter. Also gotta love it when to guy making 100k a year became the common man.

The fact that being a millionaire in Vancouver doesn't mean that much these days? :P

So that makes it 4 out of 5 banks that have called this a bubble. CIBC of course still believes it's a great time to buy a home.

In Boston area Vietnamese own the hardwood floor business. I've hired them twice and like you said, I got the 1/2-1/4th the price of the real contractor and good quality. I won't ask where they got materials, where they disposed of garbage and most likely no insurance, no health for employees, etc. :-\ I would have loved to hire them for other jobs, but I don't talk the language so it was hard to ask if they did other jobs and how/etc. This is also true in the Toronto area. The price for the Chinese contractors is about 1/2 as for the white guy. The work quality I'd say is about 90%. You can find one for about anything. There's also none of the bullshit usually associated with contractors. They quote you a price, they come, do the job, you pay them, they leave. If you have any 1st generation immigrant friends they'll know plenty of contractors. I don't ask for any for any worker's comp proof.

Right. Because Canada has a long history of confiscating mines. You are free to go invest in Congo if Canada scares you so much. Good luck with that. Other countries with fairly high capital gains taxes: Germany 30.5%, France 34.5%, Austria 27.5%, Denmark - up to 59%, UK 28%. By the way the wealthy in Canada are doing just fine.

Al, I enjoy the benefits just as much as the next guy (maybe even more) but I think that that your premise of a hike in the inclusion rate will decrease investment is incorrect. Remember that up until 2000 the inclusion rate was 75%. When it was dropped to 50% there wasn't a spike in investment. Conversely I don't see why there should be a drop if the inclusion rate is raised. Also if we were to be cold and rational about this. A lot of lower cap gains inclusion doesn't have much to do with promoting investment in Canada. For example: if I buy US shares of BRK, the Canadian gov't gives me preferential taxation via a lower inclusion rate. But my action doesn't benefit Canada from an investment perspective at all.

I didn't make any changes for a couple of reasons. 1. I actually don't know if there's gonna be any change. 2. I can't actually do much because I'm sitting on huge capital gains. It doesn't really make sense to have a huge tax bill right now. It makes more sense to keep compounding the capital even if I have to pay tax at a higher inclusion rate in the future.

I've always thought that is a great idea and we'll probably get there eventually. Making doctors issue multiple refills on drugs for chronic diseases is another measure that would lower cost. Doctors will loose their shit when that happens.

I'm not a lawyer but I would call that something along the lines of conspiracy to commit fraud. I'm sure when the investigations happen they will call it helping the customer achieve his dream of owning a home.

Of course all businesses upsell. But it gets to a point where it starts to be ridiculous bordering on felonious. Car service is one area that's been there for a long time. With banks today it's somewhere around that point. It's also a bit different with banks because depending on what you're selling you may need a license and many times prevents you from selling product that is inappropriate for the client - the line of credit with your grocery money example above I think kinda fits here. Al, in regards to Bell they used to hassle me a lot as well. Until the point when I told them that if I get another sales call I switch to Rogers. That seems to have gotten the point across really quick. Oh and if you're in Ontario and you ever wanna see a Bell rep crap their pants just mention Teksavvy.

To give you a bit of equivalence. TD is like WFC (in more ways than one it seems). It started a transformation with a new CEO in 2003. It's been retail focused and customer friendly. Very good risk management. Expanded a lot in the US mainly east coast. RBC is kinda like JPM. It has a large retail business in Canada but they like to be the big boy and do flashy deals. So for the past decade or so they've focused a lot on investment banking and wealth management. They wanna become a big global investment bank. BNS is pretty conservative in it's Canadian operation. It's also pretty international. In that it has a large Latin American and Caribbean operation. I sold my BNS stock a few years back because in my opinion their risk management in Lat-Am has deteriorated. Also has less investment banking than RBC or TD and they own the former ING direct discount bank in Canada.

I'm guessing there won't be a TFSA contribution increase since they just lowered it. 23-25% marginal tax on cap gains would imply you're pretty much in the top few % of income. For most people it's lower. I also don't think there will be a mass exodus if cap gains taxes were to be increased. In Canada you pay an exit tax when you leave. Effectively you realize all your gains at once. That can be a costly proposition under a progressive tax system.