Welcome to Finance World

Rodney Diverlus’s parents qualified to vote for the first time in last month’s provincial election after moving to Canada from Haiti — and they voted Liberal.

The reason: With a son and four daughters in or approaching university, they were swayed by liberal Premier Dalton McGuinty’s pledge to slash college and university tuition fees by 30 per cent.

But Rodney — a third-year student at Ryerson University, also voting in his first election, shunned the Liberals.

The reason: He sees too many holes and unanswered questions in the program.

McGuinty’s pledge sounded straightforward enough.

The province would give most undergraduate university and college students a grant amounting to 30 per cent of their fees. The grant would be paid directly to the university or college, which would then reduce the students’ fees accordingly.

Families with incomes above $160,000 would not qualify for the grants, nor would students at professional schools. And the grants would only apply to students within four years of graduating from high school.

The Liberals said five out of six students in the province would benefit from the program, which they said will start Jan. 1.

It was certainly going to cost real money: The Liberals estimated $423 million starting in 2012-13, and rising to $486 million in four years.

Rodney Diverlus was delighted when he first heard about the program. A performance dance student, he was accustomed to regular tuition fee increases. He has a student loan of $16,000.

“To know that the tuition fee would be reduced by 30 per cent, I was dumbfounded,” he said in an interview.

So were his parents. He has an older sister in graduate school, a younger sister graduating from high school this year, and two other sisters only a few years away from college or university.

But Diverlus found his initial enthusiasm cooling as he started pulling back the layers of the promise.

He began to realize, at the outset, that he might not be eligible for the grants on several grounds.

First, the program isn’t open to professional schools. That seemed to be targeted at law and medical schools, where nearly all students have degrees.

But what about performance arts programs, such as dance and music? And architecture, business and nursing? All are undergraduate programs, but could be deemed professional fast payday loan no faxing.

And the grant for all students is a flat $1,600 for university and $730 for college — despite the fact that some programs have significantly higher fees than the arts and science fees on which the basic 30 per cent grant is calculated.

Diverlus has another issue. He cut back to part-time status this year because he’s active in student government, but part-time students don’t get the grants.

Student organizations say there are other questions.

Nora Loreto of the Canadian Federation of Students notes that grants are only issued to students within four years of completing high school. Since many students take a year or more away from studies, they’ll lose grants when they do.

Others who work part time and take more than four years to get through a regular course will also be out of luck in their fifth and later years.

This is a particular issue for college students, who have often spent time in the workforce before returning to upgrade qualifications, she says.

Students are also puzzled by how the $160,000 limit on family income will be measured. Universities, who will be given the grant money to allot, don’t know their students’ family incomes.

Who will make the call? The Ontario Student Assistance Program has family income information on some students, but not all students use the program.

There’s even the question of whether the Liberal plan will require legislation or whether it can be set up under existing statutes. Steering new legislation through a minority legislature could be tricky.

When questions about the program’s details were put to the premier’s office, a spokesperson replied: “We’re looking forward to having more to say on implementation in the future.”

Diverlus and Loreto suggest the plan could be made simpler if it reduced fees for all students across the board.

That would spread the available money across a greater number of students, so the fees reduction would be less than 30 per cent, they acknowledge.

But it would be simpler to administer, and would bring part-time and older students into the tent.

Also read:

Easy ways to save for your child’s educationE

Source

A legal challenge launched Wednesday by the Canadian Wheat Board to stop Conservative efforts to dismantle the agency is

Mexican authorities on Thursday raised to six the death toll from Hurricane Jova, which hit along the Pacific coast as a Category 2 storm, and warned the storm’s remnants could affect opening ceremonies of the Pan American Games.

The body of a man who apparently had been swept away by a river current was found covered with mud in the town of Cihuatlan in Jalisco state, said civil protection spokesman Juan Pablo Vigueras. The games are scheduled to open in Jalisco on Friday.

The five other victims drowned, were killed by mudslides or died in a collapsed house.

Rain from the remnants of Jova may change the open-air inauguration of the Pan American Games in the western city of Guadalajara, said Bernardo de la Garza, Mexico’s top sports official.

Heavy rain falling on Mexico’s west coast also may affect training sessions for the games’ triathlon, sailing and beach volleyball, he said. All three competitions are to be held in the beach resort of Puerto Vallarta just north of where Jova hit land early Wednesday.

Farther south, a low-pressure system continued to dump rain on southern Mexico and Central America, where it was blamed for the deaths of 15 people in Guatemala. Rains will likely continue during the next couple days as the system hovers over southeastern Mexico, Guatemala and El Salvador, said the National Hurricane Center in Miami, Florida.

Guatemalan Vice President Rafael Espada said four people are missing.

He urged Guatemalans on Thursday to use the country’s highways only for emergencies, saying several were damaged by the storm or are blocked by mudslides.

The storm damaged at least 2,000 homes, said Alejandro Maldonado, director of Guatemala’s disaster prevention agency.

Meanwhile, Tropical Depression Irwin was expected to weaken as it swirled over the Pacific off Mexico’s coast and was forecast to become a remnant low within 24 hours, the hurricane center said.

Irwin’s maximum sustained winds Thursday afternoon were near 40 mph (65 kph). The storm was centered about 145 miles (235 kilometers) west of Manzanillo, Mexico, and was moving east at 6 mph (9 kph).

The depression’s was predicted to begin curving away from Mexico by Friday morning and head back out over the Pacific.

Source

The Philippine president has announced a 72 billion peso ($1.66 billion) stimulus package to cushion the economy as Asian governments step up efforts to ward off the global fallout from Europe’s debt crisis.

President Benigno Aquino III said Wednesday that the world economic slowdown is already having some impact on growth in Asia, including the Philippines, and the government “is working overtime to make certain that we do what must be done to maintain our economy’s momentum.”

On Tuesday, Indonesia’s central bank lowered its benchmark interest rate by a quarter percentage point to 6.5 percent to offset the impact of turmoil in financial markets and a slowing global economy.

Asia bounced back relatively quickly from the last global recession that was sparked by the 2008 financial crisis, helped in part by China’s massive stimulus spending. But some economists say the region is not as well placed to respond to a new slowdown because inflation is high and a lot of fiscal ammunition has already been spent fighting the last crisis.

Aquino said that his government’s additional spending this year includes 6.5 billion pesos ($149 million) for local infrastructure and poverty alleviation and 10 billion pesos ($230 million) to relocate squatters affected by floods and landslides Payday advance.

Another 5.5 billion pesos ($126 million) will be spent on national infrastructure projects and 6.3 billion pesos ($146 million) to upgrade two of metropolitan Manila’s light rail lines.

“This spending will provide added stimulus to our economy,” he said in a speech at the Foreign Correspondents Association of The Philippines. “The stimulus will be spent on projects that will have high macroeconomic impact, and will help the poor.”

The government’s economic growth forecast for this year has been lowered to a range of 5 percent to 6 percent from the 7 to 8 percent expansion projected in January. Aquino said the target for next year is also 5 to 6 percent growth.

The effects of the stimulus will be felt not just at the end of this year but also in the first half of next year, Aquino said. The spending is being funded from savings and existing loans.

Last year, the Philippine economy galloped to its highest annual growth in more than two decades, expanding 7.3 percent on strong foreign trade and election campaign spending.

Source

Union leaders from Chrysler facilities around the country assembled in a Detroit suburb Monday expecting to hear details of a new four-year contract with the company. Instead, they were told to wait for a couple of days.

UAW spokeswoman Michele Martin said Monday that no agreement has been reached, and that bargaining will resume on Tuesday morning. Neither the union nor the company would say what’s holding up a deal.

Union leaders from outside Detroit were told at the meeting to stay in town for another meeting that’s scheduled for Wednesday, a sign that both sides are close to an agreement. But it was unusual for the UAW to hold the meeting on Monday without having a deal, and it indicates that the talks are snagged on money issues.

UAW President Bob King and Vice President General Holiefield had little to say to about 200 local leaders Monday at a regional UAW office in Warren, Mich., said one official who attended the meeting.

Neither King nor Holiefield talked about sticking points in the talks at Chrysler, the last of the Detroit automakers without an agreement with the union. The two spoke for a short time and said they were not ready to recommend a deal to the membership, said the official, who asked not to be identified because the meeting was private.

“The introductions were longer than the meeting,” the official said.

Workers at General Motors Co. approved a new contract late last month. Voting is under way at Ford Motor Co. At both companies, the union agreed to forego annual pay raises for most workers in favor of profit-sharing checks and signing bonuses. The companies held their labor costs steady but promised thousands of new union jobs.

Talks with the UAW are closely watched because they set the pay and benefits for 112,000 auto workers nationwide, and they set the bar for pay at auto parts suppliers and other manufacturers.

Bargaining continued with Chrysler through the weekend and into Monday morning over money issues, spokeswomen for both sides said. All the non-money issues have been settled for several days.

Sergio Marchionne, CEO of Chrysler and Italian automaker Fiat SpA, said Friday that the GM and Ford deals may be too rich for Chrysler. The company, unlike GM and Ford, lost money during the first half of the year.

Marchionne said he hopes a new deal can be reached without resorting to binding arbitration. Chrysler workers gave up the right to strike over wages under the terms of its 2009 government bailout. But either side in contract talks can take disputes to an arbitrator.

On Friday, the union and Chrysler were hung up on how many workers would be paid entry-level wages and the size of signing bonuses and profit-sharing checks, the local union official said.

Source

A year ago, we launched Moneyville with an excerpt from The Wealthy Barber Returns, the long awaited sequel to the bestselling book written 21 years ago by David Chilton.

The chapter used the story of a French philosopher redecorating his apartment as a proxy for what great spenders we have become 240 years later, seduced by the many easy ways we can borrow money, particularly lines of credit. There were no lines of credit in 18th Century Paris, nor did consumers have them as little as 20 years ago. But we have increasingly found them irresistible, treating the convenience and interest-only repayment schedules as a second income, rather then debt. They help us buy things we can’t afford and haven’t saved for, which is rather far from their original purpose of allowing us to borrow for large, unanticipated expenses that in the old days needed a fixed-term loan from the bank. A weeklong Moneyville series this winter, revealed that for some people line of credit spending is running wild.

The Wealthy Barber Returns has been in book stores for a few weeks and is already a bestselling Canadian title. Moneyville’s review by Ellen Roseman said many readers will find the message disturbing. Easy credit is killing us and we’re deluding ourselves about how we can stay in debt all our lives and still have a comfortable retirement.

We sat down again with Chilton to get his thoughts on how things have changed since the original Wealthy Barber was published. The good news is that we’ve started to save more, but the bad is that we’re spending even faster.

“The single biggest change in the last 20 years is that debt has escalated,” says Chilton. “And there are three reasons. Interest rates are low, so that you’re not punished so much for borrowing, lines of credit have made it easy to spend and average credit card limits have gone up.”

He believes our attitudes have also changed so that we aren’t as frightened of debt as we once were and at the same time have become consumed by consumption. “You want what you want when you want it,” he says. And lines of credit make it that much easier with money that seems almost free.

Chilton tells a story in the book about a woman who borrowed $60,000 from her credit line to help her son renovate his bathrooms. She assured Chilton it was nothing to worry about, because the reno only cost her $150 a month.

“I can afford it,” she said.

She reasoned that at her borrowing rate of 3 per cent, the $60,000 cost $1,800 a year in interest which worked out to the $150 a month or $5 a day. What’s the big deal? She was conveniently forgetting her principal repayment. The real cost was $150 a month, plus $60,000.

“That’s the thing,” Chilton says. “Many people with lines of credit have no plans to pay them back.”

Since these debts are usually secured by the equity in homes, they have essentially become reverse mortgages business card templates. Ater spending 25 years to pay off a mortgage, homeowners using their home as the security for new borrowing. What many don’t realize is that banks can call a line of credit at any time. They don’t because they’d rather have your monthly payment along with the debt. But they can.

These perpetual payments are robbing us of the ability to put money aside for retirement or into tax free savings accounts or even our kids RESPs.

“The issue is not about default,” Chilton says, “but not having enough money to save.”

Another worrisome trend is the attitude of young people towards saving and spending which is very much skewed toward instant gratification. Young people have access to debit and credit from an early age, much earlier than their parents did. “A lot of kids move out and want the same lifestyle as their parents right away, not realizing that it took their parents 25 years to achieve it,” he says.

And you shouldn’t look to your banker for help. The more they lend, the more profitable they are, so their incentive is make borrowing easy.

“Banks are businesses like any other,” Chilton says with a shrug. “Loblaws sell groceries, the Star sells newspapers, Dave Chilton sells books. Banks lend money.”

Chilton is a single parent, living Waterloo and has never had a line of credit. To be fair, unlike many of us he doesn’t really need one. Nor has he ever used a cash machine or a debit card. He pays wherever possible by cash because it makes the purchase real. He says the only reason he has a credit card is that he has to have to have one to travel – you can’t book a hotel room or airline ticket without one.

Looking to the broader economy Chilton sees governments facing on a larger scale what we face as individuals. The developed world has been living beyond its means and it has caught up to us. The developed world’s solution has been to lower interest rates to encourage more spending and the accumulation of more debt.

“I’m surprised we haven’t learned our lesson,: he says. “Solving crises with ever cheaper money leads to worse problems down the road. We’re going to have to put up with slow growth, which another reason why living within your means is a good thing.”

In the meantime he advises some simple remedies when you feel the urge to spend or peer or kid pressure makes you want to pull out some plastic. It’s all about four liberating words: I can’t afford it.

According to Chilton it’s an easy step to regaining control. Instead of trying to keep up with the Jones’ let them keep up you.

Win a copy of The Wealthy Barber Returns

Send an email to editor@moneyville.ca by the end of day Tuesday for a chance to win a copy of The Wealthy Barber Returns. The first five names drawn win a book.

Source

As interest rates on certificates of deposit continue their downward slog, annuities, money market accounts and even interest-bearing checking accounts are all emerging as attractive alternatives.

In the past 24 months, the amount invested in CDs nationally dropped nearly 30 percent, while those in locally based banks tumbled 40 percent. For the 75 banks based in St. Louis tracked by the Federal Reserve Bank of St. Louis, CD deposits totaled $10.48 billion at the end of June, down from $17.6 billion when CD interest rates in mid-2009.

There’s no secret why: The national and local average for a 5-year CD this week came with a 1.26 annual percentage yield, below inflation and down from about 4 percent in 2008.

So what’s an investor to do?

Many investors are ditching CDs in search of better returns or investments that provide better liquidity, such as money market accounts. CDs have long been viewed as a relatively safe place to invest money without the volatility of stock market swings, as the funds are insured by the Federal Deposit Insurance Corp. But CDs also come with a catch

The international bank lobbying group that has been leading negotiations on giving debt-ridden Greece easier terms for its bonds on Sunday rejected calls to impose larger losses on private investors.

Forcing private creditors to write down their Greek bond holdings by more than the 21 percent tentatively agreed to in a July deal would quickly cause a “domino effect” that would see the crisis spread to other parts of Europe, warned Josef Ackermann, the outgoing chairman of the Institute of International Finance.

Such a move would ultimately cost taxpayers much more than just bailing out Greece and erode confidence in the euro, said Ackermann, who is also the CEO of Germany’s Deutsche Bank, a major lender to Greece.

Germany and other rich eurozone nations have been pushing for a re-negotiation of the July deal, arguing that the economic situation in Greece has significantly deteriorated since then and may require a steeper cut in the country’s debt load.

However, Ackermann quickly rejected that push, saying that the agreement was fair and already placed a heavy burden on banks at a time of major market turmoil.

“If we now start reopening this Pandora’s box we will lose a lot of time and I’m not sure people would be willing to participate,” Ackermann told a news conference on the sidelines of the annual meeting of the International Monetary Fund.

Under the July deal, Greece is asking banks and other large private investors to swap their existing Greek bonds for ones with longer repayment deadlines, a lower face value or lower interest rates. The IIF says the deal would save Greece some euro54 billion by 2014 and euro135 billion by 2020.

However, most analysts say that those savings are far too small to make Greece’s massive debts _ which amount to some 160 percent of economic output _ sustainable again. At the same time, there have been growing doubts that investors will agree to swap 90 percent of their bond holdings, a minimum threshold that Athens set to make the deal worthwhile.

Getting private creditors to agree to the deal comes at a heavy cost for Greece. Apart from temporarily being rated in “selective default” _ a first for a eurozone nation _ the country has to spend some euro42 billion on setting up a collateral fund that would secure the remaining value of the bonds.

If at some point Athens decides that a steeper cut in its debt was necessary, that money would go to the bondholders.

“If the July deal goes ahead, Greece would be locked into this perpetually,” said Sony Kapoor, managing director of Re-Define, a Brussels-based economic think tank.

Greece has been relying on euro110 billion in rescue loans from other eurozone countries and the International Monetary Fund since May 2010. In July, when it became clear that Athens needed more help, eurozone leaders agreed on a second, euro109 billion bailout, although several aspects of that deal still need to be finalized.

To make the second aid package acceptable for their taxpayers, several rich countries led by Germany pushed for banks and big insurance companies to share some of the pain of bailing out Greece _ despite opposition from the European Union and the European Central Bank, the central bank for the 17 nations that use the euro as a common currency.

But since July, the eurozone’s debt crisis has significantly worsened, partly because investors now fear that they may also face losses on bonds from already bailed-out Portugal and Ireland as well as struggling Italy and Spain. The Greek economy is now set to shrink 5.3 percent this year, up from a June estimate of a 3.8 percent decline, followed by a further contraction in 2012.

Source

Stock futures are plummeting after the Federal Reserve indicated the U.S. economic slump could last for years.

The Fed took steps to stimulate the economy Wednesday that had largely been expected. But investors were troubled because the central bank’s statement showed it expected a deep and persistent downturn.

A government report Thursday morning on new claims for unemployment benefits will give traders news on the country’s jobs crisis _ one of the major economic challenges cited by the Fed.

Ninety minutes before the opening bell, Dow Jones industrial average futures are down 211 points, or 1.9 percent, at 10,796. Standard & Poor’s 500 index futures are down 24, or 2.1 percent, at 1,131. Nasdaq 100 futures are down 43, or 1.9 percent, at 2,202.

Source

Stocks are opening mixed amid uncertainty about what steps the Federal Reserve might take to stimulate the U.S. economy.

Concerns that Greece could fail to qualify for fresh bailout funds also pushed stocks lower.

Fed Chairman Ben Bernanke plans to discuss the central bank’s policy decision at midday Wednesday. Most economists expect some sort of stimulus measures.

Investors are also concerned about European debt. Greek finance ministers said Wednesday the country will have to enact more austerity measures before international lenders will release rescue funds.

Shortly after the opening bell, the Dow Jones industrial average is down 11 points, or 1 percent, at 11,399. The Standard & Poor’s 500 index is up less than 1 point. The Nasdaq composite is up 11, or 0.4 percent, at 2,601.

Source