Tuesday, 11 May 2010

Where's Our Trillion Dollar Bailout?

Or are we not "too big to fail?"

Canadians' debt-to-income ratio now ranks first among 20-advanced countries in the OECD and a new study suggests the recession did little to dampen the country's enthusiasm for taking on household debt. 

Has anyone else noted that this is a ritual quarterly report now? What will it take for someone to realize this is a problem that touches the foundations of our society? Do we have to actually be at the brink of disaster like Greece before we take it seriously?

And in a "Yay Me!" moment.

As I've said before. This downturn is going to reverberate for a long time. It's not just current retirees now that are affected, those of us in for the long-term are, well, screwed. To cover the losses to my retirement portfolio I need another bubble even bigger than the last one.

Told ya so!.

Using data from a 2005 Statistics Canada study, the report says as many as 58% of Canadian families may be affected by the downturn in financial markets, while the balance sheet of 62% of Canadian families may be affected by changes in housing prices. About 39% of total household assets are potentially sensitive to corrections in the real-estate market, while 40% are sensitive to shocks on financial markets.
More worrisome for those depending on their financial assets to grow enough to support them in their retirement, the study shows the average household portfolio is now expected to have an average annual return of 6%, significantly lower than the 11% average in the five years before the 2008-09 recession.

If you work in the private sector, you probably have an RRSP contribution plan, and your RRSPs are all invested in the market. Apparently that's a bad thing now.

Stocks and mutual funds accounted for 19.2% of all household assets in 2009, more than double their level in 1990. Holdings of safer financial instruments, such as cash and deposits, now represent only 12.3% of household assets, down from 18% nearly 20 years ago.

....

Rather, households have "noticeably reduced their holdings in assets that are not sensitive to market dynamics, and increased their exposure to the financial market," it notes. Indeed, owner's equity fell to 67.8% at the end of 2009 from a peak of 70.8% at the start of 2007.

No shit sherlock. But can someone tell me a genuine investment that will meet my retirement needs that is not market based?

Conclusion. Canadians debt loads are too high, our savings are too low, and the savings we have are too vulnerable to violent swings in market conditions.

In short. We are FUBAR'd.

I ask again, where's our bailout? Oh right, we've given it all away already.

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