Calculating capital gains on U.S. stocks + MORE Dec 9th

Keep the annual TFSA contribution limit at $10,000 per year. That’s the goal of the online petition on the official Parliament of Canada website. The Liberal government has announced the intention to reduce it back to where it was before the previous Conservative government increased the limit earlier this year. There is no good reason to do that. For those in lower income groups the TFSA is a better retirement savings vehicle than the RRSP and the TFSA is a simpler more flexible tax-free savings account in general. I don’t see the government proposing to reduce RRSP contribution limits. I encourage readers to sign the petition like I already have done because it’s the sensible thing to do to protect the TFSA (as I have previously written in dissecting the type of wrong-headed arguments criticizing the TFSA that misled the Liberals into proposing the contribution cutback).

Q: I hold stocks in two non-registered accounts. One is holding Canadian equities and the other is holding U.S. stocks.  When I sell a U.S. stock, the cash remains in the U.S. account.
Since the exchange rate has increased during the time the U.S. account was first set up, how do I calculate capital gains or losses on sold U.S. equities?
— Gary
A: Most investors who have purchased U.S. stocks in the past five years have made money. It sounds like you’re one of them, Gary. U.S. markets have risen steadily, but the U.S. dollar has also taken off in the past two years after a number of years near parity with the Canadian dollar.
Fluctuations in the exchange rate can clearly have an impact on your Canadian dollar returns. As an example, the S&P 500 has returned about 3% in the past year. However, when converted to Canadian dollars, that return jumps to about 20%.
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You calculate a capital gain or loss based on the sale price of an investment less the purchase price of an investment (called the adjusted cost base)…

The Bank of Canada is saying for the first time that it would consider pushing its trend-setting interest rate below zero if the country ever suffered another major economic shock such as the financial crisis.

OTTAWA – The Bank of Canada is saying for the first time that it would consider pushing its trend-setting interest rate below zero if the country ever suffered another major economic shock such as the financial crisis.
In prepared remarks of a speech Tuesday, governor Stephen Poloz said the option of a negative key interest rate was now among several potential unconventional monetary policy tools the bank could apply in an unlikely crisis scenario.
The central bank, he said, has moved its “effective lower bound” — or its floor — for the benchmark rate into sub-zero territory for the first time, dropping it to negative 0.5 per cent from the positive 0.25-per-cent mark it set in 2009. The bank’s rate is now 0.5 per cent.
There could be limitations on the impact of such a move, Poloz said.
“While we now believe that interest rates can be pushed below zero, there still is a lower bound,” Poloz said in the speech at the Empire Club of Canada in Toronto.
How changing interest rates affect fixed-income »
“So we can’t be cavalier about how much more room to manoeuvre we have…

Mortgage rates have been so low, for so long, that it almost feels like they’ll never rise. Even the Bank of Canada’s latest decision to keep overnight target rates at 0.5% is the equivalent of saying: We’re keeping with the status quo.
But according to media reports banks have quietly increased their own prime lending rate by 0.5%, thereby reducing the discount for new variable-rate mortgage amounts.
“It’s a bit overstated,” says RateSpy.com founder and independent mortgage broker, Robert McLister, but the fact remains: lenders have tightened the discount new borrowers can expect on variable-rate mortgages.
The most competitive lenders—typically those that work with independent mortgage brokers and specialize in mortgage lending—raised their rates by 0.15% to 0.25%, while some major banks increased their variable rates by as much as 0.25%.
How does that translate if you’re currently shopping for a mortgage? It means you can no longer find a 2.39% five-year variable rates, says Jake Abramowicz, an independent mortgage broker…