I’ve been getting a few inquiries regarding what the hell is going on in the Canadian preferred share lately – here’s my best answer:
I ascribe the downturn to uncertainty.
Perpetual Discounts now yield 5.78%, equivalent to 7.51% interest at the standard conversion factor of 1.3x. Long-Term corporate bonds now yield a little over 4.10%, so the pre-tax interest-equivalent spread is now about 340bp, an enormous widening from the 315bp reported on September 26 that has been achieved entirely through the increase in PerpetualDiscount yields – the long term corporate bond yield has not changed noticeably.
At the same time, we’re seeing comparable weakness in FixedResets, which really should stay relatively stable regardless of the overall level of interest rates , but which should be expected to continue to recover from the lows of 2014-16 with an increase in yields.
It is possible that this is being driven by funds like CPD – as units are created and destroyed, individual issues are bought and sold in lockstep, regardless of their characteristics – but I’m not sure that this is the case; and while this would explain the correlation between the two sub-classes, it wouldn’t explain why the units are being created and destroyed in the first place.
It seems to me that investors in both subsectors are fearing the worst, regardless of the fact that their worst fears are of opposite environments. I suggest that this may be due to uncertainties regarding the global economy; we’re seeing the IMF cut its growth forecasts due to trade concerns; Trump trying to pick a fight with the Fed (I think this is probably because he wants some political cover in case a US slowdown does occur to a noticeable degree); and, of course, the approaching US mid-term elections.
Due to the retail nature of preferred share investors, the sector is prone to episodes like this, in which the market behaves irrationally for a while until people take a deep breath and look at the comparable after-tax yields. I just wish there was some way of predicting the outbreak and duration of such events!
My second-best answer (because it’s rather dated, but is still generally applicable) is Shut Up and Clip Your Coupons! I mean, what else are you going to put your money into that will pay such a high rate of after-tax income while providing first-loss protection?
All sectors on the TSX lost ground on Monday, led by cannabis-heavy health care which was down more than 10 per cent. Aphria Inc. closed down 17.35 per cent, Canopy Growth Corp. 14.12 per cent and Aurora Cannabis 16.10 per cent.
Since Canada legalized recreational marijuana use Oct. 17, pot stocks have lost up to about 45 per cent of their value.
The energy sector closed off more than three cent as the price of crude oil continued to fall as investors remained concerned about slowing global demand led by weakness in China
…
In New York, the Dow Jones industrial average was down 245.39 to 24,442.92. The S&P 500 index was off 17.44 points to 2,641.25, while the Nasdaq composite lost 116.92 points to 7,050.29.U.S. markets sustained sharp losses late in the day on reports that Trump is planning new tariffs on all remaining imports from China if the two sides don’t make progress in trade talks next month.
As an aside, I don’t agree with Andrew Jackson (Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute) very often – but sometimes he has things right:
Further, cuts to the corporate-tax rate are costly since most of the benefit goes to existing firms making profits from past investments, rather than to new firms or those thinking about expansion. A cut in the tax rate is also irrelevant to companies earning so-called rents or above-average profits compared to the international norm. For example, during the resource-boom companies would have invested in the oil sands even if the corporate-tax rate had been much higher, since expected profits were very high.
Canadian banks, utilities, airlines, railways, retailers and cultural industries among others all have to operate mainly in Canada to serve the Canadian market, so they are not very responsive to changes in tax rates compared to other countries.
If the politicians want to make Canada more competitive, they will break up the banks. Let them bank; don’t let them do much else. The enormous size of the heavily protected Canadian banking sector soaks up talent, soaks up capital, soaks up real-estate and soaks up political attention – for what? Second-rate (or, at best, plain vanilla) products made very cheaply as a consequence of scale and sold on the basis of the brand name. That not the basis of a competitive economy – that’s the basis of rentier economy, which is what we got.
I’ve rearranged my data collection routines in an effort that will eventually improve the attribution analysis I’ve been working on. Here are some spot results that some might find of interest:
| Total Return 2018-9-28 to 2018-10-29 |
|
| Tracking Account |
Performance |
| HIMI Index – Floater | -3.23% |
| HIMI Index – Split Share | -0.10% |
| HIMI Index – Perpetual (Premium) | -2.21% |
| HIMI Index – Perpetual (Discount) | -4.25% |
| HIMI Index – FixedReset Discount | -5.05% |
| HIMI Index – Deemed Retractible | -3.93% |
| HIMI Index – FloatingReset | -5.13% |
| HIMI Index – FixedReset Premium | -1.98% |
| HIMI Index – FixedReset Bank nonNVCC | +0.16% |
| HIMI Index – FixedReset Insurance nonNVCC | -5.83% |
| HIMI Index – Scraps Ratchet | -1.35% |
| HIMI Index – Scraps FixedFloater | -1.49% |
| HIMI Index – Scraps Floater | -2.35% |
| HIMI Index – Scraps OpRet | +1.61% |
| HIMI Index – Scraps Split Share | -0.50% |
| HIMI Index – Scraps PerpPrem | -4.23% |
| HIMI Index – Scraps PerpDisc | -4.57% |
| HIMI Index – Scraps FR Discount | -5.86% |
| HIMI Index – Scraps DeemedRet | -5.62% |
| HIMI Index – Scraps FloatingReset | -3.79% |
| HIMI Index – Scraps FR Premium | -2.47% |
Note that issues may be relegated to “Scraps” on either credit or volume concerns.
All of which is by way of introducing a snapshot of today’s preferred share market action:
Click for Big
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.6203 % | 3,029.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.6203 % | 5,558.7 |
| Floater | 3.84 % | 4.06 % | 41,613 | 17.29 | 4 | -0.6203 % | 3,203.5 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0635 % | 3,227.1 |
| SplitShare | 4.61 % | 4.86 % | 50,916 | 4.68 | 5 | 0.0635 % | 3,853.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0635 % | 3,006.9 |
| Perpetual-Premium | 5.73 % | 5.75 % | 65,601 | 14.11 | 12 | -0.3983 % | 2,860.6 |
| Perpetual-Discount | 5.71 % | 5.80 % | 74,333 | 14.20 | 21 | -0.9345 % | 2,875.4 |
| FixedReset Disc | 4.43 % | 5.41 % | 154,686 | 14.98 | 45 | -2.8808 % | 2,458.6 |
| Deemed-Retractible | 5.39 % | 6.74 % | 67,782 | 5.21 | 27 | -0.5609 % | 2,878.1 |
| FloatingReset | 3.91 % | 3.99 % | 46,209 | 5.45 | 4 | -1.9873 % | 2,709.2 |
| FixedReset Prem | 4.96 % | 4.82 % | 233,259 | 3.04 | 34 | -0.6970 % | 2,524.9 |
| FixedReset Bank Non | 3.05 % | 4.04 % | 89,083 | 3.04 | 7 | -0.0102 % | 2,576.6 |
| FixedReset Ins Non | 4.58 % | 6.51 % | 125,407 | 5.31 | 22 | -1.1287 % | 2,443.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.D | FixedReset Disc | -7.91 % | A highly suspicious quote, since the issue traded 29,954 shares today in a range of 20.77-21.95 before closing at 20.13-85.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| TRP.PR.F | FloatingReset | -7.80 % | A nonsensical quote as the issue traded 7,200 shares today in a range of 19.49-28 before closing at 18.44-20.27.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| TD.PF.E | FixedReset Disc | -5.69 % | Another nonsensical quote, as the issue traded 8,245 shares today in a range of 23.66-22 before closing at 22.88-72.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| TRP.PR.G | FixedReset Disc | -5.30 % | A highly suspicious quote as the issue traded 15,750 shares today in a range of 23.03-00 before closing at 22.53-23.67.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| BAM.PF.E | FixedReset Disc | -5.13 % | Another highly suspicious quote from Nonsense Central, as the issue traded 8,269 shares in a range of 22.71-46 before being quoted at 22.01-23.07 in NC’s very expensive reports.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| TRP.PR.B | FixedReset Disc | -5.11 % | This one is actually credible, as there was a little bit of trading below $16.00 in the last half hour of the regular market, during which one board lot touched the low of 15.75.
YTW SCENARIO |
| CM.PR.Q | FixedReset Disc | -5.04 % | But our lack of faith in the reliability of these expensively purchased quotes is restored when we see that this issue traded 11,559 shares in a range of 23.41-10 before being quoted at 22.79-43.
I have not checked whether the lamentable state of the quote is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO |
| BAM.PR.M | Perpetual-Discount | -4.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 6.33 % |
| TRP.PR.A | FixedReset Disc | -4.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 5.74 % |
| SLF.PR.I | FixedReset Ins Non | -4.52 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.39 Bid-YTW : 6.51 % |
| TRP.PR.E | FixedReset Disc | -4.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.87 Evaluated at bid price : 20.87 Bid-YTW : 5.65 % |
| VNR.PR.A | FixedReset Disc | -4.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.52 Evaluated at bid price : 23.31 Bid-YTW : 5.41 % |
| MFC.PR.Q | FixedReset Ins Non | -4.21 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.51 Bid-YTW : 6.88 % |
| TRP.PR.C | FixedReset Disc | -4.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 5.68 % |
| NA.PR.W | FixedReset Disc | -3.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.39 % |
| RY.PR.Z | FixedReset Disc | -3.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.59 Evaluated at bid price : 21.95 Bid-YTW : 5.18 % |
| BAM.PF.C | Perpetual-Discount | -3.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 6.22 % |
| NA.PR.S | FixedReset Disc | -3.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.56 Evaluated at bid price : 21.91 Bid-YTW : 5.41 % |
| BAM.PR.N | Perpetual-Discount | -3.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 19.13 Evaluated at bid price : 19.13 Bid-YTW : 6.29 % |
| CM.PR.O | FixedReset Disc | -3.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.75 Evaluated at bid price : 22.20 Bid-YTW : 5.23 % |
| BIP.PR.E | FixedReset Disc | -3.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.91 Evaluated at bid price : 24.21 Bid-YTW : 5.43 % |
| RY.PR.H | FixedReset Disc | -3.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.76 Evaluated at bid price : 22.21 Bid-YTW : 5.15 % |
| TD.PF.C | FixedReset Disc | -3.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.60 Evaluated at bid price : 21.99 Bid-YTW : 5.18 % |
| CM.PR.P | FixedReset Disc | -2.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.53 Evaluated at bid price : 21.90 Bid-YTW : 5.18 % |
| RY.PR.M | FixedReset Disc | -2.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.69 Evaluated at bid price : 23.01 Bid-YTW : 5.23 % |
| TD.PF.D | FixedReset Disc | -2.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.08 Evaluated at bid price : 23.46 Bid-YTW : 5.33 % |
| TD.PF.B | FixedReset Disc | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.76 Evaluated at bid price : 22.21 Bid-YTW : 5.18 % |
| BMO.PR.S | FixedReset Disc | -2.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.05 Evaluated at bid price : 22.65 Bid-YTW : 5.21 % |
| GWO.PR.R | Deemed-Retractible | -2.55 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.01 Bid-YTW : 8.24 % |
| HSE.PR.A | FixedReset Disc | -2.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 5.85 % |
| RY.PR.J | FixedReset Disc | -2.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.88 Evaluated at bid price : 23.29 Bid-YTW : 5.33 % |
| BAM.PR.Z | FixedReset Disc | -2.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.55 Evaluated at bid price : 23.40 Bid-YTW : 5.53 % |
| HSE.PR.C | FixedReset Disc | -2.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.46 Evaluated at bid price : 22.93 Bid-YTW : 5.94 % |
| TD.PF.A | FixedReset Disc | -2.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.65 Evaluated at bid price : 22.06 Bid-YTW : 5.18 % |
| BAM.PR.R | FixedReset Disc | -2.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 5.59 % |
| BMO.PR.Y | FixedReset Disc | -2.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.52 Evaluated at bid price : 23.88 Bid-YTW : 5.23 % |
| BIP.PR.F | FixedReset Prem | -2.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.86 Evaluated at bid price : 24.22 Bid-YTW : 5.40 % |
| BMO.PR.T | FixedReset Disc | -2.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.95 Evaluated at bid price : 22.50 Bid-YTW : 5.13 % |
| TRP.PR.K | FixedReset Prem | -2.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-05-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 5.30 % |
| PWF.PR.T | FixedReset Disc | -2.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.09 Evaluated at bid price : 22.70 Bid-YTW : 5.20 % |
| CU.PR.C | FixedReset Disc | -2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 5.48 % |
| BMO.PR.W | FixedReset Disc | -2.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.88 Evaluated at bid price : 22.41 Bid-YTW : 5.11 % |
| SLF.PR.H | FixedReset Ins Non | -2.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.09 Bid-YTW : 7.80 % |
| EMA.PR.F | FixedReset Disc | -2.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.85 Evaluated at bid price : 23.32 Bid-YTW : 5.36 % |
| TD.PF.G | FixedReset Prem | -1.99 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.17 Bid-YTW : 5.22 % |
| POW.PR.A | Perpetual-Premium | -1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.85 Evaluated at bid price : 24.10 Bid-YTW : 5.85 % |
| BAM.PF.G | FixedReset Disc | -1.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.30 Evaluated at bid price : 23.69 Bid-YTW : 5.46 % |
| PWF.PR.A | Floater | -1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 3.32 % |
| HSE.PR.G | FixedReset Prem | -1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.51 Evaluated at bid price : 23.89 Bid-YTW : 6.07 % |
| NA.PR.A | FixedReset Prem | -1.83 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-08-15 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 5.03 % |
| CM.PR.S | FixedReset Disc | -1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.46 Evaluated at bid price : 23.24 Bid-YTW : 5.07 % |
| MFC.PR.N | FixedReset Ins Non | -1.75 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.39 Bid-YTW : 7.52 % |
| BAM.PF.A | FixedReset Disc | -1.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.74 Evaluated at bid price : 23.90 Bid-YTW : 5.44 % |
| MFC.PR.B | Deemed-Retractible | -1.69 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.76 Bid-YTW : 9.31 % |
| IFC.PR.G | FixedReset Ins Non | -1.67 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 6.11 % |
| BAM.PF.F | FixedReset Disc | -1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.04 Evaluated at bid price : 23.62 Bid-YTW : 5.52 % |
| MFC.PR.G | FixedReset Ins Non | -1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.04 Bid-YTW : 6.19 % |
| TRP.PR.J | FixedReset Prem | -1.36 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 5.24 % |
| IFC.PR.C | FixedReset Ins Non | -1.33 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 6.49 % |
| BAM.PR.X | FixedReset Disc | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 5.45 % |
| HSE.PR.E | FixedReset Prem | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.63 Evaluated at bid price : 24.05 Bid-YTW : 6.07 % |
| MFC.PR.J | FixedReset Ins Non | -1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 6.36 % |
| BAM.PR.T | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 5.58 % |
| BAM.PF.H | FixedReset Prem | -1.26 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.23 % |
| GWO.PR.Q | Deemed-Retractible | -1.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 7.30 % |
| TD.PF.F | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.17 Evaluated at bid price : 23.54 Bid-YTW : 5.21 % |
| CU.PR.F | Perpetual-Discount | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 5.72 % |
| BAM.PF.B | FixedReset Disc | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 22.11 Evaluated at bid price : 22.74 Bid-YTW : 5.49 % |
| GWO.PR.S | Deemed-Retractible | -1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.28 Bid-YTW : 6.74 % |
| SLF.PR.A | Deemed-Retractible | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.84 Bid-YTW : 8.34 % |
| CU.PR.G | Perpetual-Discount | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 5.72 % |
| EMA.PR.H | FixedReset Prem | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.07 Evaluated at bid price : 24.69 Bid-YTW : 4.96 % |
| POW.PR.D | Perpetual-Discount | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 5.91 % |
| GWO.PR.G | Deemed-Retractible | -1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.65 Bid-YTW : 7.22 % |
| PWF.PR.P | FixedReset Disc | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 5.21 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.L | FixedReset Bank Non | 407,700 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 2.83 % |
| BMO.PR.E | FixedReset Prem | 81,440 | YTW SCENARIO Maturity Type : Call Maturity Date : 2023-11-25 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.92 % |
| TD.PF.H | FixedReset Prem | 71,202 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.43 Bid-YTW : 4.25 % |
| BNS.PR.I | FixedReset Disc | 69,005 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-10-29 Maturity Price : 23.06 Evaluated at bid price : 24.76 Bid-YTW : 4.80 % |
| IFC.PR.E | Deemed-Retractible | 59,700 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 6.67 % |
| RY.PR.Q | FixedReset Prem | 58,833 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 4.18 % |
| There were 53 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.F | FloatingReset | Quote: 18.44 – 20.27 Spot Rate : 1.8300 Average : 1.0966 YTW SCENARIO |
| TRP.PR.A | FixedReset Disc | Quote: 18.50 – 20.11 Spot Rate : 1.6100 Average : 0.9725 YTW SCENARIO |
| SLF.PR.I | FixedReset Ins Non | Quote: 22.39 – 23.55 Spot Rate : 1.1600 Average : 0.6272 YTW SCENARIO |
| RY.PR.M | FixedReset Disc | Quote: 23.01 – 24.20 Spot Rate : 1.1900 Average : 0.6871 YTW SCENARIO |
| TRP.PR.G | FixedReset Disc | Quote: 22.53 – 23.67 Spot Rate : 1.1400 Average : 0.6876 YTW SCENARIO |
| BAM.PF.E | FixedReset Disc | Quote: 22.01 – 23.07 Spot Rate : 1.0600 Average : 0.6162 YTW SCENARIO |
Apart from fixed resets, that should be pretty stable, floatings should also be pretty stable. Today the market dropped by about 1% but so did all the bce floaters. When the rates were heading south, these prefs took a beating presumably because of the nominal interest rate they were paying. Now that the prime rate is going up they are still losing value… At a current yield of 4.8% and strong expectations of yield going up in the next few months as the prime goes up, it is tough to figure what retail does not like! Anyway in the mean time it is a nice coupon to clip…. but makes you wonder where all this money is going!
With the yield on BNS common currently at 4.9% and other big 5 banks declining, I think that puts some pressure on prefs.
As a shareholder of 4 of the big 5 banks, I’m certainly biased in their favour. However, I don’t see the current setup for financial institutions being all that bad in Canada. In addition to the big five, there are some smaller more regional players plus the credit unions.
If the federal government wants to introduce some competition I suggest they start with the telecom companies. In my area the choices for internet access are Telus or Shaw. Prices/features are identical. Prices regularly go up for internet access when everything else computer related goes down in price over time. Service is atrocious – when I moved to a new apartment building I booked the changeover with Telus six weeks in advance. A day before my appointment someone from Telus phoned to say they couldn’t provide me with high speed internet service in my new apartment because the didn’t have fiber to the building yet, I would have to wait at least a month. They suggested I switch to copper until they had the fiber connected. Only problem, Telus didn’t have copper in the building. It turned out that Telus did have fiber, they had several customers in the building, they just didn’t seem to know it.
your second best answer is right on , they are on sale , buy . as i see it the biggest risk is the gov . if they change the div tax credit so a smaller $ amount is tax free ( you know to help the middle class) that would result in a permanent share price drop .
I cant help but think Mr. Margin has a part in this. Watched FN.PR.A fall yesterday and selling at any price in a very short period. It was a not a sensible way to close a position (imho) unless you thought it was going to zero or it was a forced hand. I was on the buy side and could not believe the strike prices I was getting. Silly.
@ malcolmm says “start with the telecom companies”. Why? We already have some the highest telco consumer rates in the world
BarleyandHops – I agree regarding the telco companies, we are stuck with some of the highest prices in the world. That is why I think it would be great if somehow the federal government could tweak the rules to encourage more competition and hopefully lower prices.
Apart from fixed resets, that should be pretty stable, floatings should also be pretty stable.
Yes, that is also one of life’s mysteries … and with Floaters, we have the benefit of many years’ history and two horrific crashes (see the fourth chart in this recent post) to illustrate just how bad it can get.
With the yield on BNS common currently at 4.9% and other big 5 banks declining, I think that puts some pressure on prefs.
You’re probably right. I believe we saw that during the 2014-16 low in government yields in which I saw numerous mentions of people using dividend stocks as fixed income substitutes.
It’s the type of strategy that works very well until it doesn’t.
I don’t see the current setup for financial institutions being all that bad in Canada. In addition to the big five, there are some smaller more regional players plus the credit unions.
We have a bloated financial sector in our stock market worth about 40% of the stock market (according to the composition of XIU) compared to 14% in the US (according to the composition of SPY). That’s a big problem. The other big problem is the law prohibiting Schedule 1 banks from having a single ownership group holding more than 5% of the company, which blocks foreign competition.
If the federal government wants to introduce some competition I suggest they start with the telecom companies.
Telecom is another sector that could benefit from having the foreign ownership restrictions listed (at least in the case of allied nations with similar home-country regulation and the rule of law. If it turns out the Chinese don’t like that caveat, tough.)
My own pet idea for improving competition – particularly as we move towards 5G – is to create a telecom wholesale utility company. A chunk of spectrum should be preferentially sold to defined utilities, that would wholesale access to retail-facing telecoms and not have any retail presence itself. Fees would be charged on a regulated return-on-capital basis.
This would foster the development of the MVNO sector; it pains me to advocate preferential sales of a valuable commodity, but the feds have been trying for donkey’s years to create a truly competitive national market with preferential small-player sales and it hasn’t worked.
if they change the div tax credit so a smaller $ amount is tax free ( you know to help the middle class) that would result in a permanent share price drop .
You will probably be very upset with me, but I advocate that very thing for both dividends and capital gains.
I see no reason why people sitting on multi-generation wealth should need to be encouraged to invest with a subsidy provided by the rest of us; I see plenty of reasons why Joe Lunchbucket should get such a break. To this end, I see the new limits on passive income in a corporation claiming the small company tax rate as being a step in the right direction; I consider income inequality to be a long-term threat to society.
but , isnt the basis for the div tax credit because dividends would be taxed twice , once by the corporation , and then again in the share holders hands . i do not see it as the gov trying to encourage multi generational wealth . i think you are talking about privately held corporations , not public . i can see that as corporations tax rates are lowered , then the div tax credit would be lowered so the gov collects the same amount of tax . if the div tax credit is lowered for the share holder but not the corporation then it is just the gov putting more of a tax burden on the individual ,because thats the gov helping the middle class (sarc)
Forgotten from the tax debate is the possibility to impose an inheritance tax. Given the fact our governments are heavily in debt, in theory investing in creating the infrastructure that fosters the economic conditions that helped create that wealth in the first place, it would be only normal that upon leaving this world one helps reimburse that debt and not leave it to the next generation. You can look at it as if governments were taking a loan on our behalf, a loan that should be repaid at death, like our other loans…
We already have a death tax on RRIF/RRSPs and it’ll be 50% for most of our estates. You think this isn’t enough to reimburse our poor dairy farmers?
The Blunt Bean Counter assesses the possibilities of estate tax, capital gains tax fiddling and principal residence exemption meddling in his recent piece:
http://www.thebluntbeancounter.com/2018/09/sacred-tax-cows.html
To Ticktock
First I am not advocating more taxes believe me, but the debate is: if we have to tax, what is the best way to do it.
RRIF and RRSP being taxed at death is only normal given that they were never taxed to begin with. This is not really a death tax.
As far as the dairy farmers are concerned, technically it is not your tax dollars that supports them but the inflated price you pay for dairy products. Your tax dollars supported Chrysler Corp to the tune of a few Billion dollars in the 2008 era and many others since… Yes the best solution is a better managed government that will limit how much we have to tax,but the question will remain on how is the best way to do it… In that regard the debate on carbon taxes is an interesting one to follow…
@ Ticktock
“We already have a death tax on RRIF/RRSPs and it’ll be 50% for most of our estates”
Not completely true. But I hope your comment caused many folks to pause and think about it!
It depends on province where folks reside. And, the terms set out in the estate/personal wills. And the time (calendar date) of death of a spouse, in case of spousal transfers for RSPS et al.
NOT a professional tax person here. But I think estate planning is very important.
As to taxes, dead people dont bitch, and spouses/families dont necessarily have the background to navigate the system. My opinion is heafty death/estate taxes are on the way. These are nice pockets to pick. And, I/We have been proactive in addressing the inevitability.
There are always ways for the wealthy to avoid taxes. When the Trudeau government was trying to crack down on some of the methods small business owners use to avoid taxes, such as paying dividends to their young children I was in favour of the tax changes.
When people hear “small business” they think of the small, struggling restaurant they like to patronize. In practice these small business rarely pay a meaningful amount of tax because they barely turn a profit, even with the owners working at minimum wage. The small businesses that the Liberals were going after were the doctors, real estate agents etc.
When mother went into a care home her financial planner advised me to consider forming a trust for my share of the estate when my Mom passed. I had never heard of that, apparently I could have minimized taxes on future earnings from my inheritance. Since I’m not against paying my fair share of taxes and I saw no reason why I should have been allowed to form one, I didn’t take advantage of this loophole. Also, I hate extra paperwork.
newbie, as for the dairy farmers, it IS my tax $$ supporting them. Seems you haven’t heard about the $1.3BB reimbursement. Read all about it here:
https://www.macleans.ca/economy/the-truth-about-dairy-farming-in-canada/
a choice tidbit:
“The average dairy producer’s net worth is nearly $5 million, and in 2016, the average producer earned an income of about $160,000, even after operating expenses had been paid, according to the most recent numbers available from Statistics Canada. Compared to the average total income of individuals in 2016, which was $43,500, dairy farmers seem to do quite well.”
Well, their net worth tops mine by a long shot, but all I did was push a pen all my working life. Admittedly, their life, which begins at 5AM and is certainly a tough one, is more economically deserving than a pen pusher’s but why should this p.p. subsidize them?
And if Mr. Hymas has his way with reducing/eliminating dividend tax credit, I’ll be subsidizing Joe Lunchbucket too, whom, I’ll argue has a higher average total income of $43,500. I’m assuming all the union guys and gals including CUPE will benefit since they don’t own any stocks/prefs either, only the Old Rich. What about the self made entrepreneur, Mr. H., why can’t he/she invest their hard won riches for a little tax break and share in the success of long term equities? Should they be driven out of Canada if they want to do that?
B&H- “Not completely true”. How so? I’m averaging across Canada at 50%. 54 in Ontario, maybe less in Alberta. And, of course it’s the last spouse pays the tax. Care to expand on your proactive steps?
m- many ways for the wealthy to avoid tax, yes indeed. Ever been to an Estate Planning seminar put on by a large registered charity, by example? Oh, and paperwork pays, trust this pen pusher.
@ Ticktock
Care to expand on your proactive steps
Estate planning is very personal. Things like age, savings, private ownership of a private company, property, health, family dynamics, spousal situation, political environment to name a few.
And I think a personal view on how some macro economic events might unfold. Example – I think in some areas, a sellors estate tax might evolve. Specifically a sellors tax on property/houses/condos beyond any cap. gains taxes that might be in place. Property is an immense store of wealth and it is easy pickings. Especially for permanent residences beyond any land transfer taxes (ON) paid by the buyer. Further, I think anything like income supplements in retirement will go beyond an income means test; but rather an asset value test which will cripple folks w/ modest net worth and low level of income. Indexing for retirement benefits (beyond the CPP) from the Feds will die. It has to.
“Should they be driven out of Canada if they want to do that”
For both individuals and corporations the onus is do do what is best for you, the shareholder. However, there is often more involved. Choice. I dont mind HST/GST in Canada to make the roads good, have fire and ambulance services, safe streets. Note – worked in a few counties where this may not have been the case.
but , isnt the basis for the div tax credit because dividends would be taxed twice , once by the corporation , and then again in the share holders hands
Well, that’s the rationale that’s always trotted out; and they have this relatively complex gross-up and tax-credit system to support the idea. But as far as dollars and cents are concerned, I see it simply as a preferential tax rate on dividends.
i do not see it as the gov trying to encourage multi generational wealth .
Neither do I. What I’m saying is that somebody with $50-million doesn’t need any encouragement to invest the money in something … he’s not going to spend it (at least, not quickly!). On the other hand, somebody with $50-thousand could very well use a little encouragement to sock it away rather than buying a new car or fancy renovation.
When people hear “small business” they think of the small, struggling restaurant they like to patronize. In practice these small business rarely pay a meaningful amount of tax because they barely turn a profit, even with the owners working at minimum wage. The small businesses that the Liberals were going after were the doctors, real estate agents etc.
Yes. From the 2018 Budget:
And if Mr. Hymas has his way with reducing/eliminating dividend tax credit, I’ll be subsidizing Joe Lunchbucket too, whom, I’ll argue has a higher average total income of $43,500.
First, I should clarify that what I advocate is capping the amount of investment income that receives preferential tax treatment.
What about the self made entrepreneur, Mr. H., why can’t he/she invest their hard won riches for a little tax break and share in the success of long term equities?
They don’t need a tax subsidy. Because, you see, they’re rich. And the super-rich are going to invest anyway.
More generally, grin and bear it. Both successful entrepreneurs and those who have become wealthy by inheritance. For example:
Progressive taxation should be looked upon as a form of insurance. How much money will you earn through your hard work if you’re caught in a riot on your way to work? What is your marginal tax rate if you’re subsequently guillotined in the middle of Nathan Phillips Square?
I highlighted the Credit Suisse Global Wealth Report 2018 on October 22, which was pretty interesting.
Another interesting read was an opinion piece in the Washington Post titled This is how republics end, which draws a comparison of the current climate to that of the end of the Roman Republic. I’ve been musing about that for years; it’s nice to know that somebody else has thought of it too!
The modern world had been disrupted by the introduction of extreme leverage. It’s not like the middle ages, where if you were a better sheep farmer than the other guy, you might live twice as well. It’s not like the early industrial revolution, where, Holy Smokes, a single steam engine could replace 500 horses. This is modern times and Bill Gates was able to run a company that sold 450-million copies of Windows 7 in less than two years.
The increasing concentration of wealth is not the result of a conspiracy. It’s the result of technology. We need to address this, not out of empathy but out of sheer self-interest: it’s either that or the guillotine.
so you think double taxation is good ? and the other thing if i understand what you wrote , you think the gov taking a substantial share of wealth so it can not be passed on is a good thing ? i disagree , savings/ wealth is how a country grows , giving more and more to the gov which has proven over and over to be very bad users of money is a good way for money to be wasted and grow the social welfare system . as i presume you are a capitalist that runs a for profit fund i find it hard to believe you think the gov can spend money more wisely than you can and so they should take more of your money .
Great thread!
In Canada, as in most of the developed world, almost all capital is in private hands. Even countries with large public investments, like France for example, have close to zero public capital due to offsetting public debt [see Piketty’s Capital in the 21st Century]. Therefore, who holds private wealth and what they do with it matters a lot to society. Further, how society taxes the flows from this wealth also matters a lot.
I agree that the current tax system is taking us toward the guillotine [James] or social rupture [Piketty]. Increasing wealth concentration is an existential threat to Canadian society and our tax system has to adapt or we’re in big trouble.
” … savings/ wealth is how a country grows , giving more and more to the gov which has proven over and over to be very bad users of money is a good way for money to be wasted and grow the social welfare system”
Yes and no. Yes, national income ought to grow with increasing national wealth but if we look at the fact that half of our national wealth in Canada is “invested” in private housing, it’s hard to argue that the private sector is doing a good job of preparing us to compete effectively down the road. And no, much public spending is actually very good (not all of it!) and contributes to what makes Canada different than shit-hole countries, like say the USA. I also agree with James that UBI is probably one solution we ought to be exploring.
So we need to explore serious tax reform, including taxing wealth directly and reconsidering how we tax flows from wealth. A federal property tax anyone?
The increasing concentration of wealth is not the result of a conspiracy. It’s the result of technology.
Going to disagree, but not to parse hairs: It is those that give rise to technological ideas that are relevant and well digested by the masses that get a bigger share of the pie. And one the one hand, good on them for having an idea and making it relevant and the other, it is all the masses that shell out for the consequence of making their lives easier or some how better.
“It is those that give rise to technological ideas that are relevant and well digested by the masses that get a bigger share of the pie.”
Yes. Good for them! They deserve their riches. But this misses the point.
In the 18th century, pretty much the ONLY way to enter into the 1% was by birth or marriage (Cinderella). There was almost zero ability for anyone, no matter how smart or competent they were to get there otherwise. This was the source of the French Revolution and one of the reasons that still today it is illegal in France to leave unequal shares of an estate among children (to minimize concentration).
The first part of the 20th Century euthanized the Rentier class through the capital destruction of the World Wars, the subsequent inflation to erase public debt and global experiments with progressive taxation (top marginal rates of 80% in the USA of all places). The 20th Century made common that idea that young men and women need only apply themselves and get a good education and they could become anything they wanted.
Piketty shows that the 21st Century is accelerating back to a time where birthright and social class may matter far more than personal effort and achievement. We fool ourselves with the examples of sports, entertainment and business superstars with insane salaries that the highest reaches of society can still be reached by anyone. We’re not there yet, but that is where we are headed if we don’t reverse the self-perpetuating, multi-generational gross wealth inequality that has emerged.
“First, I should clarify that what I advocate is capping the amount of investment income that receives preferential tax treatment.”
Personally I have decided to rent (forgoing the principal residence exemption) and have larger investment income to pay the cost of my rent. For this decision I am already being penalized by the tax system for this decision (potential tax free house gain, replaced by taxed dividends)… I would not appreciate this treatment to be made even worse than it is already!
“I consider income inequality to be a long-term threat to society.”
This issue, if that’s what it is, has been with us since cave man days and will continue to be despite how far you raise taxes. Canada is probably right behind the Scandinavian countries as one of the LEAST unequal countries on Earth, because, you see, we care for those less fortunate through programmes such as the appreciated security donation to charity tax credit, which you’d probably axe.
When you have to conjure up images of guillotines in Nathan Phillips Square to support your thesis, Mr. Hymas, you’ve already weakened your argument.
Tax Freedom Day – Canada comes to us June 10.
Tax Freedom Day – USA April 19.
How far would you push this back to accomplish your wealth drain?
“This issue, if that’s what it is, has been with us since cave man days”
Absolutely true. Even the Soviet Union had income and wealth inequality (not the same thing). Not the point however.
I believe this is issue is ensuring that the lower deciles in the wealth and income distributions can benefit from increasing national wealth. Societies are not sustainable if small groups realize most of the gains, which is what the data is showing for Canada.
“Canada is probably right behind the Scandinavian countries as one of the LEAST unequal countries on Earth”
We are more egalitarian than the USA (which is terrible and getting much worse really fast) and better than many but we are headed in the wrong direction too. For me, this issue is about proactively deciding the kind of society we want to live within and then making it happen.
so you think double taxation is good ? and the other thing if i understand what you wrote , you think the gov taking a substantial share of wealth so it can not be passed on is a good thing ?
No, you didn’t understand what I wrote.
And no, much public spending is actually very good (not all of it!) and contributes to what makes Canada different than shit-hole countries, like say the USA.
Infrastructure being a prime example. The easiest thing in the world for politicians to skimp on is capital maintenance.
A federal property tax anyone?
I wouldn’t like that. It’s hard enough keeping things reasonably assessed in Toronto, where comparators abound – assessing small communities, especially those that are in decline, is much harder. As property is not fungible, I believe that setting tax rates is something best left to the locals.
That being said, I fully support the concept of cities becoming more self-reliant by boosting their property tax. One thing that astonishes me about all the invective over Vancouver (and, lately, Toronto) house prices is that the obvious method of knocking down capital value – increasing the cost of carry – is considered anathema by those most in favour of the first part of the idea. It’s always the other guy’s fault, so it’s always the other guy who should face a complex and arbitrary tax, right?
For this decision I am already being penalized by the tax system for this decision (potential tax free house gain, replaced by taxed dividends)…
I don’t believe you’re being penalized at all. You’ve shifted your wealth from a means of consumption to a means of investment. Consumption isn’t taxed; income is.
That being said, you probably wouldn’t be affected, as I envisage such a change, which is related to the Buffett Rule. Obama’s Fair Share Tax (FST) kicked in at $1-million (annual income) and was fully applicable at $2-million (annual income).
I would prefer a system with some cumulativity, to allow for those beloved salt-of-the-earth entrepreneurs to gain a larger benefit when they sell their businesses … say, for instance, you can get preferential tax rates on $500,000 of investment income annually, which is cumulative for up to five years, so, assuming no investment income in the past five years, you could sell your business for $2.5-million capital gain and pay only the preferential rate on that.
So unless your idea of a modest family residence (even in Toronto!) is very different from mine, you would not be affected by the changes I advocate, which simply seek to end preferential taxation on income derived from multi-generation level wealth. I see no purpose in going after people who forego an average family residence in favour of rental accommodations, whether they are motivated by their own retirement or real-estate speculation.
This issue, if that’s what it is, has been with us since cave man days and will continue to be despite how far you raise taxes.
I alluded above to the extreme leverage made possible by modern technology, referring specifically to Microsoft’s ability to sell 470-million units of an incredibly complex operating system globally within a period of two years.
This extreme leverage was not possible in the cave man days.
Extreme leverage is good. It allows a more productive – if, potentially, more homogeneous and vulnerable – society to exist. But once these guys have reaped the just rewards for their idea, I see no reason to continue to reward them with preferential taxation.
Tax Freedom Day – Canada comes to us June 10.
Tax Freedom Day – USA April 19.
Tax Freedom Day calculations are fraught with simplistic mystery. The figures quoted above, for instance, do not include the effect of budget deficits. One calculation estimates an additional 17 days simply by including the federal deficit. How about state/provincial and local deficits? What about underfunded pension plans (Canada has just made a welcome accounting change; does this change any numbers)?
And, of course, there are benefits. Taxes in Canada cover the vast majority of health-care costs; in the States, private insurance and out-of-pocket payments cover about 45% of total healthcare spending; total spending represents about 18% of GDP. This is a major difference in benefits due to taxation, which is ignored in the simplistic calculation.
A similar situation applies with respect to education. Calculating this effect would be insanely complex, because a full comparison would also factor in the higher cost of a house in a good school district, where you’d move so you didn’t have to send your kids to private school.
People can argue all day and night regarding the merits of various systems of health care, education and many other services; but to use “Tax Freedom Days” straight up and pretend the comparison means anything is simply invalid.
” Consumption isn’t taxed; ” ? you have never paid sales tax ?