1. Canadian Financial DIY digs into bank practices and Canadian Payments Association rules to discover that post-dating a cheque doesn’t guarantee that it won’t be cashed right away . 2. Murray Dobbin thinks that Canada’s housing bubble will burst . Some of the remarks seem politically motivated, but he offers ample statistical support for his arguments. 3. Big Cajun Man finds that promised delivery dates for clothes dryers at Home Depot aren’t as firm as he had hoped . 4. Preet explores the question of whether Warren Buffett is skilled or just lucky .

PBS aired a very interesting story called The Card Game that takes a look at bank practices that exploit people when they start to have money problems. The story explained some of the more unpleasant practices and debated whether they should be stopped. Another concern was how they could be stopped without undermining free enterprise. One of the slimier practices described was overdraft fees on debit cards. In the example given, a consumer doesn’t realize that his bank account balance is low and goes about his business for a month making debit purchases. The bank then takes all the debit transactions, reorders them from biggest to smallest so that the account is drained on the first few transactions, and then charges a $35 fee on each overdraft transaction. So, a $5 coffee becomes a $40 coffee. This is a very nasty practice clearly designed to severely punish the unwary. There is no reason to believe that the bank’s exposure to a potentially bad loan is any different if the c...

Recently I combed through some ad fine print to show that some cars were more expensive than the ads made them seem . Yet another car ad reveals more of the same and I’m starting to wonder whether people are genuinely being fooled or whether they want to be fooled. This time I was looking at an ad for GM cars. The top car showed the price $16,498 in large font. However, the fine print says that the MSRP of the actual car pictured is $19,925. I can’t tell if that is before or after some “cash credits”. Here are a few more fun bits in the fine print: “Dealers are free to set individual prices.” “Insurance, license, PPSA, administration fees, and applicable taxes are not included.” “At some dealers, the vehicles in this advertisement are only available with additional features of glass etching (up to $424), locking wheel nuts (up to $150), nitrogen in tires (up to $399), GM tire protection plan (up to $220), mud flaps (up to $120), box liner (up to $325), Walk Away ins...

Gold bugs often say that it’s important to own gold because it is something real that will retain its value even if runaway inflation devalues cash. I don’t spend much time planning for the breakdown of society, but recent events in Haiti can cause us to think about what we should own that will retain some value when everything else is becoming worthless. In the face of extreme societal breakdown, nothing can really retain much value, but for lesser calamities, some things are better than others. It’s certainly true that poor fiscal management by governments combined with demographic changes, depletion of natural resources, and natural disasters could cause major instability leading to very high inflation. However, I don’t see gold as the answer. It has little inherent value. In the face of food shortages, why would anyone trade some food for gold? It’s true that money only has value because we all agree it has value. But the same is true of gold. If things get bad enough, w...

Many experts have commented on the relative merits of RRSPs and TFSAs for Canadian investors. Once people realize that TFSAs aren’t just for cash or GICs, they realize that they have to choose between RRSPs and TFSAs for their long-term retirement savings in all its forms: stocks, bonds, real estate, etc. The main consideration in this choice is tax rates. If your marginal tax rate while working is higher than it will be when you retire, then RRSPs look good. Some lower income Canadians will see their effective marginal tax rates increase because of the claw-back of the GIS and other government programs. Another lesser, but still significant consideration is taxes on foreign dividends. The U.S. in particular has a tax treaty with Canada so that dividends from U.S. companies have no tax withheld when Canadians hold the stock in RRSPs. When U.S. stock is held in a regular taxable account, the standard withholding tax on dividends is 15%. Unfortunately, this 15% withholding tax ...

1. Jason Zweig finds that people have unrealistic expectations about stock market returns . The more things change, the more they stay the same. 2. Both Preet and Patrick shared their takes on the efficient market hypothesis. I’ve struggled with this one myself, and I’m stilling mulling over their ideas. 3. Potato lowered the stress level on a move by getting a library to take a donation of many of his unwanted books . 4. Big Cajun Man runs into some unexpected costs during a hospital visit .

“Is it better to just invest and pay your taxes now or is it better to invest through RRSPs? Or are they about the same return?” This question came from a reader, Dan, who I met when I spoke to the Ottawa Share Club. Most people focus on the immediate tax refund from making RRSP contributions, but this is really just a tax deferral. You will have to pay these taxes when you eventually withdraw the money. If your tax rate is lower when you withdraw the money, you end up saving on taxes, but this is not the primary advantage of RRSPs. By deferring taxes you get the benefit of having the returns on your savings compound tax-free. If you invest in a regular taxable account and pay the taxes owing each year, you lose out on much of the compounding. An example will illustrate this nicely. Example Rhonda is 25 years old. She plans to open an RRSP and contribute $10,000 this year and increase this amount by inflation each year for a total of 40 years. This year she’ll get a $4...