March 22nd, 2013 Market Update

This morning we head right to Cyprus once again and it would seem that the ultimatum that the ECB levied yesterday is having some effect on the leaders as they agreed with Greece on the takeover of the Greek units of Cypriot banks which ends some uncertainty over the fate of those operations.  With that said I find it somewhat ironic that Greece is providing help in bailing out Cyprus – the world is indeed an interesting place.  More to do before Monday, but it is a start.

Euro markets on the news are essentially flat as most will wait out the weekend to determine if there is a full solution.

Moving to the US, futures are looking stronger this morning up about a quarter point as the Cyprus situation is improving, the House of Representatives averted a Federal Government shut down with a stop gap bill from Senator Paul Ryan and the continued easy money policy that was reiterated by the FOMC over the last two days

Gold has reversed its week long up leg trading down more than $10.00 to just over $1600 and ounce, oil is trading higher by half a point to about $93.00 and the Loonie is stronger this morning at 97.61.

Yesterday Jim Flaherty released his sixth budget and while it had some interesting measures it was for all intents and purposes a fairly bland document.  To the Ministers credit, he did not have a lot to work with as GDP has been in decline for the last year and forecasts are for tepid growth at best for the next couple of years.

The Canadian Press provides the following highlights:

  • ·         Revenues for 2013-14 forecast at $263.9 billion, spending at $282.6 billion, deficit at $18.7 billion.
  • ·         Deficit projected to drop to $6.6 billion in 2014-15 and become an $800-million surplus in 2015-16.
  • ·         Canada Job Grant program will be negotiated with provinces by next year to replace existing $500-million labour market agreements.
  • ·         Measures will be introduced to improve skills training for the disabled.
  • ·         New programs will promote apprenticeship.
  • ·         Two-year extension of an accelerated capital cost allowance to help manufacturers.
  • ·         Infrastructure spending of $47 billion over 10 years, starting next year.
  • ·         An improved tax break for families adopting children.
  • ·         $100 million over two years to support housing construction in Nunavut.
  • ·         Special tax break for first-time charitable donations to encourage young people to give.
  • ·         End to tariffs on baby clothes and sports gear, including skates, hockey sticks, skis and golf clubs.
  • ·         Canadian International Development Agency to be merged with Foreign Affairs.

As was mentioned in my Tuesday Blog, the theme was to be job training and infrastructure renewal, which has been addressed.  However, the funds targeted for the job training are not new just re-distributed putting the onus on both the Provincial Governments and business owners to step up to the plate and take an equal share of the cost.  Infrastructure spending was stated at $47bn which is a big number, but that will be phased in starting in 2014 over a ten year period.  The bottom line is no new spending and no tax increases however there are tax loophole closures.

Doug Carroll, INVESCO’s President of Tax and Estate Planning once again has provided a thorough analysis of the the budget and how it effects the personal finances and investments of Canadians.

Some of the issues that were deep in the document:

  • ·         Lifetime Capital Gains Exemption on small business, farms and fisherman will increase to $800,000.00 next year up from $750,000 now and after the fact will increase annually at the rate of inflation.  This is a positive win for the largest segment of the Canadian economy – small business.
  • ·         A change to non-eligible dividends paid after 2013 will adjust the formula so individuals will not be overcompensated for taxes presumed to been paid at the corporate level.
  • ·         Some estate planning strategies will be subject to further taxation effective after the budget date.  Leveraged Annuities and Insured Borrowing (10/8 Arrangements) will see wide spread change virtually killing the concept.
  • ·         Labour Sponsored Venture Capital Corps Tax Credit is being discontinued with no immediate date being stated.
  • ·         Farming losses will be restricted for part time farmers taking advantage of the tax credit.
  • ·         Foreign activity reporting will be stepped up to continue to fight offshore tax evasion.
  • ·         Sophisticated trust schemes (synthetic trusts, notes etc.) are being shut down.
  • ·         Testamentary Trusts are also under scrutiny.  No dates or changes have been set to date but the Government will be releasing a paper on the topic and invite input from stakeholders before any changes are made.


Kenneth A. Dick, BA, CIM, CFP, FCSI