Life in Canada

Canadian taxpayers will fall about $3.5-billion short of breaking even on the money the federal and Ontario governments invested in the bailouts of Chrysler Group LLC and General Motors Co. in 2009.
The federal government’s sale of the remaining 73.389 million common shares it held in GM will close the book on the investment and the auto maker’s period of being derided as “Government Motors.”

Ottawa will raise about $3.2-billion from the sale, based on a report from Bloomberg Tuesday that the stake it sold to Goldman Sachs & Co. was priced at $35.90 (U.S.) a share.

A report on the auto rescue done by the Auditor-General last year said the two governments had received $5.4-billion (Canadian) of the $13.7-billion they contributed to the bailouts of the two auto giants.
Since then, GM bought back about $400-million (U.S.) in preferred shares and the Ontario government sold its remaining shares for $1.1-billion (Canadian), before the final sale by the federal government this week. That brings the total proceeds to the governments to around $10.2-billion.

The share sale by Ottawa will help federal Finance Minister Joe Oliver balance the federal budget.
But Jerry Dias, president of Unifor, which represents workers at GM plants in Oshawa, Ont., St. Catharines, Ont., and Ingersoll, Ont., said the government should have kept its shares and used the ownership as leverage to force GM to re-invest in Oshawa and St. Catharines.

“It is remarkably short-sighted of the federal government to sell off its shares in GM at a time when there has been widespread agreement that securing GM’s future in Canada is critical,” Mr. Dias said in a statement.

Unifor has been meeting with GM officials both in Detroit and the Canadian head office in Oshawa to lobby for new investment in St. Catharines and Oshawa. General Motors of Canada Ltd. announced earlier this year that the auto maker and suppliers will invest about $540-million at the plant in Ingersoll to make the next generation of the Chevrolet Equinox crossover utility vehicle.

“The federal government is selling off its shares for short-term political gain, as it prepares its last budget before the next federal election. We need leaders with more vision, strategy and savvy than this,” Mr. Dias said. “At some point very soon, the federal and provincial governments are going to have to take decisive action to secure the future of GM.”

Answering a single written question from a Liberal MP cost the federal government $117,188 in staff time, according to information tabled this week in the House of Commons.

The right to ask departments for written answers is a key tool for MPs – primarily on the opposition benches – to dig up information that can later be used against their political rivals.
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The answers can lead to news stories on the details of government expenses, revealing everything from how often cabinet ministers use government jets to how much the RCMP spends destroying marijuana crops.

The process – officially known in Parliament-speak as answers to questions on the order paper – can also provide insight into the impact of public-policy decisions.

But Conservative MP Mike Wallace weighed in with a question asking how much departments spend on answering these types of questions.

Over less than a four-month span up to Jan. 29, 2014, the total was more than $1.2-million.

In an interview, Mr. Wallace said he simply wants MPs and the public to be aware of the costs of these questions.

“I think it’s just important that it’s on the record,” Mr. Wallace said. “I think government and Parliament could run more efficiently and effectively in a lot of areas and this is just one little tiny example of where, are we sure we’re getting value for the dollar?”

The fact that one question cost more than $117,000 might lead the public to ask questions, he said.

“‘Ok, you spent a salary for a person and a quarter for a year. What are you doing with that answer?” he asked.

Plenty, insists Liberal MP John McCallum, who made the request. The MP had asked for a list of all briefing notes provided to all deputy ministers in government. The responses were then divided up among Liberal MPs, who then filed questions under Access to Information – a separate process available to the public – to obtain briefing notes that may be of interest.

“I think those cost numbers are totally inflated,” he said, noting that the answers would have been in an existing database. “It’s inconceivable to me that it would cost anything on that order. But the more important point is this is the cost of democracy. The government spends millions of dollars hiring communications people to keep information from us … So we’re obliged to use the tools that we have available to ask the questions that Canadians want answered.”

The answer to Mr. Wallace’s question was provided by individual departments and compiled by the Government House Leader. The estimate is based on how much it would cost for a public servant with a salary and benefits of $116,160 – equivalent to $60 an hour – to produce the answer.

Amazing eh...

OTTAWA - Insurance executives say homeowners will never have access to comprehensive flood insurance in Canada unless there are new maps of flood-prone areas that take climate change into account. Cry babies I say.

That's the finding of a study that surveyed senior executives at 13 Canadian insurance firms on extreme flooding, which devastated parts of southern Alberta and Toronto this year and is becoming more frequent across the country.

Affected homeowners are often surprised to learn their policies, while covering sewage backups, do not pay for damage from water entering basement windows from swollen rivers and streams.

Canada is the only G8 country where this so-called overland flood insurance is simply not available in the private sector.

"Most insurers agreed that existing flood maps are inaccurate, outdated and inadequate for insurance purposes," says the study by two experts at the University of Waterloo, Ont.

"This data gap poses a clear threat to the viability of flood insurance."

In an advance copy of the report by academics Blair Feltmate and Jason Thistlewaite, to be released Monday. Their research was paid for by the Co-operators Group Ltd., a large insurance firm.

The insurance industry is sharply focused on flooding, which in the last 15 years has become their biggest payout area. That's because of extreme weather events that the executives agree are linked to climate change.

"The big cost now ... is flooding basements, by a country mile," said Feltmate. "So it's really high on their radar screen."

Canada has seen 289 flood disasters since 1900, the largest such category, more than the number of hail, wildfire and winter storm disasters combined in the same period.

Floods are expensive. The southern Alberta floods last summer are estimated to have cost private insurers $2.25 billion, even though damage to residences was generally not covered. In 2011, floods in Manitoba and Quebec also racked up millions in payouts. How did they get these figures and from where?

The federal and provincial governments are also exposed to huge costs under the Disaster Financial Assistance Arrangements, which pay a disproportionate amount for overland flooding compared with storm, hail and wildfire disasters, which are often already covered under private policies.

Existing sewage-backup coverage is also hurting private insurers' bottom lines because climate change results in more torrential downpours that overwhelm aging municipal infrastructure and can't be absorbed by an ever-more-paved urban landscape.

Feltmate cites the example of a Toronto neighbourhood, south of the Downsview airport, where a large percentage of basements were flooded three times since May this year.

Executives would consider offering overland-flood insurance, says the survey, but can't begin to draft policies or set premium levels until proper maps accurately identify the new risks arising from a warming planet. That is their new risk for premium increases to cover of course.

"We need new flood-plain maps that take into account not the historical weather but the weather that can be expected going forward," said Feltmate.

The study says existing maps are badly out of date, and focus on historical hazards for land-use planning rather than potential risks in the decades to come.

The federal Public Safety Department acknowledged the cartographic gap recently by ordering a new study that will survey flood-mapping in six countries, including the United States.

The report, due next March, will also assess the state of flood mapping in Canada and estimate the costs to meet any new national standard.

The department notes that a previous federal program to generate floodplain maps was killed in the mid-1990s, and little has been done since.

Feltmate says the next phase of his research is a year-long survey of mayors, town councillors, premiers and others who will have to become part of Canada's flood solutions.

The study, also supported by Co-operators, will consult as well with bank executives, who Feltmate says are only dimly aware of the threat that increased flooding poses to their mortgage business.

That's because mortgages are contingent on a homeowner obtaining insurance, and many insurance companies may begin to steer clear of properties prone to frequent basement flooding, such as in the Downsview neighbourhood.

"The banks have a much greater stake in this game than they currently realize," said Feltmate. The banks of course offer house/home insurances?.

They call it a game I personally call it a 'rip off' but shareholders will be well pleased.. another Canadian monopoly in action.

It's been said that through chequing account banking fees Canadians are being taken to the cleaners annually. In fact, it's more like to the tune of about $185 per year but that's still $185 that could be put to better use arguably.

So suggests a 2010 study by Vision Critical commissioned by ING DIRECT Canada that finds more than half of Canadians (55 per cent) have a fee-based chequing account and on average, they dole out $185 per year in fees for these accounts.

"That average includes people that are paying monthly fees and most banks charge monthly fees in the range of $10-$15 per month. In some cases, these accounts are subject to additional fees on top of that," explains John Davis, head of product management and market research at ING DIRECT Canada in Toronto. "You might find other charges such as buying cheques for your account or viewing cheques online, a lot of banks charge for that. These types of things add up."

ING DIRECT has been in front and centre for many months pushing its no-fee chequing account message on Canucks through billboards, television ads, and Internet banner ads. According to Davis, the marketing campaign is working.

"Ultimately banks benefit when people deposit money into their accounts. This is how chequing accounts used to work in Canada. Not only would you not pay any fees but you'd actually get interest on top of that," he says. "We've had more than 100,000 Canadians set up a THRiVE Chequing account.

"Overall, we're also finding our clients are really happy with this account. We do regular surveying to see if they'd recommend this account to a friend or family member and the scores are quite high."

ING DIRECT Canada's no-fee daily chequing account, known as THRiVE Chequing, has reportedly saved Canadians over $18 million in unnecessary bank fees, and paid more than $100,000 in interest. "There's no minimum balance required to use THRiVE Chequing. This account actually pays you interest and it doesn't charge fees for daily banking," he adds.

Consumers can help themselves too by using cash instead of debit cards to make purchases or by avoiding a rival institution's ATM machines. But when it comes to fees imposed on investing in mutual funds for instance, Davis says those charges can be reduced by taking the time to shop around.

"Canadians are paying the highest mutual fund fees in the world," he says. "We pay substantially more than Americans do for essentially the same product. There's no connection between the amount of fees people are paying for investments and the market performance that those investments are going to get.

"Canadians should be looking at what they're paying in fees in the first place. The other thing they can do is shop for investments the same as you would for a car, TV, or anything else."

To that end, credit unions generally offer lower fees, higher interest rates and more personal service.

In any event, there are annoying, unnecessary fees for just about everything it seems. And one can't help but to wonder if former Goldman Sachs executive director Greg Smith's remarks on making the client the focal point of business again might be sound advice for financial institutions on this side of the border.

"With respect to banking fees, Canadians are operating under a myth that most of these transactions are being manually handled when in fact they're automated," Davis remarks. "We have a call centre that wins awards globally in terms of providing excellent customer service . . . that's a client experience we want people to have. We're also using technology to give Canadians better value."

Tips on organizing your estate

If a member of your family winters down south or is about to embark on a long trip and you may need to get a hold of important financial information.

Keep your will and power of attorneys in one place.

If you have hired a lawyer to draft your wills and power of attorneys (a power of attorney for personal care is also known as a living will), the back page of the will typically has the contact details of the lawyer so that the executor can quickly contact them if you need a lawyer to help you settle an estate.

If you have alternate power of attorneys, one power of attorney should be releasable to your first choice in the event the power of attorney is required. In the event the first choice has predeceased you or is no longer able to carry out their duties, a legal document known as a “direction” should be on file which directs the power of attorney to be releasable to the 2nd choice; if you have two power of attorneys issued, you have two people with power over your property or personal care.

This is an especially important point if your primary power of attorney is your spouse and you both pass away at the same time or the survivor passes away shortly thereafter. A direction is typically kept on file by your lawyer (safe-keeping of wills and power of attorneys is often an over-looked aspect of why you should hire a lawyer to draft a will; in some jurisdictions, a lost will can be interpreted as no will at all).

Here is the important point: let someone know where you have kept these documents and provide them access to it whether through a copy of the key to the safety deposit box, the combination to the safe or the contact details of the lawyer who drafted the will.

Provide a one page memo of your holdings.

As Canadian Capitalist suggested, a one page listing of all our bank accounts, insurance policies and portfolio statements would be helpful. To drill down one more level, it should not only list the account name and numbers but who to call for more information. In the case of insurance policies, it may be helpful to list the insurance broker’s name since many older policies are underwritten by a different company than who issued it given the consolidation in the industry. The account number on the insurance policy may be different so the broker should be able to provide some assistance.

One would be surprised how much unclaimed money there is in bank accounts or unclaimed insurance proceeds simply because the executor did not know an account existed or a policy was purchased.

Photocopy important underlying documents.

This tip is especially important if the deceased was born in a different jurisdiction. Photocopies of birth certificates, and citizenship cards are important if you have to claim property in other countries. The deceased may have copied account numbers wrong and the one page summary sheet becomes incorrect.

If you photocopy underlying documents and produce a one page memo of your holdings, it would help to put them in a folder which, in turn, is stored in a drawer or cabinet. In this manner, it is easy to find rather than having an executor rummage through drawers to find one item and then a set set of drawers to find the other.

Provide the password to computers

Certain accounting software now as emergency record features. However, if the executor cannot access a password protected computer, how can they use this feature? The alternative would be to save all of the above on a USB card and to provide it to your executor.

Art

FACT:

Identity theft is one of the fastest growing crimes in North America. A recent study by Javelin Research found that in 2009 ID theft affected 11.2 million consumers costing about $54 Billion! This is a staggering increase from 2008 where 9.9 million people were affected with a cost of about $48 billion. If you have ever had your ID stolen or know someone who has been through it, then you’ll know that it is one of the most stressful events you can go through. In order to prevent or reduce the chances of ID fraud, it is important to know how ID thieves steal your information and how you can protect it. Unfortunately, there really is no way to be 100% protected against this rapidly growing crime, however you can reduce your risk by understanding how your information can be obtained by ID thieves.

ID Theft – Trash is Gold

Your garbage can is the thieves’ goldmine. Think about all the things you throw away, receipts, bank statements, tax information, bills etc. All these contain important personal information that can be used by others. All it takes is just one letter with your name and another important personal information.

Remedy: Shred sensitive material before you dispose of them.

You’ve Got Mail

Your mail is another goldmine for ID thieves. Stolen mail is one of the most popular methods of stealing identities; your mail contains all the personal information someone would need. All the marketing material you receive from companies and banks contains vital personal information.

Remedy: Most companies give you the option of receiving your mail online; view your banking and credit card statements online. You might also want to consider having a postbox as they are often monitored and protected by the postal service. Put your mail on hold if you will be absent for a while. Do not just throw away marketing material, open and shred them first.

Skim Me

Another very popular strategy employed by ID thieves is “card skimming.” Skimming is when you cards information is stolen by swiping your card through a magnetic card reader, which stores/downloads your card information. The thieves can then use this info to make purchases online or even load it on another card and use it in stores.

Remedy: Be carful when handing your card over to someone else to swipe, if you notice anything suspicious contact the authorities and your institution immediately. For example, if they swipe your card more than once or drop the card and pick it up you could potentially become a victim of ID fraud. Also, when using the PIN pad cover your PIN with your hand, even if you are using an ATM and nobody is around you. Always cover your PIN because a hidden camera could have been placed to obtain your PIN.


What’s in Your Wallet?

One of the best ways to steal ID is by stealing a wallet. Think about all the things you have in your wallet like your license, health card, bankcards, credit cards, even pictures and Social Insurance Card? Imagine all the good things that one can do with all this info.

Remedy: Try to minimize what you carry in your wallet, don’t keep 3 different credit cards and two debit cards on you at all times. Never keep your PIN in your wallet.

What should be in our wallet?
1. Driver’s license or other form of government issued ID
2. Car registration and insurance if required by law (I often keep these in my dashboard)
3. One or two credit/debit cards
4. Any other personal identification document you need on daily basis.

You should NOT keep the following in your wallet:
· Social Security/Insurance card
· Passport
· Checks
· Excess credit and debit cards
· Health insurance cards
· Passwords or personal identification numbers (PINs)
· Any other personal identification document you don’t need on daily basis.

These are just four ways your ID can be stolen. Of course there are numerous other methods such as hacking into government and/or corporation database, stealing info through employer, Phishing attempts and many others. Although you cannot stop this trend nor can you be 100% safe against ID theft, you can try to prevent it and minimize the chances that your ID will be stolen.

Has your ID ever been stolen or do you know anyone whose ID has been stolen? What other forms of ID theft do you know of? What do you do to prevent your ID from being stolen?

Insurance:

5 warning signs you may have improper insurance

Insurance is the transfer of risk from one party to another. In consideration of monetary payment by the insured, the insurer promises to pay compensation based on some future risk/loss, such as disability or death, to a designated party. In and of itself, the concept of insurance is great. Who does not want a risk management tool that shifts your risk to someone else?

However, the devil is in the details and there are two larger and worrying trends in the insurance industry. The first is that insurance companies don’t want to be boring old insurers anymore but asset managers. The second is a general consolidation of the industry. In Canada, three insurers- Manulife, Great-West Life and Sun Life- now control approximately 65% of the market. In the United States, companies dominant insurance niches. While the public opposes big banks, the insurers quietly reached a scale the banks would die for.
The result is that most insurance companies need to pay out as little as possible to maintain or grow their assets under management (in fact, many insurers sell policies as loss leaders while making money on asset management) and a consolidated industry means pricing power. Neither is particularly good for the consumer.
On a more specific level, what are 5 warning signs that you may have an improper insurance policy?

1. No medical required before obtaining an insurance policy
Four Pillars and I have written before about post-claim underwriting. While illegal in many jurisdictions, there are many ways to re-characterize a policy to be potentially within the scope of the legislation (and require expensive litigation to resolve).
A “no medical required” insurance underwriting process may not indicate per se that you are subject to post-claim underwriting but it could be a warning sign you could be sold a policy subject to post-claim underwriting. It may make the process of obtaining insurance easier but the potential future-risk is greater.

2. The purpose of insurance is not being used for risk management
As reported by Riscario Insider, the 10/8 program, which involves using insurance policies as collateral towards a loan to the policy-holder to be used for business or investing purpose (thus making the interest tax deductible), is being reviewed by CRA.
Depending on the specifics, some insurance policies were designed more as tax shelters than insurance. In such cases, the insured could run audit risk for what is supposed to be a risk management tool.
While no one knows what will happen to the 10/8 program (and you know there is too much money at stake not to have the insurance company fight this out), the larger point to consider is why you are entering into an insurance contract. If you are being sold something who’s primary purpose is not risk management then think twice since you have opened yourself to other risk factors.

3. Watch the exclusions
Insurance policies are drafted to set out what it does not cover rather than what it does. Just because it is called critical illness insurance, does not mean all type of critical illness are covered and if you have a family history of certain critical illness, the insurer could deny you on the grounds you failed to disclose a pre-existing condition.
The point is to ask your insurance broker what the policy does NOT cover as well as covers so you understand the limitations of your policy. If you may possibly fall under an exclusion, then the policy is not right for you.

4. Unnecessary insurance
Life insurance for minor children. Mortgage insurance. Credit balance insurance. Flood insurance etc. There are a lot of insurance products that are ideal for a small subset of the population but sold to everyone.

The fundamental question to be asked is always:
(i) am I actually at risk (chances of a minor child dying are slim; and

(ii) does the risk of occurrence actually require transfer of such risk (a minor child has no dependents so who really needs the money on death?)?

5. Too much insurance
This one is always tricky but insurance brokers tend to start high on their coverage (for their commission). The question to be asked is always: how much money do I really need in case something happens to me? This requires some cash flow projections based on your own life-style rather than what the insurance company tells you.

How do you attempt to avoid being caught in pre-existing condition trap? Some pre-existing condition denials occur simply because the policy-holder has not seen the doctor for a while and the insurance company is reviewing older documentation. The gap between the last medical visit and the commencement date of the policy could have incumbated a lot of medical conditions not disclosed. For policy holders who are more high risk, insurance companies do require a physical now as part of its due diligence.

But for what appears on paper to be less risky policy-holders, the insurance company may forgo this altogether (this was the case during good times but this may have changed) and by doing this really placed the risk onto you that you have a clean bill of health since your last visit. The moral of the story being get a physical as part of the process of obtaining insurance (if you are not required to already).

The second practical step is be honest and forthcoming and do it in writing. If an insurance company has on file a medical disclosure which may or may not be part of your medical records, it is more difficult to deny coverage.

Overview
High levels of government’s debt is universally regarded as a bad thing for various reasons including the potential loss of sovereignty if the debt is held by other governments and the crowding out effect on private enterprise. But what is its direct impact on the average household?

UPDATE
For the Official view on Canadian Family debt
( see this report Feb 16th 2010 )

http://ca.news.finance.yahoo.com/s/16022010/2/biz-finance-average-canadian-family-debt-reaches-96-100-2009.html

The direct effect is obvious. Large government debts are financed by one of two ways: increased taxes used to service or pay down debt or reduced services so that current government revenue can be redirected towards the same goal. There are also certain indirect effects.

In a Federal Reserve study of 2003, Thomas Laubach found that every 1% increase in projected debt to GDP ratio is estimated to raise long term interest rates by 25 basis points (1 basis point = 1/100 of 1% or 100 basis points equals 1%); a 2009 update of this study was issued but it is not free to access at this point.

The Congressional Budget Office, a non-partisan arm of the U.S. government, states that the debt to GDP was 53% in 2009 and is estimated to increase to 67% by the end of 2010 . With a borrower in that much debt, there will be pressure to raise interest rates to make investing in U.S. debt more attractive; politics can only with-stand reality for so long. The eventual raising of interest rates will force other governments which compete with the U.S. on the debt market (see Canada) to also raise rates.

The implications are quite clear. Interest rates will have to go up which means several realities going forward:

* The whole “should I lock in my variable rate mortgage” debate may be convincingly answered in the affirmative if rates begin to escalate significantly.
* The mini housing boom in Canada may soon end since it relied in large part on cheap credit which begs the question whether households can afford the increased carrying costs of a mortgage (assuming it is a variable rate mortgage) and shallow the reality that newly purchased home may fall in price.
* High interest rates tends to slow down recoveries (see below).

Here’s an interesting thought. If yields on government debt begin to rise and the investors’ appetite for risk remains cautious going forward, will dividend yielding stocks have to increase dividends in order to attract investors (a situation not without precedent)?

PIMCO, the well-respected investment management firm (and my favorite source of investing information without frills or hysteria), has already predicted that it will take 5 years to see a recovery that produces jobs given the effects of heavy governmental debt and increasing interest rates. Again, this is not without precedent. The 2010’s may indeed look a lot like the 1990’s in Canada: a brutal recession followed by staggeringly large government debt and associated high interest rates leading to a jobless economic recovery. In fact, as I posted before, it took approximately 10 years for Canada’s unemployment rate to fall back to pre 1991 recession levels.

There has been a lot of ink split lately about how most retail investors missed the rally of 2009 and whether there’s any legs left for further growth. Although important, the stock market rally of 2009 shifted the focus away from households deleveraging themselves (not to mention advertisers do not want to advertise in publications advising readers to spend less as part of deleveraging ).

When interest rates increase (and the question is now focused only on when and not if), there may be a refocus on this issue. Regardless of the economic environment, it is important to ensure all households control their expenses (even if the same can’t be said for our governments).