George Athanassakos in Globe and Mail’s “Bond investors beware” cautions bond investors not to be lulled into a false sense of security. With gold near $1,000/oz., oil at $100/barrel, money supply growing at 7%/year and food inflation expected to increase to over 7% during the next 10 years (vs. 2.3% over the last 10), he feels (like many of us) that the reported inflation figures of 2% in Canada and 4% in the U.S. do not tell the whole story. Also, while China has been a source disinflation in the past, its growing prosperity and growing middle class will increasingly compete for manufactured goods and commodities, and will become a source of inflation. Yet long term bonds’ low interest rates do not seem to price in the reality of what consumers are living with and the trend to accelerating prices. His conclusion is that somebody will be in for a surprise. “Either bond prices will collapse or commodities will do so.” (On one hand it’s difficult to argue with him given the facts he brings to the table, on the other hand perhaps if we are entering a serious and prolonged recession, demand will fall and prices of commodities and other goods will moderate also, resulting in both low interest rates and low inflation- but I may be starting to sound like an economist, which I am not, and he is probably right).

And still on inflation, Brett Arends in WSJ’s “The danger in ’senior’ inflation” points out that for seniors/retirees (who have a significantly different consumption mix than younger people) inflation is even higher than for the rest of the population. Seniors spend a larger fraction on home heating, energy, medical services, nursing homes, all with higher inflation rates the overall consumer index. At the same time falling housing prices (for now not in Canada), which is deflationary for young people, reduce the value of potential source of income for seniors (via downsizing or reverse mortgages).

In Globe and Mail’s “A place to park cash but not the break they promised” Rob Carrick shares his disappointment with this week’s budget shared by many of us who expected capital gains exemption if reinvested within six months, based on Conservative government election promises. He also points out that while the new TFSA (consolation prize) only allows $5,000 investment/person/year and there are no immediate tax benefits associated with it, $10,000/couple/year can accumulate to a significant sum over 20+ years and there is no tax on the investment income when withdrawn. Rob suggests that it may be a good place for many to accumulate and hold savings for an emergency. In a follow-up article “New tax-free account requires some planning”  he quotes investment advisors suggesting strip bonds as an ideal asset to be placed into TFSAs. He points out that TFSAs are useful for all adult age groups, with seniors being able to place required excess RRIF withdrawals. Also, seniors’ TFSA withdrawals won’t affect their eligibility for OAS and other benefits. (Watch out for annual registration fees, especially for smaller accounts). And the Globe and Mail’s Tim Cestnick answers the question “Does Tax-Free savings account replace RRSP?”  . He crunches the numbers and concludes that you’d see no difference to after tax outcomes of TFSA and RRSP. So he ends up suggesting that his preference for retirement savings remain RRSPs (taxes on withdrawal create a hurdle to withdrawal and TFSA limits are insufficient for retirement savings). But he likes the flexibility of having both and the ability to choose in retirement where withdrawals come from each year.

In “Sure it’s from AARP. But is it a good deal?” BusinessWeek’s Anne Tergesen reminds reader to stay vigilant because on comparing AARPs annuities, life insurance and mutual funds with other options, many can do better. Just because an organization is non-profit, that is not a guarantee that it operates in the best interest of its members or even when they do their recommendations are good for you. At times it may be simply due to incompetence, at other times it may be that the organization has lost its compass and starts operating in a manner focused on self-perpetuating itself and/or its management.

An finally, in Financial Post’s “Advisors must be free to advise”  Jonathan Chevreau discusses the constraints imposed on financial advisors by various regulators, yet just about anyone call themselves a financial planner even though they may actually be stockbrokers or in insurance sales or in banking and little or no financial planning training or skills.