Shameless Canadian Silver Bug plug

As you can see from the sidebar I was the second place winner in the 2007 Canadian Blog awards in the now defunct Best Business/Finance Blog category. Unfortunately they did away with this category and I apparently have to run in the best Professional/Career Blog this year against teachers, lawyers and a theoretical plethora of plumbers and used car salesmen.

Despite this category not being a good fit for a non professional, non career centered silver, gold, finance, economics, world collapse blog I have been nominated and if you read, learn from and enjoy the Canadian Silver Bug's banal gibberings I would appreciate the vote.


I know my hits, revenue and comments are up this year so I hope you actually like what you see and will vote. Each person is allowed one vote in both the first round of voting up to the 29th and again in the second round after the field has been narrowed.

I will repost the link next and plea next week should I move on to the second round. Stayed tuned I do have a real post coming later today that might find you some silver to purchase. If you don't vote for me I won't tell you who has silver, bwahahahahahaha! ;)

BCE A Capital Gains Headache

If you are one of those many many people who own BCE stock you've got a potential capital gains nightmare heading your way.

Imagine the worse case scenario that you are a long time Bell Canada Pensioner and you own 10,000 shares bought over a 40 year career and now you are being forced to sell due to the impending take over by the Ontario Teachers Pension Plan and some miscellaneous U.S. equity funds, (aka assholes.)

From talks I’ve had with people in this situation they think they can just find or guess the purchase price of their shares and claim the capital gains. This would be easy, straight forward and ultimately preferable to what really needs to be done. This route however will probably get you a Revenue Canada audit so far up your ass that they can count your teeth. The BCE takeover is big, high profile and a great opportunity to grab taxes in a year heading for federal deficit. With that in mind I expect all large BCE transactions to be flagged for extra scrutiny and considering the complexity of calculating the capital gains they WILL find many erroneous or fraudulent claims.

So what really needs to be done?

Well first you have to find or estimate your original purchase price for any particular year , this site of historical BCE prices will help you out if you can't find your purchase history.


(Remember however you should use your own receipts to get your starting purchase price, I’m using the charts as an example in this case and would only use them on a tax form if I could not source the original information.)

Next you have to take that original purchase price and modify it for any transactions that would alter the “for tax purposes” purchase price such as stock splits and company spinoffs

Share Splits
• October 1, 1948 (4 for 1)
• April 26, 1979 (3 for 1)
• May 14, 1997 (2 for 1)

Nortel spin off
Aliant spin off


Example

In Jan 1983 you bought 100 stocks at 24 and now must sell for $42.75
One would think it’s as simple as stating you have $18.75 a share capital gains x 100 shares for a declaration of $1875 on the transaction, but it's much more complicated than that

The 1983 shares in the example need to adjusted for the 1997 (2 for 1) stock split, divide the cost of these shares $24 by the split multiple (2) making your real price $12 rather than $24. Capital gains just jumped from $18.75 a share to $30 ($42.75-$12) up to $3000 total

Then you have to account for the spin out of both Nortel and Aliant

Nortel was originally priced as worth 69.21% of BCE (yeah I know, keep laughing Mr Roth) and the remainder of the company (the part not near bankruptcy) was worth 30.79%

So now your original $24 dollar shares are now worth $12 x.3079 or about $3.70, Capital gains is up to $39.05

For shares older than 1983 , BCE provides a chart of monthly average prices already accounting for the splits, The oldest, cheapest stocks are in the $6.60 range when adjusted for Nortel brings them to about $2, giving you capital gains of $40.75



“Holy shit”, for long term investors we are talking about captial gains that average about $40 per share, (gasp, turn pale, puke, as you see fit.)

Then you have to deal with the fact that you got 0.0725 units of the Bell Aliant (or its cash equivalent), and 0.915 consolidated BCE shares for each old BCE when they formed Aliant. I believe you have to take the value of the Aliant shares and convert them back into the cost per share against the original BCE shares Doh!

OK at this point it became quite obvious that I cannot do this without a tax specialist.

Now imagine the pensioner who has to go through this process for 40 years of accumulation in the company stock plan finding all the original receipts for stocks bought up to half a century ago and crunching the numbers above.

First you must think, “this is a mammoth undertaking, which I can’t handle!” and then you think “ I’m screwed!” This is going to take away my dividend income, I’m going to have a good portion of the premium on the purchase price taxed away, and the final annoying fact, this could push me into a new tax bracket and as a result most or all of the OAS (old age security) will be clawed back.

If you are in this situation know this, Revenue Canada will probably flag large Bell Canada positions for audit, especially those who don’t submit reasonable capital gains numbers. As you can see from above rough calculations long term holdings will have severe capital gains, his is not a good year to start lying, they will notice.

Now there are things you can do like gifting shares to charity, (move fast there’s little time left) or clean the losers out of your portfolio , the ones you know will never recover (Nortel anyone) and book your capital loses to offset BCE. As for the proceeds of the sale, perhaps I’ll discuss some other dividend companies that I like closer to the sales closure.

While you only get taxed on 1/2 of your capital gains in Canada, I can see people taking a bit tax hit. Be prepared and keep some cash back until after tax time or put 20% in a 3 month GIC until you see your tax bill.

Disclaimer: This is only my understanding of how these calculations work so please don’t take my word for it. Go to a tax professional and have this done properly. This was simply an exercise to show you the complexity of capital gains issue with regards to the BCE purchase and probable tax hit you might be facing.

Bring on the Morphine, I feel the pain coming on

There is a massive tidal wave of unemployment beginning to break over the coastline of the Americas and what we are seeing is just a hint of the horrors it will bring. This week's initial U.S. jobless claims have spiked to a seven year high of 516,000, up from last month and up massively from last year at this time.

Now consider how many seasonal retail jobs simply won't manifest this year due to the slow down and how many positions, or in fact how many stores will simply evaporate after what I expect to be one of the weakest Christmas seasons in in decades. What we see now is not the Big Bad, just a blur on the horizon of what's coming.

Statements backing my belief this week warn of tens of thousands more jobs cuts in the near future , Citigroup 10,000 as of last Friday now up to 75,000 by a story today ,
Sun Micro 6000 and in Chicago massive layoffs from local corporations have been warned

Meanwhile we still have GM, Ford, and Chrysler who are all screaming for money and in danger of failure which will cause unbelievable ripples. The derivatives linked to GM alone are suspected to be worth about $1 Trillion which would probably finish off the counter parties whoever the sorry bastards are, add to that 3 million or so lost jobs and you've got a mega crisis.

The problem of course is political suicide, people are getting tired of bailouts for screw up companies and it is questionable if new money can actually fix the car maker's problems. It's also questionable if the Gov can afford this endless corporate welfare. Finally, at the G20 today it was mentioned that any bailout would have to pass EU scrutiny lest it be declared an illegal subsidy and prompt some form of trade dispute.

So do they throw money they don't have on a fire that can't be smothered, risk national bankruptcy and trade sanctions wars to maintain a dysfunctional industry and millions of jobs peak oil will eventually kill anyway, or do they allow the GM derivative bomb finish off the world financial system. I'm tempted to go with the later only because even after a bailout there are many reasons to believe the car companies will still fail, just delaying the crisis.

On the Canadian perspective our most recent job numbers were actually up but those were padded with many thousands of temporary jobs resulting from the recent pointless Federal elections so we should expect some job loses despite the holiday shopping season. Car manufactures and part makers will suffer huge job losses with or without immediate failure.

As it was in Washington this week the American car makers plus Honda and Toyota were all groveling for cash from both Ottawa and Ontario, but so far have received nothing. It's happened too often in Ontario that money has been given for retooling to save jobs and a couple of years later they are back for more or close the plant regardless of past promises. The Big 3 have mismanaged their companies, misforcasted customer sentiment, fuel cost and finally engineered crap that barely met the Korean standards let alone the Japanese. If Canada is to fund a car company make it ZENN.

There seems to be little to be cheerful about in housing either where despite claims the banks are renegotiating mortgages to let people stay in their homes vast numbers of houses are still being lost, in fact 85,000 in Oct alone.

It's no wonder Fannie and Freddie $29 B and $25 B respectively this quarter.

Now this video gives little real data but it certainly gave me a "What the hell are people thinking" moment.



In Canada both home sales and prices have finally dropped as I predicted and I hope those people I tried to warn off making that first home purchase in the last two years won't get hurt too much. All I have to say is your agent lied, houses do go down in price, even in "that" neighbourhood. While the most exotic mortgages varieties did not show up in Canada a fair number of people did take 0 equity or 5% down with secondary financing for the down payment..Ouch! In this kind of correction even 10% down may not be enough to keep people above water for long.

With Peak oil here and depression predicted on FOX of all places , (in fact bigger than the Great Depression was predicted), perhaps my hoard of metals will eventually perform as I expect and I'll scoop up that little hobby farm, commune, bunker, life raft at a price I can manage.




You know when FOX stops fluffing their corporate puppet masters and lets this on the air, it's already well past probable.

It sometimes seems it's already past the "you can't save yourself point" and while it is getting more urgent there still is time to find a little gold or silver even at a high premium if you really want it. There is also time to pay debt and start cutting back on your lifestyle before your lifestyle starts cutting back on you. There is time to buy some books on canning and gardening as well as some seeds and tools at the end of season tables, so you are ready in the spring. There is still time to call family and set price limits or quit gifting, or at the very least demand necessities not frivolities.

It's going to get bumpy folks, I wish you all well.

Embry on Gold

I'm sure many of you have seen this already but someone preaching a little hope for the gold market is good for morale in times like this.



There is much speculation about the Dec contracts for both Gold and Silver, I personally don't see an actual default in silver because of the monthly delivery limits but it should be noted that Comex stocks have shrunk by a couple of million ounces recently and probably at least half of the silver they claim to hold is not deliverable. This means the magic number is not 130 million ounces but more like 65 million. If the November contracts can lower stocks by another couple million ounce than December could be that make or break month for silver. If December, which is a normal delivery month has more demand for delivery than the COMEX monthly cap then we could see panic and a run up in paper prices. Let's hope!


Apparently the Canadian mint has added a new product to the silver mix, an 800 oz plus or minus rough poured bar that is small enough to meet standard U.S. Postal shipping requirements. I don't know who else has these bars but they are available from CMI Gold and Silver, read about them here. I can't tell from the CMI site if they ship to Canada or why we've not heard about this new Canadian mint product available in Canada. Anybody heard of these locally?

I've been asked what I've been doing and it amounts to drinking, cursing and waiting. I don't have much liquidity left so I cannot take a contract, I can't find product or at least not as a reasonable premium, (10 oz bars for $200 Canadian)and I'm not desperate enough to mug people for jewelry... yet ;)

I have been averaging down on some cheap juniors including, Golden Tag, Silver Corp, Great Panther, Olympus Pacific, and New Guinea Gold, all because they are producing something or are on the verge.

I have to admit that anybody 2 years or more away from production are quite likely going to go bust or get bought out for pennies on the dollar. It sucks but it's highly likely that the majors with liquidity are going to go on a discount feeding frenzy.

With all this bailout money flying around why the hell can't governments put together an agency and offer financing to the juniors based on merit of the resources. At some point bags of Asian reserves are going to steal all the potential resources from the Americas if the majors don't do it first. The holders of good exploration company stocks will get bent over the bottom bunk like some bad prison movie.

My last market play was in the HBP Gold Bull, which is supposed give you a 2x multiple up or down with the price of GOLD. I believe we are in the gold bottom, (way over sold) and I think we are very near U.S. dollar top. Anyone who thinks a country who just raised it's debt obligations by 1.5 trillion in recent months is a safe haven is an imbecile striving to reach idiocy. U.S. interest payments will soon approach a point of default and even the mighty IMF will not be able to intervene leaving the printing press the last resort.

I think it's time for the people of western nations to go home, hug their kids and explain Santa is not coming this year, and perhaps never again.

World markets to be closed?

The always blabby Italian Primer Minister suggests the world markets may be closed to "rewrite the rules of international Finance" Yikes

Remember my last suggestion to stock up on supplies and cash, don't wait!