Income Trusts

Ottawa cracks down on Canada's favourite financial toy
Posted 11/1/2006
By Deirdre McMurdy

First and foremost remember this: don't panic.

The absolutely worst thing for any investor to do is to react to quickly to the news instead of sticking with your (You do have a Big Plan, don't you?

That means that if you owned income trusts last week, you probably still want to own them this week. And next week.

By all means review them in the context of the recent news about changes in their treatment by the federal ('Finance'); Department.

Frankly, if you own anything for tax purposes solely, it may not be such a hot idea anyway. But if you decide that you can live through the turmoil of the next few weeks, there may even be some cherry-picking to be done at a time when value isn't all that easy to find in the market.

Ottawa stuns market with pledge on income trusts

But we're getting ahead of the story here. So let's begin at the beginning.

It was quiet in the Ottawa press gallery around 4:30 on Halloween eve.

Most reporters had ducked out early to take their kids around the block or to meet for drinks, when the announcement came that Finance Minister Jim Flaherty was holding a press conference in half an hour in the theatre of the National Press Building

Given that markets had just closed when the press corps was summoned, the consensus was that Mr. Flaherty was about to say something about the long-simmering issue of income trusts. Nevertheless, the timing and the content of his remarks took everyone – from the oil patch to Bay Street to Parliament Hill by surprise.

Even Finance Department insiders knew nothing of the pending remarks and said that the income trust file was the most closely guarded of the many sensitive issues they deal with.

Trusts have a structure that encourages a large portion of revenues to flow directly to investors in the form of regular distributions, avoiding most corporate taxes. Investors can defer the income taxes they pay by holding the units of trusts in registered retirement plans.

Mr. Flaherty announced a package of measures that will tax distributions by income trusts while also cutting corporate taxes by half a percentage point and changing tax policy for pensioners. He claims these moves will ease the tax burden by C$1 billion a year.

Trusts that begin trading from now on would be subject to his new measures in the 2007 tax year, while existing trusts would have a four-year transition period.

That's all well and good except for the fact that the one thing financial markets will absolutely not tolerate is a surprise.

Over the years, that reality has entirely re-shaped the federal budget process, turning it into an elaborate, drawn-out process of consultation and directions that are clearly flagged well in advance of their ultimate announcement.

Corporations too, have learned to "manage expectations" to the last penny. They provide quarterly "guidance" to investment analysts and shareholders on their financial performance, and are exceedingly careful to forewarn of any anomalies on either the positive or negative side.

That – along with various political considerations – made the sudden directive from the federal government all the more surprising. After all, we're talking about a $200 billion dollar sector of the investment sector, a financial product that millions of Canadians own directly in their portfolios or indirectly through their pension funds.

Given investor demand for these high-yield vehicles at a time when interest rates are historically low, income trusts have also come to represent a huge chunk of the volume of business on the Toronto Stock Exchange (220 are listed), because so many of the energy companies that now dominate the index are income trusts.

Given how high these stakes have become as some of Canada's largest companies (namely BCE and Telus) adopted the income trust format, it's not altogether surprising that there has been – and will continue to be – so much complaining about the Finance Minister's rather unilateral, arbitrary move. Investment bankers, lawyers, securities dealers and brokers, in short, a lot of highly-priced, highly verbal talent just got a major hair cut.

On the government side (and yes, there is one) is an equally urgent and highly-priced agenda.

Forget all the platitudes about productivity and competitiveness in a global economy, bottom line is the income trust dudes were driving trucks through loopholes that allowed them to undermine Ottawa tax revenue flow, diverting hundreds of millions of dollars.

(BCE for example, was especially eager to transform itself into a trust to minimize an $800 million tax bill upcoming in 2008 after a series of existing shelters expires next year.

It's going to take some time for all the dust to settle on this subject in both practical and political terms.

The government has taken a political risk in aggravating several core constituencies in one smooth move: the business/financial community, western Canadian oil interests and investors. In the aftermath of the policy announcement, there's going to be plenty of lobbying to tweak the new rules as they are refined.

Forget jumping jacks and treadmills

No need for the elderly to pump iron to stay fit

Associated Press

CHICAGO — Forget jumping jacks and treadmills. Just doing household chores and other mundane activities of daily living is enough to help older adults live longer, new research suggests.

Elderly couch potatoes were much more likely to die within about six years than those whose lives included regular activity no more strenuous than washing dishes, vacuuming, gardening and climbing stairs, according to the study of adults aged 72 to 80.

About 12 per cent of people with the highest amount of daily activity died during the six-year follow-up, compared with nearly 25 per cent of the least active participants. The government-funded study appears in Wednesday's Journal of the American Medical Association.

“This is a monumental study,” said Dr. Andrew Goldberg, a geriatrics expert who was not involved in the research. “They used state-of-the-art methodology to answer a very important question, which is how important is it to remain physically active.”

The highest activity level studied “translates into a 50 per cent reduction in mortality. That's really big,” said Dr. Goldberg, a University of Maryland professor and director of geriatric research at the Baltimore Veterans Affairs Medical Centre.

The most active among the 302 adults studied didn't even do much, if any, rigorous exercise. But they did burn about 1,000 calories daily through activity, or about 600 more than the least active.

For someone weighing 170 pounds, roughly the study's average body weight, that would equal about 3½ hours of daily activity including yard work and household chores, versus less than two hours of similar activity for the least active.

The groups had similar amounts of age-related illness including diabetes, arthritis and cardiovascular disease, which affected more than half the study participants.

The most active were more likely to work for pay and to climb two or more flights of stairs daily, but surprisingly didn't do higher amounts of traditional exercise, said lead author Todd Manini, a scientist at the National Institute on Aging.

Jean Serpico, 75, of Arlington Heights, Ill., wasn't part of the research but has habits similar to the most active participants in the study. She climbs stairs daily to her second-floor condo, does frequent volunteer work, enjoys household chores, baking, shopping and helping her elderly neighbours.

“I do all that to keep busy. I just can't sit and look out the window,” Mr. Serpico said. “I just keep active. I think it keeps me going.”

The study results don't mean that older adults who engage in a more intense fitness regimen should stop, or that they won't gain perhaps even greater health benefits from it, the researchers said. Rather, they said, the study should be encouraging for those intimidated by traditional exercise, illustrating that activity doesn't have to be strenuous to be beneficial.

Mr. Manini said it is uncertain whether the results would apply to younger people.

The researchers used a laboratory technique that some consider the gold standard of measuring expended energy and more reliable than self-reported activity levels, although they also questioned participants about their habits.

Participants drank specially formulated water that is expelled from the body as carbon dioxide, which is a direct measure of energy use. For the next two weeks, they went about their usual activities. Fourteen days later, researchers measured the amount of special water remaining in the body. The difference between the levels on the first and 14th day, factoring in resting metabolic rate, determined how much energy had been expended through activity.

Participants were then followed for up to about eight years.

Improved activity-related cardiac fitness and well-being from feeling socially connected through work or volunteering might explain why active people lived longer, although the study didn't measure those effects, said co-author Dr. James Everhart of the National Institute of Diabetes and Digestive and Kidney Diseases.

Dr. Sandra Selikson, a geriatrics specialist at Montefiore Medical Centre in New York, said the results would help her encourage her older patients.

“You don't have to be motivated to do a mini-triathalon or a 10K. Just being active ... even benefited people who had medical problems,” Dr. Selikson said. “Even doing something is better than nothing.”

Herbal Supplement , Metatonin

Melatonin is a widely used over-the-counter supplement that's marketed as a way to help you overcome insomnia, prevent jet lag, battle cancer, rejuvenate your sex life and slow aging.

To find out if you can benefit from melatonin, try it for two weeks, comparing your sleep with the prior two weeks without melatonin.

However, the benefits of melatonin are often exaggerated.

Your body already produces melatonin, releasing it into your bloodstream in increasing amounts starting at dusk and tapering off toward the morning.

More research is needed to help evaluate how melatonin works and its potential long-term risks. Talk with your doctor before taking any herbal supplements.

Sleep not coming natural ?

Sleep is as important to your health as a healthy diet and regular exercise. Whatever your reason for sleep loss, insomnia can impact you both mentally and physically.

The impact can be cumulative. People with chronic insomnia are more likely than others to develop psychiatric problems such as depression and anxiety disorders. Long-term sleep deprivation may increase the severity of chronic diseases, such as high blood pressure and diabetes.

Insufficient sleep can also lead to serious or even fatal accidents. According to the National Highway Traffic Safety Administration, more than 100,000 crashes each year are due to drivers falling asleep at the wheel.

If self-help measures don't work or you believe that another condition, such as depression, restless legs syndrome or anxiety, is causing your insomnia, talk to your doctor. He or she may recommend that you take medications to promote relaxation or sleep.

Taking prescription sleeping pills, such as zolpidem (Ambien), eszopiclone (Lunesta), zaleplon (Sonata) or ramelteon (Rozerem), for a couple of weeks until there's less stress in your life may help you get to sleep until you notice benefits from behavioral self-help measures. The antidepressant trazodone (Desyrel) also may help with insomnia. Doctors generally don't recommend prescription sleeping pills for the long term because they may cause side effects, and developing your ability to sleep without the help of medication is the goal. In addition, sleeping pills can become less effective after a while.

Over-the-counter sleep aids contain antihistamines to induce drowsiness. They're OK for occasional sleepless nights, but they, too, often lose their effectiveness the more you take them. Many sleeping pills contain diphenhydramine, which can cause difficulty urinating and a drowsy feeling in the daytime.

Insomnia

If insomnia has been severely interfering with your daytime functioning for a month or longer, see your doctor to determine what might be the cause of your sleep problem and how it might be treated.

Insomnia may be difficult to diagnose because of its partly subjective nature and because so many factors can affect your sleep. Also, the kind of sleep patterns and degree of daytime fatigue that some people might consider to be indications of insomnia other people would not.

Your doctor may ask you questions about your sleep patterns, such as how long you've experienced your symptoms and whether they occur every night. Your doctor may also ask about whether you snore, how well you function during the day, whether you take any medications and whether you have other health disorders. You may be asked to complete a questionnaire to determine your wake-sleep pattern and your level of daytime sleepiness.

It's possible that your doctor may suggest you spend a night at a sleep disorders center. These centers are accredited by the American Academy of Sleep Medicine. A team of people at the center can monitor and record a variety of body activities during the night, including brain waves, breathing, heartbeat, eye movements and body movements. But for most people whose main complaint is insomnia, their sleep is usually so distorted by the laboratory environment that doctors can learn little useful information.

Insomnia Signs and symptoms

Signs and symptoms of insomnia may include:

• Inability to get enough sleep at night
• Difficulty falling asleep at night
• Waking up during the night
• Waking up too early
• Waking up feeling tired, even after a full night's sleep
• Daytime fatigue or sleepiness
• Daytime irritability

Common causes of insomnia include:

• Stress. Concerns about work, school, health or family can keep your mind too active, making you unable to relax. Excessive boredom, such as after retirement or during a long illness, may occur and also can create stress and keep you awake.
• Anxiety. Everyday anxieties as well as severe anxiety disorders may keep your mind too alert to fall asleep.
• Depression. You may either sleep too much or have trouble sleeping if you're depressed. This may be due to chemical imbalances in your brain or because worries that accompany depression may keep you from relaxing enough to fall asleep when you want to.
• Stimulants. Prescription drugs, including some antidepressant, high blood pressure and corticosteroid medications, can interfere with sleep. Many over-the-counter (OTC) medications, including some pain medication combinations, decongestants and weight-loss products, contain caffeine and other stimulants. Antihistamines may initially make you groggy, but they can worsen urinary problems, causing you to get up more during the night.
• Change in your environment or work schedule. Travel or working a late or early shift can disrupt your body's circadian rhythms, making you unable to get to sleep when you want to. The word "circadian" comes from two Latin words: "circa" for "about" and "dia" for "day." Your circadian rhythms act as internal clocks, guiding such things as your wake-sleep cycle, metabolism and body temperature.
• Long-term use of sleep medications. Doctors generally recommend using sleeping pills for no more than four weeks, or until you notice benefits from self-help measures. If you need sleep medications for longer, take them no more than two to four times a week, so they don't become habit-forming. Sleeping pills often become less effective over time.
• Medical conditions that cause pain. These include arthritis, fibromyalgia and neuropathies, among other conditions. Making sure that your medical conditions are well treated may help with your insomnia.
• Behavioral insomnia. This may occur when you worry excessively about not being able to sleep well and try too hard to fall asleep. Most people with this condition sleep better when they're away from their usual sleep environment or when they don't try to sleep, such as when they're watching TV or reading.
• Eating too much too late in the evening. Having a light snack before bedtime is OK, but eating too much may cause you to feel physically uncomfortable while lying down, making it difficult to get to sleep. Many people also experience heartburn, a backflow of acid and food from the stomach to the esophagus after eating. This uncomfortable feeling may keep you awake.
• Inherited condition. Some people have inherited poor sleep tendency. If that's your case, be extremely careful not to overexcite yourself, especially in the evening.

Insomnia becomes more prevalent with age. As you get older, changes can occur that may affect your sleep. You may experience:

• A change in sleep patterns. After age 50, sleep often becomes less restful. You spend more time in stages 1 and 2 of non-rapid eye movement (NREM) sleep and less time in stages 3 and 4. Stage 1 is transitional sleep, stage 2 is light sleep, and stages 3 and 4 are deep (delta) sleep, the most restful kind. Because you're sleeping more lightly, you're also more likely to wake up. With age, your internal clock often speeds up. You get tired earlier in the evening and consequently wake up earlier in the morning.
• A change in activity. You may be less physically or socially active. Activity helps promote a good night's sleep. You may also have more free time and, because of this, drink more caffeine or alcohol or take a daily nap. These things can also interfere with sleep at night.
• A change in health. The chronic pain of conditions such as arthritis or back problems as well as depression, anxiety and stress can interfere with sleep. Older men often develop noncancerous enlargement of the prostate gland (benign prostatic hyperplasia), which can cause the need to urinate frequently, interrupting sleep. In women, hot flashes that accompany menopause can be equally disruptive. Other sleep-related disorders, such as sleep apnea and restless legs syndrome, also become more common with age. Sleep apnea causes you to stop breathing periodically throughout the night and then awaken. Restless legs syndrome causes unpleasant aches in your legs and an almost irresistible desire to move them, which may prevent you from falling asleep.

Sleep problems may be a concern for children and teenagers as well. In addition to many of the same causes of insomnia as those of adults, younger people may have trouble sleeping because of conditions such sleepwalking, night terrors or teeth grinding (bruxism). In addition, some children and teenagers simply have trouble getting to sleep or resist a regular bedtime, often because their inherent (circadian) clocks are set later. When the clock on the wall says it's 10 p.m., their bodies may feel like it's only 8 p.m., because of their delayed clocks.

Insomnia

Almost everyone has occasional sleepless nights, perhaps due to stress, heartburn, or drinking too much caffeine or alcohol. Insomnia is a lack of sleep that occurs on a regular or frequent basis, often for no apparent reason.

How much sleep is enough varies from person to person. Although 7 1/2 hours of sleep is about average, some people do well on four to five hours of sleep. Other people need nine to 10 hours of sleep each night.

Insomnia can affect not only your energy level and mood, but your health as well because sleep helps bolster your immune system. Fatigue, at any age, leads to diminished mental alertness and concentration. Lack of sleep caused by insomnia is linked to accidents both on the road and on the job.

Insomnia may be temporary or chronic. You don't necessarily have to live with the sleepless nights of insomnia. Some simple changes in your daily routine and habits may result in better sleep.

Metabolism and weight loss:

Metabolism and weight loss: How you burn calories.

Find out how metabolism burns calories, how it affects your weight and ways you can burn more calories for greater weight loss.

You likely know your metabolism is linked to your weight. But do you know how?

Common belief holds that a slim person's metabolism is high and an overweight person's metabolism is low. But this isn't usually the case. Metabolism alone doesn't determine your weight.

Rather, weight is dependent on the balance of calories consumed versus calories burned. Take in more calories than your body needs, and you gain weight. Take in less and you lose weight. Metabolism, then, is the engine that burns these calories and is the scale that regulates your energy needs.

Metabolism: Converting food into energy

Stated simply, metabolism is the process by which your body converts food into energy. During this biochemical process, calories — from carbohydrates, fats and proteins — are combined with oxygen to release the energy your body needs to function.

The number of calories your body burns each day is called your total energy expenditure. The following three factors make up your total energy expenditure:

* Basic needs. Even when your body is at rest, it requires energy for the basics, such as fuel for organs, breathing, circulating blood, adjusting hormone levels, plus growing and repairing cells. Calories expended to cover these basic functions are your basal metabolic rate. Typically, a person's basal metabolic rate is the largest portion of energy use, representing two-thirds to three-quarters of the calories used each day. Energy needs for these basic functions stay fairly consistent and aren't easily changed.

* Food processing. Digesting, absorbing, transporting and storing the food you consume also takes calories. This accounts for about 10 percent of the calories used each day. For the most part, your body's energy requirement to process food stays relatively steady and isn't easily changed.

* Physical activity. Physical activity — such as playing tennis, walking to the store, chasing after the dog and any other movement — accounts for the remainder of calories used. You control the number of calories burned depending on the frequency, duration and intensity of your activities.

Metabolism and your weight

It may seem logical to think that significant weight gain or being overweight is related to a low metabolism or possibly even a condition such as underactive thyroid gland (hypothyroidism). In reality, it's very uncommon for excess weight to be related to a low metabolism. And most people who are overweight don't have an underlying condition, such as hypothyroidism. However, a medical evaluation can determine whether a medical condition could be influencing your weight.

Weight gain is more likely due to an energy imbalance — consuming more calories than your body burns. To lose weight, then, you need to create an energy deficit by eating fewer calories, increasing the number of calories you burn through physical activity, or preferably both.
Influences on your calorie needs

If you and everyone else were physically and functionally identical, it would be easy to determine the standard energy needs. But many factors influence calorie requirements, including body size and composition, age, and sex.

* Body size and composition. To function properly, a bigger body mass requires more energy (more calories) than does a smaller body mass. Also, muscle burns more calories than fat does. So the more muscle you have in relation to fat, the higher your basal metabolic rate.

* Age. As you get older, the amount of muscle tends to decrease and fat accounts for more of your weight. Metabolism also slows naturally with age. Together these changes reduce your calorie needs.

* Sex. Men usually have less body fat and more muscle than do women of the same age and weight. This is why men generally have a higher basal metabolic rate and burn more calories than women do.

Burning more calories

Your ability to change your basal metabolism is limited. However, you can increase daily exercise and activity to build muscle tissue and burn more calories.

Regular aerobic exercise, such as walking daily for 30 minutes or more, is an excellent way to burn calories. Strength training exercises, such as weight training, also are important because they help counteract muscle loss associated with aging. And since muscle tissue burns more calories, muscle mass is a key factor in weight loss.

Even though regularly scheduled aerobic exercise is best for weight loss, any extra movement helps burn calories. Look for ways to walk and move around a few minutes more each day. Lifestyle activities, such as gardening, washing your car and even housework, burn calories and contribute to weight loss. Taking the stairs more often and parking farther away at the store also are simple ways to burn more calories.

Don't look to dietary supplements for help in burning calories. Products that claim to speed up your metabolism are likely to offer minimal benefit and may produce undesirable or even dangerous side effects. Dietary supplement manufactures aren't required by the Food and Drug Administration to prove their products are safe or effective, so view these products with caution and skepticism.

Your metabolism influences your energy needs, but it's your food intake and physical activity that ultimately determine your weight.

Children coming back home to live ???

Back to the nest



Article By: Jennifer Gruden

You've got plans to turn your child's former bedroom into a sewing retreat, but when you get back from negotiating over the price of that new table for your serger, there's a message waiting: "Mum... Rachel and I just broke up. Can I come live at home for a few months?"


If you have an adult child who wants to live at home with you, you're not alone. Statistics Canada provides the proof after the 2001 census: "Over the last two decades, one of the trends for young adults in Canada is their growing tendency to remain in (or return to) the parental home. The census showed that 41% of the 3.8 million young adults aged 20 to 29 lived with their parents in 2001, a large increase from 27% in 1981."


The reasons may be economic, with jobs scarcer and rents higher. They may also be social, with more common-law and marital relationships ending, often casting one or both members of the relationship back to their parents' homes. And some analysts have speculated that it may just be that kids are accustomed to luxury: why would a 24 year old live in a small dingy apartment when he or she can live in a beautiful home with an in-ground pool - and enjoy home-cooked meals.


Whichever theory seems right, it's small consolation if you're trying to navigate a child's return to the nest. While some parents see welcoming a child back into their home as natural and something to celebrate, others feel a sense of failure, or annoyance that their hard-earned new lifestyle as empty nesters is disrupted. And many feel something in between. "I've been glad to help out my daughter," says Bea, 56, whose daughter, Laura, 29, has just moved out following two years of condo-sharing after a difficult period of unemployment. "But I also feel like I've put my own life on hold. I haven't wanted to invite friends over for dinner or travel as much, because I didn't want her to feel left out or like I was rubbing her limited income in her face."


"Mom's been great," says Laura, "But some months I felt like I was losing IQ points. It was hard to go into an interview and take charge, knowing that my mother was paying the bills - I felt like such a screw-up." It's hard to know what's likely to help and what might create problems. And oh, the problems that can arise when an adult child returns home - at times you may feel like they're teenagers again, and they may feel like they are as well!


What to consider
Old patterns can be hard to break. If your adult children return home you may find yourself leaning towards the role of advice giver/disciplinarian, and your child may begin to behave as if he or she is 13 all over again. This can raise everyone's stress levels tremendously! Also, if your child is returning home for difficult reasons such as unemployment or a divorce, he or she may feel angry and frustrated, or depressed and needy.


Depending on when the request arrives, you may find you have to change plans to downsize or give up privacy and time and energy. On the other hand, you will have a renewed chance to build strong family ties and enjoy the company of your child on a regular basis. Here are some things that you should keep in mind when you decide whether to say yes or no:


Does this mean giving up my own goals (to travel, to downsize)? Am I willing to make this sacrifice, and for how long?

Am I prepared to respect my child's autonomy? Am I ready to avoid giving advice or treating my adult child like a child - refrain from commenting on things such as clothing, leisure time activities, and choice of friends?

What do I expect from my child in return? Expecting your child to share in responsibilities as another adult member of the household will help in two ways - to lower resentment and also to prepare them for eventually moving on.

House rules are key
The best way to set all of you up for success is to sit down and agree on all the ground rules from the start. Some important areas to consider:


Privacy - how will each of you ensure that there is a reasonable degree of privacy for everyone? It's not just adult children who have concerns - parents too can have grown used to their business no longer being family business. Included in the idea of privacy is what kind of notification you expect if your child is staying out late or all night.

Chores - everyone who lives in the home should contribute to the chores around the house. It's best to lay out clear responsibilities and timelines.

Groceries and food - this can be especially important if grown children arrive with grandchildren in tow. How will the grocery bill, meal preparation, and meal scheduling be handled?

Rent or utilities-sharing - for most adult children, charging some rent is a good idea. It encourages responsibility for the child, acknowledges that having another person in the house has an impact on the bills, and can keep resentment to a minimum. Of course there may be circumstances that make this difficult, but it's best to at least talk about it. Also discuss whether you expect your child to pay for his or her own phone line, Internet access, cable television, etc.

Guests, overnight and otherwise - it's important to make clear what your expectations are about guests and dating while your child lives at home. It is important not to judge your child's choices, but equally important that you do not have to live with people in your home with whom you are uncomfortable.

Regular check-ins - have a family meeting once a month to discuss how things are going, so that any problems are addressed in a timely way and don't build up until there are bitter feelings. This is also a good time to express appreciation for extra help.

Grandchildren are wonderful - and complicate things
It can be especially hard when a divorced or separated child arrives with grandchildren. It can be difficult to know where to step in, and how to approach joint childrearing. Some of the tools are the same - sit down and negotiate in advance some of the boundaries. But what is more important is to always keep in mind that you are the grandparent - not the parent. You will have to step back and let your child remain the head of his or her own family. Some things to consider in advance:


Babysitting - moving in with you should not mean getting you become a free nanny service. You decide when and if you are willing to provide free child care, and beyond that charge a reasonable rate, or say no.

Discipline - you will have to follow your child's wishes for what methods of discipline are appropriate - time-outs vs. spanking, for example. At the same time it will be important to set the rules for the house - if it is not all right with you if the kids eat on the couch, talk to your child about it.

United front - don't contradict your child in front of your grandchildren, and don't sneak them treats or other forbidden privileges (except perhaps every great once in a while).

Space - be clear on how much baby or childproofing is possible in your home. Obviously safety is the first consideration, but is there a way to maintain adult space by keeping several rooms off-limits?

Re-launching into the world
One of the most important aspects of bringing adult children back into the home is setting a goal for their eventual move back into their own space. You should set a clear time limit on your help, even if it is several years into the future - unless you intend to make the arrangement permanent.


Think hard before you renegotiate this date - certainly it may be that your child needs a little longer, but if you change it more than once it is the same as not having a deadline at all. It may be more helpful in the long run, if you can afford it, to pay your child's first and last month's rent (deposit) on a new place than to give them a little more time to save up.


Although the issues and concerns can seem overwhelming, keep in mind that a family is a unit which supports all the individuals within it. If your child is asking to come back, chances are good that you have provided them with a sense of a safety net, which is a gift at any age - whether they stay for six months, or not at all.

Mayo Clinic Study on Optimists

Article By: Cynthia Ross Cravit

Aspiring centenarians may want to take a look at their attitude, according to a Mayo Clinic study.

A person's outlook on life may not only improve longevity but quality of life, according to researchers. Optimists are said to experience a higher level of both physical and mental functioning than their pessimist counterparts.

Further, optimistic people decreased their risk of early death by a full 50 per cent compared to those who were more pessimistic.

“The wellness of being is not just physical, but attitudinal,” said Dr. Toshihiko Maruta, principal author of the study. “How you perceive what goes on around you and how you interpret it may have an impact on your longevity, and it could affect the quality of your later years.”

Ideas about the associations of personality and health are not new, but have their roots in the bodily humors of ancient Greece.

While the exact mechanism of how personality acts as a risk factor for early death or poorer health is unclear, Maruto says it likely has to do with the fact that pessimists have an increased chance for future problems with their physical health, career achievements, and emotional stress – particularly depression.

“Yet another possibility could be more directly biological, like changes in the immune system,” he adds.

Researchers found that pessimists scored below the national average on physical functioning, bodily pain, perception of general health, vitality, mental health, and social functioning.

Besides looking at the world through rosier-colored glasses, living a long and healthy life may also mean paying attention to friends and family.

Loneliness in people over age 50 greatly increases their risk of high blood pressure, according to a new study at the University of Chicago.

The loneliest people studied had blood pressure readings as much as 30 points higher than those who were not lonely, suggesting that loneliness can be as bad for the heart as being overweight or inactive, said the study.

“The magnitude of this association is quite stunning,” said University of Chicago scientist Louise Hawkley, the study's lead author. For those who lack companionship or feel isolated, Hawkley said the findings indicate that one strategy for treating high blood pressure might be to become more involved, “do volunteer work, make yourself useful.”

The bottom line: living longer – and better -- may come down to having a healthy attitude and social life, as well as following more traditional wellness practices such as stopping smoking, eating a balanced diet and maintaining a healthy weight. Research shows that obesity, for example, contributes to diabetes, heart disease and various cancers.

Here are other steps you can take to live longer:

1. Don't sleep too much. Sleeping more than eight hours per night can reduce life expectancy, according to a February 2002 study in the Archives of General Psychiatry. Night owls, however, should take note: researchers say that sleeping less than four hours also increases death rates. People who sleep between six and seven hours per night were shown to live the longest.

2. Stick to a low-calorie diet. A recent study by the National Institute on Aging found that a calorie-restricted diet led to decreased insulin levels and body temperature, both considered signs of longevity. A diet low in calories but high in nutrients also led to a drop in DNA damage.

3. Have more sex. Researchers say that having intimate sex makes you happier, better rested and less stressed, which in turn can lower blood pressure and protect against stroke and heart disease. A study published in the April 2004 Journal of the American Medical Association found that "high ejaculation frequency was related to decreased risk of total prostate cancer."

4. Get a pet. People who own pets, especially dogs, have been shown to be less stressed and require fewer visits to their physicians than non-owners. Survival rates for heart attack victims who had a pet were found to be 12 per cent longer than for those who did not have one, according to researcher Erica Friedmann. Pet owners have also been shown to have lower blood pressure and are less likely to be lonely or depressed. Another healthful benefit? Pet ownership stimulates exercise.

5. Quit smoking. Middle-aged men who are long-term, heavy smokers face twice the risk of developing more aggressive forms of prostate cancer than men who have never smoked, according to a study that appeared in the July 2003 issue of Cancer Epidemiology, Biomarkers and Prevention. And according to a recent study in the Archives of Gerontology and Geriatrics, cigarette smoking has been clearly linked to the most common causes of death in the elderly. "Smoking is--for all but some exceptional subjects--incompatible with successful aging and compromises life expectancy even in extreme longevity," the study states.

6. Manage your anger. A study led by the Johns Hopkins University School of Medicine in 2002 found that men who responded to stress with high levels of anger were over three times more likely to develop premature heart disease when compared to men who reported lower anger responses. Furthermore, because anger is associated with high blood pressure, they were over six times more likely to have a heart attack by the age of 55.

7. Eat your antioxidants. Found in foods such as blueberries, artichokes, beans, cinnamon and cloves, antioxidant molecules scavenge free radicals, compounds whose unstable chemical nature accelerates the effect of aging on the cells. Cellular damage contributes to an array of degenerative diseases, including atherosclerosis, Alzheimer's disease and cancer. Research shows that certain types of beans are among the best sources of antioxidants, while blueberries and other berries follow close behind.

8. Stop nagging. Married couples who engage in heated arguments are more likely to have health problems than those who do not, according to a study at the University of Utah. Based on 150 healthy, older married couples, researchers found that women who are hostile toward their husbands are more likely to have hardening of the arteries. Men who are controlling in their relations – or are married to someone who is – are more likely to have atherosclerosis, a very serious condition of the coronary arteries.

Video Games and Seniors

Video games that exercise the brain are becoming the new cultural phenomenon among boomers. Just as physical exercise maintains body tone, strength, and endurance, mental exercising has positive conditioning effects for people of all ages

The hot new video game “Brain Age: Train Your Brain in Minutes a Day” flexes the brain muscles with training exercises like simple math problems, memory and other brain puzzles. Gamers are instructed to “train” once a day and then test their brain age. The lower the better (in so much as a 20-year-old brain is more desirable than, say, a 75-year-old brain.)

The game, designed for the Nintendo DS (Dual Screen) portable Gameboy, tracks a gamer’s progress and provides updates on improvement. Using voice commands and handwritten responses, the game produces increasingly challenging exercises and puzzles. Mental “work outs” include counting people going in and out of a house simultaneously, drawing pictures on the Touch Screen and reading classical literature out loud. Gamers also have the option to play Sudoku, the popular puzzle game.

“Brain age is launching at a time when Canadians clearly feel the need to keep their minds alive,” said Ron Bertram, Vice President –General Manager, Nintendo Canada. “Nintendo of Canada’s recent survey on mind and body fitness found that more Canadians recognize the importance of keeping their minds fit (85 per cent) than their bodies (79 per cent). With Brain Age, people of all ages can flex their mental muscles daily, even those with little or no video experience.”

The same survey, conducted by Decima Research, found that 90 per cent of Canadians feel that solving puzzles and playing board games are good for stimulating the mind.

“Nintendo’s Brain Age could be just one element of a brain healthy lifestyle that includes mental stimulation, physical exercise, social interaction, and a brain healthy diet,” said Dr. Sharon Cohen, Director, Toronto Memory Program and Assistant Professor, University of Toronto. “Brain Age is a great way for people to challenge their mental flexibility.”

Inspired by prominent Japanese neuroscientist Ryuta Kawashima, Brain Age is built around the use of real-time imaging which can track which portions of the brain are being used while doing different things. While traditional video games stimulate portions of the brain used for movement and vision, brain games stimulate the important frontal lobes where learning, memory, emotion and impulse control take place.

A Japanese version of the game has sold more than two million copies and is being used in Japanese hospitals and memory clinics to provide patients with a fun and easy mental workout.

Research indicates mental acuity can be strengthened similar to muscles with brain exercises. Major studies on aging over the past 25 years (Svanborg and colleagues in Sweden, Duke University, and the National Institute on Aging) support the findings that "mental (and physical) decline with aging is not inevitable".

The American Alzheimer’s Society offers these ten tips to maintain mental fitness:

1. Head first. Good health starts with your brain. It’s one of the most important body organs and needs care and maintenance.

2. Take brain health To heart. Heart disease, high blood pressure, diabetes and stroke can increase your risk of Alzheimer’s.

3. Numbers count. Keep your body weight, blood pressure, cholesterol and blood sugar levels within recommended ranges.

4. Feed your brain. Eat a low-fat, low-cholesterol diet that features dark-skinned vegetables and fruits, foods rich in antioxidants, vitamins E and C, B12, folate and Omega-3 fatty acids.

5. Work your body. Physical exercise keeps the blood flowing and encourages new brain cells. It doesn’t have to be a strenuous activity; do what you can—walking 30 minutes a day—to keep both body and mind active.

6. Jog your mind. Keeping your brain active and engaged increases its vitality and builds reserves of brain cells and connections. Read, write, play games, do crossword puzzles.

7. Connect with others. Leisure activities that combine physical, mental and social elements are most likely to prevent dementia. Be social, converse, volunteer, join.

8. Heads up! Protect Your Brain. Take precautions against injuries. Use your car seat belts, de-clutter your house to avoid falls, and wear a helmet when cycling.

9. Use your head. Avoid unhealthy habits such as smoking, drinking excessive alcohol or using street drugs.

10. Think ahead. You can do something today to protect your tomorrow.



thanks to Cynthia Ross Cravit for this great article

Coffee and Calories

Coffee has gone beyond basic black. Whether you make it yourself or sip it at your favorite coffee bar, you can choose from plain, flavored, whipped, topped, iced and even frozen versions. A plain cup of brewed coffee has zero fat and only a couple of calories. But it's how you "dress up" your coffee with "extras" that can make a difference in its fat, sugar and calorie count.

Coffee "extras"	Serving size	Fat (grams)	Carbs (grams)	Calories
Cream	1 tablespoon	6	0	50
Half-and-half	1 tablespoon	2	0	20
Plain nondairy creamer (liquid)	1 tablespoon	1.5	2	20
Plain, light nondairy creamer (liquid)	1 tablespoon	0.5	2	10
Flavored nondairy creamer (liquid)	1 tablespoon	2	2	40
Flavored, reduced-fat nondairy creamer (liquid)	1 tablespoon	0	5	20
Plain nondairy creamer (powder)	1 tablespoon	2	3	30
Plain, light nondairy creamer (powder)	1 tablespoon	1	4	25
Flavored nondairy creamer (powder)	1 tablespoon	2.5	7	50
Flavored, reduced-fat nondairy creamer (powder)	1 tablespoon	0	8	38
Whole milk	1 tablespoon	0.5	1	10
Fat-free milk	1 tablespoon	0	1	5
Sugar	1 teaspoon	0	4	15
Flavored syrup	2 tablespoons	0	20	80

Note: Values shown are an average of several brands.

What goes into the brew that you buy at your local coffee bar also matters. For example, here's how your choice of milk affects the calories, fat and carbohydrate content of a 16-ounce cup of latte at one popular coffee franchise.

Starbucks caffe latte espresso (16 ounces)	Fat	Carbs	Calories
Whole milk	14 grams	21 grams	260
Fat-free milk	0 grams	24 grams	160

Caffeine the stimulant

Caffeine is a mild stimulant found in coffee, tea, chocolate and many soft drinks. Too much caffeine can cause nervousness and jitters. It may also increase your blood pressure. The amount of caffeine in two to three cups of coffee can raise systolic pressure 3 to 14 millimeters of mercury (mm Hg) and diastolic pressure 4 to 13 mm Hg in people without high blood pressure.

It isn't clear how caffeine increases blood pressure. Some research has found that people who regularly drink caffeine have a higher average blood pressure than those who drink none. Other research has suggested that regular consumers of caffeine develop a tolerance to it — and as a result, caffeine doesn't have a long-term effect on their blood pressure.

In another twist, a 12-year study of 155,000 women found that drinking caffeinated cola may be associated with an increased risk of high blood pressure. However, the same causal relationship was not found with caffeinated coffee. In fact, the study suggested that women who drink caffeinated coffee may actually have a reduced risk of high blood pressure.

Among people who don't consume caffeine on a regular basis, caffeine can cause a temporary but sharp rise in blood pressure. Exactly what causes this spike in blood pressure is uncertain. Some researchers suggest that caffeine narrows blood vessels by blocking the effects of adenosine, a hormone that helps keep them widened. Caffeine may also stimulate the adrenal gland to release more cortisol and adrenaline, which cause your blood pressure to increase.

As a precaution, some doctors recommend limiting caffeine to 200 milligrams a day — about the same amount as in two 12-ounce cups of brewed coffee. Keep in mind that the amount of caffeine in coffee and soft drinks varies by brand. Also, avoid caffeine right before activities that naturally increase your blood pressure, such as exercise, weightlifting or hard physical labor.

Coffee " good or bad"

Coffee has a long history of being blamed for many ills — from the humorous, "It will stunt your growth" to the not-so-humorous claim that it causes heart disease and cancer. But some recent research indicates that coffee may not be so bad after all. So which is it — good or bad for your health? The best answer may be: It doesn't seem to hurt and it may help.

One large study of 128,000 men and women showed no increase in the risk of heart disease from drinking filtered coffee. The findings — which will publish on May 2, 2006, in the journal "Circulation" — indicated that it didn't matter how much coffee participants drank.

But another study of 4,000 coffee drinkers published in March 2006 in the "Journal of the American Medical Association" found that two or more cups of coffee a day can increase the risk of heart disease in people with a specific genetic mutation that slows the breakdown of caffeine in the body.

The design of a study can have some effect on the interpretation of results, which may be another reason for the different conclusions. Given the large number of participants in the study that showed no risk, it would be reasonable to conclude that coffee poses little or no threat to health.

However, this is not to say that you should disregard the old maxim, "Everything in moderation." Although coffee may not be harmful, other beverages such as milk and juice contain important nutrients that coffee does not.

Regarding other health effects of coffee, some evidence suggests that drinking coffee may protect against type 2 diabetes and colon cancer. But there is much more evidence of a protective effect from fruits, vegetables and whole grains than from coffee. So enjoy your coffee as part of a healthy diet that includes a wide variety of foods.

Protecting your Pension

Is Ottawa paying attention?

Article By: Gordon Pape

A few weeks ago, I wrote an open letter to Prime Minister Stephen Harper in which I encouraged his government to move quickly to address the serious issues facing current and future retirees and, in particular, the looming crisis in our private pension sector.

I certainly did not expect any quick reaction from Mr. Harper – he has plenty of other matters on his plate right now. Rather, I hoped to sow some seeds of concern among politicians and the public that might lead to a higher prioritization for these issues in the coming months.

Since I wrote that letter, two new developments have occurred that underscore the need for new policies to be introduced before the huge wave of baby boomers leaves the labour force – and remember, the leading edge of the boomers turns 60 this year.

First, health care benefits for retirees, an issue which has been increasingly in the news. Hewitt Associates, a highly-respected human resources company with international operations, recently released the results of a survey it conducted among 218 Canadian companies that now offer post-retirement health benefits plan. Hewitt found that 57 per cent of the firms plan to reduce these benefits over the next three years. Another 4 per cent said they will eliminate them entirely. Almost all cited the rising costs of health care as one of the main reasons for the move.

“The affordability of post-retirement health care benefits weighs heavily on the minds of companies,” said Naveen Kapahi, a senior benefits consultant in Hewitt’s Vancouver office. “Escalating health care costs, combined with the economic and political changes currently under way in Canada, will force many to actively look at strategies beyond traditional cost-shifting to manage rising health care costs.”

These are expected to include reduction in total coverage, stricter eligibility requirements, and increased cost sharing by retirees. In short, retirees will have to pay more of their personal health care costs in the years ahead than they expected, or budgeted for.

We recently saw an example of this in the U.S. where General Motors announced that it will cut health benefits for retirees in an effort to reduce costs. GM hasn’t done this yet in Canada but it appears to be only a matter of time.

Switching to the pension plan problem, there was a little-noticed court decision in New Brunswick that could turn out to be a milestone in the battle over retiree rights. Citing Charter issues, a judge granted a temporary injunction on Feb. 28 that stops the New Brunswick government from arbitrarily redistributing the assets of an underfunded pension plan set up for workers of the now-closed St. Anne Nackawic pulp mill.

The action, launched on behalf of 250 former mill workers who are paying the fees out of their own pockets, aims at overturning a provincial law which would have the effect of cutting the pensions of Nackawic retirees by anywhere from 27 per cent to 35 per cent. That money would be redistributed to employees who were under 55 at the time of the closure.

“It would mean that some people would lose their cars and maybe even their homes,” Craig Melanson, himself a retiree and spokesman for the group, told me. “The judge agreed, saying it would cause ‘irreparable harm’ to pensioners and violate their Charter rights.”

This is a real David versus Goliath battle: a small group of retirees from a town few people have ever heard of taking on a provincial government. So far the underdog is winning but this fight has just begun and it could conceivably end up at the Supreme Court of Canada a few years from now.

Given the large number of underfunded pension plans in Canada, the Nackawic fight may be just the start of a long series of political and legal battles. That’s why I believe it’s important to tackle these issues now, before they explode in our faces. Let’s hope someone in Ottawa is paying attention.

This article originally appeared in the Internet Wealth Builder, a weekly e-mail newsletter that provides timely financial advice from some of Canada's top money experts. For more information about becoming an Internet Wealth Builder member, go to http://www.buildingwealth.ca/promotion/50plusproducts.htm

Income Tax time is running out

If you have not collected all of your tax slips yet, here is a good method for getting ready to file.


Sympatico / MSN's tax preparation checklist
Posted 2/2/2006

By UFile.ca

We all know that the hardest part of filing your tax return can be pulling it all together. To help you out, we have put together this handy checklist of all the things to do to get started filing your tax return with UFile.

1. Collect all your tax slips. Tip: Look in all the spots where you normally put important papers that come in the mail.

2. Separate your tax slips according to the name appearing on the slip: yours, your spouse's, your son's, your daughter's, etc.

3. Organize them within those piles according to the type of slip: T4, T5, charitable donations, etc.

4. Make sure you know everyone's social insurance number. (Yes, even the kids', who should have a SIN so you can open an RESP for them if you haven’t already.)

5. Consider expenses for which you don't get a slip (e.g. your safety deposit box).

6. Tally up your medical expenses. It’s a good idea to make a list. Sort them by date, and consider using a non-calendar year-end in order to benefit from more medical expenses in a given 12-month period.

7. Finally, pull out last year's tax returns and assessments and find out what deductions you’re able to carry forward. This includes items such as your RRSP deduction limit, charitable donations carryforwards, medical expenses -- if you don’t claim them in the calendar year – as well as unused home office expenses for SOHO folks. Tip: If you used UFile last tax season, you will find this carryforward information waiting for you when you return this year.

Now for the easy part: Sign in to Sympatico.MSN Tax powered by UFile with the same user ID and password you used last year, or launch your UFile program from your desktop. Enter the information from the slips you have for each family member into their respective files.

Remember, UFile will calculate transfers and optimizations of charitable donations and medical expenses, and provide for such important credits as the eligible dependant amount, any amount for infirm dependants, and provincial tax credits.

Here’s one final tip: don’t be in a hurry! Once you have prepared your return, wait a day or two and then go back and review it. You may think of something you left out or find an input error you did not see before.

Your health

On the way home today I was listening to the radio and one of the comments from one of the hosts of the program said, " If you have a two storey house you should keep a set of cleaning supplies on the second floor to save you the climb up and down stairs while doing your house work".

I thought at the time, what a waste of money and opportunity to get some exercise.

But lets go back to what is happening in our society to a lot of us.

All of the news we hear and see on TV, is about the way we are getting heavier and heavier, our children are doing the same.

It seems that we are always looking for ways to do things with the least amount of effort.
There is a price to pay for all of this, the increased risk of a bunch of ailments, which can be traced directly to the lack of exercise and poor eating habits.

Texas Seniors Now Have Full-Fledged Reverse Mortgages

March 23, 2006 - Texas senior citizens now have the same options as seniors in the rest of the nation to convert a portion of their equity in their homes into tax-free income with a reverse mortgage.

"A 15-year battle is over, with financial companies now able to sell the same package of reverse mortgage loans as in the rest of the nation," reports business writer David Hendricks in the San Antonio Express-News today.


Related Stories



Larger Reverse Mortgages Available to Seniors In 2006

Dec. 15, 2005 - Older homeowners will be able to convert a greater portion of the equity in their homes into tax-free income using a reverse mortgage starting next year because of new, higher loan limits, the National Reverse Mortgage Lenders Association announced today. Read more...

Read more on Reverse Mortgages


"Texas voters overwhelmingly approved a constitutional amendment allowing reverse mortgage lines of credit in November. But the U.S. Housing and Urban Development Department and Fannie Mae had to review the new law before agreeing to insure and buy the loans sold through banks, credit unions, mortgage companies and other brokers."

On March 17, the U.S. Department of Housing and Urban Development released a long awaited mortgagee letter that announces the availability of a line of credit option for FHA reverse mortgages along with the ability to fund on any business day of the month in Texas.

The line of credit option, which has been available in every state in the nation except Texas until now, allows a way for seniors to request a specific amount of money as needed while the balance benefits from a growth rate. The growth rate allows for the credit line balance to grow at a rate that is competitive.

Texas has been the only state that mandates that reverse mortgages are only allowed to fund on the first business day of the month. With the change of this mandate, seniors no longer have to wait sometimes up to a full month to receive payment from a reverse mortgage. Senior Texans will now be able receive their funds four business days after they close on a loan bringing quick and much needed relief to senior homeowners.

In addition to greater flexibility of how and when borrowers can receive money, F.H.A. has raised the minimum lending limit to $200,160 in Texas. This increase allows some seniors with higher value homes to receive a substantial amount of more money from their homes equity compared to last years lending limit.

Some of this report was provided by Griffin Financial Mortgage, LLC, headquartered in Fort Worth, Texas.

the bear market rally is ending

"The Elliott wave pattern and supporting technical evidence are clear and compelling— the bear market rally is ending," says Steve Hochberg in The Elliott Wave Financial Forecast.

"This strong potential is compounded by the four-year cycle, which is entering its hard down phase and scheduled to bottom late this year or early next. The downward cyclical pressure on stocks should be intense in coming months. The majority of stocks in the Dow have already entered the next leg down and the index itself should now play catch up. The absence of participation in many of the most important blue-chip stocks dramatically signals the weakening strength of the uptrend. Any further rise should be weak and brief.

"The all-time peak in 2000 was unprecedented in terms of extreme stock market psychology. The final upward twists of the current countertrend advance may not be generating an exact replica of that period, but it’s pretty darn close. Equity funds received $31.8 billion of net inflows in January, the sixth largest monthly total in history. The only bigger months were the first four of 2000 and January 2004, when the bear market rally was a few days from a peak. This surge represents a major capitulation to the uptrend. Discount brokerage firms are seeing record levels of activity and at Fidelity, net flows into stock funds surged $5.6 billion versus just $400 million in January 2005.

"Two more features of the 2000 all-time high—IPOs and corporate buyouts— are hotter than at any time since. In some areas, the latest stock market euphoria is even more vivid. After 213 years as a partnership of members, the NYSE is becoming a publicly traded entity. More than a century of seat-price records tell the story: exchange ownership is valued most highly at major tops. In 1999, the exchange made its first move toward a public offering, just prior to the bear market swoon. The success of the latest effort to get the exchange into the hands of the public undoubtedly heralds an even more dramatic reversal. The upcoming volatility explosion will make stock trading go out of style for a long, long time."

Bull or Bear Market?

Bull or Bear?

By analyzing long-term cycles, Harry Dent sees a strong rally ahead. Also using long-term cycles, Steve Hochberg foresees a major market decline. Here, we offer their bullish and bearish views to help you decide if the glass if half empty of half full.

"It is likely that the markets will pull back briefly and then head up more sharply from April into around August," says Harry Dent in his H.S. Dent Forecast. "The typical pattern in the second year of the four-year presidential cycle is for a rally in January, sideways movements in February and March, a stronger rally from April into August, and then a sharper correction into October. The second year is the weakest, with only minor gains. However, in the second term of a president, the gains tend to be much stronger, near 20% on average.

"The Fed keeps looking like it will raise interest rates one to two more times. However, we still think that the economy is set to slow, which will change the Fed’s plans, with only one more rate hike likely and maybe not that. The slowing in housing should be a strong plus for stocks, as money continues to shift from housing speculation back into stocks, especially large-cap growth and technology stocks. The only obstacle to the markets continues to be high oil and commodity prices. We continue to expect these trends to back off soon and help to stimulate the surge ahead in stocks.

"We expect a much stronger rally than is typical of the second year, as we are coming out of a very bullish long-term trading range pattern from 2004 through 2005 and the Fed is due to end a long tightening cycle soon. If we don’t see the markets start to accelerate by April, we will scale back our forecasts. For now, we still see more upside than downside this year, even if the markets are less bubbly than our very contrarian forecasts. Investors should continue to be fully positioned for a likely strong surge just ahead and be buying further on any short-term setbacks in March. The small-cap and tech stocks should lead the next rally, with large-cap growth finally coming on much stronger."

Bonds

The following should give you a little better grasp on one type of Bond

Bonds aren't for sissies.

They’re for anyone who likes a nice, reliable income stream and enjoys knowing that while their principal may fluctuate a little, it’s guaranteed (by the issuer). And bonds are a good place for some high-and-dry money while you wait for bad things to happen.

More on that last part in a moment. But first, let’s just review the nature of bonds. The typical bond is simply a debt instrument that promises to pay the holder a defined amount at periodic intervals (the “coupon”) and repay the principal at maturity. Bonds are generally issued at par, so they mature at face value and thus guarantee the invested principal. The quality of the “guarantee”, of course, varies with the issuer of the bond. If the Government of Canada tells you that it guarantees your bond, you can effectively view that warranty as absolute. The government has sweeping powers of taxation, you see, so it’s difficult to contrive a scenario in which you’d have to worry about not receiving your interest or principal.

Farther down the food chain, the guarantee on corporate bonds is as good as, well, the corporation issuing the bond. That’s a rather broad range of safety. You have your “AAA”-rated players, and then you have your neighbour Bubba Billy, who wants you to buy Bubba Billy’s High Interest Hot Tub Improvement Bonds, “cuz they’ll pay, fer sure!” [Compliance Disclosure: We don’t know your neighbours, or anyone named Bubba Billy. But if we did, this would not be a comment on the credit quality of any bonds bearing a coincidentally similar name.] So buying corporate bonds is different than buying government bonds of a sovereign nation, since the former requires monitoring the credit risks of holding a company’s debt. As a consequence of the higher risk, corporate bonds generally pay a higher income than government bonds of similar term.

Now, although bonds are safe harbour investments, they still have various risks. For instance, bonds hate both rising inflation and interest rate hikes. (The two are related, of course, since interest rate hikes are used in an attempt to cool the hot economic growth that creates inflation.) Bonds hate rising inflation because they make the purchasing power of both the coupon stream and the maturity value decline. Nothing happens to the actual dollar amounts – it’s just that the dollars don’t buy as much. And bonds hate interest rate hikes because they make the fixed coupon payments that looked good at the old rate look less valuable at the new rate.

So that’s a bit on how they work. There’s lots more to know, of course, and managing bonds can be every bit as complex as managing stocks. All that being said, bonds aren’t just for folks who want to clip coupons, or for those who want a guarantee on their principal. Bonds are a perfectly useful place to park money if you are being opportunistically defensive.

Take, for instance, the threat of H5N1. That’s the nasty strain of avian influenza that’s been making waves globally amongst such agencies as the World Health Organization. The essence of the issue is that global health authorities see H5N1 as a significant threat to global health. I’ll leave it to you to scare yourself silly by doing the reading for yourself (see the WHO website, or just Google H5N1), but it is sufficient to note that lots of folks who work in the disease business say there’s trouble brewing out there. Maybe even spooky Stephen King-novel trouble. That tends to spook the markets too, since both the reality of infectious disease and attempts at preventing it cause economic slowing. Remember SARS? That’s a much less scary virus than H5N1, but the responsible actions to contain its outbreak still had a significant economic cost.

Now, in investing, a good defense is also good opportunistic positioning. If you’re concerned about a slowing economy or a sharp economic shock, bonds are a smart investment choice. In the first place, bonds will make you money while you hold them. In the second place, the inflation and interest rate hikes that bonds hate aren’t much of a risk when growth slows. In the third place, money in bonds is liquid and fully deployable in the event that a fire sale shows up in other markets like stocks. And in the fourth place, if your paranoia about slow grow or shocks is misplaced, your bonds will make you money while you hold them in the first place.

Bonds aren’t for sissies. They’re a smart investment that can play a role in both the defense and offence strategies in your portfolio.


© 2006 John Caspar

Small Caps and Cycles

Small Caps and Cycles...

"Roman historian Tacitus first noted that in all things there is a law of cycles; in that regard, not much has changed in the last 2000 years," notes Jim Oberweis , who explains cycles in small-cap stocks.

"Over the 1926-2004 period, small-company stocks have outperformed large-company stocks by a little more than 2% per year, on average. However, along the way there have been multi-year cyclical periods favoring small company stocks over large. From Dec 1973-July 1983, the stars were aligned for small-company stock investors. On average, small-stocks beat large-caps by 10.9% annually except for 1980, when both small-caps and large caps performed equally well.

"Satya Pradhuman, director of Small-Cap Research for Merrill Lynch, in his book Small-Cap Dynamics, points out that the single biggest long-term factor is economic growth. According to Pradhuman, smaller firms have greater economic sensitivity than large capsand thus tend to outperform large-caps when the economy experiences periods of rapid growth. To find a strong economy, look for sharply increasing industrial production.

"An appreciating dollar has historically correlated well with small-cap outperformance. Additionally, watch inflation. Inflation, per se, is not good for equities. In the short term, Pradhuman asserts that changes in market volatility should be closely observed. Periods of declining market volatility tend to favor small-cap stocks. Changes in market volatility affects the willingness of investors to assume risk; hence, when investor appetite for risk increases, small-caps tend to outperform.

"Predicting changes in the large-cap/small-cap cycle is challenging. One strategy is to simply remaining fully invested, pick good stocks, and accept the volatility of the cycles. Many, if not most, people try to emotionally guess (rather than fact analyze) the cycle and blow it. Many extrapolate the recent past and assume it will persist. Confidence tends to be highest when we approach the inflection point. When it seems like that either small-caps or large-caps will never come back into favor, it probably won’t be long before they do.

Investing in your RRSP in Bonds

Smart ways to invest .


It is definitely a good idea to have bonds in your RRSP to provide regular income or to balance out the risks of holding equities. But many Canadians make costly mistakes in how they invest in bonds.

The "hand-in-your-pocket" TV ads definitely apply to the advice on bond investing that most banks and investment advisors provide.

Investors are usually encouraged to own bond or balanced mutual funds. The problem is that the annual mutual-fund management fees, which benefit the advice-givers, draw away a substantial amount of the annual return to investors.

Take, for example, the Talvest Bond Fund, which Globefund.com says returned 5.32 per cent annually in the past 10 years. The fund has an annual management expense ratio (MER) of 2.12 per cent, which is approximately the amount by which it lagged the Scotia Capital Universe Bond Total Return Index, which had an annual return of 7.49 per cent over the decade.

In the case of balanced funds, bonds are mixed in with equities. Yes, it is a convenient, one-fund solution to having a balanced portfolio, but the high MER is applied to the bond component as well as the equity component.

A good example is the Fidelity Canadian Balanced-A Fund, with its 2.36-per-cent MER applying to its 45-per-cent holding in bonds. With Canadian yields for high-quality bonds in the 4-to-5 per-cent range, almost half of the expected yield-to-maturity on the bonds is being drained away by fees.

Unfortunately, Canadians choosing bond or balanced funds may be attracted by the decent long-term returns. However, historical bond returns were boosted by capital gains on bonds as interest rates fell gradually over the years. With interest rates expected to be stable or to rise slightly in the future, investors should expect only the coupon return on bonds and that makes it all the more important that fees be minimized.

The smart approach, therefore, is to invest directly in high-quality bonds (or GICs). This is fairly easy to do. One can replicate the work of a fund manager simply by buying a package of bonds known as a bond ladder (one bond maturing in each year for the next 10 to 15 years).

The only time it makes sense to use a bond fund is when you want to invest in high-yield, risky corporate bonds. Studies show you need to diversify into 20 such bonds in your portfolio to effectively insulate against a bankruptcy or two, and unless you have a very large portfolio, this can only be achieved through a fund.

One can also easily own real return bonds directly. These inflation-protectors are ideal for an RRSP since they provide a real return, currently about 1.5 per cent, plus the rise in the CPI.

For anyone preferring instead the simplicity of a fund for their core bond holding, the best choice would be one of the iUnit exchange-traded funds (ETFs) offered by Barclays Global, given their low MERs of 0.35 per cent a year or less.

Barclays offers the iUnits Short Bond Index Fund (symbol XSB on the TSX), which mimics the Scotia Capital Short Bond Index, the iUnits Canadian Bond Broad Market Index Fund (XBB), which replicates the Scotia Capital Universe Bond Index, and the iUnits Real Return Bond Index Fund (XRB), which approximates the return of the Scotia Capital Real Return Bond Index.

Even these low-fee funds, however, can't provide the benefits of owning strip bonds in your RRSP. Strips, also known as zero-coupon bonds, are bond principal and coupons sold separately and the advantage is not only convenience, since you don't need to reinvest coupon interest each year, but also the insurance factor.

If stock markets fall apart, bond yields would likely eventually decline and the resulting capital gains in bonds would offset losses on equities. In the case of strips, a decline in yield produces a bigger capital gain.

For example, if a regular 10-year bond (with a 4-per-cent coupon) drops in yield from 4 to 3 per cent, the capital gain would be 8.8 per cent. The same yield decline for a 10-year strip would produce a 10.5 per cent capital gain. For a 30-year term, the gain would be 17 per cent for a regular bond versus 34 per cent for a strip.

You can work out any comparative scenario you please using the bond calculator at www.smartmoney.com.



Wayne Cheveldayoff is a former investment advisor and professional financial planner. He is currently specializing in financial communications and investor relations at Wertheim + Co. in Toronto. His columns are archived at www.smartinvesting.ca and he can be contacted at wcheveldayoffyahoo.ca.

If you have Money

Starting out in building your Wealth


Vast legions of financial companies will fall at your feet if you’ve got a big amount of money to invest, but what if you or one of your children is just starting out?

Investing newcomers have two ways to go – try to build up an investing fund the safe-but-slow way using a savings account, or find a way to invest in the markets with next to nothing. Let’s say you or one of your kids wants to put some money in a registered retirement savings plan right away, with just a few hundred dollars in hand.

An obvious place to go would be your bank. Almost every bank branch has someone who can sell funds, and it happens that most bank fund families include some pretty good products, notably Canadian equity, Canadian dividend and income funds. At TD Canada Trust branches, you can buy into TD Canadian Equity, a very solid performer, for as little as $100 in a registered retirement savings plan account, or $1,000 in a cash account. You can buy BMO Dividend and Scotia Canadian Dividend for as little as $500 upfront in either an RRSP or cash account, while RBC Dividend requires $500 for an RRSP and $1,000 for a cash account.

A pair of insurance companies, Great-West Life and London Life, have a $300 minimum for their funds. The mainstream fund company with the lowest upfront minimum is AIC Funds, at $250. Companies such as AIM-Trimark, CI Funds, Dynamic, Fidelity and Mackenzie Financial have $500 minimums.

The challenge isn’t just finding a fund company with a low minimum. If you’re dealing with a fund company that doesn’t sell directly to the public like the banks do, then you also have to find an investment adviser willing to accept a tiny start-up account. For young people or those just starting out in the workforce, the best approach is to hook up with the adviser their parents use. Alternatively, new investors may find they can only interest an adviser in their account if they commit to making sizeable and regular contributions. Small independent advisers may be most open to this sort of account, whereas advisers at big firms would likely be much less interested.

Another option is to buy funds through an on-line broker, where you have access to hundreds of funds and the commissions are minimal or non-existent. Be sure to check to see if there are any minimum account sizes – some firms have them, others don’t.

If you decide to save up before getting into the markets, use the sort of no-fee, high-interest savings account offered by ING Direct, Altamira Investment Services, President’s Choice Financial, Citizens Bank of Canada and many others. The returns aren’t great at 2.5 to 3.25 per cent, but at least you’re doing better than a regular bank savings account.

Global Funds

Three Global Funds for 2006





Article By: Gordon Pape

International funds invest most of their money outside of North America but global equity funds can invest around the world. That gives the managers a huge amount of freedom in making their choices.


You'd think that would translate into good returns. Unfortunately, it hasn't. Over the past five years, the average Global Equity fund has lost 1.62 per cent annually, according to Globefund. That's a sorry record.


Part of the problem has been the rise of the Canadian dollar. Many global funds invest heavily in U.S. stocks, which have been hardest-hit in currency exchange terms by the soaring loonie.


Of course, the degree of currency exposure in global equity funds will depend on how heavily weighted they are to the U.S.
The Canadian dollar has not appreciated as dramatically against other major currencies like the euro or the pound and I don't see that changing in the coming year. If currency risk is a concern for you, check the asset weightings for the global funds in which you are interested before buying.


From an economic perspective, I anticipate some slowing in world growth in 2006 due to high oil prices and rising interest rates. Therefore, I am placing my emphasis on funds that have a proven ability to maintain value in such markets, although there are a few growth-oriented entries on our list for more aggressive investors.


With that, here are three global funds that I feel are worth considering for your portfolio in 2006. All performance numbers are to Nov. 30.


Fidelity NorthStar Fund.

This outstanding new entry from Fidelity just passed its third anniversary and I am giving it my top $$$$ rating. It is unusual for me to put a fund into our highest category so quickly but the numbers leave me no alternative. In its first three years, the fund posted an average annual gain of 12.7 per cent compared to an average of 6.5 per cent for the peer group. Part of this can be attributed to fortunate timing – the fund was launched just as the bear market of 2000-2002 hit bottom, thus enabling the managers to buy stocks cheaply. But they didn't have that advantage over the latest one-year period yet they still outperformed the category by a good margin with a gain of 10.9 per cent. All the while they were keeping their risk level well below that of the Global Equity group. High return and low risk add up to a very strong combination in my book.


Mackenzie Cundill Recovery Fund.

Here's a fund that is perfectly in tune with the Peter Cundill philosophy of looking to buy a dollar for 50 cents. Its mandate is to invest in companies that are underperforming, in turnaround situations, or which have low credit ratings — or any combination thereof. You've heard of junk bond funds? This might be described as a junk stock fund. But if you are comfortable with this contrarian investing concept, Cundill and his team are probably the best in the business at pulling it off. The fund has never lost money in a calendar year since it was created in 1998. It came through the bear market unscathed (the worst year was a 1.7 per cent gain in 2002) and managed to turn in great profits even when the loonie was surging against the U.S. dollar. The performance numbers are astounding. Over most recent five years this fund gained an average of 17.1 per cent annually while the category as a whole was showing an average annual loss of 1.6 per cent. The latest one-year number is a gain of 19.6 per cent, more than double the category average. How can you argue with that?


Saxon World Growth Fund.

Manager Robert Tattersall brings a value-oriented stock selection criteria to this multi-country entry. The mandate directs the manager to look for small-to-mid-cap companies trading outside of Canada however some of the companies in the mix are anything but small, such as Pfizer, the pharmaceutical giant. Geographic and sector allocation is secondary to the main focus of identifying value stocks. The fund gained 8.2 per cent in the latest year, slightly below average for the peer group, but shows stellar longer-term performance figures. The three, five, ten, and fifteen-year numbers are well above average. The fund held up very well during the bear market, so risk is low. You'll need $5,000 to take a position. It's a no-load fund.


Talk to a financial advisor before purchasing any of these funds.

CPP

Don't Give Up On the CPP

By Gordon Powers

Although investor attention is focused on RRSPs this time of the year, it’s worth remembering that most adults are already contributing to a pension plan of sorts, courtesy of the federal government. Although you wouldn’t want to be solely dependent on it, the Canada Pension Plan (CPP) is often the first pension that people collect and the one they understand the least.

The CPP, which was established 40 years ago, is financed through mandatory contributions from employers, employees, and the self-employed, as well as investment income. Employers and employees pay equal contributions based on a maximum amount of earnings, adjusted annually.
Contributing Canadians may receive payments as early as age 60 or upon suffering a disability. Your monthly pension from CPP is determined by how much, and for how long, you contributed to the plan over your working life. The pension is designed to replace about 25% of earnings while you paid into the plan with CPP setting a maximum monthly benefit each year.

If you qualify, the disability pension is a monthly benefit consisting of both a flat-rate and earnings-related component. The latter is 75% of the CPP retirement entitlement, calculated as if you turned 65 in the month when the disability pension kicked in. When you actually hit age 65, the total disability benefit is changed to the regular CPP retirement pension.

2006 CPP Payments

You can receive a retirement pension as early as age 60, provided you actually stop working for a bit. Once you start receiving your pension, you can still work as much as you want but you can’t contribute based on any future employment earnings.

If you take CPP before age 65, your monthly pension is reduced by 6% for each year you are under age 65. So a 60 year old would see 70% of the available pension. Similarly, if you elect to start taking it later than age 65, the amount of your pension is adjusted upwards by 6% for each year past 65. Age 70 is the limit though.

While deciding when to take CPP payments is a personal choice that you should make with a financial advisor, it may be wise for many people to take these payments as early as possible. It’s a question of potential longevity versus financial need.

Obviously, the longer you live, the more money you can expect to collect from the plan. Most actuaries estimate that women who retire at age 60 will live to 84, on average. Men who retire at age 60 are expected to live to an average of age 79. You can get a better idea of the variables involved and where you stand by looking at MSN / Sympatico's life - expectancy calculator (http://moneycentral.msn.com/investor/calcs/n_expect/main.asp). It contains a range of probing questions about age, family history and lifestyle practices.

Looking at the maximum payments by taking CPP at the age of 60, you’ll have received a total of $215,822 by the age of 90. By taking it at 65 you’ll have a total of $258,570 and by taking it at 70, your total will be $271,488 by the age of 90. Clearly, the later you take your pension, the more you end up receiving in total if you were to live to 90. But what happens in the meantime?

The bigger issue for most people is how long it takes for those starting at the later ages (65 and 70) to catch up with those opting for the earliest date (60). If you were to take CPP at the age of 65 it would take you 11 years (when you’re 76) to catch up to the total value received by someone who had taken it at age 60. If you started taking amounts at age 70, it would take 21 years (when you’re 81) for you to catch up to someone who took payments at 60. To see how this works, here’s another calculator (http://curc.clc-ctc.ca/earlycpp.html) to play with.

This simple look assumes that you spend the money as you get it. If even just some of the contributions were invested though, it would take even longer for the 65 and 70 values to catch up to the total value achieved by taking CPP at the age of 60. Inflation is going to be another variable to consider since CPP payments are indexed to the Consumer Price Index annually.

So, if you live to be much older than 75, taking CPP early would mean a lower total pension income over your lifetime. That’s why some people who expect to live into their eighties or nineties choose not to start CPP until age 65. On the other hand, you might be looking for some help with costs such as children’s education, mortgage payments or travel.

It all boils down to whether you want more now or more later. The higher monthly and total payments received by those who defer CPP payments are real. But it takes many years to collect the same amount as someone who starts early. More importantly, there are no guarantees that you will live that long.

It gets more complicated still if you’re involved with corporate pension plan that is ‘integrated’ with the CPP. This would include most public service employees and teachers, for instance. Integration means that your corporate pension is adjusted to take into account the benefits you’ll receive from CPP. The aim is to provide you with a combined pension income – from both your company plan and CPP – that equals approximately 2% of your average salary multiplied by your years of credited service in the pension plan at work.

If you opt for an early CPP pension at a reduced rate, the CPP benefit will be ‘stacked’ on top of your corporate benefit until you turn 65 but your corporate pension is generally not adjusted for CPP until age 65. In this instance, taking CPP early would take advantage of the five-year window during which your corporate pension would be unaffected.

By Gordon Powers

Stock Trimming

This may be a good time to do some stock trimming," notes John Murphy, technician par excellence, and head market analyst at StockCharts.com. Here, he looks the technical state of the market, and offers a cautious assessment for the period ahead.

"Like most other market analysts, I had been expecting the traditional fourth quarter market rally, paving the way for higher prices through the balance of December. I also wrote, however, that I didn't think this last move up would be very long-lasting. In fact, I suggested that January might be a good time to start taking some money off the table if the rally lasted that long. Here, I'm going to show a couple of reason why I'm not that enthusiastic about the staying power of the market's latest upmove, and why I believe that it's on weak technical footing.

"First, is the New York Stock Exchange Advance-Decline line. This is one of the most popular of technical indicators. It's a cumulative total of the number of advancing stocks minus declining stocks. Historically, the advance-decline line is supposed to move in tandem with the market. When it stops rising with the market, a negative divergence is being created. That's where we are right now.

"The NYSE Advance-Decline line bounced off its 200-day moving average in late October (when the market stabilized) and has been rising with the market over the last two months. The problem is that it hasn't exceeded its September high when most of the major market averages have. As long as that negative divergence exists, the staying power of the current stock market rally is in question. As usual, there's more to the story.

"In addition, we are seeing the first negative divergence between the New York Advance-Decline line and the S&P 500 index in three years. The two have been moving up together since the last bull market started in the spring of 2003. The last two market corrections took place in 2004 and 2005 and in both instances the NYAD line moved to new highs before the S&P 500. The AD line hit a new high in August 2004, which was three months before the S&P 500. In June of 2005, the AD line hit a new high a month before the S&P. In both instances, the NY advance-decline line led the market higher.

"Now, the Advance-Decline line has failed to reach a new high while the S&P has already done so. That's the first time since the bull market started three and a half years ago that the NY advance-decline line has failed to move to new highs with the S&P. One of the first things market technicians look for in a mature bull market is a peak in the NY Advance-Decline line. That's because the Advance-Decline line usually peaks ahead of the market. It's too early to call this a peak. But it's not too early to start getting a little concerned.

"Meanwhile, fewer stocks are hitting new highs. In a healthy uptrend, the S&P along with the NYSE High-Low index (which measures the number of NYSE stocks hitting new 52-week highs minus new lows) should be rising together. Again, in the two corrections in 2004 and 2005, both fell together. When the 2004 correction ended, the two rose together. The same thing happened in the summer of 2005. A new high by the S&P 500 saw a corresponding move up in the NYSE High-Low readings.

"Now, however, at the end of 2005, the S&P 500 is hitting a new high— but the NYSE High-Low index isn't. That means that fewer NYSE stocks are hitting new 52-week highs. Even worse, the index is dangerously close the zero line. That means that the number of new 52-week highs barely exceeds the number of new lows. That's not symptomatic of a strong uptrend.

"Finally, the four-year cycle turns down in 2006. Breadth indicators normally peak before the market does. In some cases, the lead time at tops can be considerable. However, the relatively long length of this cyclical bull market (three and a half years) and the fact that we're more than halfway through a seasonally strong period (November through January) heighten the significance of the negative divergences shown herein. 2005 also marks the third year of the four-year presidential cycle (which last bottomed in October 2002). Historically, the fourth year is the weakest of the four. That would be 2006. To me, that sounds like a lot of reasons to use the year-end rally for some stock trimming as opposed to stock shopping."