The Psy-Fi Blog: Blood on the Street
Excellent analysis of the factors at play in current market volatility
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The S&P 500, Dow and Nasdaq Since Their 2000 Highs
41 minutes ago
Monday, September 26, 2011
Tuesday, June 14, 2011
Up to Their Eyeballs
Canadians are slowly waking up to the fact that putting the brakes on spending is not enough to battle household debt.
According to the latest debt report from the Certified General Accountants Association of Canada (CGA-Canada), Canadian families are faced with household debt that’s reached a record high.
“The debt of a typical household is rising,” says Rock Lefebvre, CGA-Canada’s vice-president of research and standards and co-author of the report. “And the financial situation of certain groups of households is much worse than average and continues to deteriorate. This is concealed if you focus only on the national or aggregate picture.”
The report illustrates that while consumer spending may be down in the first quarter of 2011, many Canadians continue to struggle with household debt that has reached a new all-time high of $1.5 trillion. The situation has hit those already feeling the pinch of lower or stagnant incomes, or personal circumstances, even harder.
The survey-based report reveals several alarming trends, as single-parent families, retired Canadians, and those with annual household income of less than $50,000 face a bleak financial situation.
“The report confirms that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation,” adds Anthony Ariganello, president and CEO of CGA-Canada “For these individuals, there is little hope for improved financial condition.”
Some of the key findings of the report show more Canadians are carrying debt into retirement, with one-third of retired households carrying an average debt of $60,000 and 17% carrying $100,000 or more. More than half of indebted respondents (57%) singled out daily living expenses as the main cause for their increasing debt. The single-parent family is the only category where debt increases with age.
If household debt was spread evenly across all Canadians, a family with two children would owe an estimated $176, 461.
Lefebvre says that a number of measures taken by the government to address some identified shortcomings have not helped improve household balance sheets.
“It’s important that the dynamics of household indebtedness remain high on the radar of policy-makers,” said Lefebvre, “particularly when it comes to policies and incentives that encourage Canadians to improve their finances.”
With the Bank of Canada likely to delay rate hikes, an effective deterrent to debt can be discounted. At a time when household debt has reached a record high, low interest rates could prove somewhat counterproductive as they may tempt more Canadians to take on debt.
Canadians can expect borrowing costs to remain near record lows for the rest of the year, according to the quarterly economic forecast issued today by TD Economics.
“That’s because the pace of the economic recovery is expected to slow sharply in Canada, the United States and much of the world,” said the report, credited to Craig Alexander, chief economist, TD Economics.
As a result, the Bank of Canada will likely refrain from raising its key interest rates until 2012. This will make it easier for Canadians to continue borrowing, burying themselves deeper in hock which will take years to clear.
Debt is partly contributing to a slowdown in Canadian growth as households are too overstretched to further stimulate the economy, thus creating something of a vicious cycle that many global economies are struggling to break.
Filed by Vikram Barhat, editor@Advisor.ca Originally published on Advisor.ca
According to the latest debt report from the Certified General Accountants Association of Canada (CGA-Canada), Canadian families are faced with household debt that’s reached a record high.
“The debt of a typical household is rising,” says Rock Lefebvre, CGA-Canada’s vice-president of research and standards and co-author of the report. “And the financial situation of certain groups of households is much worse than average and continues to deteriorate. This is concealed if you focus only on the national or aggregate picture.”
The report illustrates that while consumer spending may be down in the first quarter of 2011, many Canadians continue to struggle with household debt that has reached a new all-time high of $1.5 trillion. The situation has hit those already feeling the pinch of lower or stagnant incomes, or personal circumstances, even harder.
The survey-based report reveals several alarming trends, as single-parent families, retired Canadians, and those with annual household income of less than $50,000 face a bleak financial situation.
“The report confirms that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation,” adds Anthony Ariganello, president and CEO of CGA-Canada “For these individuals, there is little hope for improved financial condition.”
Some of the key findings of the report show more Canadians are carrying debt into retirement, with one-third of retired households carrying an average debt of $60,000 and 17% carrying $100,000 or more. More than half of indebted respondents (57%) singled out daily living expenses as the main cause for their increasing debt. The single-parent family is the only category where debt increases with age.
If household debt was spread evenly across all Canadians, a family with two children would owe an estimated $176, 461.
Lefebvre says that a number of measures taken by the government to address some identified shortcomings have not helped improve household balance sheets.
“It’s important that the dynamics of household indebtedness remain high on the radar of policy-makers,” said Lefebvre, “particularly when it comes to policies and incentives that encourage Canadians to improve their finances.”
With the Bank of Canada likely to delay rate hikes, an effective deterrent to debt can be discounted. At a time when household debt has reached a record high, low interest rates could prove somewhat counterproductive as they may tempt more Canadians to take on debt.
Canadians can expect borrowing costs to remain near record lows for the rest of the year, according to the quarterly economic forecast issued today by TD Economics.
“That’s because the pace of the economic recovery is expected to slow sharply in Canada, the United States and much of the world,” said the report, credited to Craig Alexander, chief economist, TD Economics.
As a result, the Bank of Canada will likely refrain from raising its key interest rates until 2012. This will make it easier for Canadians to continue borrowing, burying themselves deeper in hock which will take years to clear.
Debt is partly contributing to a slowdown in Canadian growth as households are too overstretched to further stimulate the economy, thus creating something of a vicious cycle that many global economies are struggling to break.
Filed by Vikram Barhat, editor@Advisor.ca Originally published on Advisor.ca
Wednesday, April 20, 2011
One-third of Canadians can't afford basic expenses: survey
One-third of Canadians can't afford basic expenses: survey
The findings presented in this article are not a surprise but they are concerning.
Most people could probably stand to learn a few lessons from the book linked at the left - The Cheapskate Next Door.
The findings presented in this article are not a surprise but they are concerning.
Most people could probably stand to learn a few lessons from the book linked at the left - The Cheapskate Next Door.
Wednesday, December 8, 2010
Monday, November 22, 2010
Tuesday, October 19, 2010
Friday, July 30, 2010
Retirement taking a backseat to present: BMO
Why are Canadians dragging their feet when it comes to retirement planning?
BMO says the answer can be found inside their minds. Using behavioural finance research, the bank believes it has uncovered clues as to why Canadians are procrastinating the way they are.
A report from BMO Retirement entitled Retirement Planning: Can I Get Back To You On That? and based on a survey conducted by The Strategic Counsel reveals that Canadians are more mindful of their present financial circumstances rather than their future.
The concepts of "immediate gratification" and "paralysis of choice" have severely affected retirement planning in Canada.
Delving into the psychology behind the competing priorities, the report states that although 82% of respondents understood that saving early for retirement is important, more than 81% are more concerned with their present needs than their retirement.
Canadians are also overwhelmed with too much information and too many options involving retirement planning. This has resulted in frustration and paralysis when action is required.
Thirty-six percent of non-retirees said they are overwhelmed by too much information and this has been an obstacle to them moving forward with retirement saving plans.
"While it's often hard to act against our natural instincts, it's critically important that Canadians take an active role in planning for their future and start as early as possible," says Tina Di Vito, Head, BMO Retirement Institute. "Understanding the psychological barriers to effective retirement saving is the first step to overcoming them."
The report also points to other contributing factors that are delaying many retirement plans. Those who have children under the age of 18 are unlikely to see saving for retirement as an immediate priority, as post-secondary education may take precedence. It is also difficult for those with a heavy debt burden to focus on retirement. Lower income respondents are overwhelmed by the volume of information available.
(07/29/10)
Filed by John Powell, john.powell@advisor.rogers.com
Originally published on Advisor.ca
BMO says the answer can be found inside their minds. Using behavioural finance research, the bank believes it has uncovered clues as to why Canadians are procrastinating the way they are.
A report from BMO Retirement entitled Retirement Planning: Can I Get Back To You On That? and based on a survey conducted by The Strategic Counsel reveals that Canadians are more mindful of their present financial circumstances rather than their future.
The concepts of "immediate gratification" and "paralysis of choice" have severely affected retirement planning in Canada.
Delving into the psychology behind the competing priorities, the report states that although 82% of respondents understood that saving early for retirement is important, more than 81% are more concerned with their present needs than their retirement.
Canadians are also overwhelmed with too much information and too many options involving retirement planning. This has resulted in frustration and paralysis when action is required.
Thirty-six percent of non-retirees said they are overwhelmed by too much information and this has been an obstacle to them moving forward with retirement saving plans.
"While it's often hard to act against our natural instincts, it's critically important that Canadians take an active role in planning for their future and start as early as possible," says Tina Di Vito, Head, BMO Retirement Institute. "Understanding the psychological barriers to effective retirement saving is the first step to overcoming them."
The report also points to other contributing factors that are delaying many retirement plans. Those who have children under the age of 18 are unlikely to see saving for retirement as an immediate priority, as post-secondary education may take precedence. It is also difficult for those with a heavy debt burden to focus on retirement. Lower income respondents are overwhelmed by the volume of information available.
For those who are interested in saving for their retirement, BMO suggests the following steps:
Save early
- Create a budget
- Set financial goals and monitor your progress
- Sign up for your company's pension plan
- Make full use of tax-favoured investment vehicles
- Set up an automatic savings program
- Seek out financial help
(07/29/10)
Filed by John Powell, john.powell@advisor.rogers.com
Originally published on Advisor.ca
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