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January 29, 2017 | The Rich & The Rest

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.

My colleague (and closet conservative, or is he a lefty?) Doug Rowat stirred the animal spirits on this barnyard blog over the weekend by writing about Trumpism and why the guy got elected. Timely. Trump’s de facto Muslim ban on Friday earned sharp criticism from CEOs of companies like Google, Bayer and BMW as well as world leaders (Merkel, May) and crowds of airport protestors. It also had stock futures heading lower Sunday.

Markets hate disruptions and surprises. It was only a matter of time before a shock-and-awe style of presidency clashed with the predictable money-making that investors want. As this blog has warned for weeks now, the Trump Bump rally that took off after November 8th and recently pushed the Dow past 20,000 is due for a healthy correction. Seriously insulting seven dangerous countries and the world’s second major religion (Islam has 1.226 billion adherents) might just bring it about sooner. We shall see.

But this is not about Trump. Rather the times that created him, plus the Occupy movement and the growing wealth chasm. We live in a society where it’s perfectly okay for a ball player or a second-rate rock star to make $20 million a year, but the guy down the street with two Mercedes and a nice house is an economic pariah. T2 came into power riding a tax-the-rich train which led to a new 29% super-tax bracket, a gutting of TFSA contributions and (soon) an attack on small business corporations. Now people making $250,000 have a 53% marginal tax rate, and are painted as an evil elite.

Brad encountered this the other day in a hospital room on Vancouver Island.

“You’ve touched upon the “Hate the Rich” meme a few times,” he wrotes. “Here’s my story from last week.

“My parents were the children of poor immigrants.  They taught me as a child to watch how rich people lived and achieved success and maybe there was a lesson to be learned.

“So I end up a 61-year-old retired 1%er sitting in Pre-Op classes at the hospital.  A wonderful young nurse is telling all of us how to prepare for hip replacement surgery.  I’m sitting beside an angry wrinkled 75-year-old and her equally angry 50-year-old daughter.   The nurse was explaining that the surgical dressing provided by the hospital could be upgraded to a speciality dressing at a “small cost”.   When the nurse said “the price is 45 dollars” there was an audible gasp of disbelief from the two.  There was a frantic and surprisingly diplomatic explanation from the nurse that the hospital supplied dressing was perfectly adequate and that the extra cost dressing was just an option the surgeons wanted their patients to be aware of.  But the stage was set.

“During a break a total shitstorm erupted after the nurse came up to me.  She said I’d have to arrange payment for my (upgraded) ceramic implant that I’d requested and that the cost was $749.  I said that was fine, that I was expecting it to be more like $2500 and $749 was a bargain.

“Well I was trying to speak softly but Prune Face exploded….. “So the rich people get better hips than us commoners!”,  PF’s daughter…………. “That’s just not fair!”,  “That’s just not right”  Other remarks followed until I suddenly realized I was expected to apologize for being successful in life. It was a long 2 hours getting these constant laser beam glares of class resentment and bitter hatred sent my way.

“So am I supposed to be embarrassed or ashamed of working my ass off and making all the sacrifices I did? “

Of course you are, Brad. And the anti-wealth, anti-success meme is exactly what helped push a person like Donald Trump into the White House, while allowing Trudeau to get elected saying he would tax the rich to lower taxes on the rest (he failed, by the way. Not enough rich).

Brad’s comments led me to do some research into Canada’s 1%ers, by income. Who are these people? How do you become one?

There are 35.16 million Canadians but just 268,000 people who qualify as being in the 1% – who get to pay Trudeau’s top tax rate, clicking in at an income around $227,000. These people average 52 years of age, are 78% guys and overwhelmingly married (82%). On average, they pay $160,000 in income tax – which means the 1% finance at least 12% of all taxes collected.

Most of the big incomes these folks collect come from working, not investing or inheritances. In fact 70% of it. So, what do they do? In general, one of three things. Either they’re business managers (30%), health professionals (15%) or engineers (11%). At the back of the pack are lawyers (7%).

When it comes to education, 90% are university grads. The top-earning groups are corporate execs ($421,000 average) and doctors ($333,600). The business guys generally have been 22 years into their careers from entry-level positions, while the docs have spent an average of 15 years studying and training.

So now you know. Most 1%ers like Brad actually earned what they have. Education. Experience. Training. Decades invested. Skills acquired. Degrees earned. Promotions won. Nary a silver spoon in sight. Meanwhile most of the 99% are obsessed with real estate. And expecting an apology.

Enjoy the hip, Brad.

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January 29th, 2017

Posted In: The Greater Fool

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