- the source for market opinions


June 15, 2020 | Allyshipping

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.

The next four months will be a ride.

In Canada the CERB is slated to end, punting eight million people back onto their own resources. Unless, of course, the Trudeau government keeps the tap flowing. In that case (done deal), federal finances will further disintegrate, promising higher tax rates. Either way, not a swell outcome.

Close to a million households which have deferred mortgage payments for half a year will have to find the dough to start paying again. Don’t count on the banks extending this program – it’s too damn costly. So expect more listings since the unemployment rate is staying high for a while. A long while.

There’ll be a federal budget, or at least an economic update. It’ll be shocking.

And, of course, there’s a US presidential election on November 3rd. Unless there isn’t (more on that in a moment).

American politics loom large for everybody. Trump has been a polarizing figure now facing the electorate with (as mentioned last week) three daunting challenges: a public health crisis (Covid ain’t over yet), civil unrest plus a crashed economy and record unemployment. Joe Biden currently has a wide lead in polls (49.8% to 41.7%), favoured by blacks, Latinos, suburbanites, women, Mills and a growing number of older white dudes. He’s also ahead in key battleground states like Wisconsin and Michigan. Polls change fast, but right now they point to a Trump crash-‘n-burn.

Biden in the White House would likely mean expanded trade (good for investors) but a bigger government presence and enhanced social spending (not so good) as well as forced corporate reform (bad). Enhanced taxes are likely. So Mr. Market would rather have Trump.

Now, let’s dip into the contentious issues of Black Lives Matter and, while we’re at it, MeToo. These days we’re bombarded with newspeak and newthink. “White silence equals violence,” for example. Or corporations telling people to alter their signature blocks with “preferred pronouns.” Or the spreading use of fuzzy words like “allyship.” In recent weeks, since the death of George Floyd, the BLM movement has exploded with the same force and fury as did MeToo post-Harvey Weinstein.

These causes are seminal of course. But it’s interesting to note why they gained so much velocity so fast, and what impact they might have on your TFSA (to be crass about it). A US political scientist, quoted in the New York Times, has an interesting theory about social justice and Donald Trump.

Simply put, the populace moves in the opposite direction to leaders. When Obama moved left, people drifted right, making gun control legislation impossible. As Trump lurches right, citizens trend left, giving momentum to social justice issues like racial and gender equality. Of course, the shock of George Floyds’ death mobilized public sentiment and Trump has been extreme on a daily basis, exacerbating change. Plus hundreds of millions of people are frustrated, inconvenienced and impacted by the virus.

As a result, there’s a yawning appetite for change, now focused on two of Trump’s weakest profile points – race and sex. And this helps explain the shift left in politics. Biden isn’t exactly the embodiment of a youthful, ethics-based revolution, but he stands to reap the harvest.

Source: New York Times

Unless there’s no election. Or, at least, a fair one.

Covid will be with us in November, and the only logical way to have a vote without long, dense lines of people is with mail-in ballots. Many people worry this process is open to manipulation, fraud or just bumbling and results could be inconclusive. In that case the 12th Amendment calls for a president to be elected by the House of Representatives, where each state gets one vote. So much for the big Democratic bulge in places like New York and California. Trump wins.

Far-fetched? Absolutely. But when 2020 started did you expect there’d be a global pandemic, 15% unemployment, the worst economy since the Depression, no hugging, eight million Canadians on government pogey, masked people in the grocery store, shuttered office towers, areas and malls or mass protests on three continents ignited by one death in Minneapolis?

Of course not. And it’s only June.


Be careful where you invest. For example, people with units in a major real estate-based mutual fund just learned they’re locked in. No redemptions.

“During this challenging time, we want to help protect the long-term value of your plan members’ investments in their group retirement plan. This is why Manulife is temporarily restricting member-directed redemptions and transfers from the Manulife Canadian Pooled Real Estate Fund in your plan, effective at 4:00 p.m. ET on June 12, 2020.”

That notice was sent out three days after the fund was locked down, ensuring nobody could cash out. Nice. Thanks, Manulife.

Expect volatility. The Vix shot up from 25 to 40 in recent days (it hit 82 in April when the virus arrived). The next few months may well see a return to big daily swings on stock markets as a torrent of economic, health, social and political news washes over investors. In a world like this, seek balance. Ensure you have a stable fixed-income component to your portfolio. Some boring is good.

Let no tax shelter or advantage go unused. Shift assets into your TFSA until it’s stuffed. Ditto for your spouse and adult kids. Utilize your available RRSP room, and borrow at today’s ridiculously low rates to do so – using the tax refund next year to pay the loan down. Or make a contribution in kind, shifting existing, taxable assets into your registered retirement plan.

Also consider harvesting capital gains while the inclusion rate stays low (now at 50%) instead of waiting until after the next budget. Split income with a spousal RSP into which the higher-taxed person contributes and claims the deduction while the other can cash out later at a lower rate. Set up a spousal loan to gift investment funds without attribution. Make the less-taxed spouse the investor while their partner pays the bills. And, of course, don’t defer your mortgage.

Oh, and get a helmet.

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June 15th, 2020

Posted In: The Greater Fool

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