First Home Savings Plan (FSHA) – is a registered savings plan to help Canadians save for the first home. Allowing prospective buyers to save up to 40,000 tax-free. The earliest date that this account can be offered is April 1, 2023.

How does it work?

  • Contributions are tax deductible like an RRSP, unlike an RRSP contribution made in the first 60 days can not be attributable to the previous years taxes.
  • Income and Capital gains are tax-free like a TFSA.
  • Lifetime limit of 40,000 with an annual limit of 8,000 in any year including 2023.

Who’s eligible?

  • To open an FHSA you must be an individual resident of Canada at least 18 years of age, and not turning 72 or older in the year. You must be a first time home buyer, meaning you, or your spouse or common law partner did not own a qualifying home that you lived in as your principal residence at any part of the calendar year before the account is opened of the proceeding four calendar years.

Withdrawals and Transfers

  • Qualifying withdrawal to buy a home are tax free.
  • Left over funds can be transferred to a FHSA RRSP or RRIF on a tax-free basis, with out affecting your contribution limits.

Home Buyers Plan (HBP) – the home buyers plan (HBP) is a program that allows you to withdrawal up too $35,000 interest free from your Registered Retirement Savings Plan for 15 years, to buy or build a home. You must pay back the loan from you RRSP in the 15-year time period.

Comparing the FHSA and HBP

HBP are borrowed funds from your RRSP and must be repaid in 15 years. Whereas FHSA withdrawals are tax free and do not need to be re-paid. If you don’t buy a home in the 15-year time, the funds can transfer to your RRSP effectively creating additional RRSP room by starting to contribute to your FHSA.

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Retire First has been nominated for the 2022 Alberta Business Awards of Distinction. Finalist will be publicly annouced Friday, April 22nd 2022.

As expected, Chair Powell of the Federal Reserve (Fed) all but guaranteed that rates will rise next meeting, and like the Bank of Canada admitted that inflation is persisting. Signalling that they are attentive to wage growth that could put further upward pressure on inflation. Stopping short of pace or magnitude Powell mentioned that interest rate normalization will not be as slow as in previous cycles. The market reacted negatively to the news of a faster rate cycle yesterday with the SP500 trading as high as 4454 prior to the fed announcement then trading down too 4310 to close the day down 0.15% at 4349.  Some traders are placing their bets on five interest rates raises this year of 0.25% for a total raise of 1.25% by years end. Investors and borrowers should be aware that the interest rates will be on a rising path, and it will not be over after one raise in interest rates. We should expect the first move in a series of moves to come in March at the next Fed meeting.

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The Bank of Canada surprised the market by holding the overnight rate at 0.25%, waiting for the United States to move first. Raising rates has the affect of slowing consumer demand by encouraging saving, but with rates at relative lows and negative once factoring inflation (-4.55%) it will take a series of interest rate raises to have any affect on inflation. For now, it should be expected that the silent tax of inflation will keep running. Looking at the supply side the fact is our supply chains are fragile. For instance, the average inventory held by semi-conductor consumers is now 5 days from 40 days in 2019. Any disruption to supply chain from Covid 19, natural disasters or political instability could have the potential to shut down manufacturing, sending prices higher. There seems to be little reason for inflation to slow, even the Bank of Canada is forecasting inflation for 2022 at 4.2%. With guaranteed investment certificates (GIC) rates well below inflation, investors should be looking to the stock market to out pace inflation and protect purchasing power. Now we wait for the United States Federal Reserve update at noon.

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As each month comes to an end, we always take a moment to reflect on what has happened and where the markets are headed. And this month, we have a lot to reflect on. Yesterday, April 29th, the US market rallied to a seven week high on a fury of good news,  strong earnings from Alphabet (Googles Parent company), hopes for a corona virus treatment, opening of several states and positive news on the ability for the Federal Reserve to keep spending.  

Like the old saying goes, April was a surly cat and threw the market some good punches; record setting negative oil, slowed consumer spending, record high government spending and soaring unemployment. But the market was prepared, blocked April’s moves and kept driving forward bolstered by indications of possible treatments and the gradual reopening of the world’s major economies.  The S&P500 has regained 30% since the March 23rd lows, with half those gains being posted in April. April 2020 is on track to become the best month for stocks since 1974 according to data from Howard Silverblatt, from S&P Dow Jones Indices. 

As we enter earning season, we will begin to see a much clearer picture of how the coronavirus crisis has affected businesses. So far major companies like Facebook, Microsoft, Amazon and Alphabet have all reported that they saw strong growth in sales and profit for the 1st quarter while Yum Brands, who owns KFC, Pizza Hut and Taco Bell are reporting mix results. Their Pizza Hut and KFC locations have seen reduced sales while Taco Bell has seen an increase.

Back home, in Canada, the first quarter included railway blockades, a teacher strike in Ontario, and finally, travel bans causing the steep declines in air and accommodations services. Then April came and we saw record low oil prices. But then suddenly, the good news started to come in. Much like the US, the Canadian government dedicated billions of dollars in stimulus money combined with the periodic glimmer of positive news; like Saskatchewan reopening for business, fueled investors optimism and that the glut of oil, perhaps, isn’t as bad as we thought.

The direction of the stock market is a combination of hard data and investor psychology. The price of a stock is based on how much investors think a company can make in the future. The market cares about the facts reflected today and more about how those facts affect the coming year. So when the news reports that March GDP fell 4.8%, that information was already built into the market and the investors are looking beyond that for the recovery to start.  Instead, market participants have latched on to the idea that the worst-case scenarios have been mitigated.

As we head into May, I believe that Aprils positive trend will continue. May will become a month of optimism as we begin to reopen the world, after successfully slowing the spread of COVID.  Now is a time to re-evaluate your holdings and position yourself for a post-covid reality. Being an investor means worry more about the quality of the stocks over when the perfect day to buy them is. Do not miss out on opportunities by trying to outsmart the market.

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For the past six weeks, it seems like we are continually making history, and to be honest, I am ready for a bit of normalcy. Unfortunately, today was anything but normal, as the price of WTI broke all the previous records and traded below zero for the first time.

Today was unprecedented; the price for the May contract is breaking every price low since 1946, and at one point hitting -$40.32 a barrel. The extreme price lows show just how oversupplied the US oil market has become as COVID-19 shuts down industrial and economic activities reducing demand.  And while it was hoped that the deal from OPEC last week curbing supplies would help, it was too little too late. ​

So here we are today, facing a technical oddity, caused by traders flee the May Future contract ahead of its expiration tomorrow.  US storage room is non-existent, and while production cuts are being announced daily, it hasn’t happened quickly enough to avoid maximum storage levels.  The result is producers having to pay buyers to take the crude that they can not store. ​

What does this mean for Western Canadian select? Usually, WCS, which generally trades at a discount to WTI due to transportation, but today it is trading above WTI, as WCS was trading against the June contracts, not the May contracts. WCS is still not selling at a price that is supportive of production costs, closing at $9.02USD.​

I always like to include little positive thoughts to my writings, and I would like to note that we do expect as production is reduced and eventually, the easing of travel restrictions, we will see a rising demand for oil. While it is unlikely that we will see prices that we expected heading into 2020; hopefully, negative oil prices will be a once in a lifetime event. ​

Closing Prices April 20th, 2020​

WTI May contract -$37.63. ​

WTI June Contract $21.04​

WCS $9.02 USD

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Last night while you were sleeping the British pound value plunged 6% in less than two minutes. The pound dropped to $1.18 against the USD crashing through its support levels which lead to a sharp selloff. The event created a new 31 year low for the pound after it leap past the previous three decade low.

The entire event took place over 2 minutes and 6 seconds. And changed the entire nation of Britain value by 6% in mere seconds. While the currency did eventually recover the question becomes how did this happen?

There are several scenario’s floating around to what could have caused the currency drop from a fat fingered trader, a wise trader taking advantage of low liquidity, option expiration dates, stop loss orders or the a statement by the French President Francois Hollande.

1) The first belief is that computer algorithms or fat finger trader resulted in big consequences. What most people believe happened is that a trade entered the wrong number or that a glitch in a trading algorithm resulted in the trade. This is not uncommon and occurred back in the flash crash of 2010. Usually, the trades are wiped from the records within hours as if they didn’t occur. Since this has not yet happened does make this less likely.

2) Low liquidity- If you look at the time that the trades occurred it was at an intersection of markets. New York traders had gone home for the day while the biggest markets in Asia were just drinking their coffee’s. If someone wanted to do this deliberately, this would be an ideal time. This, again, does seem unlikely, but is being talked about on the news.

3) Option expiries- Friday is the day that forex options tend to expire and can cause trading moves if the writers (banks) need to cover themselves. If you look at the option expiring last night, the majority was at 1.25 with a small amount at 1.23. What this means is that when the pound dropped below 1.25 it triggered a scramble of traders trying to sell the pound to protect themselves from losses.

4) Stop Loss orders- We have talked about this before- stop losses can cause unintended events. Stop loss can lead to unexpected trades that can drive a down day into a sharp drop. While you think a stop loss at 1.25 would sell your position at 1.25 the reality is it triggers selling as soon as it hits that level. This means you could be filled at the next buyer prices far below 1.25. Traders use stop losses to mitigate losses at pre-agreed levels when the markets move or when they are asleep like last night. It is possible that there was a large volume of stop loss orders that were executed last night.

5) The final theory is that an article by the French President on their stance of Brexit was published at 7:07am Hong Kong time. Because computer algorithms are made to find news regarding breaking stories and interpret them as negative or positive it Is possible the computer traded on the article. The publishing of the article occurred seconds after the pound started moving.

Uncovering the source of the pound’s sudden drop will be difficult as forex markets cover many trading systems and time zones with no single repository for information. As a result, it will be difficult to flag what exactly happened.

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It is not surprise to anyone living in Central Alberta that 2016 has been a difficult economy.
Throughout Central Alberta agencies looking to support families affected by the low oil prices are finding increased needs for support.
Retire First is pleased that for the 10th year, we are spreading the Christmas cheer by adopting a local family for Christmas. The staff of Retire First takes great care to make sure the children have the presents that they desire for Christmas morning along with money for groceries and a gift for their parents.
Doug Allan, President of Retire First, is pleased of his staff’s commitment to giving back to the community. “It is fun to be a secret Santa. Giving smiles to children and expecting nothing in return is the true meaning of Christmas.”

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