How to Protect Your Capital


We continue to witness extreme volatility as stock markets around the world deal with significant economic stress.One of the underlying issues is that markets are deleveraging after the accumulation of enormous debt. The bottom line is that the US, Eurozone and other developed economies have too much debt relative to their productive output.

Interestingly we have noticed a trend of increased globalization, which has resulted in developed nations closely tracking one another. This has investment implications because numerous countries now move in tandem with good or bad news, whereas before simple diversification meant portfolio volatility was minimized.

We wanted to let you know our latest thoughts and action.

At TriDelta Financial our Investment Management partners have always been proactive in managing risk, which they have done by:

  1. avoiding the US and Euro markets for over 6 years now and remain 95% invested in Canada.
  2. hedging portfolio risk a number of times over the past few years.
  3. benefiting from significant gold and silver investments.
  4. successfully raising cash on numerous occasions, but particularly through mid 2011 as global economies continue to deteriorate.

They are now extremely defensively positioned with portfolios holding significantly reduced equity, between 15 – 25% cash combined with the safety of gold and/or silver holdings as a hedge.

The ongoing deterioration of global economies and growth is being reflected in lower and more realistic company valuations (stock price). As this unfolds they will maintain defensive portfolios to preserve client capital and wait patiently for the dust to settle as they scour the market for opportunities that invariably emerge in times of turmoil.

Understanding How the Disability Tax Credit Can Help You


In Canada, the Disability Tax Credit is one of the most overlooked and underused tax credits available to individuals. In the following, Senior Financial Planner Heather Holjevac explains what a disability tax credit is, and how it may benefit you.

“Invariably, many of us, myself included, get surprised by unplanned expenses over the year. My additional expenses usually revolve around the kids, however more and moreI am hearing of friends, family and senior clients whose budgets are being stretched due to costs related to a sudden illness or disability. A relative, who I have noticed having more difficulty with mobility over the past few years, was recently diagnosed with severe arthritis. With this comes the need for increased medication, physiotherapy, need for a walker and for assistance around herhome, to complete basic tasks.

As a senior on a fixed income, the discussion has been around ways to manage these increasing costs. One place to start is the The Disability Tax Credit.

The Disability Tax Credit and the disability amount is a non-refundable tax creditthat a person with a qualifying impairment can claim to reduce the amount of incometax he or she has to pay in a year. The credit, once approved by CRA, can also be transferred to a spouse or parent (if they are dependent on them for all or some of thebasic necessities of life – food, shelter or clothing) and carried back up to 10 years if anindividual qualifies. The refund or tax reduction is based on your tax payable and canbe worth up to a $2,500 tax reduction or refund for each year an individual qualifies.

How do you know if you are eligible? There are three conditions that must be met.

1) You must have a severe impairment in physical or/and mental functions or the cumulative effects of two physical impairments.

2) This impairment must be prolonged such that it has been persistent or will remain persistent for a continuous period of at least one year.3

3) A qualified practitioner needs to certify that your impairment is severe and prolonged by completing the Disability Tax Credit Certificate.

Once completed, the Disability Tax Credit application form should highlight and detail the effects of the impairment on your normal functioning. In recent years, the rules have changed to include additional conditions to the list o fthose that qualify, such as:

• insulin dependent Diabetes,

• life sustaining therapy, such as dialysis

• the cumulative effects of 2 significant restrictions or conditions, such as vision- speech- hearing- dressing- walking- feeding- elimination (bowel or bladder functions)- mental functions necessary for everyday life.

This could include the effects alzheimer’s, arthritis, anyone using a walker and thoserequiring Attendant Care at home or in a Retirement Home or Nursing Home.

Dosing is very important with this, since instead of curing it can harm the same (when overdosing). We recommend using only Levitra Bayer’s medical.It has the best quality

An additional measure in the June Federal 2011 Budget, is that it proposes to eliminatethe current $10,000 cap on the eligible expenses that can be claimed for other eligibledependents for the medical expense tax credit for other dependents.

While the process to qualify and receive the Disability Tax Credit can take 3 to 6months, it is a worthwhile pursuit. Once established, it can mean a lifetime of tax credits.”

Watch for a review of the new Family Caregiver Tax Credit that the Budget proposes tointroduce beginning in 2012 in an upcoming blog entry.


Canadian Investment Review Special: Week 1- Aug/2011


In light of the whirlwind of activity in the past week, Edward Jong, Head of Fixed Income at TriDelta Investment Counsel offers us a special Canadian Investment Review: a  concise summary and practical view of what went on in the world’s markets last week and what it might mean for Canada.

“There were many highlights, and low points to start of August. Weak economic releases; particularly the data released by the Institute for Supply Management (ISM) for manufacturers and GDP, overshadowed the debt ceiling resolution. Even the affirmation of the triple-A rating of U.S. Treasuries did nothing to allay the renewed concerns for the health of the U.S. economy. Putting this against the back-drop of the European financial situation, all worked against the equity market, and to the benefit of government bonds.

Both Canadian and U.S. 10-year yields ended last week roughly around 2.80% (and had been hovering around 2.95% for the most part of the summer), entered into a new range, closing out the week around 2.45%. Equity markets and European matters aside, the issues at heart today is the substantial increased concern for economic growth, lack of (esp. U.S.) government policy actions available, and no lack of investor complacency.

With the debt ceiling matter behind, the concern is the implications of the American austerity program, and how this would work against economic growth going forward. The inability to enact prudent fiscal policy measures during this soft-patch; coupled with Fed Funds at 0.50%, means the path of least resistance is for the yield curve to continue flattening (i.e. longer dated maturities outperforming the front-end of the yield curve), with a bias for yields to gradually shift lower over the intermediate term.

The release of the July Non-Farm Payroll report was bitter sweet. The immediate reaction was negative for interest rates (but positive for equities) as jobs were created, since market participants throughout the week were worked up into a possible contraction in payroll. The creation of 117,000 jobs in July along with upward revisions totally 50,000 positions for the past two months, will for a short time reduce some of the panic and fear built up during the beginning of the week. We believe this relief is short-lived as there are structural issues with American job creation. The participation rate dropped to a 27-year low; meaning that there are many discouraged job seekers. Should they be actively searching, the unemployment rate is sure to be much higher than the 9.1%.

In contrast, the Canadian employment release continues to portray a decent Canadian job situation. In light of the struggles State-side, we continue to argue that the Bank of Canada’s interest rate policy will remain on hold for longer than the market anticipates. We remain cautiously optimist for the prospects of the fixed income markets, and would continue to remain long duration, with a bias for the yield curve to flatten.”

Am I Ready for Retirement?


Are you financially and emotionally ready to retire? What are the things you should consider when thinking of retirement? Here, we discuss some of the necessities for determining “retirement readiness.”

Goals for Retirement

When deciding to retire, the first step is to have your own fine-tuned vision of what retirement looks like. What are your goals for the next life stage? To better understand yourself, you might consider filling out a goal-setting questionnaire, such as this True Wealth Questionnaire that we frequently use with our clients.

The purpose of our easy goal-setting questionnaire  is primarily not financial, but mostly about measuring where your life is today and what you want your future to look like.

Financial Ability

Once your lifestyle vision is sorted out, it is time to shift the focus to the financial planning side. Try to estimate a financial plan that projects the next 30 years or so.

Consider talking to a financial planner to get a good sense of what your lifestyle will be like in retirement if you retire today, or at a certain point in the future. A comprehensive financial plan will expand on other issues too, like how much you can afford to help Three steps to knowing when you are ready for retirementyour children or grandchildren, or how to support your favourite charities. Based on your financial ability, you might get a “green light” for retirement, but it doesn’t mean you should retire.

Personal Considerations

Of course, financial ability is not the only concern for retirement.

For many of us, our jobs are an important part of our identities and can be very difficult to give up “cold turkey.” Also, retirement can significantly alter the balance and routine that currently exists with your spouse or partner – sometimes in a bad way.

Another issue is how to fill all of your free time. Without a plan that reflects your retirement vision, hobbies and goals, the free time can lead to depression. Eileen Chadnick, a certified coach and principal at Big Cheese Coaching in Toronto, says it is a mistake to plan for a life of full-time leisure, “Seven days of fishing gets stale very fast. The balance paradigm shifts in retirement. The key is to determine what the right balance is for you”

The issue of retirement has become much more complicated than simply aiming for a financial number. Much like other things in life, a successful and happy retirement takes planning – both financial and emotional.

If you want to read more, here’s an article that talks about all the things you can do in your free retirement time. It’s enough to get anybody excited!

Is Canadian residential real estate overvalued?


Real-Estate-Overvalued-CanadaI was at a dinner party recently and the topic came up; “We’re renting, just waiting for property prices to tank” said Bruce. “Well this house has been our best investment ever, we built it 14 years ago and have watched it go up every year since” quirked Janice.

The debate on peaking property prices is now commonplace as we all wonder just how much longer we can expect things to remain good when so many countries have experienced such dramatic property price destruction.

The so called double dip in US home prices is here. On average home prices are selling at the same values that they were nine years ago, which are 34% below their 2006 peak. (Source: S&P’s HousingViews blog).

The Standard & Poor’s/Case-Shiller 20-city housing Index shows that the housing market remains in a protracted and horrendous bear market wherein housing prices have continued to fall.

Case-Shiller noted that prices fell in 18 of 20 major cities in the US in March and of those 18 the prices in 12 of them fell to levels not seen since 2006.

This is not good for US banks, among others. S&P calculates that a double dip in home prices could cost US banks an additional $70-80 billion in loan losses.

The man who called the last two bubbles, Mr Baker, calculates that U.S. home prices still have 10% to drop. He wrote; “given the continued near-record vacancy rates and huge inventory of homes in the foreclosure process, there is no reason to think that house prices will stop falling anytime soon.”

But what of Canada’s real estate market? He said; “I would be very wary in markets like Canada. In fact, I would be very, very wary.” (G&M June 4th 2011)

The Economist magazine’s latest survey of global home prices claims that Canadian real estate is overvalued by a staggering 23.9 per cent.

The Economist determines fair value by comparing the current ratio of house prices to rent with the long-term average, which is one of the major, fundamental determinants of house prices.

By that measure, Australia led the way among the overvalued markets, with homes 63.2 per cent more expensive than they should be, followed closely by Hong Kong, where the housing market was 58.1 per cent overvalued. By comparison, the Economist says real estate in the United States is undervalued by 2.1 per cent, and houses in Japan are 34.6 per cent cheaper than their fair value.

The magazine says Canadian home prices rose by 4.5 per cent over the past year, and gained 70 per cent between 1997 and 2010.

Canadian real estate has become very expensive as evidenced by the ‘house price to income’ ratio, which is at its peak, 40% above its long term average. The translation is that our houses are too expensive relative to our incomes.

The United States had a similar spike only to have this ratio fall back to normalized levels and we should expect that Canada will be no different.

We recently featured the TVO Agenda program that made a strong case for renting given the many hidden costs of home ownership and demonstrated the rates of return of equity markets clearly favor not owning a home, see “A case against home ownership”.

The April 2011 issue of the Toronto based Post City Magazines, published the result of a roundtable discussion on the future of our real estate market. There is no mentioning of science or complex mathematical modeling; however, the discussion is diverse and informative. Click here to read the full story and then decide for yourself.

A December 2010 report on Canadian home prices concluded that;

‘Though overpriced, the absence of widespread speculation and egregiously loose credit standards suggests the market is not in a bubble. Instead, Canada’s housing market remains reasonably affordable because of exceptionally low interest rates. Barring a sharp spike in mortgage rates or a relapse into recession, a substantial price correction is unlikely to occur. The greater risk could be that sustained low interest rates might recharge the housing market and inflate a true bubble that ultimately bursts when rates normalize.’

(Source: TriDelta News)