This is a funny one I got from Ken Kivenko who is a tireless advocate for the small investor up against the giant mutual fund industry. You can read his monthly newsletters at Canadian Fund Watch . Ken says he received the following message signed as the branch manager of a member firm of the Mutual Fund Dealers Association: “Mr. Kivenko, please stop sending your Newsletter to my clients Mr. ----- and Ms. -----. Since they have been receiving your rag they constantly pester us about fund fees, returns and how our Seniors Specialists are paid. The more they read the more anxious they become. They are elderly and your stories are scaring them. It is now virtually impossible to even approach them about our new line of proprietary funds because of your rantings. The next thing I know they'll be asking about alternative investment choices. Our sales team is worried this will spread. STOP sending this material NOW! Have a good day.” This is too funny for words, which makes me th...

A reader I’ll call Jeremy has a question about how to handle the HST for his practice that he operates with a partner I’ll call Sandy. Here is the situation: Sandy runs a business offering an HST exempt service out of an office she rents. The service Jeremy offers is not HST-exempt. Because Jeremy offers a different but complementary service to the public, Sandy suggested that Jeremy offer his service out of Sandy’s office space. To keep the arrangement simple, Sandy suggests that Jeremy pay her 40% of his revenues, and Sandy will provide the office space, supplies, computers, etc. without any further charges. The idea is that Jeremy will just keep 60% of his revenues. The complication comes with how to handle the HST. Jeremy must charge his clients the HST, but how should it be split between Jeremy and Sandy? Possibility #1 Sandy only gets 40% of Jeremy’s base rate and gives all of the collected HST money to Jeremy. Jeremy then remits the HST money to the government ba...

I made a change to this blog that should go unnoticed by most readers. I now have my own domain (http://www.michaeljamesonmoney.com/) instead of the blogspot address. Although I’ve set it up to automatically refer from the blogspot address to the new address, I’d be pleased if those who point to my blog from their own web sites could update the addresses. Readers of my feed should see no substantial changes. Thanks to Frugal Trader at Million Dollar Journey for the advice on how to make this change smoothly. Now, on to this week’s short takes. It’s been a quiet week, but I found a couple of interesting articles. Big Cajun Man has a list of things to stay away from in the post-Christmas sales. My Own Advisor reviews the ebook The Dividend Toolkit .

The word “millionaire” is mainly used loosely to mean a person with so much money that he or she can spend far more than the average person with no fear of ever going broke. Increasingly, this loose definition does not match up with the more precise definition of a person with a net worth of at least $1 million. Consider the hypothetical couple, Sam and Christie, both 56 years old. They met working for the same employer and have 3 children, two of whom are still attending university. Their employer is having tough times and they both got forced into early retirement. Unfortunately for them, their skills are mostly useless now that the entire industry they worked in has collapsed. Fortunately, though, they are collecting a defined-benefit pension of $5500 per month. Using a rule of thumb that an indexed pension is worth about 15 years’ worth of payments, their pensions have an actuarial value of $990,000. Sam and Christie live in a house worth $450,000, but their mortgage is $...

With apologies to the blog Give me Back My Five Bucks , I say to Google, give me back you can keep my ten bucks! That’s how much they charged me for a service that I can’t get finally got to work. This all began with the many complaints I get from people who say that their employers block all blogspot links, so they can’t see my blog. I’ve been trying for a while to figure out how to fix this, but the only advice I ever get is that I should move to WordPress. However, I get frustrated enough fixing problems that come up with Blogger. My family would disown me if they had to endure my ranting about having to fix WordPress problems. Besides, I don’t want more features; I just want some simple blogging features to work without constant attention from me. I poked around in Blogger settings and noticed a publishing option to “Add a custom domain”. This seemed too good to be true. Clicking on it led me to an offer to sell me my own domain for only $10 per year. So I pulled out ...

Canadian Mortgage Trends explains how wrong Amanda Lang is about the ability to forecast interest rates and how quickly they can rise or fall. Preet Banerjee interviews Financial Advisor John DeGoey who has some very blunt words to describe the state of the financial advice industry. Canadian Couch Potato explains how the cost of currency conversion has nothing to do with current fair exchange rates. Million Dollar Journey gives a snapshot of where he is with his RESP, which is based on TD e-Series mutual funds. He also lays out his complete RESP strategy for shifting from stocks to safe investments as his children approach the end of high school. Big Cajun Man says that store-fronts for the telecom companies like Bell and Rogers are no-ops in the sense that they offer little of value over visiting the company’s web site. Increasingly, low-level employees of businesses have almost no discretion to make any decisions themselves. Business strategies are created at the cor...

People who play the lottery generally know that their odds of winning are very low. However, some ticket buyers I’ve spoken to believe (or hope!) that they’re bound to win if they keep playing long enough. I decided to do some simulations of the Lotto Max lottery to examine this belief. I ran a million simulations of playing 2 tickets per week for 25 years. At $5 per ticket, that’s a total cost of $13,000 for each of a million lottery players. I included all the gory details about how the prize pools are determined, winning a free ticket when matching 3 numbers, and everything else. A simplifying assumption I made was to treat all chosen number combinations as random instead of having some of them chosen by people. I also had to make assumptions about ticket sales: I chose sales of $25 million per draw when the previous jackpot was won and sales of $15 million more than the previous jackpot when it wasn’t won. This crudely models the hysteria that comes with big jackpots. ...

I recently received what appeared to be a reminder from McAfee to renew my subscription to their antivirus software. On the surface this seems like a useful reminder service for an existing customer who wants to maintain continuous security coverage for my PC, but all is not what it seems. A curious omission from the McAfee email was any mention of when my subscription expires. After some digging for an old password, I was able to log in to my McAfee account to discover that my subscription will last another 20 months! Why would I want to extend my subscription for another year or two now? There’s half a chance that my PC won’t even be working by then. Another annoyance is that McAfee renewed an old subscription on a PC that I had scrapped. I thought I had been careful to check the “never automatically renew” box, but either I missed it or this box got reset somehow. Fortunately, renewal attempts by McAfee don’t work if I have an updated credit card with a new expiry date and...

In an interesting blog post, The Blunt Bean Counter asks whether newspaper paywalls will save newspapers or if they are just a last ditch effort to save an industry that will ultimately fail . I think the answer is some of each. Revenues for newspaper businesses will continue to decline as more people opt not to pay for a physical newspaper each day. It will take some time but people like me who like to flip through the dead-tree version of newspapers will eventually die off. Newspaper business people recognize this and hope they can replace subscription revenue from physical papers with subscription revenue from web site access. For the most part, this won’t work; collectively, people will never pay as much for web site subscriptions as they pay for physical newspapers. The reason is simple: competition. It costs far less to run a newspaper as a web site than it does to deliver physical newspapers. Production and delivery costs are eliminated and there is far less need for a...

Daniel Solin, senior vice president of Index Funds Advisors , bluntly describes the need of fund managers and the financial media to anoint financial gurus as seers of future stock market prices . Scott Adams comes at just about every subject from a unique angle. In discussing whether it makes sense to raise taxes on the rich, he had a great quote: “fairness is a concept invented so dumb people can participate in debates.” The Blunt Bean Counter is giving away copies of Rob Carrick’s book How Not to Move Back in With Your Parents . Big Cajun Man goes into rant mode when he can’t find some tax receipts and can’t seem to follow his own advice about staying organized. It always amazes me how people don’t spend 10 seconds to file away an important receipt to save an hour at tax time looking for it. Occasionally I’m guilty of this myself, but for the most part I’m pretty organized. Where Does All My Money Go? explains how to deal with some common problems that arise in closing ...

So many Canadians like to spend their winters in the U.S. that we have a name for them: snowbirds. If you’re a snowbird or aspire to be one, beware of U.S. tax law. If you’re not careful, the IRS will treat you as a nonresident alien subject to U.S. income taxes. Fortunately, there are ways to avoid this fate. Be careful of taking people’s word on these tax rules. I’ve heard so many contradictory explanations of the rules that I decided to dig through the IRS website to find the truth. The main things you need to understand are the Substantial Presence Test and the exception to this test called the Conditions for a Closer Connection to a Foreign Country . It’s also important to know that if you wish to assert a closer connection to Canada, you have to file Form 8840 . On page 3 of this form it says “If you do not timely file Form 8840, you will not be eligible to claim the closer connection exception and may be treated as a U.S. resident.” I’ll summarize the highlights of t...

I highly recommend having a look at a 54-minute movie called Passive Investing . The discussions are mostly non-technical and fairly easy to follow. They even cover the lifestyle advantages of switching to passive investing. For more details about this movie see Canadian Couch Potato’s description . What prompted me to write a post about this movie is an issue that is more technical than the film itself. Canadian Couch Potato made the following remarks about the movie’s mention of the capital asset pricing model (CAPM) : “CAPM—which predicts the expected return of a security based on its beta —is still widely taught, but it doesn’t do a particularly good job of explaining returns in the real world. (The Fama-French three-factor model is a dramatic improvement.) So I’m surprised the film’s website describes CAPM as ‘the mathematical foundation of passive investing.’” He is right that the three-factor model is better at modeling past investment returns than CAPM. However, wha...

When we buy shares in a company, one of the things we count on is that all shares are treated equally and get an equal slice of the company’s profits. The Financial Post reported on research into changing this equal treatment : “A global research project launched Wednesday by Mercer, Stikeman Elliott LLP and the Generation Foundation will look at the concept of granting ‘loyalty’ dividends or warrants, or additional voting rights, that would ‘reward’ certain corporate shareholders for retaining their shares for a specified number of months or years.” On the surface, this seems like a great idea. You get a bonus for holding your stock for a long time. However, all shareholder claims on company profits come from the same pie. If some shareholders get more, then others must get less. But so what if some high-frequency trading jerks get a smaller slice of company profits? Who is to say that companies will only use their long-term shareholder bonus programs to shaft day traders? ...

My Own Advisor explains how he considers his defined benefit pension to be like a large bond that allows him to take more equity risk with the rest of his portfolio. This makes a lot of sense, but something that many people don’t consider with defined benefit pensions is the risk that you won’t collect as much as you think. If you decide you can’t stand your job or get laid off, you may be left with only a very modest pension (or none at all if you take a commuted value when you leave). Even government jobs aren’t as safe as people used to think, particularly with all levels of government facing huge deficits. When balancing a portfolio, it makes sense to consider only the value already accumulated in the pension rather than the entire future value if you stay until retirement age. Boomer and Echo tells a story of parents financially supporting spendthrift adult children at the expense of their responsible children. Perhaps living only for today pays off if you have wealthy pa...

Having spent much of my working life around type A personalities who pour all their effort into their careers and have little in the way of personal lives, I’ve always respected those who sacrifice some career advancement to get life balance. This doesn’t include just high-powered business executives; I’ve seen it in a mechanic as well. The way we pay for car repairs usually involves book hours instead of real hours. A book lists the number of hours each type of repair is supposed to take. Then you pay for this number of hours no matter how long the repair takes. Mechanics vary greatly in how long they take to complete repairs. A former mechanic friend (I’ll call Dan) used to routinely take less than half the book hours to complete his work, but he says that he worked with some mechanics who would spend all day on a 2-hour job. Dan was well-liked by his employer because he made maximum use of the space he took up in the garage (i.e., he made them lots of money). And he was ...

I get the feeling that enthusiasm for Christmas gift exchanges is mostly limited to children and shopaholics. I think this comes from the fact that most of us already have the small things we want. There was a time when gift-selection was quite easy. When everyone one needed food and clothing it wasn’t too hard to pick a gift to make or buy. But now it’s hard to find the right gift for everyone on your list. Most people have the basic things they need and want. A gift sweater may never be worn again after the obligatory trying it on for the camera. It’s normal for the enthusiasm for Christmas to fade with age, but the age where this begins seems to be getting younger. And it’s hard to blame teenagers of well-to-do parents for losing some interest in Christmas, unless their parents buy extravagant gifts like a new car. How excited do you really need to be about getting an eleventh gaming system? It would be nice to see all the wasted money and energy that goes into wanderin...

There is an uneasy relationship between emotions and rational thinking in investing. I’m a believer in using careful rational thinking when making big life decisions like how to invest your life’s savings, but it isn’t possible to keep emotions out of the equation entirely because most of life’s core goals are fundamentally emotional. To the extent that I have any philosophy in life it would be “sustainable happiness”. Without the sustainable part, drugs would be a good solution to produce a burst of happiness. But this is hardly sustainable. So, I try to eat well, get regular exercise, and treat others well in a bid to be happy for the long term. The pursuit of money is not an end in itself, but a means of achieving freedom, comfort, interesting experiences, and ultimately, happiness. There are those who say that money doesn’t matter. They are partly right and partly wrong. Of course money matters, but what you give up for it matters too. I’ve consistently turned down car...

Years ago I noticed that my wife and I have different payment dates on our credit cards. Until recently, I never really thought about the implications of this difference, but it does present an opportunity to “optimize” cash flow. The following calendars illustrate the differences in our credit card statements. My next statement will cover purchases from roughly Nov. 16 to Dec. 15, and the payment will be due Jan. 5. I indicated a full week for the payment to illustrate that it is sensible to pay somewhat early to avoid interest charges. Note that my wife’s credit card dates are shifted forward 19 days. This creates an opportunity that I hadn’t thought much about before, but I’m sure that many people use. For purchases between Dec. 16 and Jan. 3, my wife will have to pay before Jan. 24, but I won’t have to pay until before Feb. 5. Similarly, for purchases between Dec. 4 and Dec. 15, I’ll have to pay sooner. To optimize cash flow, it’s always better to use one credit car...