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April 2011 Miscellaneous Economic Fundamentals

Ally

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News articles for April 2011.
 

Ally

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Why you shouldn't buy mortgage insurance





There are many excellent articles about the pros and cons of mortgage insurance vs. term life insurance. But every spring a new crop of first-time buyers begins their search for a perfect new home, so it seems like a subject worth revisiting.







The purpose of mortgage insurance (also known as mortgage life insurance or creditor insurance) is to pay off the mortgage when you die so your spouse and dependents are mortgage-free and have one less major expense to worry about. If both you and your spouse are working and want to protect each other, both of you need to be insured.







The first major advantage of term life insurance is that it is much less expensive than mortgage insurance.







Using a calculator on the Cowan Financial Solutions web site, I got standard non-smoker term life insurance quotes for both a man and a woman aged 36 for $400,000 of life insurance for a term of 25 years. The lowest annual quotes were $604 per month for the man (Assumption Life) and $440 for the woman (Unity Life), or $1,044
in total for both. Of course, if you plan to pay your mortgage off more quickly, you can request quotes for a shorter term.







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Don R. Campbell, real estate advisor-investor-author





In early 1992, Don R. Campbell wasn`t much involved in real estate. He`d saved up enough at a retail job to buy his first residential property in 1985 in British Columbia`s Fraser Valley. But other than that, his professional focus was on aviation; he was working at Edmonton`s Sky Harbour Aviation as the general manager. Don`s career was going very well and he was earning good money, in spite of the fact that he didn`t have any formal post-secondary education. He had no need to change course.





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Symptoms of a subpar tenant






Q: I own a rental house about 50 miles from where I currently live. The tenant vacated a few months ago and I had received barely any calls from rental prospects until a prospective tenant contacted me about a month ago.







I met him at the property with a blank lease form, but I forgot the rental application that also includes a section to fill out for credit. He seemed very nice and so did his family, so I felt comfortable renting the home to them.







I explained that I needed some basic information, which we used to complete the lease form, and we both signed the lease with the intent that he and his family would move in at the beginning of next month.







Later, I emailed him the rental application form to fill out so I can complete my tenant screening, but he has been very evasive. He will not give me any information about his job, his banking relationships or his credit cards. He won't even give me his Social Security number or driver's license number to allow me to verify that he is the person he says he is.






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Mapping Global Food Spending




A one dollar bag of rice in the U.S. is not the same as a one dollar bag of rice in Indonesia. For an American, who, on average, devotes about seven percent of his or her spending to food, it won`t matter that much if the price of rice doubles to two dollars. An American can likely take the money that would have gone to a `non-essential` item and put it towards food instead. But for an Indonesian, who devotes 43 percent of his/her spending to food, it could mean less to eat.






According
to the World Bank, food prices have risen dramatically in the last few months, largely due to weather events and political unrest around the world. Wheat is particularly hard hit. In Azerbaijan, for example, the price of wheat went up 24 percent during the second half of last year and Azerbaijanis already put almost half of their spending toward food.




Ephraim Leibtag, an economist with the U.S. Department of Agriculture, said these times of high food prices affect people disproportionately: `As situations change in the food market, who feels that more or less in their everyday lives? The consumer who spends the majority of spending on food, when there`s a food spike, if food prices are 40 percent of their budget, that takes a bigger hit.`





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Resist the urge to splurge, even if you're rich




There`s an old financial planning adage that states `your rate of saving is just as important as your rate of return.` Savings, particularly in the early years of wealth building, creates the seed capital that unleashes the magic of compounding. Today, with the Baby Boomers heading into retirement, a more apt adage is `your rate of spending is just as important as your rate of return.`





This maxim is critical for the affluent. A family earning $70,000 a year, about the median Canadian family income, will find that CPP and OAS payments on retirement replace a healthy portion of their employment income. Affluent families, on the other hand, who are used to several hundred thousand dollars a year of income, will find that these payments are a drop in their expenditure bucket. Many will have their OAS payments clawed back.





Also, one of the biggest expense reductions for the typical family on retirement comes from paying off their mortgage. Most high net worth families will have paid off their mortgages long before retirement. Their ongoing expenditures are related to lifestyle ` expensive homes and vacation properties, luxury autos, first class travel and hefty charitable giving. Some couples even increase their spending as they get older.





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Here's the lowdown on sump pumps






QUESTION: Last month, I had a backwater valve and sump pump installed in my Charleswood home, built in 1974. I have not had water issues but installed them just in case and as part of the City of Winnipeg basement flooding initiative.






Since installation, the sump pump runs every couple of hours for about 10 seconds at a time. It was my understanding that the sump pump would kick in if weeping tile water was backing up into the sewer drain. There is some water coming from the weeping tiles into the drain, but the drain is easily handling this amount. I called the installer and he said there is runoff water under the basement floor and this is what the sump pump is pumping out. Could this be the case?







If I unplugged the sump pump, would the water go down the sewer drain or would it cause damage to the sump pump? Should I just leave everything as it is and assume the sump pump will run less often once all the snow melts and the yard dries out? Maureen Spier.







ANSWER:
With the popularity of the new civic and provincial program to help homeowners install backwater valves and sump pits, I have received several inquiries and calls and your question raises an excellent point.




While I recently answered another inquiry about sump pits, I felt it prudent to explain what is occurring in your home and also offer a couple of possible installation methods employed by your contractor for the benefit of any readers thinking of taking advantage of this program.





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Few offers for Canada's biggest fixer-upper




Maybe it`s the location, the price tag or the fact that it`s not quite finished. Whatever the reason, selling Canada`s largest house has not been easy.




The 65,000-square-foot property is in Haileybury, Ont., about 140 kilometres north of North Bay, Ont., on the shores of Lake Temiskaming. It includes an art gallery, office area, swimming pool, squash court, two elevators, a giant hot tub, a small gym, a boathouse and 43 acres of land. But many rooms aren`t finished and a new owner will have to sink in as much as $1-million to make it livable.





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Do some good with your money - right now



Some of today`s biggest charitable givers are shaking up the endowment world by applying the same business savvy that earned them millions to their approach to charitable giving.





`Once you`re dust, you`re dust,` says Brett Wilson, a Calgary-based investment banker and philanthropist. `This idea of setting up a legacy for 100 years is shameful ` it`s an empire-building strategy.





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How to steer your way toward tax deductions




A few years ago I was travelling through Red Deer, Alta., and stopped at a restaurant for lunch. I couldn`t help but overhear a conversation between a local rancher and a farmer. The rancher was bragging and said: `I can get in my car at six in the morning, drive for six hours, spend an hour eating lunch, drive for another six hours, and I still wouldn't have reached the end of my property.` The rancher smiled proudly as the farmer looked at him in amazement. `Ya, I can sympathize with you,` the farmer replied. `I had a car like that once, too.`





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10 stocks that will boom in the food price spike




Soaring commodity prices and growing demand from the emerging markets are sending food prices sky high. They've already contributed to revolutions in the Middle East, forced central banks to take action in Asia, and hit consumers around the world, but what companies are benefiting from this boom?.





Bank of America has compiled a list of its top stock picks that are positioned to reap the benefits of this boom, and we've highlighted which of their picks have risen the most since the start of the year.





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The 'thrill' of buying a house




You walk into the open house, take one look and say to yourself: This is it. It`s the house I have to live in. Where do I pay? A bidding war? I`m in.





Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I`ve taken weeks to decide on the right pair of shoes.)





It is no way to make an `investment,` to be sure. But, as I`ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.





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16 ways to cut your hydro bill




When Claudette Trepanier made a few small changes in her daily routine to take advantage of off-peak hydro hours, she was able to shave $1, 200 a year from her hydro bill.




To encourage people like Trepanier, who lives in Ottawa, to use off-peak hours, when electricity is in low demand and cheaper, the Ontario Government introduced Smart Meters which track how much electricity households use and at what times. This weekend (May 1) the government rolled back the start of off-peak use to 7p.m. at night. until 7.a.m. so more people can take advantage of the savings. Weekends are also considered off-peak hours.




The changes that Trepanier made to cut down her bill weren`t difficult and were easy to keep up. She waited until the weekend to do laundry, didn`t run her dishwasher until it was full and turned off the lights when she left a room.





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Soaring food prices to raise Asian poverty: Report




World food prices that surged 30 per cent in the first two months of the year threaten to push millions of Asians into extreme poverty and cut economic growth, the Asian Development Bank said Tuesday.




The surging prices translated into domestic food inflation of 10 per cent on average in many Asian economies, which could drive 64 million people into poverty, the bank said in a report, adding that it will also erode the living standards of families already living in poverty.




Food prices have been driven higher by surging oil prices, production shortfalls due to bad weather and export restrictions by several food producing countries.





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What price green energy?





A study released this week concludes that government "green-job" programs aren't the yellowbrick road to happiness in Europe. "Green programs in Spain destroyed 2.2 jobs for every job created," write Kenneth P. Green and Ben Eisen in their paper for the Winnipeg-based think-tank, Frontier Centre, "while the capital needed for one green job in Italy could create five new jobs in the general economy."



Pity the Greens, here and around the globe. Things haven't been going their way in the last couple of years, ever since those pesky e-mails surfaced in Britain -the ones showing that Green-tinged scientists at the climatic-research unit of the University of East Anglia got carried away with the nobility of their global-warming mantras. All in a good cause, of course, but still, "it's no use pretending this isn't a major blow," as George Monbiot wrote in Britain's The Guardian in the fall of 2009.




Actually, 2009 may have been the first year of serious reversal for the Green movement that has gone from triumph to triumph for the past 50 years. The astrologers and alchemists of ecology have been merrily reading tea leaves and crying wolf for almost half a century.





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Tips for spring homebuying




Spring is widely known as the hottest real estate season for both buyers and sellers. It's a season for frantic races from property to property and quickly calculating your mortgage pre-approval in your head while trying to beat the other potential buyers to the next house.




Home sellers who've been renovating properties for months are finally ready to place them on the market - complete with new fences, budding gardens and recently installed hardwood floors, all meant to appeal to buyers' aesthetic values. (Historical housing price data suggests ongoing increases in housing prices, but these numbers don't tell the whole truth. Check out The Truth About Real Estate Prices.)





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