Thursday, May 17, 2012

Reality of the situation

Now that tax time is mostly over (Except for those self-employed people like myself.  You still have until June 15th to file.  But strangely enough you have to pay "the man" by the now past deadline of April 30th...  So how do you know how much you owe before you do your return?  Good question.) and the RRSP contribution deadline has LONG since passed, it's time to enjoy the fresh spring weather, sit on a patio and enjoy the benefits of your fruitless labours.  Or for those of you who are doing better than me, the fruits of your labours.

Perhaps this post is ill-timed.  I'm either way late about it, or far too early.  Take your pick.  Now once again I might have said some of this stuff before but you people are being brainwashed by the propaganda that's in the main-stream media as "most" Canadians are good worker bees.  They lead their 44 hour weeks a day at a time with the underwhelming 10 days off (that I never get) and a huge chunk of their pay-cheques automatically withheld on their behalf.

What happens to them when they make an RRSP contribution?  It lowers their taxable income and deferring taxation on the contributed monies.  Thus helping them reclaim some of their hard-earned dollars in the form of a tax refund.

However, if you're a starving artist like myself, you probably don't owe any income taxes.  So your RRSP contribution will get you a BIG FAT ZERO of tax benefit.  In fact, if you manage your RRSP well, when you do take it out you WILL be taxed on it and probably at a much higher rate of taxation than your current ZERO.

Thus you have NO BUSINESS WHATSOEVER contributing to an RRSP unless you're doing well enough to be beyond the first tax bracket.  (Even still it won't be all that helpful... wait until you're in the 3rd)

I'm not kidding you folks.  Your RRSPs will give you almost NO advantage whatsoever vs. a taxable account.  Having said that, load you your TFSA account to the max first before contributing anything to a taxable account.  Doing your investing in a TFSA will relieve the burden of having to report your trading activities to the CRA.

Here are the other kickers for using your TFSA rather than an RRSP...  Once you retire your taxable income will be essentially the same as it is now... which will probably keep you out of any tax bracket.  Thus you will qualify for all the poverty-stricken government benefits that may or may not exist in the future when you decide (or your body decides for you) that it is time to hang it up.  (Whatever it may be)

Currently there is CPP (Canada Pension Plan, which pays you a taxable pension), OAS (Old Age Security which is a non taxable benefit) and GIS (Guaranteed Income Supplement).  The latter two do get clawed back at various TAXABLE income levels.  But if all your dividends/distributions/interest are coming at you from your TFSA, your only taxable incomes will be CPP and your private pensions like the Musicians' Union Pension plan, or ACTRAs pension plan if applicable.  The rest of your money in your TFSA, no matter how much it generates will NOT count as taxable income and not jeopardize the government monies given to low income seniors.

If you had contributed to an RRSP, your income from it would be taxable and would quickly bump you out of the income level to receive GIS and OAS.

So... stay hungry my friends.

Wednesday, May 16, 2012

taking a beating

So the market can be great... and it can also suck.

I've (like many including billion-dollar fund managers) have taken quite a beating in the past 2 months.  I hit an all-time high in my accounts late February/early March, and it's a slow grindly painful, lumpy, bumpy downward road ever since.  Probably somewhere to the tune of 20-25%...  Which just so as it turns out is completely in lock step with the TSX.

Now, in all fairness, thanks to my heavy-handed REIT and dividendy portfolio I haven't sagged quite that badly.  Mind you only to the tune of oh... 2-3%.  But I'll take it!  (And re-invest it at these new discounted levels).

So yes, I'm still unchanged.  I haven't done any panic selling, although to be completely honest I have been very very tempted since there's a fancy coffee grinder I want to buy to replace my "Rocky" which isn't quite up to the task.

The world is once again locked into listening to fears of European debt problems.  But I have to say this, "big fat hairy deal!"

The people of Greece, Italy, Portugal, bumble-@#$-istan, still have to eat, they still have to get to work, they still have to feed, house, clothe their children.  Commerce happens no matter how much fear exists.  Sure, people trade down the quality ladder...  (But that's another story since the crap they buy breaks faster requiring more rapid replacement so what they lose in margin they make up for in volume)

Sure the travel, tourism, hotel, restaurant industries to take a beating, but consumer staples always remain a requirement of life.

Just like last year, the good numbers coming out of North American companies will eventually persuade people to stop caring about media fear-mongering.  (Or Greece will default, withdraw from the EUR... it will be messy.  The markets will swing wildly.)  But eventually things will settle down and people will get back to the business of excessive consumerism, keeping up with the Jones', and the other fine aspects of enjoying life so that we once again return to a huge bull market for several years until the next sociopolitical event or crooked bank crisis spurns the next round of recessions.

The markets will continue to be lumpy for a while.

Try to not panic and DO buy more of the stuff you like.  (Unless of course news breaks that the CEO is a crack-head)

Thursday, May 10, 2012

The nity gritty

I've fielded a few requests before, and I suppose I should have some neat-o type graph-o-metre on the side of my blog somewhere indicating my current level of monthly gain/loss and/or incomes from my progress.

I have alluded to it in the past on a percentage basis, but as my costs are dramatically different because of where/how I live (object poverty) so percentages might have been too unclear for you to really understand how beneficial doing what I do can be to your monthly income.

GROSS Dividends/distributions/interest = $510.59
NET (after margin expenses) = $331.73.

So that may not sound all that great... but to my starving artist lifestyle it's huge.  Monthly income when sometimes I have none?  It's awesome.

It's always re-invested mind you...  I just draw down my margin when I have a slow month and my work doesn't keep up with my fixed expenses.  Then "re-balance" when necessary.

Thursday, May 3, 2012


It has become very clear to me that we are now in a period of consistent market floundering. The markets fall by 200 points then churn their way back 250 points over the next few weeks...  Then there is another 200 point setback followed by another few weeks of gradual churning upwards.

What does this mean?

Bumpy, lumpy slow nothing...  Which is exactly why I'm loving my REIT heavy portfolio.  It doesn't matter if they periodically go up and down with a net increase/decrease of ZERO, as they all pay handsome MONTHLY yields.

Sure, when the S&P TSX falls 200 points (like today 2012-05-03) then I'm down a "smallish" amount.  But at the same time, when the markets bounce back, I get all that back as well as the monthly income I get from dividends and distributions.

I did CLOSE my positions of AGF and SII.  (Two companies that sell mutual fund products to the uneducated masses aka. suckers)  As I continue to see increased competition for them.  (Which means lower profits over time)  This means that the "unwashed masses" are finally realizing that mutual funds are robbing them blind and getting them little to no return.

So what's next for me?  I'm going to continue to add to (and re-balance) my REIT heavy portfolio.  D.un (Dundee REIT) is now far too large a holding.  (Thanks to D.un taking over WRK.un)  So I'm looking to sell off some in my RRSP and cash it out while I'm currently in the "poor slob" tax-bracket.

New positions include PAR.un and IIP.un.  I only have 200 and 100 units of each, but I'm looking to add more to get them up to a 5-7% weighting in my portfolio.

I might try my hand with the VIX, but that's not for the faint of heart.  I had played oil (via HOU and HOD) for a while, but I'm convinced there is only one direction oil can go in the long term, nor am I that tuned in to what the oil market is doing.

What does this mean?  Your guess is as good as mine.  That's why I love REITs and the monthly rental fees they send my way.