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PAGES 4 Dream 3 Issue 5

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4 FEBRUARY 2013 Direct


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Unchanged Until 2015: Scotiabank Economists at Bank of Nova Scotia have sharply altered their interest rate forecast, and are now expecting the Bank of Canada to keep rates unchanged through next year. In a new report, Scotia economists reveal that they have significantly changed their rate forecast, and now expect the overnight rate to finish 2014 at an unchanged 1%. Previously, they only saw rates on hold until the first quarter of 2014, "so we are therefore now pushing that out by about a full year," it says. The report cites a number of reasons for what it calls "a pretty sizable forecast

Canadian consumers see improvement, U.S. counterparts don’t Canadian and U.S. consumers appear to be heading in opposite directions in terms of their confidence in the economy going forward — it's up in Canada and down south of the border. The Conference Board of Canada's survey on consumer confidence in January shows the index rebounding strongly by 5.1 points to 83.1, the highest level since June 2011 and the first increase in four months. Meanwhile, a similar survey by the Conference Board in the United States found confidence among consumers there plummeted this month to 58.6, the lowest level since November 2011. The results are particularly baffling given that most economists believe the U.S. is on the verge of a relatively strong economic performance in 2013, while the expectations for Canada — while not negative — are more modest. Bank of Montreal economist Doug Porter says the U.S. result is most surprising to him, noting there are specific reasons why Canadians should be seeing the sunny side of the economic street at the moment. In Canada, financial markets have been positive in January, gas prices are down, jobs are being created and interest rates remain at rock-bottom. “It's not so obvious what's going on in the U.S.," he added. "I think what's behind it is that consumers first had to deal with risks of the fiscal cliff difficulties and then they had to deal with the impact on their

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payrolls." The fiscal agreement is estimated to add about $700 in taxes to the average American households this year, says TD Bank economist Thomas Feltmate. The U.S. also still faces the risk of another politically-induced crisis if the Democrats and Republicans don't agree on extending the nation's debt ceiling later this spring and a potential cut of $80 billion to government spending. Feltmate says confidence could pick up quickly in the U.S. if employment conditions continue to strengthen. "Moving forward, a continued rebound in home prices augurs for an improvement in consumer sentiment and spending," he added. Economists are divided on the importance of confidence surveys mostly because they tend to reflect perceptions of the economy that have already occurred, rather than what is about to occur. But some say declining confidence could also translate in lower spending by consumers, which has the effect of slowing down growth. For Canada, the Conference Board said the improvement mainly reflected improved confidence in future jobs and future income. When asked about the employment outlook in their community in the next six months, about one-fifth of respondents said they expected there would be more jobs.

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change", including growing confidence in their expectation that the U.S. Federal Reserve Board will keep rates low until mid-2015. "It is difficult to expect Fed funds target rate hikes before early 2015 and so timing a BoC hike to occur around the same time seems reasonable," it says. It also notes that efforts to tighten mortgage lending seem to be working, which lessens the pressure for the BoC to reign in lending with higher rates. "As the lagged effects of rules-based and less transparent forms of regulatory tightening continue to unfold, there may well be additional down sides to credit growth," it says. Scotia also continues to expect that spare capacity in the economy will be used up more slowly than the BoC expects. "We see spare capacity persisting into 2015 at a minimum and therefore do not anticipate that the BoC's malleable 13% inflation target band within a flexible framework will be significantly chal-




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lenged," it says. And, it says, another reason to believe that the output gap might persist is weakness in the energy sector. Additionally, it suggests that inflation could easily keep undershooting the central bank's inflation targets. (Source : Investment Executive)

Moody's Downgrades Six Big Canadian Banks Moody's downgraded the long-term credit ratings of six large Canadian banks, citing concerns over record high Canadian consumer debt and soaring home prices. Moody's Investors Service cut the long-term ratings by one notch of the Bank of Montreal, Scotiabank, Caisse That was an increase of nearly four percentage points from the December survey. But economists are not nearly as sunny about jobs growth in 2013 as the respondents. Although the economy has created almost 100,000 new jobs in the past two months, the consensus view is that employers have gotten ahead of economic growth in recent hiring and will need to rein in future expansion. Asked about their income in six months, nearly one-quarter of the respondents said they expected an improvement — up 1.4 percentage points from last month. The index was based on a survey conducted from Jan. 4 to 14. (Source : The Canadian Press)

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centrale Desjardins, Canadian Imperial Bank of Commerce, National Bank of Canada and Toronto-Dominion Bank. The ratings of the six banks now range between AA1 and AA3, but they still rank among the top-rated financial institutions in the world. "Today's downgrade of the Canadian banks reflects our ongoing concerns that Canadian banks' exposure to the increasingly indebted Canadian consumer and elevated housing prices leaves them more vulnerable to unpredictable downside risks facing the Canadian economy than in the past," said Moody's vice president David Beattie. By September 2012, the ratio of Canadian household debt to income reached a record 165 per cent, up from 137 per cent in 2007, as housing prices rose 20 per cent and Canadians borrowed more to afford to buy a new home, he noted. Another rating agency, Fitch, also raised concerns Monday about Canadians' indebtedness but maintained its own high scores for the nation's biggest banks, which also includes the Royal Bank of Canada.

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TAX TIPS INCOME SPLITTING Income splitting allows taxpayers to lower their income and in turn, their tax payable. It means if one spouse earns $60,000 and splits their income with their spouse or common-law partner, they will pay tax on $30,000 each, rather than $60,000. Tax rates increase depending on your income level so the lower the income, the less tax payable. However, the Tax Act only allows income splitting under very specific circumstances. For most taxpayers, this is not an option.

You can earn just over $900 every month tax-free. Make sure everyone in the family does…it’s your starting point for personal productivity and tax planning. But beware of the Attribution Rules. - Evelyn Jacks Registered Retirement Income Fund (RRIF), retirement allowances, death benefits, Old Age Security (OAS) or Canada Pension Plan (CPP) benefits. To split eligible pension income, both spouses or common-law partners must complete Form T1032,Joint Election to Split Pension Income and attach the form to their income tax returns. Taxpayers who file electronically should maintain a copy of the completed forms in case the Canada Revenue Agency (CRA) asks for them. Benefits of Pension Income Splitting

by reducing the amount of income that is taxed at the higher rate. In addition, splitting of pension income has the potential to: Ÿreduce the amount of the transferor’s OAS clawback as it reduces the transferor’s net income, and Ÿincrease the age amount for the transferor because it reduces the transferor’s net income. Drawbacks of Pension Income Splitting Though many older taxpayers can benefit from income splitting, there can

Cosmetic Chemicals In Fast Food?! Beginning in 2007, the Federal Government began allowing seniors to split certain pension income. Only certain types of pension income are allowed to be split up to 50 percent of the income between a spouse or common-law partner. Qualifying pension income includes periodic pensions and superannuation payments, foreign pension excluding income from a U.S. Individual Retirement Account and annuities. It does not include lump sum payments, excess amounts from a

The two most obvious benefits of splitting pension income are: Ÿthe transferee will be able to claim the pension income amount on the transferred amount. This is a benefit if the transferee does not already have $2,000 or more of eligible pension income. Ÿif the transferor is in a higher tax bracket than the transferee, the splitting of pension income has the potential to reduce the family’s overall tax liability


Sodium Steroyl Lactylate Found in Shampoo and soap Reasoning for use: 'dough conditioner' even though bread does not require this, and has been made without SSL for thousands of years Calcium Disodium EDTA Found in skin products and hair conditioners (used as stabilizer) Reasoning for use: Flavor protectant in fast food sauces, dips and dressings Ammonium Glycyrrhizin Found in facial mask products Reasoning for use: Flavor enhancer, flavoring agent, surface Disodium Phosphate Found in mascara and mouthwash Reasoning for use: Food preservative Propylene Glycol Found in Shampoo, mouthwash, hand sanitizers Reasoning for use: Gives most of today's food and beverages their distinctive taste Benzoyl Peroxide * Recently banned in China Active ingredient in acne creams Reasoning for use: Bleaching wheat flour white (all fast food breads)

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be negative effects such as: ŸIf income is transferred from the lower-income spouse to the higher, the overall tax bill may be increased. ŸThe transferee’s OAS clawback may be increased by the transfer as their net income is increased. ŸThe transferee’s age amount may be reduced as their net income is increased. ŸIf the transferee’s income is low, the transfer may reduce or eliminate the spouse or common-law partner amount. It is important to review your tax situation before opting to split eligible pension income. The goal is to maximize the benefits and minimize the negative effects.



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Editor & Technical Advisor Aishwar Muthuraman 105-2100 Ellesmere Road, Scarborough, ON, M1H 3B7 Ph: 647 352 4945 | Fax: 647 352 6110 Email: DISCLAIMER Dreams and Money takes care to present all the information as accurately and efficiently as possible. Any advice or recommendation appearing in the paper is also part of information only. They should not be construed as an expert opinion. Please note that no representation or warranty with respect to the accuracy or the completeness of the information is given. Information always keeps changing. Hence all the information, including advice and recommendations are to be treated as of general nature only. For your specific circumstances, you are always advised to consult an expert before acting on any information.

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I am just reporting a news that is not at all encouraging. It appears that it is better to have a low rise home ownership. New home sales continue to plummet in the Greater Toronto Area with the latest statistics from RealNet Canada Inc. showing a 52.1% drop in sales in December from a year ago. But inventory levels continue to rise year over year with unsold inventory in December climbing 29.1% from a year ago. The inventory levels did drop 2.2%

from November. High-rise sale prices for December average out at $436,024 in December across the GTA, a 0.4% increase from a year ago. By comparison, low-rise prices climbed to $632,868, a 16% jump from a year ago. In 2012, low-rise sales were down 20% from a year ago to 14,069 — the second-lowest level since 2000. Low rise sales represented only 43% of all new home transactions last year. The group also said prices for low-rise

WILL SPRING BRING CHEERS TO THE REAL ESTATE MARKET ? Spring is generally considered the most active season for home buyers and sellers. Most deals often close in


summer. In fall and winter, families are often focused on work and school. Market activity during this fall and winter was much lower than the previous year. Will spring bring an enthusiasm into the market? Possibly yes, I think. For those of you who are confused about seasons, here are what they are Spring is from Mar 20 to Jun 20 Summer: June 21 to Sep 21 Fall : Sep 22 to Dec 20 Winter : Dec 21 to Mar 19

At Dreams & Money, we want to help people lead happy lives. We want to help people reach their dreams. A lot of dreams in the world require financial awareness and proper planning to bring to fruition. To get this financial knowledge can be challenging. We realize this, and want to make this process simpler. We will bring you financial news happening around you that impacts you, along with timeless classics on topics like financial planning, life skills, health etc. to help you grow all around to reach your dreams. If you are someone who shares this same passion, and think you can contribute to us in any way (writing articles, spreading the message etc.), please let us know. We’ll be happy to hear from you.

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homes have risen 44% over the past four years based on its index while supply has decreased 52% during the same period. In its release, the group lays the blame on land and constraints, regulatory requirements and a complex approval process. “In simple terms, today’s low-rise purchasers are coming out on the losing end of a supply and demand equation,” Steve Deveaux, first chair of BILD. RealNet says the gap between a lowrise and high-rise home in the GTA grew to a record high of $196,844, more than double the long-term average.


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Global and Indian Market Weekly Review - Week Ended 1 February 2013 Weekly review of Global markets European markets mostly lower during the week and Asian markets traded positive during the week and closed mixed after recovering most of early losses on Friday as string of positive economic reports from the euro zone helped to mitigate a mild disappointment over official data on the china's manufacturing sector. US markets traded volatile and rose to fiveyear highs on Friday, with the Dow closing above 14,000 for the first time since October 2007, after jobs and manufacturing data showed the economy's recovery remains on track. Pharmaceutical giant Pfizer Inc.'s better-than-expected earnings helping to lift the market. US Federal Reserve said after the conclusion of a two-day meeting on US interest rates on Wednesday that US economic activity has paused in recent months after data on Wednesday, showed a surprise economic contraction in US economy in Q4 December 2012. Chinese manufacturing activity showed that the sector improved last month, helped by a buildup in new orders, supported the market trend. US Employment grew modestly in January, with 157,000 jobs added. That was slightly below expectations, but Labor Department revisions showed 127,000 more jobs were created in November and December than previously reported. The Federal Reserve on Wednesday maintained its aggressive bond-buying policy given the downside risks to the economic outlook. The Fed has kept its federal funds target for short-term rates unchanged at a record-low range of 0 to 0.25% for four years. The Commerce Department reported fourth-quarter gross domestic product dropped at a


reduction of its key policy lending rate by 25 basis points (bps) after a monetary policy review on 29 January 2013 signaled that there is less room for aggressive policy rate cuts amid any negative surprise emanating from inflation and the twin deficits. Sensex slipped below the psychological 20,000 mark and Nifty fell below the psychological 6000 mark. The market was volatile as traders rolled over positions in the futures & options (F&O) segment from the January 2013 series to February 2013 series. Sensex declined 1.6% to 19718.19 and Nifty fell 1.24% to 5998.90 for the week ended 1 February 2013 Market outlook – week begins from 4 February 2013 Market may follow the results to be announced by key corporate. Next batch of Q3 results to set the tone. Investors and analysts will closely watch the management commentary that would accompany the result which could cause revision in their future

0.1% annual rate, the worst performance since the second quarter of 2009, when the economy remained in recession. Chinese industrial enterprises slowed sharply to 5.3% in 2012, nearly one-fifth of the 25.4% jump seen the previous year. Business conditions for Chinese manufacturers showed a significant improvement in January, according to the final reading of the results of a survey by HSBC released Friday. HSBC's final print of the manufacturing Purchasing Managers' Index for January came in at 52.3, up from the survey's initial reading of 51.9, and also higher than the final measure of December PMI at 51.5.. Japanese industrial output rose in December from the month before, the seasonally adjusted industrial output rose 2.5% in December. Japanese unemployment rate rose back to 4.2% in December, while price-adjusted spending for households of two or more people fell 0.7% from a year earlier. On the brighter side, average monthly household income rose 1.1% in real terms from December 2011. Weekly Review of Indian markets Indian markets declined during the week after RBI while announcing a

earnings forecast of the company for the current year and or next year. Market Economics will unveil HSBC India Services PMI for December 2012 on Tuesday, 5 February 2013. The HSBC services Purchasing Managers' Index, based on a survey of around 400 companies, rose to 55.6 in December 2012 from November's 52.1. Services make up nearly 60% of India's economic output. Asian markets will on Monday, 4 February 2013, react to the influential US non-farm payrolls data for January 2013, which will be released on Friday, 1 February 2013 The more defensive end of the market is what's performing the best. Under volatile circumstances, investors should thoroughly analyse and select the best choice of investment. We structure and manage investment portfolio for NRI, Foreign investors, QFI according to their needs and financial goals. We also provide training to individuals to manage their investment portfolio independently. Further details: | Ph : +91 9380034431/9962534431

TSX Remains Stable TSX Trend From Jan.28, 2013 to Feb.2, 2013

Weekly Statistics Canada News THE RETAIL SERVICES PRICE INDEX (RSPI) WAS DOWN The Retail Services Price Index (RSPI) was down 1.0% in the third quarter, marking the second quarter-over-quarter decrease since the beginning of the series in 2008. Retail margins fell in 6 of the 10 retail sectors

TSX Trend From Feb.2, 2012 to Feb.1, 2013

THE WHOLESALE SERVICES PRICE INDEX (WSPI) WAS UP The Wholesale Services Price Index (WSPI) was up 0.9% in the third quarter. This was the third consecutive quarter-over-quarter increase for the WSPI. Wholesalers of petroleum products (+5.6%) recorded the largest margin increase in the third quarter. Wholesalers of farm products (+3.3%), machinery, equipment and supplies wholesalers (+2.6%), food, beverage and tobacco wholesalers (+1.4%) and wholesalers of motor vehicles and parts (+0.2%) also contributed to the advance of the WSPI in the third quarter. Declines registered by wholesalers of personal and household goods (-1.3%), miscellaneous wholesalers (-1.0%) and wholesalers of building material and supplies (-0.3%) in the third quarter moderated the upward movement of the WSPI. Source : Yahoo Finance

GDP UP Real gross domestic product grew 0.3% in November, following a 0.1% rise in October. Most major industrial sectors increased production in November. Goods production increased 0.6% while the output of service industries rose 0.1%. Manufacturing and mining, quarrying and oil and gas extraction were the main contributors to the November increase. Wholesale and retail trade, utilities as well as transportation and warehousing services also rose. Construction and the public sector (education, health and public administration combined) were unchanged. In contrast, accommodation and food services and the finance and insurance sector decreased.

The Toronto stock market was higher Friday as U.S. job creation data in the American manufacturing sector raised hopes. The S&P/TSX composite index rose to 12,768.83 while the TSX Venture Exchange was at 1,228.66. U.S. stocks sprinted to fresh five-year highs Friday and closed at 14,009. Earlier the S&P/TSX composite index ended near its session lows on Thursday and at its weakest level in two weeks. Many U.S. reports support the view that the economy is on a sustainable uptrend. So far, over 63 per cent of U.S. companies have beaten earnings expectations, and 62 per cent beat revenue forecasts, according to Bespoke Investment Group. The TSX's gains were led by the industrials and materials sector. 4

Dreams & Money: February 2013 Issue 1  

Dreams & Money: February 2013 Issue 1