# is there a secure investment with after 25% tax still equals inflation?



## anon125 (Feb 21, 2013)

$25K a year has to go somewhere outside of RRSPs!
TFSA is full
thanks


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## MoreMiles (Apr 20, 2011)

anon125 said:


> $25K a year has to go somewhere outside of RRSPs!
> thanks


Assuming the inflation is 3%, you need to make 4% before taxes.

GIC / cash savings do not give 4% these days.

You have to go with corporate bonds or shares... one is about debt to a company, the other is about ownership to a company. Neither of them is secure. So the answer to your question is NO.

Now you see why stock markets kept going up? There is simply nowhere else to stash your savings. If you find one that is risk free, let me know.


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## anon125 (Feb 21, 2013)

thanks
even corporate strip bonds don't pay 4%
I don't see this situation improving anytime soon.
we are into a japanese style flat economy.


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## AltaRed (Jun 8, 2009)

MoreMiles said:


> Assuming the inflation is 3%, you need to make 4% before taxes.


Except inflation is currently between 1-2%. If one assumes high end at 2%, one has to make 2.67% at those levels to break even. Still stretching to do that with no risk to capital but not impossible (think 5 year GIC ladder).

If inflation increases beyond 2% for any length of time, central banks will have to increase short term interest rates to push inflation back down to the 2% range. HISA's and GICs will likely march along to some degree when that happens.


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## anon125 (Feb 21, 2013)

5 year rates are not that high!
but i did find a 2.65 5 year. 
hoping inflation does not go up during that time!

more comfortable with 3 year terms
thanks


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## liquidfinance (Jan 28, 2011)

Implicitly are giving a 5 year for 2.85% 
https://www.implicity.ca/Rates/


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## AltaRed (Jun 8, 2009)

As does Peoples Trust have some higher rates... perhaps others.


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## birdman (Feb 12, 2013)

I guess it depends on your interpretation of "secure". You may wish to consider a MIC which are often reported as being secured but not guaranteed. I own a couple of MIC's which yield 5% which is down from a high of 9-10% and while I am comfortable with them they are not for everyone and I suggest you should be comfortable with the management should you elect to consider these. While "Implicity" deposits may be insured, they are not CDIC insured.


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## Cal (Jun 17, 2009)

Anon, what makes you feel we are in a Japanese style (flat) economy for the next (at least) 3 years that you alluded to?


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## james4beach (Nov 15, 2012)

With the talk of MICs (mortgage investment corps) I feel an obligation to point out that mortgage trusts and similar leveraged mortgage businesses, in the USA, were one of the first to get absolutely destroyed when their housing market tanked and the crisis started.

If the Canadian housing market turns out to be a bubble and pops, these will turn out to be horrible investments. I can't fathom investing in one for only 5% yield... that's so little reward for all the risk.

Peoples Trust is also a heavily leveraged mortgage company, but I believe their deposits are CDIC insured. Double and triple check CDIC eligibility before you lend to Peoples Trust.


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## anon125 (Feb 21, 2013)

liquidfinance said:


> Implicitly are giving a 5 year for 2.85%
> https://www.implicity.ca/Rates/


all deposits are 100% guaranteed by the Deposit Guarantee Corporation of Manitoba says the website


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## anon125 (Feb 21, 2013)

Cal said:


> Anon, what makes you feel we are in a Japanese style (flat) economy for the next (at least) 3 years that you alluded to?


i see no movement on the US and Europe to get their debt down much (same for canadian provinces).
banks do not want to lend money to businesses - so no growth.
yes many companies have gazzilions of money - but they see no way outside of asian to make money with it.
add in aging population - low birth rate....


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## ChrisR (Jul 13, 2009)

anon125 said:


> all deposits are 100% guaranteed by the Deposit Guarantee Corporation of Manitoba says the website


The question is, what is the "Deposit Guarantee Corporation of Manitoba", and how good is it's guarantee? 

According to this website, the province of Manitoba oversees the corporation, but does not itself guarantee the deposits.

http://depositguarantee.mb.ca/faq/


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## birdman (Feb 12, 2013)

Chris, you got it right. The Deposit Guarantee provided is not CDIC. However, BC Credit Union deposits have a similar guarantee but is backed by the Provincial Gov. In saying this , however, I have confidence in the credit union system generally but in making any investment it is important to understand the differences including CDIC, Dep Gtee Corp of Manitoba, and also the words "secured" and "guaranteed" and if guaranteed, by "who". I invest in lots of different institutions and as a matter of course always read the fine print and review their financial statements including profitability and equity. And yes, I have investments in Achieva which is backed by the Dep. Gtee Corp on Man.


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## james4beach (Nov 15, 2012)

Manitoba's guarantee corp states that “There is no legislated requirement for the Manitoba government to provide financial support to the Deposit Guarantee Corporation of Manitoba.” ... as I learned from this source

Doesn't look like the province backs it. The deposit guarantee corp's ability to cover losses is limited to their reserve fund, unlike say CDIC which has limitless pockets of your taxes & your children's future taxes


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## anon125 (Feb 21, 2013)

BTW aren't credit union accounts backed up - unlimited.
banks have the limit.


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## birdman (Feb 12, 2013)

Credit Unions are provincially regulated whereas banks are federal. Each province is different and as I mentioned above in BC and perhaps some others (Alta??) the deposit guarantee is backed by the provincial government without limit. You should check each credit union's guarantee through the guarantee link on their web page.


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## MrMatt (Dec 21, 2011)

anon125 said:


> BTW aren't credit union accounts backed up - unlimited.
> banks have the limit.


Depends on jurisdiction.
But I'd argue that within the limit CIDC is very strongly backed, I don't see the federal government backing out during a financial crisis.
A group of credit unions, with no government commitment, saying "we guarantee our deposits", is pretty weak. When their fund is depleted, that's it.


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## james4beach (Nov 15, 2012)

Just because they're provincially regulated doesn't mean the province promises to cover bank shortfalls or pay the credit unions' losses. Even if the province has its people on the board or controls the organization, _it doesn't mean the province will give them money._

Each of the provinces has a fund for covering losses. I'm most familiar with Manitoba; their guarantee corp holds $208 million in assets against total insured deposits of $20,820 million. I interpret this as meaning that Manitoba credit unions can experience losses of up to $208 million in insured deposits before depleting the fund. Once the fund is depleted, I don't think there is any further money.


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## james4beach (Nov 15, 2012)

Similarly, the province of Ontario will not cover losses at credit unions (beyond what's in their DICO fund). Info in this thread:
http://www.highinterestsavings.ca/f...vincial-deposit-insurance-manitoba-rates-etc/



> For provincial deposit insurance, let take a look at Ontario (DICO). It is an "agency" of the provincial government, and people seem to assume that the government would be required to cover any debts from the guarantee. When you look more closely, though, it turns out be an "operational enterprise", and DICO declines to comment on the legal liability, referring you to the Ministry of Finance, which never responded. However, the Ontario auditor-general's office did, saying:
> 
> DICO is in fact classified as a “Trust” and therefore its results are not consolidated in the Province’s financial statements (Public Accounts). Typically, an agency is classified as a Trust when the government is under no obligation to finance their operations, but rather that responsibility rests with the agency’s stakeholders.
> 
> This is a very strong indication that whatever the practical realities, Ontario is not legally required to cover DICO's debts (they have provided DICO with a line of credit, which is a separate matter).


I think it's safe to say that provincial deposit insurance is weaker than CDIC deposit insurance.


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## liquidfinance (Jan 28, 2011)

Do people really think that these credit unions have a chance of imminent doom to the extent where the provincial deposit schemes will be unable to cover the losses?

If this is the case I think it may be wise to withdraw all assets move up north a dig yourself a nice bunker.


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## Jay3 (Jul 16, 2013)

I'm confused - I thought Peoples Trust deposits (their 3 percent account, GIC's) are backed by CIDC up to 100,000d dollars. 

I've always been under the assumption that if Peoples Trust went under and you had money tied up into their 3 percent account or GIC's that you would get all of your money back up to 100,000 dollars.


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## mrPPincer (Nov 21, 2011)

Jay, you were right, People's Trust is backed by cidc, and it is not a credit union, although it's non-TFSA rates are just as competiitve as the Manitoba CU's.
I use both, PT and a few of the Deposit Guarantee Corporation of Manitoba-backed online CUs.


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## liquidfinance (Jan 28, 2011)

Jay3 said:


> I'm confused - I thought Peoples Trust deposits (their 3 percent account, GIC's) are backed by CIDC up to 100,000d dollars.
> 
> I've always been under the assumption that if Peoples Trust went under and you had money tied up into their 3 percent account or GIC's that you would get all of your money back up to 100,000 dollars.


Peoples Trust is CIDC

Implicicty Financial is the Manitoba Guarantee Corp.


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## james4beach (Nov 15, 2012)

liquidfinance said:


> Do people really think that these credit unions have a chance of imminent doom to the extent where the provincial deposit schemes will be unable to cover the losses?


Imminent doom? No, I don't think so -- I think the credit unions are reasonable safe banks to lend to. I was just pointing out that the provinces are not back stopping them.

Based on the risk metrics I look at, Assiniboine Credit Union for example (they run Outlook) looks in great shape compared to the big banks.

Impaired loans versus total loans: ACU 0.20%, big banks 0.75%
Tangible equity capital versus total assets: ACU 4.6%, big banks 3.2%

If that's representative of other credit unions, I would say credit unions have better loan quality and higher levels of capital than the large banks. Assiniboine/Outlook, in any case, looks safer to me than the big banks.


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## birdman (Feb 12, 2013)

Implicity Financial is a subsidiary and the on-line arm of Entegra Credit Union and not the Manitoba Gtee Corp. Again, credit unions are provincially regulated and vary from province to province. In BC the Credit Union Deposit Insurance Corp was created by Statute and is administered by the Financial Institutions Commission. The Financial Institutions Act allows but does not obligate the provincial government to assist the the Deposit Ins. Corp. in case of need. I too am comfortable with the performance of the credit unions I deal with but as a matter of course review their annual reports in regards to equity, loan losses, profitability, etc.


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## MrMatt (Dec 21, 2011)

liquidfinance said:


> Do people really think that these credit unions have a chance of imminent doom to the extent where the provincial deposit schemes will be unable to cover the losses?
> 
> If this is the case I think it may be wise to withdraw all assets move up north a dig yourself a nice bunker.


Generally I don't, but while low the risk with the credit unions is higher.

Just like provincial vs federal debt, while neither is likely to default, the feds are less likely.

In both cases we're arguing about low but non-zero risks, which is reflected in the small risk premiums being demanded by the market.


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## anon125 (Feb 21, 2013)

so i guess the answer to the original question is NO! or only just.
thanks all


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## liquidfinance (Jan 28, 2011)

frase said:


> Implicity Financial is a subsidiary and the on-line arm of Entegra Credit Union and not the Manitoba Gtee Corp.


Yes but we are saying the funds are guaranteed by the Manitoba Gtee Corp



> At Implicity, we believe in the simple power of saving money, so we offer interest rates that are among the best in Canada. We provide you with clear options that are quick, easy, and fee-free*. Your savings are also 100% guaranteed by the Deposit Guarantee Corporation of Manitoba.


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## james4beach (Nov 15, 2012)

Getting back to the original question --

I think the reality of today's market is that you can't get a return that beats inflation, without taking on significant risk.

This is the whole point of what central banks do. By pumping money into markets and manipulating asset prices higher, _they are forcing us to take on more risk_ than we would logically accept. This is a deliberate manipulation of the market to achieve what they believe is a good outcome (risk-taking).

I refuse to be manipulated like that, which is why (for now) I accept poor real returns in cash savings & fixed income. I'm not going to have some Fed chairman coerce me into taking poor risk/reward tradeoffs just because I'm "desperate" for inflation-beating returns.


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## gibor365 (Apr 1, 2011)

I checked CDIC website and yes, PT is insured... The big banks discount brokerages like CIBC also offer PT GIC... I`m just wondering , in case and PT goes belly up, who will cover you GIC, CDIC or CM...


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## MrMatt (Dec 21, 2011)

gibor said:


> I checked CDIC website and yes, PT is insured... The big banks discount brokerages like CIBC also offer PT GIC... I`m just wondering , in case and PT goes belly up, who will cover you GIC, CDIC or CM...


If PT goes belly up, their insurer (CDIC) would cover you.
GIC isn't an entity, and CM isn't liable for investment losses.


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## anon125 (Feb 21, 2013)

james4beach said:


> Getting back to the original question --
> 
> I think the reality of today's market is that you can't get a return that beats inflation, without taking on significant risk.
> 
> ...


Thanks for your very useful post


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