Search found 8726 matches

by ghariton
18 Jan 2012 17:42
Forum: Financial Planning and Building Portfolios
Topic: Wills, Estate Planning, Life Insurance
Replies: 406
Views: 63048

Re: Wills, Estate Planning, Life Insurance

brucecohen wrote:I forgot to clarify if the cost of preparing tax returns and US estate tax filing is covered by the executor's fee or charged separately.
I's be very surprised if it were. Most "professional" executors charge all expenses as disbursements in addition to their fee, and income tax preparation would be an expense. But negotiation is always possible.

George
by ghariton
17 Jan 2012 23:49
Forum: Financial Planning and Building Portfolios
Topic: Wills, Estate Planning, Life Insurance
Replies: 406
Views: 63048

Re: Wills, Estate Planning, Life Insurance

Situation in Ontario : A bond protects the beneficiaries and creditors of the estate in the event of improper administration of the estate assets. It is posted with the court by the estate trustee as security for the collection, administration and accounting of the assets of the deceased's estate. A bond is required under the Estates Act and the Rules of Civil Procedure in three situations (with certain limited exceptions): Before an estate trustee obtains a certificate of appointment of estate trustee without a will ; Before an estate trustee obtains a certificate of appointment of estate trustee with a will where the estate trustee is not named in the will ; and Before an estate trustee obtains a certificate of appointment of estate trus...
by ghariton
16 Jan 2012 22:33
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Your Plan for Doom's Day?
Replies: 26
Views: 1422

Re: Your Plan for Doom's Day?

Having gone through a bigger loss than 50% in 2000-2002, I know that I can hold my present portfolio through a 50% fall in equities and not lose any sleep at all. (In fact, my portfolio is designed with such a possibility in mind.)

George
by ghariton
16 Jan 2012 13:09
Forum: Retirement, Pensions and Peace of Mind
Topic: Public vs Private Pension - Envy and Debate
Replies: 906
Views: 66766

Re: Public vs Private Pension - Envy and Debate

More about MPs' pensions : NDP pension critic Wayne Marston (Hamilton East-Stoney Creek, Ont.) said he doesn’t see the necessity of reforming MPs’ pensions right now, as they were already reformed in 2000 and since then have been more reasonable. <snip> Liberal MP and pension critic Judy Sgro (York West, Ont.) said that she doesn’t see why MPs or public servants have a right to better pensions than the average Canadian, but she doesn’t think the answer is cutting their plans. “I’ve always believed in fairness…but I have to say at the same time, it’s not about bringing people down,” she said. <snip> The Canadian Taxpayers Federation, which has been calling on MPs to reform their pensions, estimates that Canada puts in $4 for every $1 MPs co...
by ghariton
16 Jan 2012 11:34
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

In continuous time, Macauley duration and modified duration are the same, simplifying things so that even I can figure them out. Now I'm puzzled as this suggests that what you meant by continuous time was not the same as what I called Newtonian time. I had thought we meant the same thing by those, but maybe not. By Newtonian time, I simply meant that time is a real variable, and so the payment times of cash flows didn't have to occur at, essentially, integer values. By continuous time I mean that compounding happens at every instant. It is the limit of compounding once a year, twice a year, every month, every day, every minute, every second, and so on. On one dollar, if the return is y, if compounding is yearly, the amount after a year is ...
by ghariton
16 Jan 2012 03:01
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

I've reworked the algebra in continuous time, and I've come to the conclusion that James is right and Globe Investor is wrong. In continuous time (I will spare you the calculations), it is abundantly clear that the duration of a residual (or coupon) maturing in ten years is ten.

(In continuous time, Macauley duration and modified duration are the same, simplifying things so that even I can figure them out.)

George
by ghariton
14 Jan 2012 23:16
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

Just like the real and nominal yields are different, so to the values of real and nominal durations will typically be different, because they arise from different (non-proportional) cash flows (if inflation isn't zero). Yes. The problem, I think, is with the definition of "duration". It is the change in the price of a bond in response to a 1% proportional change in the yield (or interest rate). [I know that it is really the response to an infinitesimal change (di/i), but I have been criticized here before for calculations in continuous time.) So are we talking of a 1% change in the real rate, or a 1% change in the nominal rate? The two won't reflect the same phenomenon. For simplicity, assuming Fisher's relationship between real ...
by ghariton
14 Jan 2012 20:31
Forum: Financial News, Policy and Economics
Topic: Austrians & Keynesians & the current crisis
Replies: 256
Views: 30692

Re: Austrians & Keynesians & the current crisis

An interview with Peter Boettke on Austrian economics.

Coincidentally, last November, Harvard students walked out of Prof. Greg Mankiw's introductory class in economics. They were protesting that he taught only "orthodox" economics, and not the "heterodox" alternatives. Here is the open letter they sent him, justifying their walk-out.

George
by ghariton
14 Jan 2012 00:57
Forum: Taxing Situations
Topic: Self-Employed Mat Leave Benefits
Replies: 9
Views: 1167

Re: Self-Employed Mat Leave Benefits

DavidR wrote: Or (after having children) incorporate the business and take dividends, not salary?
Yup. Not having to pay EI was one of the factors in my incorporating, although incorporation would have been justified by income splitting alone.

While I deplore the structure of our EI program in aggregate, I urge individuals to get everything that they are legally entitled to. May you and your partner have many children and collect much in EI maternity benefits.

George
by ghariton
14 Jan 2012 00:48
Forum: Financial Planning and Building Portfolios
Topic: New to forum. Comments on my asset allocation please.
Replies: 28
Views: 1803

Re: New to forum. Comments on my asset allocation please.

First, welcome to FWF. I hope that you find the information you are looking for here. But I should tell you that we rarely give short and snappy advice. That kind of advice often turns out to be inappropriate. Your portfolio looks nicely diversified. But without more information about you, it's impossible to say whether this is a good portfolio for you . Financial advisers (I'm not one) generally ask you to state your objectives. I personally don't find that useful -- my objectives in investing are to make money. But there are a series of more precise questions which are important. My first question relates to risk of loss. How would you react to a loss of 5% of your money in a short time period? 10? 20? How about a slow grind downwards? Yo...
by ghariton
13 Jan 2012 23:53
Forum: Taxing Situations
Topic: Question on RRSP deduction limit
Replies: 13
Views: 1146

Re: Question on RRSP deduction limit

No, and no.

George
by ghariton
13 Jan 2012 18:04
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

I should make clear that I'm not agreeing with what Globe Investor does. I'm just trying to understand why. My conclusion is that they are trying to "standardize" durations across various bonds. I personally don't find that helpful (I never buy nominal bonds anyway). I would rather do the calculation on the RRB's own terms, as James says. But it's interesting to figure out what Globe Investor is up to. (There's only so much excitement I can get from walking the dogs.)

As to IdOp's point about using future inflation rather than past inflation, I agree. Perhaps they are using past inflation to forecast future inflation. Or perhaps I haven't understood Globe Investor after all.

George
by ghariton
13 Jan 2012 13:10
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

but I can't think of a rationale for multiplying duration by the Index Ratio. Okay, I think I understand. For simplicity, consider a residual, i.e. a bond with only one payment, at maturity, T years from now. If this is a nominal bond, the value of the bond is V(nominal) = P / [(1 + i) ^ T] where P is the principal and i is the nominal rate of return. If this is a real return bond, the value of the bond is V(real) = [P * (1 + f) ^ T] / [(1 + i) ^ T] where f is the rate of inflation. But since 1 + i = (! + f) * (1 + r), where r is the real rate of return, then V(real) = P / (1 + r) ^ T Now duration is the first derivative of the present value with respect to the rate of return. But to make comparisons among bonds, that reference rate must b...
by ghariton
13 Jan 2012 02:27
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

jiHymas wrote:This may have been discussed somewhere already (can somebody give me a link?), but I can't think of a rationale for multiplying duration by the Index Ratio. Programmers gone wild? Note that using normal bond calculations for the duration of RRB ignores the back-loading effect which can be significant unless the assumed inflation rate is zero.
This has been discussed elsewhere on this forum, but none of us could figure out how a reported duration can exceed the maturity of a bond. Even for a strip, which is completely back-end-loaded, the duration equals the maturity (or maturity divided by gross return).

George
by ghariton
13 Jan 2012 00:28
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

Shakespeare wrote:http://www.globeinvestor.com/servlet/Pa ... ype=fedgov gives 143.91 on the 2021; my spreadsheet gives -.145% - i.e. 10-year RRBs are now negative.
You mean the ten-year RRB shown with a yield of 0.00% and a duration of 12.33 years? :wink:

That's why I don't trust globeinvestor's numbers.

I note in passing that, by interpolation, a nominal bond of comparable maturity yields about 2.00%. Coincidentally, the Bank of Canada targets an inflation rate of 2%. If expectations are the same (i.e. if the Bank succeeds in "anchoring" inflation), we are getting the insurance against unanticipated inflation for free.

George
by ghariton
13 Jan 2012 00:22
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

northbeach wrote:If core inflation rises to 5% in 12 months, what will the RRBs do?

If core inflation remains around 2.0% which way will RRBs go in 12 months?
RRBs track total inflation, as measured by the CPI. They do not track core inflation, which can be higher or lower.
Or does the price depend solely on long term rates?
In theory, the yield on a RRB equals the yield on a nominal bond of equal maturity (or better, duration), minus expected inflation, minus a "premium" for unanticipated inflation, plus a liquidity premium (there are more nominal bonds actively traded than RRBs). In practice this holds over the long run, but may not hold at any given point in time.

George
by ghariton
12 Jan 2012 21:13
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

I confess, George, I don't understand RRBs no matter how patiently you and Bylo explain them. But I was surprised that they did so well last year and wonder how this jibes with your own experience as a bond holder. Gosh, I didn't realize that they had done that well. I figured it was more like 12% (plus 3% coupon cash flow, and I'm heavily weighted toward the 2021's, so I guess Dan is right after all). The RRBs saved my portfolio. The rest, all in equities, was down a lot, but the portfolio as a whole was up 8%. I dunno what to say. I'm holding these things for capital preservation, not expecting gains. I guess there's a flight to safety or something. Will it reverse any time soon? Who knows? (I do know that the Bank of Canada and the U.S....
by ghariton
12 Jan 2012 19:05
Forum: Financial News, Policy and Economics
Topic: Clippings 2012
Replies: 308
Views: 46739

Re: Clippings 2012

From a Financial Times review of a new book on hedge funds: According to Mr Lack, the hedge fund industry lost more money in that one year [i.e. 2008] than all the profits it had generated during the previous 10 years. In fact most likely, he says, is that hedge funds lost more money for their investors in 2008 than the industry had made in its entire history. If true, that would put the industry up there with airlines and banks in the annals of long-term, non-productive performers from an investor perspective. Not that the managers have suffered the same way, of course. That is the brilliance of the hedge fund model. Between 1998 and 2010, the book shows, even on favourable assumptions hedge fund managers earned an estimated $379bn in fees...
by ghariton
12 Jan 2012 14:50
Forum: Stocks, Bonds, ETFs, Funds, REITS and More
Topic: Real Return Bonds
Replies: 1545
Views: 242897

Re: Real Return Bonds

Bank of Canada shows 0.38% real return, as of yesterday.

Time to sell? Time to buy? Time to go lie down?

George
by ghariton
12 Jan 2012 00:16
Forum: Financial Planning and Building Portfolios
Topic: Blodget sums it up
Replies: 12
Views: 1511

Re: Blodget sums it up

AltaRed wrote:
ThomTheAnalyst wrote:2012 nominal growth is expected to be 3.9% (2.0% real + 1.9% cpi).
Source(s)?
by ghariton
12 Jan 2012 00:09
Forum: Retirement, Pensions and Peace of Mind
Topic: Public vs Private Pension - Envy and Debate
Replies: 906
Views: 66766

Re: Public vs Private Pension - Envy and Debate

A DM or ADM earns enough during their career to invest on their own whereas a clerk may well live month to month for their entire career and never be able to make regular or even significant contributions to an RRSP, or a TFSA. The purpose of a pension plan is to replace a reasonable part of final income so the person can retire with a substantial reduction in standard of living. Your proposal would create retirement windfalls for clerks who, BTW, are already well provided for by the public service plan. The other side of the coin is that senior public servants are underpaid relative to the private sector. Any reduction in their pensions would have to be compensated by hefty increases in salaries. Of course, not all senior managers in the ...
by ghariton
11 Jan 2012 13:01
Forum: Financial News, Policy and Economics
Topic: Clippings 2012
Replies: 308
Views: 46739

Re: Clippings 2012

Broad brush, the G&M figures are correct. If anything, they're a little kind. Boy, I must be on a lot of people's ignore list. Uphread I gave a link to the specific Department of Canada study that the Globe and Mail is quoting. No calculations needed. Just read the numbers off the page. For convenience I repeat the link here . Look at the bottom of page 37. Actually, 42% sounded on the high side to me. Remember that a lot of people file income tax returns solely to obtain credits of various kinds. Thus, 25 million out of a total population of 34.6 million filed. Note that the labour force is only 18.7 million. So 6 million not in the labour force filed. (I note that these are not necessarily the most disadvantaged. For example, it's us...
by ghariton
11 Jan 2012 01:35
Forum: Financial News, Policy and Economics
Topic: Clippings 2012
Replies: 308
Views: 46739

Re: Clippings 2012

The dividend tax credit is tied to corporate tax rates, so the lower the corporate income tax rate goes, the lower the dividend tax credit goes. Yes. This is seldom mentioned by advocates of corporate income tax increases. Those increases should be accompanied by increased dividend tax credits, to respect the integrity of the overall tax system. What stands out is the number of Canadians who pay no tax at all. That would seem to be where some action needs to be taken. Look at it on the bright side. 15.5 million Canadians (out of 34.6 million) do pay some tax. Added. From the Finance Canada report : The tax system also changes the distribution of income among different groups of taxfilers, in particular to the benefit of women, youth, senio...
by ghariton
10 Jan 2012 00:35
Forum: Financial News, Policy and Economics
Topic: Greece
Replies: 397
Views: 43220

Re: Greece

e-kathimerini : Greece’s economy is heading for a nightmare contraction of 7 percent this year according to the Economist Intelligence Unit, raising fears that the country’s recession is nowhere near bottoming out anytime soon. While the 2012 budget sees gross domestic product shrinking by 2.8 percent, the EIU forecast places Greece second only to Sudan in the global recession chart: The African country’s economy is expected to contract by 9 percent owing to oil reserve losses after the secession of South Sudan. Even the most pessimistic projections of the International Monetary Fund had only seen a 3 percent contraction for Greece. And one must bear in mind that this year’s budget was also based on the assumption that the 2011 GDP would h...
by ghariton
08 Jan 2012 21:45
Forum: Financial Planning and Building Portfolios
Topic: Life Insurance
Replies: 84
Views: 9170

Re: Life Insurance

flywaysuzy wrote:I don't have a spouse, yet am required to pay for life insurance. I think you ought to be able to opt out when you don't have any dependants...
I'm available for adoption...

George