CanaGold

continuing this exciting series on crypto and pegged tokens in Canada. in my last post I sketched an outline for CanaCoin, a Canadian dollar (CDN) crypto pegged token.

it occurred to me since thinking about currencies and pegged tokens. how about the "ultimate currency", the one still standing after all these centuries, gold. unlike CDN, which may be more niche, gold or a "gold crypto coin" is likely more developed in the crypto thought space. gold, like US money (USD), and crude oil is of course global. everyone knows about it and has to care about it. search around and some such products may well already exist.

gold is the gold standard, heh. now gold is a bit different than USD or CDN. it is typically valued not in its own unit. so 1 USD = 1 USD, and 1 CDN = 1 CDN (kind of a tautology, but I hope you get the point). gold is generally expressed as its value in USD, as opposed to its value in, well gold. 

then the Canadian or US dollar is backed by gold. again this is a bit of the specialness, the uniqueness, the mystique about gold. typically people don't talk about using gold to buy something, or trading say land or valuable hockey cards for gold.

so CanaGold then is a pegged crypto token valued at 1 oz of gold.

how to get the gold to back CanaGold

unlike CanaCoin, users probably wouldn't be expected to send gold, or acceptable gold certificates. with CanaCoin you send 50 CDN and get 50 CanaCoin tokens. CanaGold I'd think the user would have to send enough CDN to purchase on market an ounce of gold to back the minting of a CanaGold coin. see the CanaCoin post for kyc, auditing and all those fun administrative details.

at TD Wealth Precious Metals I saw a link go by where they can get gold for clients. They offer both certificates, as well as secure storage, and the real physical bullion. CanaGold would want the certificates. Setting up and operating a secure facility to manage physical gold like Barclays or TD Wealth would be cost prohibitive. CanaGold is looking like a premium high end service but managing physical gold would be too hard and costly. 

I'm not personally a client of TD Wealth at this time. Just showing it as an example where it should be possible to acquire gold. A CanaGold authority would have to get a real gold provider for bona fide gold certificates. One option I guess would be for the client provides the gold certificate for the CanaGold, instead of CDN to purchase gold. That sounds hard and I'm not sure CanaGold authority would want that, to be receiving gold certs.

the cashout issue

So redemption is a bit trickier with gold. A $1 Canadian Tire money issued in 1995 is still worth $1 today at Canadian Tire. Same as a Canadian $1 loonie minted in 1999 still buys $1 of candy at a corner store today. Maybe not as much as you could have purchased in 1999, but still $1 worth. 

The token redemption would be onto gold, as that is what the token is pegged to. One option would be to send the gold certificate as the redemption. Client now owns gold. Another option would be the gold certificate is sold to some kind of gold market provider, the same one the gold was purchased from in the first place, and proceeds sent to the redemption client. 

In a way sell at market makes sense as it as CDN into gold at the creation of the CanaCoin, then gold to CDN on the way out. What must be avoided is CanaGold assuming any kind of risk or exposure to changes in the price of 1 oz of gold in CDN. All risk for the price of gold in CDN going up or down has to be assumed by the client for better or for worse. 

So if client spends $1000 CDN for 1 CanaGold token, price of gold declines to $900. at cashout, client loses $100. So the peg is to gold, not to CDN. I guess if the client wants a CDN peg then use CanaCoin. For a USD pegged token use some USD product. So just saying, it's a bit different than a peg to currency.

again like CanaCoin, the product CanaGold does not exist at the time of this writing. this crypto series has been an interesting exercise for me to organize some ideas around it. I've covered a few concepts and some of the challenges around bridging between the digital crypto world and the more conventional real world wealth.

CanaCoin

Follow on from my last post about pegged crypto tokens. I was thinking about pegged crypto tokens and the Canadian dollar (CDN)

Offhand I can't name any or any prominent CDN tokens. I thought it might be fun or interesting to think about how to define a CDN pegged token. That is, a crypto coin whose value is pegged to the Canadian dollar. I came up with a name anyway, CanaCoin.

So to be pegged, each CanaCoin is backed by one real-world Canadian dollar. I'm thinking some kind of database of guid or whatever, one for each CanCoin. Each CanaCoin may have some kind of digital signature or something establishing who owns it. Technical details are still sketchy. I would say as it stands it would be based on trusted and centralized authority, the CanaCoin issuer. So not anything as sophisticated as trustless or decentralized like Bitcoin.

A user in Canada could send an Interac e-transfer of the amount of CanaCoin to purchase. So would be using Interac to serve as the know your customer (KYC) requirement. CanaCoin authority would still need to find some kind of bank and financial institution with Canadian money to hold the backing money side.

So Interac e-transfer $50 and be issued 50 CanaCoin tokens. On the redemption side redeem 50 CanaCoin and get back Interac e-transfer $50. The CanaCoin authority accepts CanaCoin at $1 CDN.

While the CanaCoin tokens are issued. How to manage the backing money. Something like 50% in plain bank account (immediate access to settle cashouts), 25% maybe in money market (can be accessed in about one week), 25% maybe in max 3 month Canada savings bonds, Canada government or government backed. (can be accessed in max 3 months). So in event of a mass cashout, then make it clear that in an extreme situation some fraction cashouts may take up to three months. The money behind the tokens is safe, it's there. These accounts should generate a bit of interest which could help offset the operating costs of running CanaCoin. Other funding options might include say a modest annual custodial fee on the coins. Would have to think about that. The idea would be a minimal bare bones, part-time operation.

To keep the money safe, could bring in regular proper auditors. They would verify that the coins in the database are backed 1:1 by the money in the accounts. Perhaps verify that the liquidity of 50% immediate is adhered to, and that the money is in what is considered effectively minimum/no risk holdings.

I haven't quite thought through how CanaCoins could be listed on crypto exchanges, or how the digital signatures of ownership might change hands after purchase, without having to redeem the coins at the CanaCoin authority. I mentioned KYC above, along with third party auditing the reserves, which indicates I'm at least aware of the concept of regulatory.

Now CanaCoin doesn't exist at the time of this writing. This is all just conjecture and speculation at this point, a thought exercise.

pegged crypto tokens in Canada

 Lately with FTX and everything I got thinking about crpyto a bit more.

One subject of interest was pegged coins. Where some crpyto object value is kept in sync with some other currency such as the US dollar (USD). With Canada and pegged tokens there was an interesting tweet

Canada’s original pegged token #Bitcoin pic.twitter.com/LJZVJkIdTO

— argc (@tookalito) January 31, 2023

ah yes Canadian Tire money. The original pegged token. A $1 of Canadian Tire money earned in 1990 is still worth $1 today toward merchandise purchased at Canadian Tire.

I remember back when there were newspapers that people read. There was something of a market in Canadian tire money. Around 75 cents on the dollar as I recall. So someone would post a classified ad offering to sell or buy $100 of Canadian Tire money for $75.

How does this relate to crypto today. I wasn't sure what the point was of pegged tokens in crypto. After all if I wanted to own USD I can just get USD at any bank. Why use a crypto representation of USD. 

Then it occurred to me that the tokens can act as a kind of bridge between conventional real world money and the new digital crypto currencies. So you can "convert" your crypto coins into or out of conventional money without necessarily selling them and having to "leave" crypto. There becomes a path where I can keep some of my money in crypto, in a way that holds its value relative to the real reference currency, the USD say. avoiding the volatility of Bitcoin

Plus with the stable pegged token it gives a way to value other crypto coins or assets such as Bitcoin, dogecoin, NFT, etc. against a digital reference currency with predictable value (at least in terms of its value in USD). thinking about it a bit more, it's almost a medium of exchange say to sell litecoin, and buy bitcoin for example.

This post has run a bit longer than I expected. I was going to get into CanaCoin and CanaGold but that will now be in later posts in this series.

a progression in spending

this is how government spending, and the financing of government spending, has progressed in the last few decades. these the first decades of the post WWII welfare state

1960s: tax and spend
new and higher taxes normalized to pay for major social programs

1970s-1990s: tax and borrow and spend
deficits normalized. government spending surpasses taxes collected. public debt rapidly increases at all levels

2000s-today: tax and borrow and print and spend
printing becomes normalized. spending outstrips taxation and borrowing capacity. a new term quantitative easing appears. fifteen years after the financial crisis of 2007-2008 there is still temporary printing aka quantitative easing. the appearance of Covid-19 provides cover for more extraordinary measures

the concept of a structural deficit is introduced. units of discussion switch from billion to trillion

Australia central bank is insolvent

Surprisingly little coverage of recent financial news out of Australia. The Australia central bank has technically failed.

Australia's Central Bank Says It Is Bust

Australia’s central bank has equity wiped out 

Reserve Bank of Australia reports loss of $37bn 

hmmm. so the lender of last resort is itself insolvent. what to make of all this.

ah no worries mate we're assured

• bank of Australia losses are apparently backed by the people of Australia
• the bank of Australia is apparently free to just print money to meet its obligations
• if they hold the bonds to maturity, as they say they intend to, and the borrowers make good (by rolling over into newly printed bonds on payment day no doubt), then it's just an unrealized accounting loss
  

I'm sure the taxpayers of Australia will be thrilled to hear that first point.

For the second point, I'm shocked at such a flip attitude toward printing money. For years we've been assured by such as the Bank of Canada that there's no printing to see here. The money is all "backed" by gold or "other" assets AAA bonds (i.e. the money is backed by itself, money). But now all of that is weakened, thrown into some doubt.

Thoughts about Bitcoin

It is an interesting phenomena the rise of Bitcoin. In many ways Bitcoin questions and challenges how we have thought about money, banks, and government the last several decades at least. As long as I've been around.

Like many I wish I'd thrown $100 into Bitcoin back when you could buy them for $1 each. Oh well.

One concept is there's no "they" with Bitcoin. No central bank. No ultimate federal government authority. That takes some getting used to. With traditional currency, money and state tend to be pretty closely tied. Also with traditional money we accept there is some kind of central bank authority somehow controlling some unseen money supply with interest rates or whatever. We accept the state, perhaps in conjunction with a central bank, can as it deems necessary print money, aka "quantitative easing" to use a more polite term.

Bitcoin is more like true property. To own Bitcoin is to truly own it. Bitcoin cannot be frozen, zeroed out, seized, transferred to another, garnished, blocked access. Also if you have network, you can have access to your Bitcoin wherever you are. Unlike traditional money in a bank, a central authority can access your funds, or block your access, without your consent. With no intermediary such as banks, you can both direct access your Bitcoin, and prevent third party access through the intermediary.

Speaking of property. Banks are required to report cash withdrawals over $10,000 to the government. The individual is required to fill out forms saying what the withdraw is for. No wiretap, warrant, or court order is required. Why is this? Is the balance in your bank account not your own private property? Apparently not entirely. And yet nobody questions this, it's just passively accepted.

The withdraw reporting rule just shows that with traditional currency, in a real way it isn't entirely your property. In a way it's akin to a passport. You can hold it and use it within certain boundaries, but underneath it is the property of the nation state that issued it.

From its mathematical structure, Bitcoin cannot be created by a central authority. That is a powerful concept. It basically cuts "them" out of the picture from the outset, with no way to muscle in. With traditional money, we have to trust and rely on the national government and central banks to guard and maintain the integrity of the national currency. However there's nothing really preventing a government or central bank from creating raw new money out of thin air. So if you come to own a Bitcoin you don't have to be concerned that an identical Bitcoin could be legally counterfeited by a government or central bank straight off a printing press, thus diluting and devaluing your property.

--

A note on how bad and corrosive printing money can be. A short tale. Suppose a businessman owns two apartment buildings side by side in a lower middle class neighborhood. There's a fair size lawn around and in between the buildings. The landlord wants the grass mowed so that his site looks good and the tenants are happy. You agree to mow the lawn for $100. He provides the lawn mower and gas.

On the agreed day you arrive at 9 AM. You spend several hours mowing the lawn. About 5 PM you are finished and packed up. He hands you a $100 bill as agreed. You take the $100 you earned and decide to go to a local bar for a $20 burger and beer deal.

Now at the same time a government truck rolls by with a printing press producing $100 bills. The government hands your neighbor a $100 bill hot off the printing press, just for being fabulous. He takes his $100 and goes to the same local bar.

Now at the bar your $100 spends identically to the printed $100, there's no difference. The difference is that you had to do physical work in the sun all day to obtain your $100, while the other did not have to do anything to get an identical $100.

Canada banking situation

Considering events in Nicosia it is startling the announcement this week that Canada's six largest banks have now been deemed too big to fail. hmmm, I mean why would the government make such an announcement at this time? Especially in the unmistakable backdrop of the situation in Cyprus. Is there concern that one or more of the majors is in trouble? Is there a quiet, electronic bank run going on? The domestic money is stuck, we can't pull out or go anywhere (nor are we inclined to). How much foreign capital is deposited in Canada's banks, and are they quietly pulling out or threatening to pull out.

By announcing this while Cyprus is going on could be interpreted as a signal that all deposits will be protected, there will be no "haircut" on depositors in any scenario. This renders deposit insurance (capped at $100k) now effectively infinite. Again, why would the government make such an assurance. Although everyone implicitly understands and accepts that the federal government would intervene for a major bank in Canada to prevent a disorderly failure; in the past the implicit understanding was strong enough. So by coming out now with an explicit announcement it is actually a sign of weakness, not strength. After all before now there was never a need to make such an announcement, the combination of the strength of the institutions, and the implicit social federal guarantee were sufficient.

It's a concern. After all it was just a couple of years ago that the federal government created $70 billion out of thin air and swapped this raw clean cash for a portfolio of dodgy mortgages off the banks books. I just realized now that the government by doing that very quietly created a "bad bank" to be presumably eventually wound down. Speaking of Canada's bad bank, what is the status of the people's $70 billion investment? Who is managing this portfolio, how many of the mortgages have gone into foreclosure, what are the losses at this point on the $70 billion portfolio now that inventory of listings is rising fast and housing prices are set to stall and then decline? Why does the media and opposition never speak of this or ask any tough questions, or even any questions at all for that matter?

Investments again

I made a couple of tweaks to a couple of investments the last few days.

There's a GIC my parents bought for one of my kids that I ended up now managing. The last deal was good, a 5 year stepper finishing at over 7% in the final year. Pretty good for a GIC.

So the TD bank called after sending the notice in the mail that the GIC was maturing. so back to the branch to figure out what to do with the rollover. The TD person was pleasant and knowledgeable. She suggested a more comprehensive personal financial review at the start of the sit down. I explained that with RRSP I get 100% matching from work with Manulife. And this investment is something my parents bought for my son. So I just needed to deal with this GIC rollover and that was that. We quickly moved on to the GIC.

Well my son is nearly in high school so a 5 year scheme isn't in the time frame for an education oriented investment. Additionally the rates on the 5 yr stepper now suck. After going over some options I decided on a 3 year scheme at 1.95% a year. Not great but should be good enough for its purpose.


Over to my own RRSP. I did a small amount of research on dividends a few weeks back. After noticing that Aliant pays 7% a year dividends and their shares have been in a $26-$31 band basically since at least the middle 1990s I wanted to try to get some of this dividend action. If I could I would just put like 40% or whatever of my Manulife RRSP into Aliant and take the 7%. Alas of course it's not so easy. Anyway I deleted a 15% money market and 5% 1 yr fixed allocation from my instructions. I shifted the 20% into 5% of four funds, 3 large cap Canadian and 1 balanced fund which is something like 40% equities.

And with that Manulife grades my selections as "moderate", up from "conservative". Which I think is about right. What they call the "balanced" approach I think is too much stock market / non and low dividend shares. I'm still getting 100% on my own money that I put in due to matching so hopefully this new allocation will give a slightly better yield. I mean retirement is something that's out there, right now say 21 years away. Who knows what might happen in those years but hopefully on a track to a reasonable future standard of living if I can get there.

price of lobster in Nova Scotia

Right now at Sobeys here in the peak buying season lobster is on for $5 a pound. The grocery store price is now the same as the roadside folks selling lobster off the backs of their trucks.

I suppose it's possible this is some Machiavellian scheme by the major grocery chains to put the apparently unlicensed, unregulated independent roadsiders who sprung up the last couple of years out of business and restore the traditional retail model. I don't believe that though.

The problem with lobster is that there are too many fishermen bringing in too much catch. With excess supply the hit is on price per pound. The roots of this go back to the US financial crisis from 2007. In the period 2000-2007 house prices were constantly rising and it was easy to convert on paper gains into real cash through home equity loans. This housing wealth allowed many of the American middle and lower middle class to "live big" and premium lobster at Christmas was one of many luxuries they enjoyed.

Today and for the last few years only the really well to do in America are inclined to splurge on imported Atlantic lobster. A weak US dollar hasn't helped either.

So what to do? This year, like several previous years, there was a "strike" at the beginning of the lobster season as a protest to disappointing wharf prices. It worked to an extent. Choking supply for a few days did nudge prices up - until everyone then went back to their boats to sea. The long term solution is to permanently choke off the lobster supply. That is, there needs to be fewer boats on the water bringing in less catch collectively. So it's on DFO to reduce quota, cancel and buy out lobster licenses.

savings account(s)

Since I paid off my car I've been taking the amount that used to go to car payments off each cheque and putting it into a new savings account. After a couple months I noticed something. I was getting as much interest in the President's Choice savings account each month as I was getting in the TD savings account each month.

I use the TD account to save for bigger stuff I want to do or get in the future to avoid borrowing. Last year when I moved I used the TD savings to pay for it. Bigger stuff like that.

So I checked the rates and I was quite surprised. The TD pays 0.5% interest. President's Choice pays 1.5%. So three times the interest! I was annoyed at TD for being so stingy with their loyal customers. 1.5 is hardly anything special.

So this morning I arrived at the TD branch before work. There were like 5 of us there at the 8 AM open. I did the transfer using a bank draft. There was a $7.50 fee on the draft but it was better than taking the TD money as cash. Although unlikely stuff could happen on the trip between the TD and CIBC (President's Choice) branches such as car accident, heart attack, robbery. So it was worth $7.50 just to avoid carrying cash and having to worry about any of that. The amount isn't huge but enough to be really sad if it disappeared. But the bank to bank trip was uneventful between the strip malls and it's now in the PC account.

I left a token amount in the TD account and didn't close it. That account is still useful because it gives me branch access in walking distance from home with convenient hours. I still use the branch for rolled coins, and getting rolled loonies out for laundry. Plus I've been with TD and its predecessor Central Trust for like decades so it's good to still have a connection there.

Sears card

I now have a Sears card.

I didn't set out yesterday to get a new credit card. I was at Sears looking for a belt. I've needed a black belt for some time. I saw one I liked, two sided black and reddish brown. It was $30 with a 25% sale discount.

When I got to the cashier the clerk told me the discount is if you pay with your Sears card. I wasn't upset, I hadn't read the sale sign carefully. I just shrugged and paid cash. As I was leaving I mentioned I should get a card for these types of specials.

The clerk told me I could get a card right there at the customer service desk in just a few minutes. I figured if I could save $7.50 for a few minutes of my time that was a good investment. So I did the application which was very fast and virtually nothing to fill out. A few moments later it came back and I had a new card.

The clerk refunded the original cash purchase. When I re-bought the belt I got the $7.50 discount. Plus apparently there's a $10 discount on your initial Sears card purchase. So instead of paying around $34 for the belt I ended up spending $15. That was pretty good for just a few minutes of my time.

I was a bit surprised at the credit limit. I was expecting to get around $500 or $1000 perhaps. It instead came in at $4000. Either Sears thinks well of me or they are reckless and a bunch of fools. The $4K limit is more than my Visa and MasterCard limits combined. I don't anticipate I'll use it but I guess it's nice that it's there.

Although I've been meaning to ask Visa at least for a limit increase. I think the rules are different now they cannot auto increase credit limits; customers have to ask for an increase. Which is annoying and a hassle. I have to call them to register my upcoming address change so maybe I'll ask then.

Now I have to go through some steps to set up this new card with my President's Choice financial and epost. And of course pay the $15. It's a bit strange I never really thought I'd ever have a Sears card.

RRSP contribution

Some good news at work recently. The matching RRSP has been increased from 3% to 4% of salary.

I signed up immediately and went from 3% to now 4%. As noted before this is a great deal. For every $1 I put into the RRSP my employer throws in $1. Then I get a tax refund on the contribution. Plus whatever the RRSP investments are able to get.

So for every dollar I spend my personal wealth increases by about $2.50. That's a great deal for me. So with 4% out of paycheque going to RRSP and 4% matching I'm now saving around 8% of my pay. That's not bad. Still I'm interested in other investments outside of RRSP some higher risk or non traditional ventures perhaps.

With the matching I revisited my investments allocation on Manulife. I decided again to adjust it to a bit more conservative. Since I'm getting 100% anyway on investment because of employer matching there's a case for preserving that gain. Plus I might be more willing to take risks in non registered schemes.

car is paid off

Some news in my recent bank statement. The last payment has been made on my 2005 Honda Civic. So I now properly own it. Another debt gone. The car has around 130,000 km on it and is running well; hardly any problems at all.

It's great to have it paid off. I've been thinking for a while about what to do after it was done. The payment was $175 every two weeks. Counting the occasional 3 payment months it averaged to $379 a month.

I'm pretty sure it would be a mistake to just pocket this $379 a month as new clear money. That would create a distortion in my finances where I have unnatural prosperity when payment free then followed by the shock of going back to making payments.

I see car ownership as an ongoing expense. I do expect and hope to be well enough physically and financially to own more cars after this Honda. So my plan is to enjoy some relief right now for paying off the vehicle while continuing to make payments for car ownership.

So I went to the Presidents Choice pavilion at the local Superstore and opened a savings account. My plan is to put what would have been car payments into this account. I think I'll put in around $340 a month or so. That way I see some new money now in the monthly budget while smoothing out the vehicle payments. Depending on how long the 2005 lasts I might be able to buy my next car outright with no financing. Or at least I should have some down payment that I can get a better car with financing for about the same amount per month.

I already use PC financial for my chequing account so it will be easy to deposit to the PC savings account. Basically one click from their well designed website.It was interesting at Superstore the PC financial rep told me after opening the savings account that I qualified for a low interest line of credit. Ah the life of the self cured. I politely declined his offer to go back into debt.

One other vehicle cost I want to look at is insurance. The car is basically old with high mileage. A quick kijiji search reveals 2005 Civics are selling for around $5k - $9k today. I suspect mine would be worth closer to 5 than 9. So I'm considering dropping my insurance back to PLPD. At some point the marginal cost of collision on the insurance vs. the amount they would pay out in a claim just isn't worth it. Especially since I could always get a new vehicle and just go back to paying $380 a month.

the wrong track

Well bad news on the doorstep all this week.

In Europe they come up with yet another trillion bailout. This time for Greece and it's equally irresponsible neighbours. So now Greece won't have to raise the retirement age over 53 after all. Rioting with a cute dog pays.

So where did the trillion come from? Was there some vault with a trillion Euros in it? I doubt it, the socialist government spending machine would have consumed the tril if it actually existed. Nope since Germany was involved the money bomb would have to be the from the printing press. You would think the Germans of all people would see the danger in printing. Oh well America and everyone else prints so whatever, let's kick the can one more time.


I was shocked to hear the RCMP is not interested in investigating a $30 million mortgage fraud scheme. So let me get this straight. If a Canadian wishes to grow some weed in his basement for his private personal use that's a crime and off to jail. There's police resources and jail space for that, but not for multi million dollar crime schemes. Disgraceful! Check out the Pakistani straw buyer and his wife, not to mention the India born Conservative MP are untouchable.

We're failing. In New Brunswick a school principal bans O Canada at the request of anti-Canadians and didn't even lose his job or be disciplined for it. The only one who got in any trouble over that matter was the brave patriot who burst into the principals office and threatened him and ran him out of town. At least someone stood up for the country, its flag and its anthem.

LTD scam

At work the premiums for long term disability have doubled in the last two years. This is after years and years of 10%-30% increases every single year. This is a big part of why.

Indiscreet partier cut off from disability claim

Our LTD carrier is also ManuLife so make no mistake, it's my premiums that were paying for Nathalie's dream to retire at age 28 at my personal expense. Tough luck she was cut off after "only" 18 months. I wonder how many Nathalies there are from coast to coast. Thousands? Tens of thousands? Sitting on the beach enjoying margaritas laughing at the suckers back home.

The thing about LTD is this. This is entirely employee paid. So the employer has little reason to care about premiums. Also the scheme is mandatory so ManuLife and other carriers have a captive group of policyholders. They have little incentive to deal with fraud and abuse since the costs are just transferred directly to the captive policyholders who aren't going anywhere. It is mathematically impossible for LTD rates to increase as much as they have without being accompanied by systemic fraud and abuse.

In the past when I started out in high tech LTD was a good thing. For a negligible cost you could protect your income in case something serious and unexpected happened. Something like a major car accident or a serious stroke where someone was clearly messed up and indisputably unable to be at work.

That's no longer the case and now we need to make changes. The reality is that the way disability is defined today is that basically anyone with moral blinders and a bit of moxie can get himself classified as disabled. Even someone who otherwise looks and acts healthy, partying it up with friends at the strip club.

What I'd like to see is to give employees choice in LTD. I don't disagree with forcing employees to purchase at least some level of LTD coverage. We should be allowed to take our business elsewhere if the carrier is not doing enough to control increases in claims. Specifically I'd like to see a competitor emerge which provided more traditional LTD as it was originally designed and intended at a much lower cost to the policyholder. The following conditions and more would specifically not be covered.

- clinical depression
- chronic fatigue syndrome
- chronic muscle soreness
- environmental illness/ multiple chemical sensitivity
- stress

Investing again

One of the things I wanted to do after paying off the TD loan was to invest some more. At work I've now increased the RRSP deduction to 2% of pay. It used to be 1%. I started out at 1% around a year ago.

The company matches up to 3%. This is a great investment. For every dollar of my own I spend the company adds a dollar. Plus on the income tax you end up getting around half of it back due to the tax deduction. So matching RRSP is a good deal with 150% profit plus whatever returns the investments make.

The RRSP scheme is set up with manulife. They have a well designed web site with a login section specific to my company. It was easy to navigate around and see what I have there. Due to good luck my investments have done OK so far. As it happens I joined around the time of the TARP crisis last year when SPX was around 700, NASDAQ around 1400, DOW 6000 etc. Since then they have recovered a fair bit so that was timely for me.

I did change my investments though. Before it was a 'balanced' scheme based on allocation funds. I decided to change the percentages going forward to a more conservative approach. There's still some allocation, i.e. stock market, funds. But I've added more bond and fixed income.

Since I'm getting 150% profit anyway on money spent it's valuable to preserve those wins. Plus it would be nice to actually retire some day. So it would be unfortunate to have the account wiped out. Not that I'm anywhere near retirement. The other thing is I see the RRSP part of investing as safer and more conservative.

I'm also interested in making more speculative, unconventional, self directed 'investments' outside of RRSP. So I might be more willing to take risks outside of the RRSP and play it safer inside the RRSP. That kind of makes sense to me.

Hopefully this 2% deduction will go well. I'll plan to reevaluate in around 6 months or so and aim to set it to the max 3% deduction.

taxes are done

My taxes are done for another year. It went pretty smoothly this year for once. After last year's taxes I resolved that it would be better this year, and it was. It's great to have it done and out of the way.

I went to H&R block again this year like in years past. They have a new office in Wedgewood so that was pretty convenient. I stopped by on the way home from work and they could take me right away. I didn't have my papers so we set an appointment for an hour later. My papers were already ready and it didn't take long to do. It turns out my taxes are simpler this year than in previous years so I may try doing my own tax next year. Still H&R block is very good and good value for the money.

It was a good tax year. Partly because I switched jobs during the year that meant I was over on CPP and UI so that was a bonus. Making some RRSP contributions for the first time since the 1990s was also a positive.

One good thing about using a service for the taxes is they have efile. So I got my refund very quickly, it only took a little over a week. The priority remains to eliminate the debt but I did allow a bit of spending for some stuff that I want.

lending

This past weekend I did something I haven't done in a long time. I lent someone money. I lent $40 to an old friend who I've known since we were in grade school.

I can't remember the last time I lent someone money. Around 20 years ago. My buddy is starting a new job and gets paid Thursday he said. We agreed he would settle it then. I've known him a long time and I'm confident he's good for it.

For my friend, he's onto the new job. And some other life changes after he and his girlfriend he was living with broke up. So it's good for me to be able to help out someone a little bit. Some people have offered to help me out in the past so what goes around comes around. Some positive karma for me. It's good to be able to actually lend to someone.

TD Visa limit increase

There was some news in my most recent statement from TD Visa. They have lowered the rate on the card. Also they have increased my credit limit by $1000 to $4500 now.

It's been around a year since they increased it to $3500. I never used the additional balance above $2500 they granted. I don't use the TD visa or any credit card very much. I mostly just use cash and sometimes debit card. There's something highly satisfying and powerful about paying cash.

Mostly with TD visa I just pay a bit more than the minimum each month. I've been using a win-hold strategy between the TD visa and MBNA mastercard. I've been pretty much minpay the visa while putting more payments onto the MBNA. That makes sense when the MBNA interest is over 20% and the TD interest is around 12%.

Still it's nice to get recognized for the ongoing progress with the debt situation. I don't really plan to use this newly available balance but it's there I guess for some unexpected thing.

I know some people are interested in getting a credit limit increase. Here are some tips for how to TD visa credit limit increase.

Don't call the bank, they'll call you. They have a big mainframe computer which runs a big batch job once a month to determine who gets credit limit increases. They'll know about you soon enough when they decide you're ready for a higher limit.


Be a customer. If your only product with the TD bank is the credit card then you're not really a first class customer. They don't really care much about you [except they care that you stay always current on the card] and will be not inclined to do anything for you. For myself I have a small savings account with TD and a personal loan. I've been with the bank in one way or another all my life. If you have some accounts, investments, a TD green card, etc. and set foot in a branch once in a while then they will look at you more holistically as a customer when determining to grant additional credit card limit.


An importanct concept to the bank is capacity. They want people who have the capacity to service higher debt or make higher payments. So you need to demonstrate capacity to the bank. These are some ways to help the banks computer recognize you have the capacity for an increased credit card limit.

• greater than minimum payment. If you only make the mininum payment then you're telling the bank you are stretched to your limits financially. The bank will be risk averse and will not grant you new credit. You are barely able to service your existing loans, borderline delinquent. Even if you just take the minimum payment and round it up to the next multiple of $10 then you are showing the bank you have additional money to spare and you can service a higher limit
• steadily decreasing balance. If your outstanding balance declines six months in a row this is an important thing the bank's computer will notice. It's OK to have a balance and make new purchases on the card. However your overall balance owed must decline each month. By doing that you are showing you have the capacity to service your balance and things are well in hand. Thus you are low risk for an increased limit.
  
  Conversely if your balance is rising month over month then that is a red flag to the bank. You are demonstrating you probably spend more than you make and are higher risk for eventual default. The bank will be much less likely to risk putting a higher credit limit at risk.
  
  Of course if you want to go south this winter and use credit card to pay for the trip [although you should either pay cash or stay home]; then pay it down smartly over the next 6 months then that's OK with the bank. A balance increase due to a big spike purchase is one thing. The bad type of balance increase is when the purchases are for gas, groceries, gifts, entertainment, etc. They know what you're buying and pay attention to why your balance may be increasing.
• unused capacity. This is a bit of a paradox in that the bank tends to give credit card limit increases to those who don't seem to "need" it because their available unused balance is already pretty high. But that's the thing. By keeping unused balance you are demonstrating the capacity to properly manage that amount of available credit. You are a good candidate to be trusted to manage more available credit; even if the bank expects you likely won't use it.
  
  On the other hand if you are at or near your credit limit then you are demonstrating poor credit management skills. Although you would very likely spend the newly granted credit on your card, the bank has to be concerned if you have the capacity [either income stream or personal financial skills] to service an increased credit limit and actually repay it. A wise bank would be very cautious about letting these people extend themselves any further until they can demonstrate some capacity to service their existing debt load.

Difference between GIC and debenture

I was talking to my uncle a little while ago at my parents place. He's taken good care of his money all of his life and he has different types of investments. He said he was thinking about getting some debentures. But he wasn't sure quite what a debenture is or how it is different from a GIC.

I was curious too so I looked it up and made a printout I'll give him the next time I see him [which should be this Friday]. A Guaranteed Investment Certificate (GIC) is when you lend the bank money. The bank pays you back over time generally with fixed compound interest rates that are set at the time you purchase the GIC.

GICs are protected if the issuing bank or financial institution fails. In the event of failure the GIC is covered by government deposit insurance. It is treated the same as an ordinary bank account and investor losses are covered by the government up to a certain amount. Thus they are a very safe investment.


In a Debenture you are also lending the bank money. A debenture is similar to a GIC in that the bank will repay the loan with compound interest rates specified up front.

A debenture differs from a GIC in that your loan to the bank or financial institution is unsecured. So if the bank fails then a debenture holder is lumped in with other common creditors. Thus you would recover little or nothing on your debenture in the event the financial institution fails.

Because a debenture is an uninsured loan, it is a higher risk than a GIC. So the interest rates on debentures should be higher than on GICs to account for the increased risk for the purchaser.