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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

November 20, 2015 | The Path Ahead

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

Ross Pavel sells luxury digs to cowboys with Big Oil money in Cowtown. “The appetite for homes over $2 million,” he says, “has almost completely evaporated.” Overall, the ‘luxury’ house category (over $1 million, which everyone in YVR thinks is a starter home) has fallen by 40% since this time last year.

Prices are still sticky, though. The average, says Pavel, is about 7.5% below last year. But I’d suspect that may soon change. A lot.

On the day when our new finance minister, Suicide Bill, delivered his first economic update, the Canadian dollar slid below the 75-cent US mark, and oil lost more ground as it careens toward forty bucks. We also heard on Friday it’ll cost a billion or two to fast track all those Syrian refugees – which is a big humanitarian operation, but one which was  uncosted during the election campaign.

Anyway, here’s the situation this weekend: the Cons lied. Thus, we do not have a balanced budget, as Joe O insisted for months and as the Harper government announced long before the election was called. That was a fabrication. It was marketing. Fraud.

In fact that $2.7 billion surplus has turned into a $3.9 shortfall. Oops. Thus, seven of the eight years of Harper rule in Canada were ones in which the government spent more than it took in – including two where we had the largest annual deficits in history. That added over $170 billion to the national debt. It is hardly Conservative.

What now?

Government revenues from income taxes are falling. Ditto for corporate taxes. Same story for energy royalties. Meanwhile expenditures are rising, particularly for unemployment insurance, with the hulk of new claims coming from Alberta – where the greatest decline in revenues is also emanating. This is why your pathetic blog has been talking about oil creep. Nobody escapes it.

The Liberals are planning on adding at least $10 billion a year in new spending to fulfill election promises, half of it for temporary, make-work infrastructure projects. The need for something is obvious. The economy was in recession for the first half of the year and will grow for 2015 by only about 1%. Concurrently the US is doing fine, and on track for the first interest rate increase in a decade next month. That will inevitably impact the bond market, and gradually increase the cost of financing the national debt, now at $612.9 billion.

Today the world’s awash in oil, and prices could certainly retreat further than the 40% hit taken in the last year. Commodities remain at 16-year lows, and while they will recover at some point, such an event is not yet on the horizon. It seems prudent to expect next year will bring more of the same, as well as a lower loonie when US rates actually do lift off. That will raise our inflation and eat into consumer spending.

All this – the Harper lies, the Trudeau excess, the oil hit and the bad choices most people have made in their daily lives – leads me to believe you need to be careful. Most voters think they just elected a government which will cut their taxes and goose their take – more cash for kids and better pensions, for example – because the Libs will Robin-Hood the overlords. In truth, collecting $3 billion more from rich people (it will actually be far less) just equals the mess the Harper gang left behind. The numbers no longer add up. It won’t be a big surprise if we end up with $20 billion deficits once again.

So with more spending come more taxes. It’s why this blog will spend time on tax avoidance strategies over the coming weeks, as we head towards the Trudeau government’s omnibus tax bill, to be tabled before Christmas and fast-tracked through Parliament, then the budget in late winter. The Libs may be rolling back the TFSA contribution limit by almost half, but there are ways you can maximize this and shelter significant amounts. Trudeau may be erasing family income-splitting, yet couples can still manage to reduce their overall household tax bill through legal means. One percenters are in the cross-hairs for earned income, which means they should take money in other forms, set up a new business structure or create a fat, tax-deductible mortgage.

We’re on a new path now. It’s no surprise Harper lost government. This week reinforces that. But a future with more tax and more spending, more deficits, more assaults on wealth and more majority government arrogance calls for more attention.

Remember, this blog’s agnostic. No political affiliation. No agenda. Just a lust for freedom.

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November 20th, 2015

Posted In: The Greater Fool

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