Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Is the Fixed Income Market buying what the Fed is Selling?

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Fed’s Balance Sheet Normalization Guidelines (in billions)

By Kevin Flanagan , WisdomTree Investments

Special to the Financial Independence Hub

In the post-Federal Reserve (Fed)-meeting world of the money and bond markets, there seems to be a disconnect between what market participants are thinking and the Fed policy decisions actually being made. It is a case of the market not buying what the Fed is selling.

In other words, the term “policy mistake” has begun to enter the discussion, as the U.S. Treasury (UST) arena appears to be operating under the assumption that the Fed should perhaps ease up on its tightening campaign because

(a) inflation has been slowing in recent months, and

(b) economic growth has been lackluster. This line of reasoning concludes that the policy makers will go too far with their rate hike and balance sheet normalization plans, to the detriment of the economic setting.

Based on the Fed’s actions at the June FOMC meeting, the policy makers do not seem to be deterred in their “full steam ahead” outlook, as they envision yet another rate hike this year and expect “to begin implementing a balance sheet normalization program this year” as well. (On Wednesday, July 27, the Fed kept interest rates unchanged — Editor.)

So, let’s assume economic and financial conditions do live up to the Fed’s expectations, what then will their plan look like for phasing out their reinvestment program.

Continue Reading…

5 overlooked costs when Upsizing Homes

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Planning to upgrade to a larger home? Trading in a petite Toronto condo for greater square footage is in the five-year plan for many homeowners. And the opportunities to trade up are better than they have been in years; recent provincial rules to calm the housing market have softened the pace of price growth and created frantic multiple offer situations, giving prospective home buyers some much-needed financial breathing room.

Whether buyers are looking to swap high-rise downtown living for options in other GTA markets —  such as a reasonably-priced detached home or condo in Hamilton,  for example —  the time is right to come off the sidelines and explore your real estate options.

However, upsizing your home can come with upsized expenses, which can take condo dwellers by surprise. Here’s what buyers should consider, beyond budgeting for a larger down payment and closing costs.

Blend A bigger Mortgage

Chances are moving to a larger property means taking on larger monthly mortgage payments. Just as you did with your starter home, it’s important to connect with a mortgage broker before starting the house hunt to determine your maximum budget, based on the down payment you’ve saved and the existing equity you’ve built up in your current home.

Depending on your existing mortgage, you may have a few options for new financing. If you have a fixed mortgage rate, the ability to port your mortgage, and are mid-term, you can simply move your mortgage over to your new home and get what lenders call a “blend and extend.” This approach combines your existing mortgage rate with what you’d qualify at for a new term, with your new interest rate the weighted average between the two.

For example, let’s say your existing mortgage has a remaining $250,000 balance, a fixed rate of 2.1 per cent, and two years left on a five-year term. Assuming interest rates have risen since signing up for your last mortgage and you now qualify at a rate of 2.69 per cent, your new, blended mortgage interest rate will be somewhere between those two rates.

However, while blending your mortgage can be a good way to take advantage of an existing lower rate and avoiding the fees associated with breaking a mortgage, it’s not an option that’s available to all borrowers. If your mortgage product doesn’t include the ability to port or transfer your mortgage (most variable-rate mortgages do not), you may be forced to refinance instead and pay the interest rate differential, or three months-worth of interest,  whichever is higher.

Ramp up your Reno Budget

Many larger, detached properties are considerably older than new condo stock, and you may need to shell out for a few upgrades. Be prepared for costs to add up quickly – older home renovations can range from cosmetic, like ripping up old carpeting, to important structural fixes. Some of the most common renovations in older homes include outdated electrical wiring — such as knob and tube, which is a fire hazard — and replacing old plumbing, like ki-tech or galvanized piping. Continue Reading…

Opinion: Morneau rings death knell for entrepreneurial spirit in name of “fairness”

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Finance Minister Bill Morneau

By Trevor Parry

Special to the Financial Independence Hub

Liberals are majestic creatures, always knowing what is better for the masses, and careful never to swallow a dose of their own medicine.  One can conjure up the Hogwartsian image of the Little Prince and “Red” Billy Morneau stumbling hand and hand through the torch-lit catacombs of the Department of Finance, where, to their great joy, hidden behind the cobweb-covered portrait of Alan MacEachen they find a secret passage to Chamber of the Knights of the Just Society.

For it can only be a long forgotten cell of Birkenstock-wearing discredited ideologues, clutching fervently to their well-worn copies of the Carter Commission Report that have vomited forth Tuesday’s discussion paper decrying the apparent abuses perpetrated by the shareholders of private corporations.

Mr. Trudeau likely can’t spell dividend, and Mr. Morneau dare not ask his father how his tuition to the LSE (coincidentally, founded by the Fabian Socialist Society) might have been funded. For these two, along with a good portion of the Liberal caucus, are completely unaware of the sacrifices that are made to create a successful business, or create a professional carreer, and who frankly shake hands with the Holy Spirit of Hypocrisy on a daily basis.

Entrepreneurialism is a plague to Liberals

No, to the Liberal Party of Canada entrepreneurialism is a plague to be eradicated, replaced by a compliant corporate oligopoly working in symbiosis with a burgeoning civil service, and of course legions of ravenous consultants.

The  Department of Finance Paper seeks to target corporate tax planning strategies that have been in place for over 30  years. Paying dividends to adult children, parents and other family members in lower tax brackets, often as a measure of generosity or as a means to pay for higher education (something Mr. Trudeau aspired to but could not achieve), multiplication of the capital gains exemption to preserve a life’s work, and realizing deferral as a means to create capital are apparently at odds with the omniscient and ubiquitous Liberal goal of “fairness.”

Tax fairness should be holding all to the lowest possible measure of taxation, not subjecting everyone to the highest. For in Trudeau’s lexicon fairness is synonymous with mediocrity.    For it is an unassailable lesson of history that the fundamental precondition for the creation of economic dynamism is the creation of surplus savings and capital by the entrepreneurial class. The tax strategies that Mr. Morneau and his Office of the Five Year Plan (formerly known as the Department of Finance) targeted on Tuesday had in some tiny measure allowed for that.

In Liberal Canada economic results must be ordained, not by a higher power, or by the ability or drive of the individual but by a collection of over-entitled, mentally ossified Liberal politburo. By every measure possible; some of which arguably violate the Charter of Rights and Freedoms, in that they directly and unabashedly discriminate against familial relationships, anyone who dare exceed the rigid definition of “middle class” (which for most of the country is “lower” middle class at best) will be assaulted by the great level of an over-50% tax rate. The product of this fairness will be the corpulent rewarding of Liberal sacred cows without even the pretence of accountability.

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Millennial Money: How Daydreaming can help you Budget

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“If you can dream it, you can achieve it” is a saying more often seen on an inspirational Instagram account than in a financial blog. While I am loath to agree with the sentiment of a mere bumper sticker, dreaming really can be an excellent tool for those struggling to get their financial futures in order.

I began to think about the value of dreams in achieving financial freedom a few months ago. From there I decided to do some research on the subject. What is it about having defined dreams that can help solidify steps needed to achieve goals? When, if ever, is dreaming going to hurt instead of help?

I came across this blog post from ‘The Lady in the Black’ site, which includes a variety of guest bloggers all chiming in with that they consider the true value of using our daydreams to achieve our financial goals.

It’s safe to say we all love a good daydream once in a while. It can be an excellent way to escape the day-to-day uncertainty in our lives. More importantly, however, daydreaming can be an opportunity to really discover what is most important to your future financial wellbeing, and can even help you plan a concrete goal for that future.

Continue Reading…

Canadian ETF growth continues in 2017 but still early innings

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Source: Strategic Insight data as of December 31 of each year. As of April 30th for 2017.


By Atul Tiwari 

Special to the Financial Independence Hub

With summer in full swing, along with warmer weather and blooming gardens, it got me thinking about cycles in investing. In particular ETFs, which have been taking root in Canada over the past few years.

When Vanguard entered the Canadian market in December 2011, we were one of only eight ETF providers. Our own evolution illustrates how much has changed in just over five years: We started with six index-based ETFs and currently offer a lineup of 33 ETFs, including four actively managed equity factor-based ETFs launched in June 2016.

Industry-wide more than 500 ETFs now vie for the attention of investors and advisors. And it’s not just products that have proliferated; new ETF providers enter the industry every month. More than $130 billion in Canada-domiciled ETF assets is now divided among 24 ETF providers. And there’s room to grow. ETFs make up only 8% of Canadian investable assets while capturing 25% of industry flows for the first quarter.1

Investors have clearly grown more comfortable adding ETFs to their portfolios. While I’m not one to make predictions about whether the pace of expansion will continue, I do see three trends that tend to favour it.

1.)  Greater fee transparency

Thanks to the second phase of Canada’s Client Relationship Model reforms (CRM2), investors are starting to see — in dollar terms on their account statements — what they’re paying their advisory firms. Canadian regulators are also considering a potential ban on embedded trailing commissions. This will surely generate discussion and shine an even brighter light on investment fees.

No less an expert than billionaire investor Warren Buffett extolled the long-term benefits of low-cost investing in his 2016 letter to Berkshire Hathaway shareholders. Cost plays a critical role in total investment return. The less investors pay in fees, the more of the potential returns they can keep. This is true whether you are investing in an ETF, mutual fund or any other investment vehicle.

2.)  Fee-based advisors are on the rise

Driven partly by regulatory changes and heightened awareness of investment fees, many financial advisors are moving to fee-based business practices. We favour this transition as we believe it better aligns advisors with the needs of investors and creates full transparency. Continue Reading…