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Post by MC Habber on Jul 27, 2008 18:03:07 GMT -5
Personally, if you have 7 million and CAN NOT make it work, then you deserve to be broke. Assuming you (or family/friends you wish to help) don't owe a huge fraction of that in debt....then yep...I'd have to agree with you. Only reckless spending and poor financial planning would result in not being able to make it work. There's a difference between making it work and living large. IF inflation really is 8%, then, assuming you can get 7% interest, and you want an annual income worth (only) $60,000 after inflation (i.e. your income will have to increase over time to much more than $60,000 to maintain a constant value), you will be out of money after 79 years. If you win the lottery in your twenties, you better hope you don't live to be much older than 100. Of course, that's using HA's 8% inflation figure. |
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Post by oldhabsfan on Jul 27, 2008 22:52:54 GMT -5
I think that if you're careful and diversified, you can reasonably count on making 2% to 3% over the rate of inflation, most of the time. That's assuming you're a passive investor. If you want more than that, it can be done, if you work at it *and* you're competent while following the rules of safe investment.
If you're in Germany at the end of World War I for example, you don't keep much of your money in financial instruments (bonds, bank deposits) but go in for equity and land. I'd say similarly in Canada in 2008. There's not so much wrong with us (though much more than I like) but unfortunately we are tied to the American dollar, which is being managed by raving lunatics.
Our particular little slice of history is not "most of the time" but looks really dangerous to me.
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Post by CrocRob on Jul 28, 2008 0:24:08 GMT -5
I think that if you're careful and diversified, you can reasonably count on making 2% to 3% over the rate of inflation, most of the time. That's assuming you're a passive investor. If you want more than that, it can be done, if you work at it *and* you're competent while following the rules of safe investment. If you're in Germany at the end of World War I for example, you don't keep much of your money in financial instruments (bonds, bank deposits) but go in for equity and land. I'd say similarly in Canada in 2008. There's not so much wrong with us (though much more than I like) but unfortunately we are tied to the American dollar, which is being managed by raving lunatics. Our particular little slice of history is not "most of the time" but looks really dangerous to me. Generally speaking the expected rate of return on a perfectly diversified portfolio is 13% (give or take depending on external variables) and is sometimes used as the standard to be held against. However if you can practically do that on a perennial basis there are a lot of banks that will give you a lot of money to do that for them. For what it's worth, perfect diversification is impossible, so you effectively have to be well-researched and continually predict (read: guess) market fluctuations. For the common investor getting 2 or 3% above real inflation is pretty unrealistic without entering into fairly volatile/risky ventures. The real money is made in venture capitalization. |
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Post by HabSolute on Jul 28, 2008 7:06:51 GMT -5
Only reckless spending and poor financial planning would result in not being able to make it work. I would like to take my chances.... ;D |
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Post by The New Guy on Jul 28, 2008 8:13:49 GMT -5
The core rate is biased toward items that do not really impact our daily costs. Go here, look at their weight for 1....Recreation, education and reading...12.2% 2....Alcoholic beverages and tobacco products....3.07% 3....Health and personal care (cosmetics!)....4.73% 4.....Clothing and footwear......5.36% 5....Household operations and furnishings....11.1% Together they make up more then a THIRD of the CPI on items which are from disposable income and not really equally important to everyone. A lot of those items have been dropping in price and dragging the overall CPI down with them. To take an extreme example, if I was to measure the cost of a TV at $3,000 dropping to $2,000 and my grocery bill going up from $100 to $120 then my CPI is zero...but in reality, I am paying 20% more for groceries. Furnishings are cheaper because of a strengthening dollar and China BUT the items one needs every day are much more expensive. I buy a lawn mower every ten years. Does it make any difference to me if the law mower was $300 in 2002 and $320 today? I am not a conspiracy freak but I am a "government do lie" realist. CPI is used as a population "calmer". A union negotiating an increase can not demand a 8% raise if the government statistic shows 3.1% inflation. Imagine what would happen if the governments had to pay 8% increases in old age pensions. The cumulative effect over the last several years would practically double. And the list goes on.... Lastly, salary increases push the personal taxation to a higher level. If you got an annual increase of 5% over the last 8 years then you are in another tax bracket and paying a higher percentage in taxes. That is HIDDEN from the CPI because they simply do not measure it. On the other hand, what you take home is proportionately LESS. No government worth two votes wants to measure that combination because people will get up in arms. So yes, the CPI number that we are told is intentionally flawed and biased toward the low side. If you REALLY want to really secure your future income and keep it at the current REAL rate of inflation, you need to put it at 8%. The stats are here..... www.statcan.ca/english/Subjects/Cpi/cpi-en.htmGo here to take them apart item by item.... cansim2.statcan.ca/cgi-win/cnsmcgi.pgm?Lang=E&SP_Action=Result&SP_ID=2178&SP_TYP=5&SP_Sort=1The amount of statistics StatsCanada has is just ming boggling. Thank God my mind is already boggled. There are lies, damn lies and statistics HA. And, in a surprisingly similar fashion to the way the government behaves (I was going to say you accuse the government of behaving - but honestly I won't even bother trying to deny that the government try to spin numbers to the best of their ability) you bend them to favour your argument. Anyways, let's break down your numbers. You list five categories which make up 1/3 of the CPI. The remaining three categories make up the other 2/3, and those three areas are the big three - shelter, food and transportation. To 'spin' it positively ~66% of your annual paycheck should go to these very basic needs. Look at your bills and your paycheque. What percent of your monthly paycheque make up your mortgage payments (or rent - depending on how you live). I'm a little over the suggested 26% (closer to 30% for me) but I've chosen to live in a more expensive area of town, and cut back in other areas. 20% for car and again I'm in that neighbourhood (if only I could avoid that costly headlight fluid). 14% for food - well, honestly I don't know how much a month I spend on food, but I think I come under that bar most months. Further to my disagreement with your thesis, you also misrepresent the items that you do list. Health and personal care is not just cosmetics. It also includes stuff like OTC pills and prescription meds. It also likely includes stuff like shampoo and soap (you do take showers, don't you), razors and a host of other fine and wonderful things. Cosmetics are just one part of it. Same with household operations and furnishings. You focus on the furnishings, without thinking about the operations aspect - utility bills, repairs, paying some neighbourhood kid to mow the lawn. With the drastic change in fuel prices and the (much smaller) change in food prices (something like 1-2% in Canada, much less than the 7% seen south of the border) those areas are probably slightly undervalued at this time. However it can be adjusted, if the prices for these things stay high (and there's little indication that they will - in fact oil is already starting to lose ground on the international market because the general perception amongst investors is that its price has peaked, and if price continues to remain at insane highs then people will stop buying oil). "True" inflation might be closer to 4% or even as high as 5%, but I find your 8% number to be somewhat specious. Unless you care to back it up with some math? |
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Post by The Habitual Fan on Jul 28, 2008 10:54:21 GMT -5
Shouldn't this be moved to non-hockey related subjects by now?
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Post by clear observer on Jul 28, 2008 11:30:04 GMT -5
Shouldn't this be moved to non-hockey related subjects by now? Yes...yes it should.  |
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Post by Cranky on Jul 29, 2008 0:36:38 GMT -5
There are lies, damn lies and statistics HA. And, in a surprisingly similar fashion to the way the government behaves (I was going to say you accuse the government of behaving - but honestly I won't even bother trying to deny that the government try to spin numbers to the best of their ability) you bend them to favour your argument. Anyways, let's break down your numbers. You list five categories which make up 1/3 of the CPI. The remaining three categories make up the other 2/3, and those three areas are the big three - shelter, food and transportation. To 'spin' it positively ~66% of your annual paycheck should go to these very basic needs. Look at your bills and your paycheque. What percent of your monthly paycheque make up your mortgage payments (or rent - depending on how you live). I'm a little over the suggested 26% (closer to 30% for me) but I've chosen to live in a more expensive area of town, and cut back in other areas. 20% for car and again I'm in that neighbourhood (if only I could avoid that costly headlight fluid). 14% for food - well, honestly I don't know how much a month I spend on food, but I think I come under that bar most months. Further to my disagreement with your thesis, you also misrepresent the items that you do list. Health and personal care is not just cosmetics. It also includes stuff like OTC pills and prescription meds. It also likely includes stuff like shampoo and soap (you do take showers, don't you), razors and a host of other fine and wonderful things. Cosmetics are just one part of it. Same with household operations and furnishings. You focus on the furnishings, without thinking about the operations aspect - utility bills, repairs, paying some neighbourhood kid to mow the lawn. With the drastic change in fuel prices and the (much smaller) change in food prices (something like 1-2% in Canada, much less than the 7% seen south of the border) those areas are probably slightly undervalued at this time. However it can be adjusted, if the prices for these things stay high (and there's little indication that they will - in fact oil is already starting to lose ground on the international market because the general perception amongst investors is that its price has peaked, and if price continues to remain at insane highs then people will stop buying oil). "True" inflation might be closer to 4% or even as high as 5%, but I find your 8% number to be somewhat specious. Unless you care to back it up with some math? Damn right I bend stats to fit my argument. I learned from the best....the sky fallers! If I am living on a fixed income, what is the most important thing to me? What do I need to allow me a good life? How much do I need so as not to dip into cat food section? While the CPI can tell you what the average Canadian spends, it hides what pensioners and people on fixed income have to face. The huge problem with the CPI is that it's income depended. If you make $500,000 a year and I make $20,000 on a fixed income, the CORE increases hurt me much more then your ability to buy the next Benz. The spending pattterns of our vastly different incomes would see vastly different effect from the CPI. Thus my EPI. What count's is food on the table, roof over one's head and going to where you need to be. Almost everything else comes from disposable income. You have a choice to spend whatever you want to spend on (other then prescription) but THESE are the "inalienable" costs. 1....Food.....17.04%.....x1.5.....25.56%....up by 2.8%.....BUT it's FAR higher then just 2.8%. Our dollar has hidden the true jump in prices. In the US, it has been about 6%. 2.....Shelter.....26.62%....x1.5.....39.93%....up by 4.7% 3....Transportation.....19.88%....x1.5.....29.8%.....up by 5.5% 4...Health....remainder 5%.....up by .7% Weighted average....4.27%...CORE CPI..or EPI...Essentials Price Index. Now, more fun with stats.......here is the best I can find to show how the CORE costs affecting us and why I put it up to 8%. These are 2 year old stats (2005-2006) but it will give you an idea what I am talking about. High Items ...% increase... Natural Gas 17.1...more like 20% now... Fresh Veggies 16.1....FAR more now that the dollar is not rising Fuel Oil 13.7.....more like 40% now Bread 8.2....50% Water 7.5.... Gasoline 7.4.....more like 40% Cheese & Butter 7.3.... Rail & Bus Fares 7.0....and THIS is subsidized. Housing (New houses) 5.8......now flat Home Insurance 5.5 ........... Electricity 4.7.....FAR more now and it will go up 50% in Ontario Health Care Services 4.1 ........ Cable TV 3.8...... New Autos 3.2 Rent 0.8 Property Taxes 3.2.......now up by 5% PLUS fees Cigarettes 3.00...who cares Bottom line.... While your "guess" at 4% or 5% is in the ballpark to my EPI, it still does not take into account specific CORE items that are rising at a crippling rate. Gas, electricity, food are jumping up by 20% to 50%. A bag of rice goes from $7 to $15 overnight. Feul in my car risen from $70 a fillup to $125. Bread jumps $.89 to $1.49. Electricity is going to go up 60%. THESE are the stuff that hurts hard and deep. That is how I derive my 8%. Last but not least..... If Dion the Whacko comes to power and shoves his "green shaft" then you might as well make that another 2% top the EPI because EVERYTHING needs energy to make or transport. Some stats came from here...(because I couldn't find them at StatsCanada)....even though this article wants to put a positive spin on CPI. Banks LOVE a low CPI. It allows them to steal money at low interest rates. www.bmonesbittburns.com/economics/focus/20060331/feature.pdfP.S. I am trying to find some facts behind some articles I was reading. Apparently, the government CHANGES the basket of goods and substitutes cheaper alternatives if he price of that item goes too high. Talking about lies, damn lies and bullsh!t. |
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Post by Cranky on Jul 29, 2008 0:57:03 GMT -5
Assuming you (or family/friends you wish to help) don't owe a huge fraction of that in debt....then yep...I'd have to agree with you. Only reckless spending and poor financial planning would result in not being able to make it work. There's a difference between making it work and living large. IF inflation really is 8%, then, assuming you can get 7% interest, and you want an annual income worth (only) $60,000 after inflation (i.e. your income will have to increase over time to much more than $60,000 to maintain a constant value), you will be out of money after 79 years. If you win the lottery in your twenties, you better hope you don't live to be much older than 100. Of course, that's using HA's 8% inflation figure. Tell me what Canadian bank I can get 7% interest and I will buy you dinner. Do you know what the current bank rate is? 3% Last year? 4% The year before that? 4.5% In fact, from the top of my head, the average bank interest rate for the last TEN years is about 4.5% to 5%. The ONLY way to get your 7% is to buy mortgages or invest in stocks and bonds. All of those carry moderate to high risks. Real estate is the one with the least amount of long term risk but it needs to be carried a long time and bought/sold at the right time. If you buy real estate now (in Ontario), it's going to bite you big time in the foreseable future. Money is a war with two fronts...... making it...and keeping it. |
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Post by MC Habber on Jul 29, 2008 12:30:59 GMT -5
There's a difference between making it work and living large. IF inflation really is 8%, then, assuming you can get 7% interest, and you want an annual income worth (only) $60,000 after inflation (i.e. your income will have to increase over time to much more than $60,000 to maintain a constant value), you will be out of money after 79 years. If you win the lottery in your twenties, you better hope you don't live to be much older than 100. Of course, that's using HA's 8% inflation figure. Tell me what Canadian bank I can get 7% interest and I will buy you dinner. Not my numbers. I was using your 8% inflation figure and TNG's 7% return figure, which he said was from investments. |
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Post by Disgruntled70sHab on Jul 29, 2008 12:47:13 GMT -5
Tell me what Canadian bank I can get 7% interest and I will buy you dinner. Dinner eh? How about: TD/Canada Trust: No? OK how about, CIBC: No? Darn! Well, I tried. But, you did say "tell me what Canadian Bank ..." Didn't say it had to be accurate mind you. Oh and by the way ... you'll have to come to Chez Dis with that dinner (Mary Brown's Chicken ... be sure to ask for the taters) ... if you don't like Mary Brown's Chicken then make sure whatever you choose goes well with Moosehead Lager. ;D |
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Post by MC Habber on Jul 29, 2008 12:53:19 GMT -5
The huge problem with the CPI is that it's income depended. If you make $500,000 a year and I make $20,000 on a fixed income, the CORE increases hurt me much more then your ability to buy the next Benz. The spending pattterns of our vastly different incomes would see vastly different effect from the CPI. Thus my EPI. What count's is food on the table, roof over one's head and going to where you need to be. Almost everything else comes from disposable income. You have a choice to spend whatever you want to spend on (other then prescription) but THESE are the "inalienable" costs. Just for information purposes: Core inflation is overall inflation minus the most volatile components, such as food and fuel. According to this adjusted measure, Canada appears in relatively decent shape on the inflation front.
For instance, in the June Statistics Canada report, Canada's core rate stood at 1.5 per cent, well within the Bank of Canada's target range.www.cbc.ca/money/story/2008/07/25/f-inflation.htmlEDIT: Just so no one accuses me of hiding anything, the above article is titled Inflation rises from the dead and it talks about rising fuel and food costs. |
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Post by Cranky on Jul 29, 2008 18:50:15 GMT -5
The huge problem with the CPI is that it's income depended. If you make $500,000 a year and I make $20,000 on a fixed income, the CORE increases hurt me much more then your ability to buy the next Benz. The spending pattterns of our vastly different incomes would see vastly different effect from the CPI. Thus my EPI. What count's is food on the table, roof over one's head and going to where you need to be. Almost everything else comes from disposable income. You have a choice to spend whatever you want to spend on (other then prescription) but THESE are the "inalienable" costs. Just for information purposes: Core inflation is overall inflation minus the most volatile components, such as food and fuel. According to this adjusted measure, Canada appears in relatively decent shape on the inflation front.
For instance, in the June Statistics Canada report, Canada's core rate stood at 1.5 per cent, well within the Bank of Canada's target range.www.cbc.ca/money/story/2008/07/25/f-inflation.htmlEDIT: Just so no one accuses me of hiding anything, the above article is titled Inflation rises from the dead and it talks about rising fuel and food costs. From that article, what I mean by core and what they mean by core are two different things. Basically it's items that one has no choice but to pay. Gas, bread, milk, electricity bill, water bill, rice, etc. I should of used "basic"...or "dead without it". Their definition of core EXCLUDES what we need the most..... Core inflation is overall inflation minus the most volatile components, such as food and fuel. |
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Post by MC Habber on Aug 3, 2008 1:38:08 GMT -5
Just for information purposes: Core inflation is overall inflation minus the most volatile components, such as food and fuel. According to this adjusted measure, Canada appears in relatively decent shape on the inflation front.
For instance, in the June Statistics Canada report, Canada's core rate stood at 1.5 per cent, well within the Bank of Canada's target range.www.cbc.ca/money/story/2008/07/25/f-inflation.htmlEDIT: Just so no one accuses me of hiding anything, the above article is titled Inflation rises from the dead and it talks about rising fuel and food costs. From that article, what I mean by core and what they mean by core are two different things. Basically it's items that one has no choice but to pay. Gas, bread, milk, electricity bill, water bill, rice, etc. I should of used "basic"...or "dead without it". Their definition of core EXCLUDES what we need the most..... Core inflation is overall inflation minus the most volatile components, such as food and fuel.Right, but their definition of core is probably more meaningful for someone who is pretty well off (like a lottery winner), because they will spend a much lower percentage of their income on the basic, essential things, and more on those core things. |
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Post by Disgruntled70sHab on Aug 3, 2008 17:05:59 GMT -5
Geeze ... I'd be just happy if he took a bunch of us to a game  |
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