SIMON AVERY
This is a light week for economic data in the lead up to the holidays. But even as activity slows down after a dramatic year in the markets, optimism is unquestionably on the rise.
Expectations have brightened over the last few weeks, getting a boost from the U.S. Federal Reserve’s second round of quantitative easing, Congress’s $858-billion (U.S.) package of tax cuts, and improving economic numbers.
Markets are close to locking in double-digit gains for 2010: 12 per cent for the S&P 500, 10 per cent on the Dow Jones industrial average, and 12 per cent for Toronto’s S&P/TSX. Stocks haven’t enjoyed these heights since before the collapse of Lehman Brothers in September 2008.
A dozen brokerage strategists surveyed by Bloomberg are anticipating further gains for the broad S&P 500 next year. Their median estimate is for an increase of 6.7 per cent in 2011.
Yields on U.S. Treasuries are at their highest level since May, with the 10-year bond settling in at 3.34 per cent on Friday. The rise, in part, reflects a more upbeat economic outlook, as well as the realization that expanding U.S. debt will have to be funded and that inflation may reappear.
The Chicago Board Options Exchange Volatility Index, also known as the VIX, sank 10 per cent Friday to 16, its lowest point since April. The VIX became part of main street’s vernacular this summer. As the barometer of market anxiety surged past 30 this spring, and then closed in on 50 in June, it seemed to be charting civilization’s course to financial ruin. These days, the VIX is barely mentioned, even in detailed reports from economists and equity strategists.
The U.S. Conference Board on Friday said its index of leading economic indicators increased in November by the most in eight months. The rise is “an early sign that the expansion is gaining momentum and spreading,” said Conference Board officials, but they remain cautious. “Looking further out, possible clouds on the medium-term horizon include weaknesses in housing and employment,” said economist Ken Goldstein.
Most market watchers now think that the U.S. economy will manage to grow 3 per cent next year, nearly half as much more as they were forecasting a few months earlier.
On Thursday, U.S. durable goods orders are expected to show a decline for the second consecutive month, weighed down by weak orders for aircraft. But when the transportation sector is removed from the results, orders could show a 2 per cent rise, a positive signal in terms of capital spending by businesses. Consumer spending, meanwhile, is expected to have risen 0.5 per cent and income 0.3 per cent.
In Canada on Thursday, the latest GDP figures are expected to show a rebound for October, following September’s dip.
Despite the cavalcade of good news, stubbornly high jobless rates, sovereign debt loads and the troubled U.S. housing sector remain concerns. James Marple, senior economist with Toronto-Dominion Bank, warns that there could be as much as 21 months supply of housing in the U.S. market when homes in foreclosure are included. The housing industry is a key driver of the economy, and real estate accounts for roughly one-quarter of household wealth in the U.S. That means the U.S. consumer is not about to carry this recovery.
It will take another two or three years for the economy to grow sufficiently to bring some relief to housing and unemployment, he says.
Get great rates on your next mortgage. http://www.tmdc.ca/
Monday, December 20, 2010
Wednesday, December 15, 2010
Banks hike mortgage rates across the board
By Michael Lewis
Mortgage rates are moving higher thanks to the rising cost of borrowing in the bond market.
RBC Royal Bank was the first of the big banks to announce increases this week, with the Toronto Dominion Bank following suit Tuesday.
Dan Eisner, chief executive of Calgary-based True North Mortgage, said the Bank of Nova Scotia has “warned” of a pending hike, adding that he expects all of the big banks, along with other lenders, will have pegged their so-called special fixed rates higher by the end of the week.
TD Canada Trust hikes effective Dec. 15 range from of a 10th of a percentage point to nearly a third. The highest increase affects one-year closed mortgages, which are now at 2.94 per cent, an increase of 0.29 per cent.
TD’s five-year closed rate is up 0.20 per cent to 4.24 per cent, while its seven-year closed is at 4.94 per cent, an increase of 19 basis points.
RBC on Monday hiked its six-month convertible rate by 0.10 per cent to 4.05 per cent and raised its five-year closed by 0.20 per cent to 4.24 per cent, among other special fixed rate offer increases.
The changes follow cost hikes in the North American bond market, where banks raise money to finance mortgage loans to consumers — and come as investors dump North American bonds and rotate cash into rising stock markets. That has forced the banks and other borrowers to pay higher interest rates on bonds to win investors.
Concerns about global economic woes and market volatility had spurred many investors to move their money out of stocks and into bonds this year. But the Treasury bill buying spree culminated in the U.S. Federal Reserve’s announcement early last month that it would buy U.S. bonds in an effort to add liquidity to the American economy.
While mortgage rates remain low, the increases occur at a time when the Bank of Canada is warning consumers to reduce liabilities and control spending due to record levels of household debt.
Check out our rates http://www.tmdc.ca/index.php/rates
Mortgage rates are moving higher thanks to the rising cost of borrowing in the bond market.
RBC Royal Bank was the first of the big banks to announce increases this week, with the Toronto Dominion Bank following suit Tuesday.
Dan Eisner, chief executive of Calgary-based True North Mortgage, said the Bank of Nova Scotia has “warned” of a pending hike, adding that he expects all of the big banks, along with other lenders, will have pegged their so-called special fixed rates higher by the end of the week.
TD Canada Trust hikes effective Dec. 15 range from of a 10th of a percentage point to nearly a third. The highest increase affects one-year closed mortgages, which are now at 2.94 per cent, an increase of 0.29 per cent.
TD’s five-year closed rate is up 0.20 per cent to 4.24 per cent, while its seven-year closed is at 4.94 per cent, an increase of 19 basis points.
RBC on Monday hiked its six-month convertible rate by 0.10 per cent to 4.05 per cent and raised its five-year closed by 0.20 per cent to 4.24 per cent, among other special fixed rate offer increases.
The changes follow cost hikes in the North American bond market, where banks raise money to finance mortgage loans to consumers — and come as investors dump North American bonds and rotate cash into rising stock markets. That has forced the banks and other borrowers to pay higher interest rates on bonds to win investors.
Concerns about global economic woes and market volatility had spurred many investors to move their money out of stocks and into bonds this year. But the Treasury bill buying spree culminated in the U.S. Federal Reserve’s announcement early last month that it would buy U.S. bonds in an effort to add liquidity to the American economy.
While mortgage rates remain low, the increases occur at a time when the Bank of Canada is warning consumers to reduce liabilities and control spending due to record levels of household debt.
Check out our rates http://www.tmdc.ca/index.php/rates
Tuesday, December 14, 2010
Amount Canadians owe continues to rise
CRAIG WONG
Canadians continue to rack up more debt but the speed at which they are piling it on is beginning to slow, the TransUnion credit agency reported Tuesday.
The average debt for about 24.8 million Canadians tracked by the report, which excludes mortgages, rose to $25,163 — up 4.3 per cent in the third quarter compared with a year ago.
The main source of non-mortgage debt for Canadians was vehicles, with credit card purchases a distant second.
However, despite the increase is the amount of debt, TransUnion said Canadians seem to be managing their debts better than they were, with delinquency rates and past-due balances dropping across the country.
The national credit card delinquency rate was down nearly 10 per cent in the third quarter of this year compared with a year ago when the Canadian economy was just beginning to recover from a major recession.
"There continue to be positive signs in the credit market as Canadians slowly manage out of the recession," said Thomas Higgins, TransUnion’s vice-president of analytics.
"The most positive sign has been the significant decrease in past due balances (outstanding debt that is at least 30 days past due), which has dropped 15 per cent since last year after three years of increases."
Jeffrey Schwartz, executive director of Consolidated Credit Counselling Services of Canada, said the report was good news in that fewer Canadians have been missing payments, but bad news because overall borrowing continues to grow.
"We are still at extremely high levels on a debt-to-income ratio and that's a little scary and that's still going up, so that is a concern," he said.
Bank of Canada governor Mark Carney has voiced concern about consumer debt and the ability of borrowers to meet their payments once interest rates begin rising again.
However, Mr. Schwartz noted that borrowers are becoming more conscientious of their debt loads and he is seeing less panic among borrowers than at this time last year.
"They are looking for opportunities to get out of debt and even try it on their own so they can maintain their credit standing as best they possibly can," he said.
Quebec posted the largest increase in debt at 6.6 per cent, while Manitoba had the lowest increase at 2.6 per cent compared with the national average of 4.3 per cent.
However, TransUnion says that is still an improvement over the double-digit increases that had been going on since before the recession.
Canadian average credit card debt increased to $3,709 from the previous quarter’s $3,614, but fell 1.7 per cent compared with a year ago.
Average auto loan debt increased to $16,183 from the previous quarter’s $15,135, and up 9.8 per cent from a year ago.
Looking to consolidate? Visit http://www.tmdc.ca/ for your free check up.
Canadians continue to rack up more debt but the speed at which they are piling it on is beginning to slow, the TransUnion credit agency reported Tuesday.
The average debt for about 24.8 million Canadians tracked by the report, which excludes mortgages, rose to $25,163 — up 4.3 per cent in the third quarter compared with a year ago.
The main source of non-mortgage debt for Canadians was vehicles, with credit card purchases a distant second.
However, despite the increase is the amount of debt, TransUnion said Canadians seem to be managing their debts better than they were, with delinquency rates and past-due balances dropping across the country.
The national credit card delinquency rate was down nearly 10 per cent in the third quarter of this year compared with a year ago when the Canadian economy was just beginning to recover from a major recession.
"There continue to be positive signs in the credit market as Canadians slowly manage out of the recession," said Thomas Higgins, TransUnion’s vice-president of analytics.
"The most positive sign has been the significant decrease in past due balances (outstanding debt that is at least 30 days past due), which has dropped 15 per cent since last year after three years of increases."
Jeffrey Schwartz, executive director of Consolidated Credit Counselling Services of Canada, said the report was good news in that fewer Canadians have been missing payments, but bad news because overall borrowing continues to grow.
"We are still at extremely high levels on a debt-to-income ratio and that's a little scary and that's still going up, so that is a concern," he said.
Bank of Canada governor Mark Carney has voiced concern about consumer debt and the ability of borrowers to meet their payments once interest rates begin rising again.
However, Mr. Schwartz noted that borrowers are becoming more conscientious of their debt loads and he is seeing less panic among borrowers than at this time last year.
"They are looking for opportunities to get out of debt and even try it on their own so they can maintain their credit standing as best they possibly can," he said.
Quebec posted the largest increase in debt at 6.6 per cent, while Manitoba had the lowest increase at 2.6 per cent compared with the national average of 4.3 per cent.
However, TransUnion says that is still an improvement over the double-digit increases that had been going on since before the recession.
Canadian average credit card debt increased to $3,709 from the previous quarter’s $3,614, but fell 1.7 per cent compared with a year ago.
Average auto loan debt increased to $16,183 from the previous quarter’s $15,135, and up 9.8 per cent from a year ago.
Looking to consolidate? Visit http://www.tmdc.ca/ for your free check up.
Thursday, December 9, 2010
Four easy steps to a wealthier new year
ANGELA SELF
A fresh start is only a few weeks away and I’m looking forward to it. This year, instead of all of us making a laundry list of things we’ll likely lose interest in come Valentine’s, let’s come up with just a few thoughtful resolutions - and nail them. Putting away more money but in fewer pots, and being more efficient with managing money are at the top of my list. Here are a few other ideas to take you into a happier, wealthier and financially healthier new year.
Manage your money easier
I put a few nerd-alert gadgets on my holiday list, including a shredder and a receipt scanner. Seriously. You can see the full list here (in case you’re feeling generous). Simple tools to help me stay organized and spend less time inputting, filing and searching is what 2011 is all about. Online tools like Money Strands will also help you streamline your finances and simplify. Next year, we should also follow the example of New York Time’s columnist Ron Lieber and take a fiscal health day. You can see more of what this day entails here to get the idea. I’m going to schedule mine in February. I’ll let you know how it goes.
Focus your financial goals
This year my financial goal was to max out my TFSA. I stopped funding my retirement account and other secondary savings accounts to achieve this goal. What should your top goal be this year? That depends on your life stage and your values. We all want to build wealth, but what we need or want, in what time frame, and for what reason, is different for all of us.
You might value a conservative savings account over travel, or travel over early retirement, or a home over something else. Taking on too many goals at once decreases focus, so focus on the most important. Trying to do too much can also be discouraging if your progress inches slowly rather than in leaps and bounds.
Stick to your 'Rather Factor'
What would you rather spend your money on? Your response will likely relate to your values and to what you care about most. Determine your rather factor and keep it top of mind and on the tip of your tongue, because this allows you to spend money on the things you love and dramatically cut costs on the things you don’t. Sticking to your rather factor means attaching a "why" to your values.
You value being debt-free. Why? Because you’ll have freedom, the chance to explore other opportunities when debt-repayment is off the table, the ability to finally save for financial security or a kitchen renovation or a vacation. When you attach an emotion to the reasoning, you’re better be equipped to see the resolution through.
Automate some fun
While it's a great idea to automate your savings, don’t forget to include a fun-money account just for you. Set one up for yourself in the New Year to cover unexpected splurges, the good stuff. It will take you less than 10 minutes to link your chequing and savings accounts online and have a certain amount automatically sent to your various saving pots each month. It's easy to do this on your banking institution’s website or by calling your bank directly.
This year, I’m opening a sub-account entitled “Love,” which will house money to spend on the things and the people I love. You don’t have to put a lot away, but if you’re saving a little bit each month toward something that’s important to you, you’ll be motivated to fund the account and watch it grow.
These are simple resolutions. They don’t take much time to set up or maintain and they'll be easier than trying to tackle a lengthy list of goals. Focus your energy and resources on a few resolutions, see them through, and you’ll be ahead of most other people before the snow’s even melted.
A fresh start is only a few weeks away and I’m looking forward to it. This year, instead of all of us making a laundry list of things we’ll likely lose interest in come Valentine’s, let’s come up with just a few thoughtful resolutions - and nail them. Putting away more money but in fewer pots, and being more efficient with managing money are at the top of my list. Here are a few other ideas to take you into a happier, wealthier and financially healthier new year.
Manage your money easier
I put a few nerd-alert gadgets on my holiday list, including a shredder and a receipt scanner. Seriously. You can see the full list here (in case you’re feeling generous). Simple tools to help me stay organized and spend less time inputting, filing and searching is what 2011 is all about. Online tools like Money Strands will also help you streamline your finances and simplify. Next year, we should also follow the example of New York Time’s columnist Ron Lieber and take a fiscal health day. You can see more of what this day entails here to get the idea. I’m going to schedule mine in February. I’ll let you know how it goes.
Focus your financial goals
This year my financial goal was to max out my TFSA. I stopped funding my retirement account and other secondary savings accounts to achieve this goal. What should your top goal be this year? That depends on your life stage and your values. We all want to build wealth, but what we need or want, in what time frame, and for what reason, is different for all of us.
You might value a conservative savings account over travel, or travel over early retirement, or a home over something else. Taking on too many goals at once decreases focus, so focus on the most important. Trying to do too much can also be discouraging if your progress inches slowly rather than in leaps and bounds.
Stick to your 'Rather Factor'
What would you rather spend your money on? Your response will likely relate to your values and to what you care about most. Determine your rather factor and keep it top of mind and on the tip of your tongue, because this allows you to spend money on the things you love and dramatically cut costs on the things you don’t. Sticking to your rather factor means attaching a "why" to your values.
You value being debt-free. Why? Because you’ll have freedom, the chance to explore other opportunities when debt-repayment is off the table, the ability to finally save for financial security or a kitchen renovation or a vacation. When you attach an emotion to the reasoning, you’re better be equipped to see the resolution through.
Automate some fun
While it's a great idea to automate your savings, don’t forget to include a fun-money account just for you. Set one up for yourself in the New Year to cover unexpected splurges, the good stuff. It will take you less than 10 minutes to link your chequing and savings accounts online and have a certain amount automatically sent to your various saving pots each month. It's easy to do this on your banking institution’s website or by calling your bank directly.
This year, I’m opening a sub-account entitled “Love,” which will house money to spend on the things and the people I love. You don’t have to put a lot away, but if you’re saving a little bit each month toward something that’s important to you, you’ll be motivated to fund the account and watch it grow.
These are simple resolutions. They don’t take much time to set up or maintain and they'll be easier than trying to tackle a lengthy list of goals. Focus your energy and resources on a few resolutions, see them through, and you’ll be ahead of most other people before the snow’s even melted.
Wednesday, December 8, 2010
4 mistakes to avoid for a more profitable 2011
Here are four mistakes to avoid if you want to make 2011 more profitable.
1. Don’t sell your top-quality stocks just because they’ve gone up.
Selling your best stocks too soon is a particularly big risk for 2011. When the market recovers from a black hole like the one it fell into in 2008 and 2009, somebody always says it has gone up “too far and too fast.” Applying this pseudo-conservative advice gives you an excuse to take profits, which appeals to us all. But it hurts your results in the long run.
In the course of an investing career, some of your stocks will go up way more than you’d ever guess, some do about as well as you’d expect, and some stagnate or fall. The top performers contribute an over-sized part of your lifetime profit.
You need a few “five baggers” (stocks that go up, say, 500 per cent) to make up for the inevitable losses of 20 per cent to 40 per cent or more that strike every portfolio. If you’re too quick to sell stocks that seem to have gone up “too far and too fast,” you’ll never have any five-baggers.
2. Don’t be afraid to sell speculative stocks.
My advice in point one above applies mainly to well-established companies. In contrast, you should be ready to take at least partial profits in any low-quality stocks you own that go up substantially.
Of course, it takes judgment to spot low-quality stocks. But some of their chief earmarks are a lack of earnings history, a dependence on projects that are still under development, and investor relations material (press releases, websites, emails and so on) that seems promotional rather than informative.
You may want to apply the “sell-half rule”: sell half of any speculative stock you own that doubles, so you get back what you initially invested.
3. Don’t settle for profitless security.
The marketing directors at financial institutions are just like their counterparts at soap companies. They don’t want to create products that are bad for you or will hurt you. They just want to create products that you’ll buy.
Today, investors are huddled on the “fear” end of the fear-greed spectrum. One way to appeal to them is to come up with innovative financial offerings that provide a no-loss guarantee.
The problem is that guarantees cost money, and buyers pay for them. That’s one reason why “guaranteed” investment innovations generate far less profit than stocks, plain-vanilla mutual funds, or other forms of ‘un-guaranteed’ investment. For that matter, the guarantee may be far flimsier and loophole-riddled than you’d guess from reading the sales brochure.
You only learn about these limitations by reading and understanding the prospectus or offering memo. In general, the closer you look at the fine print, the less likely you are to buy.
4. Don’t close your mind to new information.
When shopping for a new car, you may at first feel equally drawn to a Ford and a Toyota. If you buy the Ford, an all-too-human mental process takes hold. You begin to ignore faults that occur in Fords, and disregard anything good about Toyotas.
This is your mind’s way of making peace with your decision. In today’s world, it’s a good thing. Most of today’s cars can do what most consumers expect. Besides, replacing a new car soon after you buy is expensive and wasteful, and we all have better things to worry about.
Unfortunately, the same process takes hold when you buy a stock, or begin dealing with a new broker. But investments and brokers vary more widely in quality than do cars.
You aren’t (or shouldn’t feel) stuck with those that turn out to be bad choices. That’s why you should keep an open mind about your investments. That’s good advice this year and every year.
1. Don’t sell your top-quality stocks just because they’ve gone up.
Selling your best stocks too soon is a particularly big risk for 2011. When the market recovers from a black hole like the one it fell into in 2008 and 2009, somebody always says it has gone up “too far and too fast.” Applying this pseudo-conservative advice gives you an excuse to take profits, which appeals to us all. But it hurts your results in the long run.
In the course of an investing career, some of your stocks will go up way more than you’d ever guess, some do about as well as you’d expect, and some stagnate or fall. The top performers contribute an over-sized part of your lifetime profit.
You need a few “five baggers” (stocks that go up, say, 500 per cent) to make up for the inevitable losses of 20 per cent to 40 per cent or more that strike every portfolio. If you’re too quick to sell stocks that seem to have gone up “too far and too fast,” you’ll never have any five-baggers.
2. Don’t be afraid to sell speculative stocks.
My advice in point one above applies mainly to well-established companies. In contrast, you should be ready to take at least partial profits in any low-quality stocks you own that go up substantially.
Of course, it takes judgment to spot low-quality stocks. But some of their chief earmarks are a lack of earnings history, a dependence on projects that are still under development, and investor relations material (press releases, websites, emails and so on) that seems promotional rather than informative.
You may want to apply the “sell-half rule”: sell half of any speculative stock you own that doubles, so you get back what you initially invested.
3. Don’t settle for profitless security.
The marketing directors at financial institutions are just like their counterparts at soap companies. They don’t want to create products that are bad for you or will hurt you. They just want to create products that you’ll buy.
Today, investors are huddled on the “fear” end of the fear-greed spectrum. One way to appeal to them is to come up with innovative financial offerings that provide a no-loss guarantee.
The problem is that guarantees cost money, and buyers pay for them. That’s one reason why “guaranteed” investment innovations generate far less profit than stocks, plain-vanilla mutual funds, or other forms of ‘un-guaranteed’ investment. For that matter, the guarantee may be far flimsier and loophole-riddled than you’d guess from reading the sales brochure.
You only learn about these limitations by reading and understanding the prospectus or offering memo. In general, the closer you look at the fine print, the less likely you are to buy.
4. Don’t close your mind to new information.
When shopping for a new car, you may at first feel equally drawn to a Ford and a Toyota. If you buy the Ford, an all-too-human mental process takes hold. You begin to ignore faults that occur in Fords, and disregard anything good about Toyotas.
This is your mind’s way of making peace with your decision. In today’s world, it’s a good thing. Most of today’s cars can do what most consumers expect. Besides, replacing a new car soon after you buy is expensive and wasteful, and we all have better things to worry about.
Unfortunately, the same process takes hold when you buy a stock, or begin dealing with a new broker. But investments and brokers vary more widely in quality than do cars.
You aren’t (or shouldn’t feel) stuck with those that turn out to be bad choices. That’s why you should keep an open mind about your investments. That’s good advice this year and every year.
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