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Tuesday, July 25, 2017

Dunkirk

British Soldiers on the Beach at Dunkirk Waiting to Evacuate


We went to see the movie "Dunkirk" which was very good.  Pretty true to history, graphically shows the horror of war and the different sides of the human spirit, and just the right amount of patriotism.

When I spoke to my 87 year old mother last night, I told her about the movie, and her reaction was surprising.  She said something like "..well I won't go and see that movie, it cuts too close to home.  I remember the ships gathering in the estuary for the evacuation.."  She was a 10 year old school girl in Westcliff on Sea, a city at the mouth of the Thames, and must have seen the little ships going and coming back.  Sadly, some of the local fishermen lost their lives in the evacuation.

Saturday, July 8, 2017

Why Do Canadians Buy Canadian Mutual Funds?

Now that I am back in Canada, I see more Canadian financial information.  After looking for a Canadian stock index mutual fund, I thought, "why do Canadians buy Canadian mutual funds??".

I searched for "series D" Canadian equity mutual funds, and the minimum expense ratio (MER) was 0.60%.  This is quite high compared to US index mutual funds, which are around 0.20% or lower.

Then I searched for Canadian stock index ETFs.  The expense ratios are under 0.10%.  Here are some samples:
So why would anyone buy a Canadian mutual fund and give up over 0.50% of their return?  In today's low return environment, that is a lot.  I just don't see the point, am I missing something?

Wednesday, June 14, 2017

Canadian Customer Service Compared to U.S. Customer Service

You would think customer service would be identical north and south of the border, but it's not.  There is one fundamental difference that I run into constantly.

In the USA, if you the customer have a problem and common sense indicates that the store bends its rules or policy to make you happy, they generally will.  If not, they will certainly agree that the rule is silly and apologize profusely that they cannot take the right actions to make you satisfied.

In Canada, the RULES ARE THE RULES.  If you have a problem and the store's rules do not allow it to be solved, even though common sense says it should, you are out of luck.  Not only that, you will feel that you are causing the problem by exposing the weakness of their rule.

An example illustrates this difference:

  1. I want to transfer all my stocks and ETFs from my US broker Vanguard to my new Canadian broker, RBC Direct Investments (part of Royal Bank, a huge Canadian bank).
  2. This can be done by filling out a standard form.  Vanguard, like most brokers, requires that you get a special identity verification called a Medallion Stamp.  This is normally done by a US bank.
  3. RBC says that they can stamp the form, which makes sense since they operate in the USA, and they are the ones receiving all these investments.
  4. Long story short, RBC gives me the runaround of all their divisions (two weeks of calling and email) and finally says that they can only stamp their own form.  They cannot stamp the Vanguard form even though they know me, know what I am doing, I have lots of my money in their bank, I pay them lots of fees, and the form is almost identical to their form.  "It is a rule at the bank".  It is just a stamp saying they guarantee my identity, but they cannot do it.
  5. So I call Vanguard, tell them I cannot do the transfer because I cannot get the stamp.  Even though they are losing the business, they quickly come back to me and say they will accept voice verification of my identity using their voice identification system.  They will bend the rules to lose business and RBC will not bend the rules to get more business.  This is the essence of Canadian customer service - you will get good service as long as the rules allow it, otherwise you are SOL.

Saturday, June 10, 2017

Another Monte Carlo

Monte Carlo - Monaco

Some of my readers, well, at least one, are interested in Monte Carlo tools to evaluate retirement savings.

I will not bore you with the details of Monte Carlo simulation, it is covered in a previous blog post here.  It basically gives you a better estimate of how much you can spend in retirement based on your portfolio and the variability of the stock and bond markets.

The previous tool I recommended was from Vanguard.com.  I recently found another tool at this website that you can try.

Photo credit

Monday, June 5, 2017

Avoid CAD to USD Ripoffs


You can lose a lot of money converting Canadian dollars (CAD) to US dollars (USD).  This is not a big deal when you are converting $200 so you can buy that camouflage recliner at the Walmart in Buffalo.  It can be thousands of dollars if you are sending $20,000 to a relative or $200,000 on that retirement condo in Fort Lauderdale.

If you go to a Canadian bank and ask to change CAD to USD, you will get their standard rate.

Today June 5, 2017, the Standard Over the Counter Rate at the Royal Bank is $1.3791 USD per CAD.  Most banks are very close to this rate.

But, if you convert your money using their online brokerage, RBC Direct Investing, you will pay $1.3349 to get a USD, a savings of 3.2%.  On that $200,000 USD Florida condo, that is $6,410 CAD (real money).  You have to move money from your bank to the brokerage and back, but this can be done online in about 15 minutes.  Most bank-affiliated brokers have this service.

But what if you don't have a brokerage account or don't want to open one?  You could use an online money converter like XE.com.  If you wanted to get $200,000 USD today, their rate would be $1.3669, which is 0.88% better, or $1,770 CAD.  Not as good, but it is still good money you want to keep in your pocket.  There are other online services you can investigate like knightsbridgefx.com.

So if you are moving a lot of money to or from USD, I recommend you investigate alternatives to the simple and convenient method of going to the bank.  Oh, and avoid buying that hideous recliner, your wife will thank you.

Disclaimer: this is not professional financial advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Sunday, June 4, 2017

American Versus Canadian Golf Clubs

We just joined a golf club here in Ottawa, we have never joined a club before.   It is one of the top clubs in town.  My only previous experience was playing as a guest multiple times at high end country clubs in Dallas and Virginia.  The differences between Canadian and US clubs are interesting.

Canada: elite but practical
USA: elite and luxurious, Caddyshack without the comedy


What have I noticed?


USACanada
TippingBring a wad of $1 bills and tip everybody: bag drop boy, locker room attendant, beverage cart girl..Never tip, employees are overjoyed if you do tip.
CartsAll golfers use powercarts, which have GPS, built in 2 way radio to call for food, refreshing towel, tees, ..Everyone walks and uses a pull cart. If you are really righteous, you carry your bag.
Beverage CartCart comes around every 10 mins with a good looking young lady in daisy dukes. Tip heavily and flirt.Beverage cart only operates if the course is full, most people just take free water. Cart girl is ecstatic when you give her 50 cent tip.
BarBar stocks 50 different kinds of single malt whiskey, 45 kinds of tequila, and lots of cigars.Bar stocks 20 kinds of draft. Cigars must be smoked off the property on the side of the road.
Lost ballsWoods and ponds full of high quality balls that no one bothered to findWoods and ponds scoured clean
Course MaintenanceSpare no chemicals or treatments to keep it beautiful. Good thing Trump took us out of the Paris Accord.Sierra Club would be proud.
Course DesignCourse designed by Jack Nicklaus or Greg NormanCourse designed by founder's brother in law Norman.
ClubsCleaned after every round, make sure to tip.There is a bucket behind the pro shop if you want to do it yourself.

Tuesday, May 30, 2017

Stocks At All Time Highs, Time to Rebalance

The stock markets in the USA are hitting new records again, 21,000+ for the Dow Jones etc.  This happens about once a decade or so, and is unpredictable.  It means your stocks, ETFs, Equity Mutual Funds are probably at all time highs as well.

You probably have a desired portfolio allocation for stocks, bonds, international stocks, cash, etc.  Check your holdings and you will likely find you are over-weighted in stocks because of the market's performance.

So now is a good time to rebalance your portfolio if your allocation is out of balance by more than a few percent.  Sell some of those winning domestic equity holdings, buy bonds or international stocks or whatever you are underweight.  This means "take some of your winnings off the table."

This technique of keeping a balanced portfolio is recommended by Warren Buffet, Vanguard, Fidelity, and most other respected investment authorities.

Disclaimer: this is not professional investment advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Photo credit: flickr

Tuesday, May 23, 2017

Russia and Putin are Winning



Getting your opponent taken over by a radical leader has worked in Russia.  Lenin was actually sent by train to Russia by Germany during WW1 to undermine the government and get the Russians out of the war.  The German plan worked perfectly as Russia devolved into a civil war and withdrew from WW1, freeing many German troops to go to the Western front to fight the English and French.

Helping Trump get elected is not quite as powerful and will not result in an immediate civil war in the USA, but it is paying big big dividends in terms of weakening the world's superpower.  We are lucky that Trump is not as smart as Lenin or as charismatic.

Not all of this can be directly tied to the Russians but they certainly helped:
  1. Reduce the USA's stature in the world by getting an obvious blowhard, lying, racist narcissist elected President.
  2. Make democracy look bad as Trump lost the popular vote, won the election, and he does not care about the people who did not vote for him.
  3. Undermine the free press by having the President and his supporters call it "Fake News".  Kudos also to Rupert Murdoch for destroying trust in the press while running a company that considers itself part of the press.
  4. Undermine the judicial system by having the President and his supporters attack judges, defendants, free speech, and the courts.
  5. Undermine the US intelligence agencies (CIA, FBI, NSA) by having Trump accuse them of criminal acts and lying.
  6. Making the USA look silly as they know the Russians manipulated the election, but cannot do anything about it since Trump is President.
  7. Split the USA into two camps that detest each other:
    1. Conservatives
    2. Liberals
So the Russians are certainly winning at this point, we can only hope that this stops soon.

Tuesday, May 9, 2017

Saturday, May 6, 2017

Why Boomers Are Not Downsizing


There are numerous news reports that Baby Boomers are not selling their houses and downsizing to condos or smaller dwellings.  As a boomer who has downsized to a condo, this intrigues me.  Why is this happening?  Perhaps some anecdotal evidence from friends and acquaintances will shed some light on this.

Downsizing Requires Foresight

Typically, you will become physically unable to maintain a house and handle a move in your mid 60's to early 70's.  If you are going to downsize, you should really do it in your early to late 60's based on foresight that you will be physically unable to handle your house or a move later.  It is easy to overlook your coming infirmity and stay in your lovely house until you are too old to move without major disruption.  We know a 75 year old couple who are now too infirm (she has cancer, he is too weak) to ever move out of their 3000 square foot suburban house.

Inertia

It is easy to stay in your current situation, enough said.

"I Will Never Pay Condo Fees Like That!"

After 30 or 40 years of owning a home and paying for maintenance of the home, it is hard to swallow the idea that you will pay a fixed monthly fee for condo fees or rent.  These folks religiously believe that it is better to buy than rent and condo fees seem too much like rent.  We know a couple of 60 year olds who balk at the idea of $500 a month for condo fees but they are OK with getting a new roof installed for $10,000 and paying $400 a month for utilities.

We Need The Space

I have some sympathy for this idea as downsizing means that you cannot keep all that "stuff" that you accumulated over your 45 years as an adult.  You cannot put all that junk you own or buy in the basement or garage.  The alternative of spending $200 to $300 a month for a storage unit brings them back to the issue of spending money on rent.  We know a few couples with this hangup.


We Like the Neighborhood

This is a very valid reason to not move assuming you cannot find a condo or smaller dwelling close to your current home.  It is harder to make friends and settle in a new area when you are older.  If you lived in a place for 10 years, it is easier to stay than move.


photo credit: flickr

Thursday, March 16, 2017

How to Kill US Gerrymandering

One of the most objectionable and undemocratic characteristics of American government is legalized gerrymandering.  Gerrymandering is defined as "the dividing of a state, county, etc., into election districts so as to give one political party a majority in many districts while concentrating the voting strength of the other party into as few districts as possible."  Basically, the votes of the minority are devalued further by grouping them into districts that give them as little representation as possible.  One person's vote is worth less than another - NOT democracy.

I lived in a gerrymandered district in Virginia.  It was drawn up by the Republican state legislature to guarantee a Republican federal representative, and it has delivered this result for over 35 years, in spite of the fact that the area voted for Obama twice and Clinton in the last election.  You can see that it was drawn to guarantee a result by looking at the map, which is carefully drawn to ensure enough Republicans to elect a Republican federal representative.  The map does not follow logical geographic, municipal, or any other boundaries.
Virginia 10th District, courtesy Wikipedia

Many districts in many states are like this, and they favor the right or the left depending on who owns the state government.

How to defeat this undemocratic abomination?

Answer: vote in the primary of the party that always wins the district.  Since the district is guaranteed to go to a particular party, your only choice is in the primary election of that party. Do you want a more moderate representative or do you want the other party to choose a radical?  Of course you, the minority voter, want someone who is more moderate.  If you have to register as a supporter of the other party to vote in the primary, do so.  It costs nothing and does not bind you to vote for them in the general election.  Also, what is the point of voting in the primary for your party?  They are going to lose anyway.

If enough people do this, you will get a more moderate candidate for the favored party.  A Republican who does not want to eliminate Social Security and Medicare or a Democrat who does not want to outlaw cars and turn the roads into Kale farms.

So this is my idea to improve democracy in the USA.  After the last 15 years of turmoil, we certainly need it.

Tuesday, March 14, 2017

USA to Canada - Moving Investments


This is an update to my guide to moving to Canada, covered in this post.

One of the issues with moving is getting your investments moved from the USA to Canada.  Why would you bother?

  1. The USA will consider you to still be a resident and will expect tax payments on your income.  But you now live in Canada, and the Canadian government expects payments on this same income.  Untangling this mess will take a lot of time and money from your tax accountant.
  2. Your US broker will likely kick you to the curb if they find out that you moved out of the USA.  They will quickly close your account and you will have to scramble fast to get the investments moved.  If you don't move the investments before the brokerage acts, they will sell all investments with resulting capital gains that you will owe to the USA and Canada.
  3. You will not be able to claim any Canadian tax reductions on dividends as your investments are held by a US brokerage and they don't calculate Canadian tax reductions.  You will also have more paperwork to submit concerning foreign investments, just trust me on this one.
  4. NB: You actually end up with two cost bases when you move from USA to Canada:
    1. The USA considers your cost basis to be what you paid for the investments.
    2. Canada considers the cost basis to be what the investments were worth when you moved.
So how do you make this transfer?  It does depend on the investments and the US brokerage or mutual fund company you used.

  1. If you can, convert your US mutual funds to ETFs.  Vanguard will do this at no charge and with no tax consequences.
  2. If you own mutual funds that cannot be converted to ETFs, you should call your broker/mutual fund dealer where your hold the mutual funds.  Call the customer service number, do not say who you are, then ask "what happens if a person who owns mutual funds with you moves to Canada?"  You may get these replies:
    1. No problem.  This is good.  Keep the investments with them and just change your address.
    2. You can continue to hold the mutual funds, but you can only sell them for cash, no changes in investments.  This is not so good.  You have to look at the tax consequences and your investment plan.  Should I sell immediately and take a gain or loss?  If I hold the funds for a long time, will I continue to be happy with them, will they meet my diversification goals, are the fees reasonable, etc.?  Probably best to talk to your financial planner.
    3. You must sell the mutual funds.  This is bad.  Again, you need to look at the tax consequences as you may trigger large gains or losses.  Probably best to talk to your financial planner.
  3. If you own stocks, bonds, or ETFs in the USA:
    1. Open a brokerage account in Canada with the exact same owners as you have in the USA.  If it is a joint account in the USA, open a joint account in Canada, same for individual account.
    2. Call your brokerage in Canada, get the forms to transfer from a US brokerage to their brokerage, and fill them out.  Call your Canadian broker to make sure you fill the forms out correctly and that you selected a straight transfer with no tax consequences (simple transfer of securities, no buying or selling).  Make double sure that you are doing this.  Make copies and send them via registered mail or similar method to your Canadian broker.  This will cause the US brokerage to send the securities to your Canadian broker and they will appear in your account.  Expect to get phone calls from both brokerages during the process to verify information, ask questions.  Expect to call your Canadian broker to follow up if you don't hear from them, it will likely not happen automatically with no intervention by you.
    3. After the transfer is done, inform your US broker that you are a Canadian resident.  In the case of stock brokerage accounts, they will start the "kick the foreigner to the curb" process immediately. 
NB: If you are a US citizen, do not buy Canadian mutual funds or ETFs unless you are willing to submit a lot of paperwork to the US government.  These are considered PFICs (passive foreign investment company), which, for some unknown reason, the US government does not like.

Remember, you should talk to a competent financial planner before taking action.  This blog is just a single information source and a lot of information on the Internet is wrong, maybe including this blog, so do your research before taking a decision.

Photo credit: flickr

Thursday, February 16, 2017

Do Your Expenses Decrease After Downsizing?


In August last year, we downsized from a 3800 sq foot suburban house with 2 cars in the USA to an 1800 sq ft urban condo with one car in Canada.  This is supposed to be a trend for baby-boomers: urban to suburban, bigger to smaller, Trump to No-Trump, etc.

  1. But what happens to your expenses?  
  2. Do they really decrease and is it significant?  
  3. What are the sources of the savings?
Luckily, I track expenses using Quicken and we follow a budget so the answers should be easy to find.  We also have not changed our lifestyle or budget since downsizing.

The answer to 1. and 2. is yes, there are savings of about 10 to 15% overall, depending on which downsized month is compared to our previous full-size average.

The harder question to answer is number 3, what are the sources of the savings.  
  • Unfortunately, the biggest absolute saving was in a category that I call "household" and includes a lot of miscellaneous expenses: decorating items, small services, small purchases, etc.  I am not sure why our expenses dropped by 8 to 10% in this category.  Maybe we don't have the space for impulse purchases or the need for a lot of services?
  • Utilities dropped by about 10% and that makes sense.
  • Auto expenses dropped by 50%
  • Groceries went up by 15%, prices are higher at urban supermarkets
  • HOA fees went up, home repairs and services went down, for no net change
  • Entertainment expenses went up by 10%, there is more to do downtown than out in the suburbs.
But net-net, our expenses have gone down by about 10 to 15%.  So you can expect some savings but this will not radically change your lifestyle.

Monday, February 6, 2017

Killing the USA While Defeating Terrorism



The US public is afraid. They are bombarded daily with negative stories about muslims, terrorists, immigrants, crime, climate change, wars, and unemployment.

Some of the fear is justified, but much is not.

Let's look at terrorism, one of the greatest and most emotional fears. It is behind the immigration ban, airport security measures, security at concerts, government surveillance, militarizing the police, huge security spending, casualties in Iraq, Afghanistan, Libya, and other negative and inconvenient changes to our daily routine. Fear of terrorism helped elect Donald Trump, a racist bombastic narcissistic misogynist.

But how big a problem is terrorism? The last attack on the US by organized terrorists was the underwear bomber about 10 years ago. All other attacks were from self radicalized lone wolves. The casualty rate from all attacks averaged 171 per year from 1995 to 2014, or 0.00005% of our population. A very very low rate compared to deaths from drugs (47,000 per year), traffic (32,719 per year), crime (14,196), workplace accidents (4836 per year), and medical malpractice.

Yet we are radically changing our society to combat this tiny terrorist threat. Why spend trillions on something which kills so few? Why change our society into a repressive police state with intrusive surveillance for such a small problem? Why divide our country by whipping up fear and enacting controversial laws such as immigrant bans and encouraging suspicion of certain religious groups? Why give up our rights and liberty? Are all our military casualties worth it?

Clearly some measures make sense such as airport security since we know terrorists have repeatedly targeted aircraft. Increased police activity makes sense since they have caught some terrorists before they acted.

My point is that US society is changing for the worse due to massive efforts to combat a small problem while we neglect other more serious threats to our health and safety such as opioid addiction, violence in the inner city, health care for the poor, bad roads, and our low high school graduation rate.

We are turning America into a divided, fearful, less free, overly policed, and more racist society to combat a threat that is 300 times less that the problems of drug addiction or traffic deaths. We have to rethink our priorities, or America "the shining city on a hill" will be destroyed in our misconceived all-out fight against terrorism.