Money Sense

[Anonymous]

The Canadian dollar, oil and gold were all up today. I expect the Dow to sink as  the circus around the Russia collusion thing will reach fever pitch as Flynn testifies.

[cc]

souel: my accountant tells me that corporate accumulated expenses  can now go back 20 years for tax purposes.



My understanding was 10 years but she said it had been changed in about 05



Does that stack up to you?



I also expect that Shareholder loans never still date?

[Angry White Male]

I also expect that Shareholder loans never still date?

I can't answer the other question, but shareholder loans don't date, as far as I know.



So, if you loaned your company, say, $1,000,000, but 'paid' yourself back $100,000/year, that would be 10 years of repayment, which would not be taxed.

[Anonymous]

souel: my accountant tells me that corporate accumulated expenses  can now go back 20 years for tax purposes.



My understanding was 10 years but she said it had been changed in about 05



Does that stack up to you?



I also expect that Shareholder loans never still date?

You can carry a non-capital loss arising in tax years ending after 2005, back 3 years and forward 20 years. However, this extension does not apply to a non-capital loss resulting from an allowable business investment loss.



If you borrow funds from your company and don't repay it within one year, the CRA can assess the outstanding balance as ordinary income at an income tax rate similar to that of a salary. The catch is that your corporation isn't allowed to claim this as an expense the way they would if it was a salary – you're effectively double taxed.



For example, if you borrow or withdraw $50,000 throughout the year, without declaring a salary or dividend, the CRA could effectively call this income meaning that you'll pay about $9,000 in income taxes and your corporation will pay about $7,500 in taxes, roughly $6,000 more than if you declared dividend or were paid a salary.

[cc]

Thanks



Specifically what I meant about Shareholder Loans was, if I loan the company interest-free money to operate, can I take it back at ANY time in the future without it being taxable for company or myself?

[Anonymous]

can I take it back at ANY time in the future without it being taxable for company or myself?

It depends.  Under tax law this too may end up being considered as income in the year the loan was made. The general rule is that if a withdrawal from a corporation, designated as a shareholder loan, is repaid within one year from the end of the taxation year of the corporation, that is the taxation year in which the loan was made, it will not be included in the income of the borrower.

[Anonymous]

The Dow Jones closed above 25,000 today. That is three times what it was ten years ago during the financial crisis.



The United States added 250,000 private sector jobs last month alone. Deregulation and lower taxes have added rocket fuel to the American economy. Trump is the most unconventional and more controversial presidents, but Americans are better off since he became president. And I am now a convert to his policies.

[Anonymous]

The Dow Jones closed above 25,000 today. That is three times what it was ten years ago during the financial crisis.



The United States added 250,000 private sector jobs last month alone. Deregulation and lower taxes have added rocket fuel to the American economy. Trump is the most unconventional and more controversial presidents, but Americans are better off since he became president. And I am now a convert to his policies.

[Anonymous]

The markets had their worst week since Brexit. Here are some of the reasons why.



1. Concerns that the Fed will raise rates



Stocks have been rising steadily since the election in part because the economy is so strong. Unemployment is historically low, and there are more open jobs than people to fill them.



Companies are starting to pay workers more to retain existing employees and attract new hires. Businesses will eventually have to raise prices on the stuff they sell to afford their growing payrolls. In economics, that's called inflation.



Though the economy has been growing steadily for almost nine years, inflation has remained stubbornly and mysteriously low. The Federal Reserve combats inflation by raising its interest rates. The central bank has been unable to significantly raise its interest rates over the past decade, fearing it could stymie the economic recovery and perhaps cause prices to fall.



The Fed planned on raising interest rates slowly this year -- just three times in 2018. But if inflation picks up, the Fed could raise rates more often and more steeply than it had planned.



2. Rising interest rates



3. Worries about the bond market



Stocks have also been on a tear because they have been one of the only investments with a decent return. U.S. Treasury bond yields have been so low that many stock dividends are paying better.



But stocks are a higher-risk investment than bonds, which are backed by the United States Treasury. If bond yields start to rise, investors will want to take some of their money out of stocks and put it into safer bonds.



Sure enough, bond yields hit a four-year high Friday. The recent tax bill has forced the Treasury to borrow more money, which will put more bonds into play. A supply glut could devalue bonds. Prices and yields move in opposite directions, and bond buyers will want a higher yield (and lower price) to make it worth their investment.



Inflation is bad for bonds, too. If borrowing costs increase, bond investors will want more return -- a higher yield.



Attractive yields on a safer investment have made stocks suddenly less attractive.



4. Ugly politics



Politics has played a part in stocks' steady march higher, too. The Republican tax cut is great for corporate profits. Investors have rewarded companies' promises of bigger stock buybacks and dividends by raising their stock prices. Business confidence is on the rise, in part thanks to the Trump administration's push to cut regulation.



On Friday, the controversial release of a once-classified memo about the Russia investigation gave investors pause. Turmoil in Washington could be bad for business. It could create a logjam in Congress.



It's not top of mind for investors, but it's adding to their concerns.



5. Too far, too fast



Stocks have been rising pretty much in a straight line since November 2016, and that's not exactly healthy. Stock market analysts believe the stock market is long overdue for a 5% pullback or even a 10% correction.



A cooling-off period would be a good thing. It would make stocks cheaper and more attractive to investors, especially if the underlying companies are healthy, cranking out strong sales and profits.



The market finally began to come down to earth -- just a bit -- this week, and investors wonder whether this is the beginning of a correction. There could be a little groupthink taking place in the downturn.

[Anonymous]

The Dow closed 1175 points lower today, it's biggest one day loss ever. But not in the top one hundred percentage wise. The TSE closed 271 points lower.



Friday's US jobs report sparked worries over the prospects for inflation and a surge in bond yields, as well as concerns the Federal Reserve will raise rates at a faster pace than expected.

[Anonymous]

My husband just put more of his RRSP's into mutual funds.

 

Do you think a big correction is coming  Seoul?

[Anonymous]

My husband just put more of his RRSP's into mutual funds.

 

Do you think a big correction is coming  Seoul?

I can't count how many calls and emails I got today asking me that same question. I would be lying if I said I knew the answer. But, what I can tell you is I don't see a muti quarter drop at this point. Fourth quarter earnings are solid.

[Anonymous]

Another wild day on the markets and it's not over yet.



The Dow has dropped as much as 680 points on Thursday, primarily because of concerns about the bond market and inflation.

Stocks have swung wildly over the past week. The Dow traded up and down in a 1,900-point range this month alone.



Here's what's driving the volatility.



1.Concerns about inflation ...



Stocks had been rising steadily since the election in part because the economy is so strong. Unemployment is historically low, and there are more open jobs than people to fill them.



Companies are starting to pay workers more to retain existing employees and attract new hires. Businesses will eventually have to raise prices on the stuff they sell to afford their growing payrolls.



Though the economy has been growing steadily for almost nine years, price inflation has remained stubbornly and mysteriously low.



The Federal Reserve combats inflation by raising its interest rates. The central bank has been unable to significantly raise its interest rates over the past decade, fearing it could stymie the economic recovery and perhaps cause prices to fall.



The Fed planned on raising interest rates slowly this year -- just three times in 2018. But if inflation picks up, the Fed could raise rates more often or more steeply than it had planned.



Related: Dow plunges 1,175 -- worst point decline in history



2. ... and interest rates



When the Fed raises rates, the cost of borrowing money increases. That means companies have to pay more for their loans, which cuts into corporate profits. It also means Americans will pay more for mortgages and loans.



Another reason the stock market has risen so much over the past year has been the steady growth in corporate profits. Companies are healthy, and investors have rewarded them by pushing up their stock prices.



When interest rates rise sharply, stocks often fall. Investors worry that businesses' profit parade will slow down.



3. Worries about the bond market



Stocks have also been on a tear because they have been one of the only investments with a decent return. U.S. Treasury bond yields have been so low that many stock dividends are paying better.



But stocks are a higher-risk investment than bonds, which are backed by the United States Treasury. If bond yields start to rise, investors will want to take some of their money out of stocks and put it into safer bonds.



Sure enough, bond yields hit a four-year high Thursday. The recent tax bill has forced the Treasury to borrow more money, which will put more bonds into play. A supply glut could devalue bonds. Prices and yields move in opposite directions, and bond buyers will want a higher yield (and lower price) to make it worth their investment.



Inflation is bad for bonds, too. If borrowing costs increase, bond investors will want more return -- a higher yield.



Attractive yields on a safer investment have made stocks suddenly less attractive.



4. Too far, too fast



Stocks have been rising pretty much in a straight line since November 2016, and that's not exactly healthy. Stock market analysts believe the stock market is long overdue for a 5% pullback or even a 10% correction.



A cooling-off period would be a good thing. It would make stocks cheaper and more attractive to investors, especially if the underlying companies are healthy, cranking out strong sales and profits.



The market finally began to come down to earth -- just a bit -- and investors wonder whether this is a much-needed correction or the beginning of a bear market. There could be a little groupthink taking place in the downturn.

[Anonymous]

The Dow plunged over one thousand points lower today. The Dow is 10 per cent below the record high it set just two weeks ago, putting it in what is known on Wall Street as a "correction."



Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market's relentless march higher over the past year



The market fell steadily as Thursday wore on and is on track for its fifth loss in the last six days. Many of the companies that led the market's gains over the last year have struggled badly in the last week. Those including technology companies, banks, and retailers and travel companies and homebuilders.

[Angry White Male]

My husband just put more of his RRSP's into mutual funds.

 

I hope he's maxed out his TFSA allowance?



You can have one also, right, which is considered separate.