rb

Really? Surprised? It is a discussion board frequented by people that admire two conservative insurance companies, named as the intersection of said insurance companies. To very loosely paraphrase Warren Buffet you went to a ballet looking for a rock concert and then you complain that you're surprised by the content of the show. See I can be blunt too ;).

Do they allow U.S. dollars to be held inside registered accounts like RBC? They do allow CAD and USD to be held inside registered accounts, but no other currencies. So you limited to investing on Canadian and US markets in those accounts. Also their standard $10 minimum fees per month applies for accounts below $100k. rb

Liberty, I was really glad when I found out that IB recently started offering RSP and TFSA accounts. They're one of the brokers I use and I have nothing but great things to say about them. Disappointment set in soon after when they clarified that they will only offer CAD and USD product in those accounts. So no global stuff. rb

Biaggio, in Canada investing inside a corporation is one of the worst ways to do it tax wise. In the 90s there was wide spread tax avoidance using corporation and the gov't introduced legislation and squashed that with an iron fist. Now there are ways to do it but I didn't want to bring it up because I didn't feel like looking up exact numbers today, but if you're interested you can take what I say and confirm the details yourself. Based on what I know, to avoid being classed as a Canadian Holding Corporation your marketable securities need to be less than 20% of your assets. A professional corporation is not good cause it doesn't have a lot of assets. The best way to do it would be through a leveraged property company. That way your marketable securities are a small % of your assets but a higher % of your equity. That way you get all the goodies: no tax on dividends, capital gains at 50%, everything taxed at small business rate, and you can even trade. rb Edit. Sorry I butchered your name. Fixed now

CM, Thanks for your reply. I'm still hoping there's a broker out there that will settle for less than my right arm and my first born. Between fee, F/X, and stamp duty transaction costs are pretty steep. What you said about holding pink slips for securities that trade on a CRA approved market is really interesting though. Do you know where I can find more detail on that? Thanks, rb

Incorrect. During partnership days, Buffett only used leverage in dealing in special situations. What our OP is doing is down right reckless. I don't exactly know WB's turnover back then... but if he used higher turnover when younger and then used less. Maybe you should assume that as he learned more about things he improved his method. Furthermore, taxes are a higher problem when you trade often. Not just the income vs. capital issue, but also compounding effects. If I trade often and I harvest my gains, then I need to pay taxes on my gains today as opposed to the future. Therefore I have less capital available to compound today which results in significantly less assets in the future. If you model it you'll be surprised by the long term effects. Also since you brought WB into this, he tries like crazy to push recognizing gains as far into the future as possible. See recent P&G and Graham Holdings transactions. rb

That maybe so. But the op is an adult. He asked for some tax-related help and I tried to provide what I can. While I wouldn't do what he is doing, I don't think it's my place to provide adult supervision. We all make choices and we live with them.

Why is that?

No worries cloud, if you would have been upset I wouldn't have replied. If most of your positions are over 30 days don't worry about being classed as a business dealing in securities. But you still need to follow the other rules. So for example you COS profit is income not capital gain. Also keep in mind that while it is totally ok to claim your margin interest, you cannot claim interest paid for personal loans so no claim for your LOC since you cannot prove that it was directly linked to investing. Furthermore, you're supposed to file your taxes according to rules I mentioned which are from the Income Tax Act. When filing double check the tax slips from your broker with your personal records. You're supposed to file according to the Act not according to broker slips. You should also probably go back and check your filings for previous years and make sure everything is ok. If it is not, you should file T1-adj with CRA to correct mistakes. It's better to do it sooner rather than later. Cheers, rb

Does anyone know if there is a Canadian broker that offers global equity (ex Canada and US) in registered accounts - RRSP and TFSA? Thanks, rb

Cloud, May I suggest, that when you are looking for help, maybe you should not go ahead and insult ppl who are trying to help. If I ask for more information is to make sure I give an accurate answer. I don't think writing a bit of follow-up like u did was that hard. Now let's get started with this. Firstly, yes CRA challenges returns. I have this happen quite often with clients, not because of anything wrong being done, but because their dealings are more complicated and CRA goes and investigates. It's not necessarily a full blown audit. They send a request for information. Basically asking you to back claims you made on the tax return. If you were wrong or cannot back claims things get dicey. Keep in mind that CRA also gets a copy of you tax slips from your broker. But from my many dealings with CRA I found them to be very reasonable. Basically follow the rules and everything will be ok. From what I read about your situation you are ok to claim your capital gains and losses as capital gains and losses. Also you should go ahead and claim the interest paid on margin loans - nothing wrong with that. It goes on the "Carrying Charges" line. A few things to keep in mind that may apply to you though: -gains and losses from short sales are always income -gains and losses from naked options are always income -gains and losses from covered options normally get the same treatment as the underlying shares do -if you hold a security for less than (I think it's 30 days - double check) then the gain or loss is income -if you hold a security, sell it, and the buy back into it after less then 30 days (again check), then you must claim the capital gain if it was a gain, but you cannot claim the loss if it was a capital loss. In that case you go back and adjust your basis. CRA covers capital gains in T4037 you should read it. Link below: http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-14e.pdf Now, whether you can claim capital gains or everything should be income: What you copied from taxtips is a straight quote from CRA IT479, but it's a small part of it. You should read that one as well: http://www.cra-arc.gc.ca/E/pub/tp/it479r/it479r-e.html The gist of it is that is that the determination of whether it is capital gains or income is determined by how you behave: if you behave like a broker-dealer or speculator (benefitting from the short term movements in prices of securities) then it's income. If you behave like an investor (deploying capital to earn a rate of return) then it's capital gains. Re Incorporation: A corporation is one of the worse vehicles to use for investing. Canada has special legislation pertaining to investment holding corporations. One of the things covered is that you cannot claim capital gains - it's all income. Furthermore, I don't think you're going to find an FI in Canada who will extend credit with no collateral to further leverage leveraged investments. But if you're hell-bent on levering up so much then why bother with lines of credit? You can just trade CFDs. rb

Welcome to the board. Let me say that I like your enthusiasm. Reminds me of younger days :) Now let's get to the business at hand. Let me start by saying that CRA does not mess around. If you think that CRA will not bother to ask about $10,000 gains you are greatly mistaken. Take the taxes seriously. From what I read in your post, your taxes would already be quite complicated. Issue #1. I can help you here, but you'll have to be more specific and give more detail. What exactly do you mean by capital and income accounts? I think I know what you mean but I want to be sure. More detail and specifics are preferable to less. Issue #2. The simple answer is that the most tax efficient way to invest in Canada is as an individual. There a few other ways of structuring things, but you are very very far away from that and are particular to certain situations. Most of the things you've read that are done in US and UK are not allowed in Canada. And our legislation is very tight. So let me know more about #1 and we'll go from there. If you're really interested in #2 I can give you more colour, but keep in mind that there's not much you can do there. rb

Nope, that's tax gravy :)

Took a quick look. WOW Did that stock get crushed! It's not the type of company I would normally be interested in, but at half book it's really interesting. I will now go and investigate. Thanks!

You're right. Short term weird things will happen to drilling and drilling suppliers. I won't even try to venture any guesses about what will happen. I'm more of a longer term hold type, so I'm looking more at how the dust will settle. I don't mind waiting a few years for my return. In regards to your thesis and how it can be played, I understand that you're looking at those 3 names in ordered to be levered to the price of oil. Now I don't know what the position sizes are or your financial resources so I'll plead ignorance to that. But here's an idea. If you want to be levered oil, then why not oil futures? Or if you're really adventurous cause they're not for the faint of heart - futures options. Futures will give you the leverage you're looking for to higher oil prices and I think your downside would be better protected than with a PWE. Just an idea. rb

Well my thinking is like this. US and Canada right now produce about 14-15 Mn bbl/day. The market appears to be oversupplied by about 1 Mn bbl/day. So producers will have to cut about 1 Mn bbl/day and the med term price will probably be below $80/bbl (just my opinion on the price). This would imply that a serious impairment on the earning power of producers. The flip side of that is that you still need 13-14 Mn bbl/day production. To get that you still need to do a lot of drilling. To drill, you need drill pipe. So suppliers will see a drop in volume - about 10% - not great but not end of the world either. The key is pricing, how hard will the producers squeeze the suppliers. That's why I am looking in specialized areas where there's not a lot of competitors. Names like "No Other Vendor" are inspiring in this scenario. rb

Forget the yield. Where do I get something for 198k in Vancouver. Or maybe that's the price of the bus?

rb, I like most of what you write, but I don't agree with the above. You are probably looking just at supermajors - and then you are right, they are not cheap. However, there is a lot of blood in small E&Ps. Companies like DNR, GTE, PWE (I own all of these). Of course, a lot of them are (over)levered, but some are not. And clearly you'd have to do a deep dd to figure out which ones are good candidates for investment. I don't claim my dd is deep or good. :) Yes, I was referring more to the higher quality names, not just the supermajours, but also the big Canadian producers like CNQ, SU, and IMO. I agree that smaller producers got hit hard. But some of these were really basket cases. I'm not familiar with DNR and GTE, but I did work on PWE about a year ago and I didn't even like it when oil was $80. I have a real problem with companies who issue shares in order to pay dividends. That being said, I'm sure that there are some smaller producers that are a good buy right now. I'm just afraid to play in that end of the pool. It's very hard to assess management in those cases (or maybe I lack the ability?) and some of these smaller players are led by ppl I wouldn't want to be in business with. rb

Ok, The reporter was a joke, WB carried her all the way through. That being said, there are a lot of businesses in Europe that would be a great fit for BH. Especially in Germany where there are a lot of privately owned, medium sized, very successful companies. Schluter comes to mind as a perfect fit. Let's hope they will be willing to sell and we reap the rewards. rb

I think there's zero chance she's a third CIO. If that was the case she would have become one a lot sooner. The fund probably transitioned to a structure where she doesn't have to report.

Aurelius, You will have to provide a bit more information if you want an informed answer. In my browser I cannot even see what country you are from. Taxation is a very specific thing and it differs from country to country. It gets even more complicated when you introduce cross border investing: Fx treatment, double taxation treaties, ADR vs actual share ownership. Tighten up your question and I'll try to provide some help. rb

I want to extend my thanks and congratulations for what you have built. I only joined recently but have followed the conversation on the board for years. I don't think there's any other place where you can find this kind of civil, smart, and constructive discussion. Cheers, rb

I agree with ni-co that China distorted the commodity markets for the past decade with huge real estate and infrastructure build. But oil is a bit of a different beast since it's more of a flow rather than a stock. You can increase demand for iron ore to make steel to build a building that will last for 50 years and don't need that ore again. But oil is 2/3 used for transportation and 1/3 for chemicals. So to say demand for oil will go down you have to make the case for ok, someone will not drive that car tomorrow or someone will not go on a trip next year, or efficiency of the combustion engine will increase like crazy. The way I see things is that demand will continue to grow but at lower rates than in the past. So to get an equilibrium price of oil you need to figure out the demand and then figure out how much it will cost to fill out the last barrel of that demand. There's very good figures at the US Department of Energy for demand. Supply figures are more muddled because oil producers aren't that eager to publish their true costs. Btw, Russia is quite expensive, as their existing fields are depleting and new field will be pretty expensive. I also don't think that Russia is in the business of doing China any favours. So who's the swing producer? I don't have any data, but I think it's US shale. So immediate minimum price for equilibrium is OpEx for US shale. Medium term is replacement cost for US shale. Longer term if consumption goes up is Alberta oil sands and Orinoco Valley oil sands. These are very expensive. Let me state that I am quite bearish on the long term (50 years) prospects for oil. Conventional field production is still going down (peak oil and all). Shale can bridge the gap for a while but then you need to go to oil sands. This oil is very expensive to get out of the ground and the cost will only go up. There's also a price cap on oil dictated by the spread of electric car vs combustion car and oil vs electricity. However in the short to medium turn prospects may be quite bleak for oil. This being an investment board and I'm in the business of deploying capital to make more, I ask myself what to do? The stock prices of oil companies have stood up very well to the point where they're really expensive now. I don't see the blood. There's probably much better value in the suppliers to the oil industry, something like NOV and Vallourec - whose stock prices took much more of a beating. rb

I agree with yadayada that these guys are not that extreme as they're portrayed. And I agree with Heilko that it looks like the market doesn't appear to care about a grexit. But then the market often is wrong in situations like these. The market thought it was a good idea to let Lehman fail. Futures were up strongly that morning, before the shitstorm that followed! I think in these situations is better to let cooler heads prevail instead of having a measuring contest between men with huge egos. But it doesn't seem to be the case here. Better strap in.

ni-co, In regards to HKD/USD peg, don't think it's the same with other pegs that broke down. Those usually did because the currencies were weaker than the USD. HKD is stronger. Anyway, it's more complicated, and I'll write another post about it when I have more time to look up more info about it. In regards to the Euro stuff, I completely agree with you that the best solution would be the United States of Europe scenario but I don't think that that's likely to happen. In regards to the split up, to be honest, in the beginning I was sure it was going to happen, now I'm not so sure. A lot of people have been willing to take a lot of pain to keep it together. Also it's not going to be good for Germany either to break it. So maybe they'll find a way to make it work. My argument regarding Italy's trade surplus is that it's an indication whether the currency is too high or not, so if you have trade surplus, it's not. And yes, their surplus is recent: 2.3% in 2013, 1.1% in 2012. For 2005-2012 there were deficits but small ones - sub 1% (except for 2010, 2011 at 1.9 and 1.4). I fail to see why they would so desperately need to devalue just because they run a deficit with Germany when they're balanced overall. Regarding the ECB's implicit guarantee... Well there is no guarantee really. The ECB has no mandate to be a lender of last resort. The bank guarantee is more from the goodness of their hearts and can take it back at any time, probably when it's needed the most. So yea your own central bank would be better. This is a bit of a moot point tho because the Italian banks go bankrupt when Italy leaves Euro. Now let's take a look at some debt ratios. I agree with you that you need to look at them in totality. I'll leave aside the pension liabilities cause I didn't feel like digging for those. If you get them, post them because I'm interested. I got the gov debt to gdp and private non-financial debt to gdp for Germany, Italy, France, and Canada (for non-eu comparison) Gov Debt Private Debt Total Germany 78.4 111.6 190.0 Italy 132.5 120.8 253.3 France 91.8 178.2 270.0 Canada 88.8 206.2 295.0 Now, some of the debt is on the higher side, but nothing catastrophic. Italy has higher gov debt, but that has really been accumulated mostly in the 70s and 80. They've been pretty responsible for the past 20 years. I also don't see how France is going bankrupt any time soon. Gov debt is not ideal but nothing catastrophic, not that far from the pillars of fiscal responsibility that are Germany and Canada. I must admit that I am a bit surprised by the Private debt. I thought it would be smaller. If there's a worry to be had it would be there. As a P.S. to this, and I see you're from Germany so I hope you can help. From what I know German home ownership rates are the lowest in the developed world (55-60%) though I cannot find good stats. For our discussion here that would mean that German private debt is understated (less mortgages). But what I really want to know is 1. Is that true? 2. If yes, do you know the reason for that?