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At what long-term rates would you commit the bulk of your portfolio to fixed income
June 19, 2023
6:17 am
dougjp
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UkrainianDude said

I would like to know how much debt population had during 20% interest rates vs now.
This is reminiscent of summer 2007 to me.  

I also remember back in the days of 20% (or so) prime lending rates, and your question was most interesting.

The Canada debt to disposable income ratio is currently a bit over 180%, the highest in the world with the exception of, as expected, Denmark, Norway and Netherlands . It was 160% in 2011, 140% in 2007, 120% in 2005, 100% in 1996 and 66% in 1980. There is a snapshot of Canada's more obsessive drug addiction to debt timeline, compared to the world. Debt equity ratio requirements to qualify for a mortgage back then were much lower than now. And limitations on qualifying for a loan or especially a credit card were way more stringent.

A comparison to some other countries' present ratios is an eye opener. France 104%, Spain and Portugal 90%, Germany 89%, Italy 64%. Australia, Sweden and New Zealand 171%.

It would be pretty hard to create a historical "affordability when in debt" index, because its highly dependent on the actual weighted average interest rates people pay. Its a good guess that the weighted average now is much more in lower rate mortgages than many years ago.

However looking at the history of major banks' prime rates compared to the present (just increased) 6.95%, what stands out is that today's rate is not high, historically. For almost 20 years, from January 1973 to May 1992, prime rate was always higher. After that, prime rate was higher more often than it was lower, all the way to mid 2001. Prime was slightly lower than now in the summer of 2007.

" We may never pass this way again " - Seals & Crofts

June 19, 2023
6:18 am
savemoresaveoften
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I would never write a check to a GIC broker, no matter how good the rate may be.

June 19, 2023
9:32 am
RetirEd
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I'm mostly long-laddered; I only bought short during the recent super-low-rate COVID-19 years but still have some better high-rate stiff with a year or more on it. I'm expecting rates to gradually come down after perhaps some short-term rise, but of course I could be wrong. Laddering damps down wild swings in return.

Why worry about the future when one has limited lifetime left? For care and housing in one's non-high-earning years. Remember Kevin O'Leary's warning: "When you're old and grey, nobody will love you but your money." 😀

I can't find the exact wording right now, alas. He's also said contradictory things but this one always makes me laugh.

And think.
RetirEd

RetirEd

June 19, 2023
12:17 pm
Loonie
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savemoresaveoften said
I would never write a check to a GIC broker, no matter how good the rate may be.  

And you don't have to. At worst it would be an 'in trust' cheque, and that would only be with permission from the provincial Securities Commission and would apply only to that particular broker. This is according to the finiki website , which AltaRed often cites.
I wouldn't do it either. I write the cheques payable to myself and the account is opened at the issuer same day cheque is received by broker.

June 19, 2023
1:16 pm
Norman1
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I would also question it if the deposit broker requested the cheque to be payble to the deposit broker, in trust.

If the deposit broker can deposit cheques into its own account at CIBC, then the broker can deposit cheques into MCAN's account at CIBC if the cheque was payable to MCAN.

One will be really screwed if one makes the cheque payable to the deposit broker when the broker is not an investment dealer and the broker goes out of business before the funds are turned over to MCAN.

MCAN won't owe one the funds because MCAN didn't receive the funds and didn't issue the GIC yet. Instead, one will have an unsecured claim against the broker. There will be no CIPF coverage because the broker is not an IIROC regulated investment dealer.

One cannot tell one's bank to clawback the funds for the cheque because the "intended payee was not paid". Bank will investigate and see that the cheque was payable to the broker and deposited into a bank account in the name of the broker.

I recommend going to the Registered Deposit Brokers Association site and find another broker in town who can offer MCAN deposits.

June 19, 2023
5:05 pm
fat_dog
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That is why I said no even with an attractive rate . as for in trust I asked what they would do with the cheque after I gave it to them . and they said cash it in CIBC no mention of trust . and in a few day buy the GIC from macan .
Question were asked . I just see people on here talk of deposit brokers .
have never heard any thing like this

gic direct is listed here

do they pay to be listed here ?
am I the only one to try and buy a gic from their office in Winnipeg here ?
why would it be different for me then others ?
are the experiences people write about here with gic broker real ?
or are they adds ?

June 21, 2023
3:14 pm
hayman
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NCC1701Z Thanks for this post I went ahead and matched Motive and got 5.1% on the 10 year registered, TFSA paid yearly (Motive doesn’t allow incremental payouts). Great post!

June 21, 2023
4:26 pm
NCC1701Z
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hayman said
NCC1701Z Thanks for this post I went ahead and matched Motive and got 5.1% on the 10 year registered, TFSA paid yearly (Motive doesn’t allow incremental payouts). Great post!  

Who matched them for 10 years?

June 21, 2023
7:20 pm
hayman
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BMO beat them at 5.1%, they are the top dog on 10 year GICs IMO, also they pay annually on registered which is hard to find. Motive only pays at maturity and prob plans on many customers defaulting for that reason, I like the income. BMO has been great to work with. I have 660k invested at an avg of 5.6% all 10 year, locked in 600k in November last year at 5.7%. Gotta love it!

I’m betting Real Estate will have a major correction inside 10 years, bonds are great collateral.

June 21, 2023
7:47 pm
HermanH
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hayman said
I’m betting Real Estate will have a major correction inside 10 years, bonds are great collateral.  

And your basis for this prediction?

Will a massive amount of housing suddenly appear?
Significant mortgage defaults?
The demand for housing will disappear or slacken?

June 21, 2023
8:40 pm
hayman
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There are large demographic headwinds given current birth rates (could be a glut of homes) and the ongoing decline in the middle class ie. affordability crisis, 20% correction in stocks aka recession and money supply is dwindling. Also couldn’t be a worse time for a down trend given current interest rates.

Rentals are also proving to be a disaster for most as buying in the last couple years with even 30% down has very little positive cashflow (definitely not keeping pace with inflation)if any,!and delinquency is on the rise. Only 1/3 of mortgages have went up to to interest rate hikes so far 2025 and 2026 are going to be tough years if high interest rates persist.

I think it’s more a second home housing crisis, there are lots of apartment buildings as is and tons of cheap land inside Canada, should be building incentives, primary sales speculation tax etc.. Don’t fight the fed

June 21, 2023
10:28 pm
NCC1701Z
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hayman said
BMO beat them at 5.1%, they are the top dog on 10 year GICs IMO, also they pay annually on registered which is hard to find. Motive only pays at maturity and prob plans on many customers defaulting for that reason, I like the income. BMO has been great to work with. I have 660k invested at an avg of 5.6% all 10 year, locked in 600k in November last year at 5.7%. Gotta love it!

I’m betting Real Estate will have a major correction inside 10 years, bonds are great collateral.  

Where did you get 5.6% for 10 years? registered? TFSA, RRSP or RRIF?

June 22, 2023
12:11 am
HermanH
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NCC1701Z said
Where did you get 5.6% for 10 years? registered? TFSA, RRSP or RRIF?  

There was a GIC broker surge offering 5.6% rate for 5-yr GIC, but it petered out very quickly in May, I think. I don't know who was offering them.

June 22, 2023
2:39 am
hayman
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I got 5.7 through BMO I negotiated when the going rate was 5%, currently only offering 4% (and negotiated to 5.1) on their website, investing a larger amount might have helped me. I had a guy named Ivan help me, everyone knows of him on the 1800 number he’s the next level up. Gluck!

June 22, 2023
2:56 am
hayman
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Sorry, the 5.7 was unregistered and the 5.1 was registered as of late. I locked in the 5.7 in November of last year when rates were higher and there was more momentum.

June 22, 2023
11:19 pm
NCC1701Z
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Unregistered is about 5.7% now with GICwealth . Registered is always lower.

Did BMO give you those rates for 10 years? or 5?

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