Financial Markets Meltdown

[Trochu]

Interesting personal note...I bought a bunch of Argonaut Gold, see they are getting bought/merging with Alamos Gold, stock has gone up 66.6% in the last month. Never owned stock of a company that was bought out/merged with another. Guess I need to wade though the intricacies to see what the merger deal is regarding Argonaut shareholders. Yay!

[DiabeticKripple]

Originally Posted by Trochu

Interesting personal note...I bought a bunch of Argonaut Gold, see they are getting bought/merging with Alamos Gold, stock has gone up 66.6% in the last month. Never owned stock of a company that was bought out/merged with another. Guess I need to wade though the intricacies to see what the merger deal is regarding Argonaut shareholders. Yay!

I’ve been through a few mergers, you’ll likely just get an amount of stocks in the purchasing company that equals the amount you have invested in the company being bought. Basically a straight swap over.


GTE for me is starting to creep back up. A solid Canadian oil company operating in Columbia and Ecuador.

[tranq78]

Originally Posted by Drewski Canuck

Who really needs that kind of growth in their Portfolio. Justin and Friends will take care of you from Cradle to Grave and even feed your kids lunch at School, (something you will not be able to do at home once Justin and Friends are done with you),

SO PLEASE THINK ABOUT THE CHILDREN!!!!

Drewski

Ya know Drewski, school programs are a provincial responsibility not a federal one -- that includes Alberta lunch programs. And provinces, including Alberta, already has this plan.

Trudeau/Freeland's announcement of a child food program was done with zero consultation with the provinces. The provinces weren't even told ahead of time, not even the liberal/NDP provinces.

Good sound bites though for CBC to let us know how well the feds are taking care of us. Don't mention the already existing nasty UCP school nutrition program, a lunch program must be a totally different thing. See how doublespeak and willful ignorance works?

=========

Back to investing topics.

Oil and gas companies are benefitting from the unintended consequences of Trudeau trying to kill the industry.

The surviving energy co's have stopped growth spending. They are just spending enough to replace the reserves they used up while at the same time demand continues to grow even under Trudeau as our population is growing.

This means the current energy cycle is going to continue for a way longer time than past cycles.

Now hush, stop talking about it. You'll let everyone in on the secret and we can't have that!

[Drewski Canuck]

Originally Posted by tranq78

Ya know Drewski, school programs are a provincial responsibility not a federal one -- that includes Alberta lunch programs. And provinces, including Alberta, already has this plan.

Trudeau/Freeland's announcement of a child food program was done with zero consultation with the provinces. The provinces weren't even told ahead of time, not even the liberal/NDP provinces.

Good sound bites though for CBC to let us know how well the feds are taking care of us. Don't mention the already existing nasty UCP school nutrition program, a lunch program must be a totally different thing. See how doublespeak and willful ignorance works?

=========

Back to investing topics.

Oil and gas companies are benefitting from the unintended consequences of Trudeau trying to kill the industry.

The surviving energy co's have stopped growth spending. They are just spending enough to replace the reserves they used up while at the same time demand continues to grow even under Trudeau as our population is growing.

This means the current energy cycle is going to continue for a way longer time than past cycles.

Now hush, stop talking about it. You'll let everyone in on the secret and we can't have that!

Oh Brother I know your pain!!! But it was not Trudeau's policies, it is also the US Democrats who created this crisis in the Oil Markets.

The Majors are all that is left in North America due to mergers in the US Industry. They are not investing in North America, and are only harvesting profits. They are waiting for a change in political climate before proceeding to re invest.

But they are working off shore in places like Guyana. This is why big players like Exxon, Chevron, Shell are going up 1- 3 % per week right now.

The Canadian Oil Space has seen small and mid level producers fail or be bought out from 2015 forward. The Majors still play in our Patch through big Oil Sand Plays for the simple reason that they own the Refineries on the US Gulf Coast that are set up to process this heavy oil, bought at a steep discount of course!!! The so called Differential was well known to the Liberals / NDP, who let this heavy oil discount continue for so long and allowed the US Multi Nationals get very rich on our expense. The fix was in from 2015 forward. The US Multi Nationals paid very little Tax in Canada, as the Discounted Canadian Heavy Crude Oil was sold to the US Refineries where the Processing resulted in a huge Value Added finished product and profit, for the US.

Things are now changing in Alberta. The Heartland Upgrader is taking Bitumen ROYALTY In Kind (BRIK) and making Alberta money.

Trans X is now running and there will be an alternative market for our heavy Oil forcing the US Multi Nationals to compete for our Heavy Oil and driving up the prices.

Now all that we need is for Domestic small and medium sized producers be Incorporated, start working in the Western Canadian Oil Patch, and start drilling for conventional oil. That is what creates the jobs and creates the wealth for Alberta.

Drewski

[Dean2]

These are American numbers but pretty clear the reported CPI numbers are pure B.S., as I have said many times. Food inflation in Canada has actually been even worse.

7) Is CPI Understating Food Inflation?
A WSJ analysis found that a commonly purchased basket of supermarket goods has increased in price by 36.5% over the past 4 years (+8.1% per year). This is much higher than the US Government CPI figures which show food price inflation of 25.2% over the last 4 years (+5.8%/year).



Meanwhile, average hourly earnings in the US have increased 21% over the past 4 years (+4.9% per year). This is one reason why many Americans, particularly those with lower incomes, feel like they’re falling behind.


For all of you that believe the highest income earners pay next to no tax, or far below their fair share, this might be of interest.

The top 1% of income earners in America made 26% of the country’s total income in 2021 and paid 46% of total income taxes (their avg tax rate: 26%). The bottom 50% of income earners made 10% of total income and paid 2% of total income taxes (their avg tax rate: 3%).

[Buckhead]

So the other 49% of the schmucks in the middle brackets paid 52% of the total income tax, in other words.

[Dean2]

Originally Posted by Buckhead

So the other 49% of the schmucks in the middle brackets paid 52% of the total income tax, in other words.

It would be more accurate to say that the top 10% of earners paid 76% of the income tax collected. The other 90% of earners paid the remaining 24% and the bottom 50% were only about 3% of the 24%. Thus the top 11% to 50% paid 21% of the total tax collected, with the 25% to 50% contributing only 8% of that.

What this demonstrates is the top earners pay a very large amount of the total tax paid, despite them being a quite small number of income earners.

[Dean2]

One more point, in case it wasn't clear. The vast majority of those that work, being 75% of the income earning population, only accounts for 11% of total tax collected. These are American numbers, in Canada, the load on the top earners is even higher than it is in the States.

If you run off the high paying jobs, and the people who are in those high paying jobs, like Canada has been so ruthlessly trying to do for the past 8 years, then the tax burden falls more and more on the lower income earners. This is what the carbon tax, sales taxes, taxes on alcohol, cigarettes, cannabis, inflation, property taxes, school taxes and all the other new levies and tax increases are in the process of doing.

If you think we have a productivity problem in Canada now, and it is already REALLY bad, it will only get progressively worse if the Liberals keep killing off the high paying jobs in our economy. If they manage to shut down Oil and Gas, 30% of our GDP would disappear. there is a reason why high tech doesn't thrive in Canada, no one wants to suffer the tax burden here when they can get paid in the States and pay half the tax.

[Drewski Canuck]

What people and politicians forget is that wealthy people are the ones who have the capital to invest, innovate, and lead the economy.

High wage earners are professionals, as well as Business people.

The reason for a brain drain from Canada is the opportunity to make and KEEP more elsewhere. Once the business professional class leaves, it takes generations for a new group to rise up into this role.

What is so funny is that alot of the Laurentien Liberal Elite are families that have already moved their wealth and businesses off shore. Yet these are the same Politicians trying to tax the average Canadian to poverty.

If Pierre Polievre wants a Campaign Slogan, it is blatantly clear: Canada, lets PROSPER.

There is no other message that has to be communicated. Right now, Justin and Friends are squandering our chance at prosperity.

Drewski

[KGB]

Was reading today that one of the financial gurus is predicting our loonie will drop to $.50 US by the end of this year… If that’s a case- we are going to be in a deep poop! Gold is over $2200 so the actual inflation is closer to 50% in the last two years…

[Dean2]

A little more information on Productivity. I find it interesting that this is starting to be a regular discussion piece. It should already have been for at least the last 6 years.



Mark Parsons, ATB ECONOMICS | April 11, 2024

The productivity imperative:

Talk of Canada's sluggish productivity performance has been trending. Senior Deputy Governor Carolyn Rogers recently said the need to bolster productivity is “an emergency - it’s time to break the glass”.

Productivity is the ability to convert resources (raw materials, people and capital) into output. It ultimately determines a jurisdiction’s living standards. Nobel Prize-winning economist Paul Krugman once remarked: “Productivity isn’t everything, but, in the long-run, it is almost everything”.

While that sounds important, it also sounds a bit theoretical. It’s easy to dismiss productivity as an abstract academic concept.

Incomes are more relatable. In a Hub article released last week, University of Calgary professor Trevor Tombe shows a clear connection between declining real earnings growth and weak productivity, warning the “Great Canadian Slump” is back.

Another way to make the productivity-wage connection is by looking at industries. Statistics Canada maintains detailed productivity accounts for individual industries. As shown in the below figure, there is a strong relationship between the productivity of workers in an industry and the wages it pays.

Energy-related industries have among the highest levels of productivity and wages in Canada. We recently showed that the majority of Alberta’s higher overall labour productivity (vs. the national average) is due to the province having a higher concentration of workers in these industries.

Bottom line: Productivity shouldn’t be dismissed as a theoretical or academic concern. When labour productivity suffers on a sustained basis, it ultimately translates into lower overall wages for workers.


Owl chart Apr 11 2024

[fishtank]

Tech had a very rough day , probably just want to beat the line up for the sell in May and go away .

[trailraat]

Originally Posted by Dean2

It would be more accurate to say that the top 10% of earners paid 76% of the income tax collected. The other 90% of earners paid the remaining 24% and the bottom 50% were only about 3% of the 24%. Thus the top 11% to 50% paid 21% of the total tax collected, with the 25% to 50% contributing only 8% of that.

What this demonstrates is the top earners pay a very large amount of the total tax paid, despite them being a quite small number of income earners.

Does this take into account all of the income earners with personal corporations that pay themselves relatively low incomes?

I certainly understand why people use corporations to avoid extra tax because of how insane our tax rates are, but I am curious about how that factors into these statistics.

[Dean2]

So in case any of you were inclined to believe the drivel from the Government or the Central Banks, of late there are more and more experts now predicting that U.S. interest rates may go up more, before they come down. Reasons cited, economy still growing, inflation still well above the 2% target, more jobs than workers etc.

I find it interesting that in Canada, despite record immigration, the GDP is shrinking, productivity is dropping, house and rent prices continue to sore and almost every service, including health services, food banks and government services, despite the number of federal of employees having grown 50% in the last 4 years,, are massively over subscribed.

Anyone expecting relief from higher interest rates, surging food, fuel and everyday costs inflation needs to take another look at their plans for the next 12 to 24 months, because it is likely to get worse, or at minimum not get any better, any time soon.

I don't say this to be negative or to depress folks but it goes back to the theme I have advocated for a long time; Reduce debt, invest in things that grow faster than inflation and produce an income, and make sure you have a VERY firm grip on your monthly and annual personal budget.

All you have to look at is what has happened to the cost of gas in the last few months, up 60%. Groceries, taxes, if you live in Edmonton property taxes alone are going up 25% in the next 3 years, mortgage payments when you go from 1.5% at renewal to 5 or 6%, apartment rent is jumping at every annual renewal etc. If you are currently living from paycheck to paycheck, you need to find a way to bring in more income, or reduce expenses, or both, because your current costs are 10% less than they will be 12 months from now.

Best of luck to all.

[Dean2]

Originally Posted by trailraat

Does this take into account all of the income earners with personal corporations that pay themselves relatively low incomes?

I certainly understand why people use corporations to avoid extra tax because of how insane our tax rates are, but I am curious about how that factors into these statistics.

Just saw this post. Paying yourself through a corporation is only partially effective in mitigating tax. Long and short, highest earners are getting heavily taxed no matter how they earn the money.

https://wtcca.com/corporate-tax-rate...tes-in-canada/

What is the Corporate Tax Rate in Canada?

Based on the Income Tax Act, the Federal corporate tax rate starts at 38%. This rate has an offsetting 10% Federal income tax abatement and an additional 13% general tax reduction. All of this places the net corporate tax rate at 15%.

This tax rate applies to general corporations, which are corporations that are not Canadian-controlled private corporations (CCPCs). Typically, these corporations are public companies with resident subsidiaries in Canada and private companies controlled by foreigners or non-residents.

Several factors determine how much corporate tax your business must pay in Canada. The corporate tax rate in Canada depends on which province your business is located in, the size of the company (how much revenue is earned), and income sources, that is, whether or not the business earns active income or passive income.

Note that active income is income from your ordinary business activities, excluding amounts generated from passive income, a specified investment business, or a personal services business. Investment income is income generated from interest, dividends, rent, and capital gains.

Here is a breakdown of the general corporate income tax rate by province:
2023 General Corporate Tax Rates
Federal 15%
Ontario 11.50%
British Columbia 12%
Alberta 8%
Manitoba 12%
New Brunswick 14%
Prince Edward Island 16%
Nova Scotia 14%
Newfoundland & Labrador 15%
Nunavut 12%
Northwest Territories 11.50%
Yukon 12%
Saskatchewan 12%
Quebec 11.50%
What is the Small Business Tax Rate in Canada?

Small businesses that are located in Canada pay different tax rates based on how the business is set up and how much revenue the business earns.

A Canadian small business is defined as having less than $500,000 in annual taxable income.

Canadian-controlled private corporations (CCPCs) can use the Federal small business deduction (SBD) to reduce the corporate income tax rate on the company’s active business income with all primarily activities being carried on in Canada. A CCPC is a corporation owned by either Canadian residents or a company controlled by Canadian residents. To be defined as a CCPC, your corporation must be incorporated in Canada, a private corporation, and it is not publicly traded on any stock exchange.

The Federal small business deduction was designed with small businesses in mind to reduce the overall corporate income tax liability. In most provinces and territories, the maximum limit for preferential tax treatment is $500,000 in taxable income. This is also known as the small business limit for the corporation.

The preferential tax treatment of small business deduction helps small to medium enterprises, startups, and other smaller companies fulfill their tax obligations and provide valuable incentives to bigger, larger corporations.

The following chart shows the Federal and each province’s small business tax rates applicable to businesses claiming the SBD small business deduction. For CCPCs eligible for preferential tax treatment to claim the SBD small business deduction, the Federal corporate tax rate is 9%.
Business Limit Threshold 2023 Small Business Tax Rate (CCPC)
Federal $500,000 9%
Ontario $500,000 3.20%
British Columbia $500,000 2%
Alberta $500,000 2%
Manitoba $500,000 0%
New Brunswick $500,000 2.50%
Prince Edward Island $500,000 1%
Nova Scotia $500,000 2.50%
Newfoundland & Labrador $500,000 3%
Nunavut $500,000 3%
Northwest Territories $500,000 2%
Yukon $500,000 0%
Saskatchewan $600,000 0%
Quebec $500,000 3.20%
Combined Corporate Tax Rates in Canada

Not all provinces have the same corporate income tax rate. In some instances, there is a dual tax rate.

The dual tax rate consists of a lower rate and a higher rate. The lower rate is applied to income eligible for the Federal small business deduction (SBD), which is the income that meets or falls below the established Federal business limit threshold. The higher tax rate applies to all other income.

Here is an example of what this might look like:

ABC Company has a permanent business in Ontario and has a taxable income of $600,000. All income is earned from ordinary business activities carried on in Canada.

The small business deduction tax rate in Ontario is 3.2% and 9% at the Federal level, providing a combined total of 12.2%.

The General Corporate Tax Rate in Ontario is 11.5% and 15% at the Federal level, providing a combined total of 26.5%.

ABC Company would calculate corporate income taxes on the first $500,000 income (i.e. small business limit) using the Small Business Tax Rate of 12.2%. This equals $61,000. ABC Company would then calculate the corporate income taxes on the remaining $100,000 income using the General Corporate Tax Rate of 26.5%. This equals $26,500. The combined corporate income taxes payable are $61,000 plus $26,500 for a total of $87,500.

The following chart shows each province’s combined Federal and provincial corporate income tax rates on income eligible for Small Business Tax Rate and income subject to General Corporate Tax Rate.
Province/Territory 2023 Small Business Tax Rate (Lower Rate) 2023 General Corporate Tax Rate (Higher Rate)
Ontario 12.20% 26.50%
British Columbia 11% 27%
Alberta 11% 23%
Manitoba 9% 27%
New Brunswick 11.50% 29%
Prince Edward Island 10% 31%
Nova Scotia 11.50% 29%
Newfoundland & Labrador 12% 30%
Nunavut 12% 27%
Northwest Territories 11.50% 26.50%
Yukon 9% 27%
Saskatchewan 9% 27%
Quebec 12.20% 26.50%
What is the Corporate Investment Income Tax Rate?

In Canada, investment income is income generated primarily from investment assets, including interest, dividends, rentals, and capital gains. It is often considered passive income as it is not directly tied to or related to the corporation’s primary business income.

In 2019, the Canada Revenue Agency implemented changes to the way corporate investment income is taxed. These new rules dictate that if passive income crosses a $50,000 threshold in the tax year, the corporate tax rate on the corporation’s active business income will increase.

These rules were implemented to encourage businesses to reinvest passive income back into the business rather than let it sit and continue to grow as passive income. CCPCs, under this tax structure, don’t have the incentive to increase passive income if they wish to keep their tax rate at a lower level. In fact, the reduced Small Business Tax Rate is completely phased out if passive income exceeds $150,000. Historically, CCPCs may have invested this income in things like stocks and bonds to preserve assets and increase overall income.

CCPCs are subject to a Federal investment income tax rate of 28% (net of 10% Federal income tax abatement) plus a refundable 10⅔% for a total Federal income tax rate of 38⅔% or 38.70%.

Here is a breakdown of the Corporate Investment Tax Rates in Canada:
2023 Investment Tax Rate
Federal 38.70%
Ontario 11.50%
British Columbia 12%
Alberta 8%
Manitoba 12%
New Brunswick 14%
Prince Edward Island 16%
Nova Scotia 14%
Newfoundland & Labrador 15%
Nunavut 12%
Northwest Territories 11.50%
Yukon 12%
Quebec 11.50%
Saskatchewan 12%
Underused Housing Tax (UHT) Rate

For Canadian residential properties owned on or after December 31, 2022, a 1% tax on the value of the property may be levied if it is considered vacant or underused. You are required to file an Underused Housing Tax return if you are not an excluded owner, and you are required to pay the 1% tax if you do not qualify under one of the four categories of exemptions.
What is the Capital Gains Corporate Tax Rate?

A capital gain is earned through the sale of a passive investment asset. Passive investment assets can include shares of businesses, publicly traded stocks, goodwill, land, and other real properties. Capital gains must be declared as part of a corporation’s income.

The good news, however, is that due to the capital gains inclusion rate, only half or 50% of a corporation’s capital gains need to be included in declared income.

Since only 50% of capital gain is subject to taxation, the corporate tax rate on capital gains is equal to 50% of the Investment Income Tax Rate.

If the assets held by the corporation have appreciated substantially in value, this may result in hefty tax liability at the time of sale. Any business with the potential for capital gains should speak with a professional corporate tax accountant to fully understand the implications and how these gains will be taxed.

After capital gains are reported, the business can take advantage of the Capital Dividend Account (CDA) to distribute the non-taxable portion of the capital gain. This is because only 50% of the capital gain is subject to taxation, and the other 50% can be distributed using the CDA on a tax-free basis.

Note that if the sale of assets results in a capital loss, it can be carried back 3 years to offset prior year capital gains and carried forward 20 years on any future capital gains. Capital losses cannot be used to offset ordinary active business income earned.

Here is a look at the Capital Gains Corporate Tax Rates in Canada.
2023 Capital Gains Corporate Tax Rate
Federal 19.35%
Ontario 5.75%
British Columbia 6%
Alberta 4%
Manitoba 6%
New Brunswick 7%
Prince Edward Island 8%
Nova Scotia 5.75%
Newfoundland & Labrador 7.50%
Nunavut 6%
Northwest Territories 7%
Yukon 6%
Saskatchewan 6%
Quebec 5.75%

[cowmanbob]

Thanks for taking the time to post this.

[Fisherdan]

Good post. It’s all speculative of course, but do you think that the BOC will be forced to cut rates (our economy seems to be tanking) while the US maintains? I’ve heard that our dollar might be “sacrificed” in this way.

On a side note… an interesting company I heard of: Terravest (TVK). They build storage and transportation units for LNG, as well as fertilizer, etc. Been growing and acquiring nonstop since their inception in 2014. With rates higher for longer, they might roll up more distressed businesses. They seem to be under the radar somewhat.

[Dean2]

Originally Posted by Fisherdan

Good post. It’s all speculative of course, but do you think that the BOC will be forced to cut rates (our economy seems to be tanking) while the US maintains? I’ve heard that our dollar might be “sacrificed” in this way.

On a side note… an interesting company I heard of: Terravest (TVK). They build storage and transportation units for LNG, as well as fertilizer, etc. Been growing and acquiring nonstop since their inception in 2014. With rates higher for longer, they might roll up more distressed businesses. They seem to be under the radar somewhat.

It is entirely possible that BOC lowers rates before the Fed. That would have a very negative impact on the Canada/U.S. exchange rate. If you are going to need U.S. dollars any time soon, it would be prudent to get them now. Holding stock or cash in U.S. dollars is also a prudent hedge against devaluation of the Canadian dollar. If you live in Venezuela or Argentina you will wish you had converted most of your wealth to greenbacks many years ago. It we get another Liberal government that scenario is not out of the question here in Canada.

Even if BOC doesn't drop rates first, I really don't see the Canadian dollar getting stronger against any other major currencies. Our economic performance sucks VERY badly, see my previous posts on productivity, and the Liberal policies have made Canada next to un-investable. When you have to give Billions in subsidies to get anyone to setup a business here, you know you aren't a preferred location for investment.

We badly need a change of government, but even with one, it will take a few years to repair the massive damage that has already been done.