Action List Worth A Look

Our Canadian research comes from National Bank. Since November, 2009, they have produced an Action list where their analysts provide their best ideas. In conjunction with their recommendations, they also recommend when to sell these holdings based on price appreciation or earnings surprises.

From November 30th, 2009 to June 30th, 2010, 27 names have appeared on the list with 13 still on the list. In the last quarter, five names were removed while six were added.

In the last quarter, the NBF Action List returned 3.76% vs. -0.33% for the TSX. Since November 30, the Action List netted 6.13% vs. 0.81% for the TSX.

The Action List is updated daily. To get the current action list, please don’t hesitate to contact us and we would be happy to email or send you a copy.

Have a great weekend. Your comments are always appreciated.

It’s Time to Rename Tax-Free Savings Accounts

Reading the Financial Post this weekend, an incredible statistic was reported about TFSA’s. About 90% of all tax-free savings account contributions were held in actual savings accounts earning a paltry .25% give or take. With interest rates like that, who cares if the earnings are tax free as you earned $12.50 over the course of the year on a $5000 contribution.

Part of the problem no doubt were the teaser rates that companies offered for the first three months of the year at 3% – 4%. After that, the rates came down but who could bother changing things at that point. Obviously, 90% of contributors couldn’t be bothered.

Tax Free Savings Accounts should be renamed Tax-Free Investment Accounts. After all, we are allowed to buy stocks, bonds, mutual funds, etc… in these accounts. Corporate bonds still offer yields in the 4% – 7% range that can be very attractive when no tax is being paid. A $5000 investment would yield $200 – $350 per year depending in the bond purchased. Considerably higher than the $12.50 more than 90% of TFSA holders earned last year.

If you did open one of these accounts last year, its time for a review. Oh!!! If you did put your contribution in a savings account, consider talking to a financial advisor about your options as your bank or trust company didn’t do you any favours by paying you .25%. Your comments are always appreciated.

RRSP Loans…Now More Than Ever

With Christmas around the corner, the last thing most people are thinking about right now are taxes and RRSP contributions. That being said, this season is the perfect time to start thinking about saving taxes and building your retirement nest egg.

A recent survey has shown that most Canadians have not contributed to RRSP’s in the last couple of years with the recession and poor equity markets in 2008 as the major culprits. Another sobering statistic is that Canadians closing in on retirement in the next 5 years are those that have stopped contributing the most which will lead to a more difficult retirement.

We have just received our details for RRSP loans for this 2010 season and the borrowing rates are lower than ever starting at 3% on loans up to 24 months. Considering investors can borrow at these low rates and get higher returns on corporate bonds, it becomes very attractive to build back your savings and save some taxes at the same time.

To contact us for more information, you can click “HERE“. Your feedback is always welcome.

Canadian Investment Idol Competition

We would like to congratulate Mr. Joseph Weisz of Montreal, Quebec for winning the first Rothenberg Capital Management Canadian Investment Idol Competition powered by Claymore ETF’s. Mr. Weisz had a return of 15.02% over the eight week time frame.

To view all of our weekly winners, you can click on the link HERE.

 

Have a great week.

Life Settlements in Difficulty in Canada

I have seen some ads in the Calgary Herald advertising life settlements yielding 10%. The ads definitely peaked my interest as this was something different than real estate, commodities, equities or even the bond market.

To have a different asset class paying a 10% yield would be quite attractive. Of course, with the rash of real estate deals going south and ponzi schemes rearing their head, one can only be skeptical.

The underlying concept behind life settlements is that a company offers an individual that is diagnosed with a life threatening illness a lump sum while they are alive in return for the proceeds from a life insurance policy upon death.

The company raises money from individuals paying them the 10% interest rate. They are supposed to pay the individuals from the proceeds of the policies which is difficult to pinpoint as they cannot guarantee when a policyholder will die.

The industry is growing in the US with about $12 Billion in policies sold in 2007 according to an article in this weeks investment executive. In Canada, the purchasing of policies is illegal in most provinces so the ones being offered for sale are from jurisdictions outside of Canada.

The main issue that is now plaguing this sector is similar to other unregulated industries. The individuals selling the policies are not registered to do so and are not offering proper documentation to potential investors outlining the risks.

Two companies in Ontario selling these policies have been shutdown while one in Alberta is currently being investigated.

All one needs to do is visit the Ontario Securities Commission or Alberta Securities Commission websites and do a search on life settlements to get more details on some of the issues.

If you have had any positive or negative experiences in this area, your feedback would be greatly appreciated.

 

 

 

Headline Deflation Number Not Worth Reporting

Media outlets have been reporting that inflation was -0.9% for the last 12 months in Canada. Many people will listen to that one number and not look any further.

The headline number includes food and energy prices with energy prices being the main reason for the decline since a barrel of oil in July 2008 was trading as high as $147 a barrel compared to $70 today.

As a result, gasoline prices dropped 28%. The decline in energy prices was quick and steep and will quickly disappear from the deflationary number being reported.

Core inflation which excludes these items was 1.8% and right in line with the 2% target of the Bank of Canada. There was nothing in this report to indicate a change in Bank of Canada interest rate policy.

Going forward, expect energy prices to contribute to the headline inflation number. Just like my post of a couple of weeks ago disecting the jobless numbers, it is always important to read more than the headline in order to say informed.

Your comments and inquiries are always appreciated.