Loose Money, High Household Debt, Weak Loons and #MoneyStories

The Bank of Canada on Wednesday held the line, in terms of their key overnight interest rate, and neither raised nor lowered it. Lowering the interest rate would have triggered a significant drop in the value of the Canadian dollar, but it would have provided a much-needed boost to the economy. On the other hand, raising the overnight rate would have protected the value of the Canadian dollar, but it would have created chaos in the real estate market. By choosing to remain inactive, the Bank of Canada may imply that it does not see the need for further stimulation or protection of the Canadian dollar.

In their own words:

All things considered, therefore, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities continue to edge higher, as expected. The Bank’s Governing Council judges that the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

For now, we are OK? Maybe.

Another distressing statement from the Parliamentary Budget Office (PBO) about Household Indebtedness and Financial Vulnerability, and we are more in debt than most G7 nations, which upsets the PBO (and the financial media in general).

In their words:

Based on PBO’s November 2015 Economic and Fiscal Outlook, we project that household debt will continue to rise, reaching 174 per cent of disposable income in late 2016, before returning close to current levels by the end of 2020….Household debt-servicing capacity will become stretched further as interest rates rise to “normal” levels over the next five years. By the end of 2020, the total household DSR, that is principal plus interest, is projected to increase from 14.1 per cent of disposable income in the third quarter of 2015 to 15.9 per cent.

So the world of family debt is going to get worse before it gets better, and it better get better soon because interest rates are going to rise one day.

Finally, the Loonie is below 70 cents US and showing no strength either. Could this mean spirally prices for imported stuff? We already have the great Cauliflower Calamity of 2016 (where it costs anywhere from $5 to $8 ahead). Inflation will most likely be low for a little while in reaction to very low gas prices, but the weak loonie may spark higher inflation, thus higher interest rates might be sooner than we think.

If I was a musician over the age of 60 I’d be worried, 2016 looks like a bad year for the Stock Market, and Musicians.

My Writings for Week Ending January 22nd

Winter may be here, but there is no canal skating going on yet in Ottawa, maybe soon:

I was a dirty skunk with my post Optimize Your Budget for Any Debt Level, where I tricked unsuspecting readers into reading my sure-fire way to optimize their budgets (yes I am going to hell for that one):

I hear that 55 is the new 40? I am not buying into that, because I could still run at 40, but I do write about my advancing age in Now I’m Fifty Five, nothing too exciting yet, but very close to retirement.

Remember Tax Season is Here

Thanks for reminding us Mr. Mercer

Canadians Resourcefulness is the Topic Now (not our Resources)

Most money writers tell you what you should be doing, however, Mark the Blunt Bean Counter decided to go in the opposite direction with How Not to Plan Your Estate! He was also published in the Globe and Mail about this topic, I only end up in the Globe as the subject of an interesting article. Speaking of financial management Marie from Boomer & Echo has been working on a set of exposes on financial planning at different ages, and now she gets to my age group with Financial Management By The Decade – The 50’s. It is never too late to start planning, but if you haven’t started a plan at 50, you might be cutting it a little close.

When is The Best Time to buy a Home ? Barry from Money We Have tries to help answer that question, evidently in Toronto January is the best month for getting deals? Wouldn’t have thought that, and how can you get a good idea about the outside of a house if it is buried in snow? Another fun thing to remember is that as of March 31st many of the banks will be changing their fee structures on some of their services. TD is raising their “Non-TD ATM Fee” from $1.50 to $2 per transaction, so if you use a “White ATM” you could end up pay almost $5 for a single transaction (in fees). Happy New Year!

What should you put in your TFSA? That is a very good question that Mark from My Own Advisor tries to tackle, but the easy answer is “… as much money as you can afford…” and then start figuring out where to invest it. If you are not sure how to invest your TFSA funds, BMO might have something for you as pointed out by Million Dollar Journey in Online Portfolio Manager Review: BMO SmartFolio. Wonder why in that ad on TV where the nice Scotiabank Lady “finds $1500” for her client, the client is happy about it? If they were hiding $1500 from me, I would be PISSED OFF! If you set up a safe Couch Potato portfolio, here is an example of the returns you might expect from the Canadian Couch Potato, Couch Potato Portfolio Returns for 2015, yes those numbers won’t be too good for the start of 2016, but Dan B. says, “Don’t Panic”.

Now that there are all these cheap stocks out there (thanks to the Crash of 2016) Tom from Canadian Personal Finance gives us some advice with New Year Investing: Build Your Portfolio. I would suggest buying Index Funds, they are on sale right now. The Simple Dollar put out a very interesting read with Six Basic Personal Finance Facts People Should Know (but Constantly Get Wrong), a little American slanted, but still worth reading.

Michael James takes a poke at the Financial Blogging world with Financial Dreck, where he exposes why some posts seem odd on some sites. You know that on this site if there is an odd post, it is because the owner of this site is quite odd, and rest assured I will continue to write about what is interesting to me. It is interesting the “offers” I get to add content to this site (remember my views on Guest Posts).

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Mostly Money Video Podcast

The World-Renowned Podcast Mostly Money, is now in Video format. Will this mean that I end up reprising my role as the “long-winded clown prince of personal finance”? I doubt it, I have been told I have a face for Radio.

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A Topical Tweet

Roller Coaster, of a stock market week

Someone ran a high resolution data study and found out what happened to the stock market today $SPY pic.twitter.com/EWziP0m1Go

— stef (@scheplick) January 21, 2016

2016 Random Thoughts

• December 18th, Star Wars, Christmas Money, Shaw gets Wind and #MoneyStories
• December 30th, Top Canadian Personal Finance Posts for 2015
• January 7th, Market Meltdown, TFSA, WildCard Weekend and #MoneyStories
• January 14th, Cheap Oil, Cheap Dollar, Dead Folk, and #MoneyStories

My Twitter feed is where I re-tweet many great articles by some of my featured writers (and make the occasional odd or off color commentary on life (in 140 characters or less)). I am also on reddit, Tumblr, Pinterest , Flipboard, Instagram and other Social Media sites (look for the BigCajunMan userid) as well. If you have social media accounts, don’t forget to vote for my posts (see the nifty dashboard on the bottom of each article, where you can cast your votes).As they say in Quebec, vote early and vote often!