[Dean2]

Originally Posted by CMichaud

I follow you guys on this thread but admit to knowing next to nothing about all this money stuff.

With the uptick in inflation, what is the fall out eg. savings in bank being worth less, investments etc.

Is there a better place to shelter?

Sorry for the stupid sounding question but am curious what the options are to plan ahead.


Thanks

I posted this earlier in this thread.

I have said parts of this on a couple of other threads but thought I would post this here. PAY VERY CLOSE ATTENTION to what is happening right now. Gas is up 80% from a year ago, food 40%, Lumber 400%, copper 200%, housing is going up 30% a month in some places, even Edmonton and Calgary are seeing prices rising and short supply. There are severe shortages of everything from electronic chips to fresh produce. Despite what we see every day, the Fed tells us inflation is under 2%. Bank of Canada has changed its tone on interest rates, signalling possible rate hikes much sooner, and the liberal government has started knee jerk reactions to increase revenue and cool the Eastern Canadian and B.C. housing markets. If interest rates get to 5% it will take nearly all of the taxes raised from income tax just to cover the interest payments on our current National Debt. Income tax is still double what is raised on GST so increases to GST is not out of the question post the next election if the Liberals get in.

Between rampant inflation, higher taxes, and higher interest rates the financial health of many is going to take a real beating over the next 5 years. The advice I am giving the people I consult for, make sure your money is in assets that will increase with inflation and that you get as much debt paid down as possible, even debt where the interest is tax deductible. Assets that earn income are a far better choice than straight cash in a savings account. Best of luck all.

Some even earlier posts, and for the record, as of today the TSX is over 21,000, so it is up over 5000 points or 30% from the high in Feb 2020 prior to the big dump in March 2020. So money in the bank is worth 80 cents of the buck it was two years ago in Oct 2019, that same dollar in the market is worth $1.40 today, minimum.

Getting to a basic level of competency in money is not all that hard, it just takes a little study. Good start is the book "The Wealthy Barber". If u don't take the time to develop at least a mid level of knowledge you have to rely on others and have no ability to evaluate whether they know what they are doing until it is too late.

Below is the First post I made on this thread Feb 25 and my last post prior to this on Nov 11th. Was looking at the indexs and various stocks today. DOW over 30,000, NASDAQ at record highs and the TSX is very close to the High of Feb this year. Except for Oil and Gas, Travel and REITs almost all other stocks have come back to their previous levels or even exceed them.

It was interesting to read through this post from the beginning this morning and see just how much stuff has happened since the thread started. It is also very interesting to see just how wrong and how pessimistic the expectations were in March and April. Considering the second wave of Covid is far worse than the first in Case count but not in severe outcomes, the fact the market continues to roar ahead as a result of the massive infusions of free cash tells you that fundamentals are important and liquidity is a fundamental issue. Hope everyone has a great Santa Rallty happening to them and a Merry Christmas.


Nov 11, 2020


Quote:
Originally Posted by Dean2 View Post
Figured it was time to awaken this thread. So, NASDAQ is at an all time high, from previous high to low back to record high in less than 5 months, qualifies as the shortest bear market cycle in history. TSX is back to within 1400 points of its previous high of 18,000 mid Feb this year and is 200 points above the 16,400 it was at Aug 2019.

So, anyone that sold out in the drop fearing it will drop more and are still on the sidelines, you missed the window big time. Those that sold out in Feb and are still sitting on the sidelines, you missed out to but your rational is you are probably waiting for the next big drop to buy back in because it is going to crash again this fall don't you know. How are you feeling about earning 1/4 of a percent interest in an environment where real inflation is still clipping along above 2%. Hope you don't need income from your investments to live on.

For those that had quality stocks and gutted it out, you are back to where you were, TSX at 16,600 now, versus 12 months ago when the TSX was at 16,400 and closing in on where you were Feb 20th before the drop. In addition you have collected your dividends for the past 6 months and if they were in a DRIP you were buying more of that stock at depressed prices.

For those that sold out prior to Feb 20th and bought back in in late March early April, my hat is off to you, you are the truly rare breed that can time the market perfectly.

Feb 25,2020


Quote:
Originally Posted by Dean2 View Post
I know Justfishin has all his stuff in tax free accounts like RRSP and TFSA so getting in and out may make sense if he can manage to get back in somewhere near the bottom. For the majority of the long term buy and hold investors the tax consequences means getting in and out doesn't work.

Let me see if numbers can make the case more simply.

If I am holding 100,000 in ENB stock and my cost on that stock is 30,000 ($16.50 cost on what is now a $55 stock, that is also yielding me 19.7% dividend on my original investment, paid quarterly), I pay the government $17,500 in tax on the gain. That is a 17.5% drop in capital and I also lose the 20% dividend. Dividend income, because of it preferred tax treatment is a very effective form of earning money. A couple can basically earn $84,000 a year tax free if all their income comes from dividends. Not something you want to give up.

Even if ENB drops 20% from today's price, I will basically have broke even with having sold out and paid the tax. The problem with selling out and paying the tax is, I now only have $85,000 to buy back in with. No matter how you cut it, selling out your gains costs you a min of 25% of the gain, and that is a permanent reduction in capital. It also means that when you buy back in at $43, you will have another taxable position on that gain as the stock climbs back to $55, so the whole theory of avoiding downdrafts does not bear out unless everything you are transacting is in tax free accounts.

I do however have some cash on the side to deploy as some top quality stocks are going to be a deal as this market drop keeps up.