Travellers use their phones as they line up at the Ottawa International Airport, as airlines cancel or delay flights during a major storm in Ottawa, on Friday, Dec. 23, 2022. THE CANADIAN PRESS/Justin Tang passengerJustin Tang/The Canadian Press
Getting caught up on a week that got away? Here’s your weekly digest of The Globe and Mail’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Bank of Canada cries mea culpa on inflation
Governor Tiff Macklem has admitted that the Bank of Canada misread the rise of inflation. In his last speech of 2022, he said the central bank expected inflation would be close to 2 per cent by the end of the year, but it’s roughly 7 per cent. “That’s a very big forecast error,” Macklem told The Globe’s David Parkinson and Mark Rendell. “So, yes, we have some explaining to do.” When the year began, the bank maintained a record-low policy interest rate of 0.25 per cent, but ends the year with a policy rate of 4.25 per cent, a 15-year high. In between, the bank has hiked interest rates seven consecutive times – including an increase of a full percentage point in July, the biggest single step up in almost a quarter-century – in an effort to tamp down the highest inflation rate in nearly 40 years. As the bank nears the end of its historic interest rate-hike cycle, much of the impact of higher borrowing costs has yet to be felt in the economy.
Getting reimbursed on cancelled flights
As travellers get stranded in airports across the country owing to treacherous weather conditions, many might be asking: How do I get compensated by the airline or my insurance for delays and cancellations? Salmaan Farooqui asked travel experts for their advice on what options travellers have. If you’ve made it past security, and your flight was cancelled at the gate, airline representatives at the terminal have the most power when it comes to rebooking you on another trip. There are some circumstances where accepting the cancellation and getting your money back is better than having an airline continuously rebook and delay your flights. If you’re able to claim with an insurance company, ensure that you keep every receipt associated with your flight cancellation including hotel stays, meals and car rentals.
What’s a good retirement income target?
The most-often-cited retirement income target is 70 per cent of gross income in one’s final working years, which translates roughly into 10 per cent to pay income taxes and 60 per cent for everything else. But in a spending breakdown by year for a two-earner middle-income couple with two children over the period 1990 to 2019, spendable income never exceeds 40 per cent of gross income, writes Frederick Vettese. If the mortgage is paid off and the children become self-supporting by retirement age, a good retirement income target is 50 per cent of gross income.
Spending breakdown
Spendable income as a percentage of gross pay in working years
100%
Retirement
saving
90
Work-
related
80
Child-
raising
70
60
Mortgage
50
Income
tax
40
Spendable
income
30
20
10
0
33
35
37
39
41
43
45
47
49
51
53
55
57
59
61
Age of older spouse
the globe and mail, Source: the rule of 30,
frederick vettese
Spending breakdown
Spendable income as a percentage of gross pay in working years
100%
Retirement
saving
90
Work-
related
80
Child-
raising
70
60
Mortgage
50
Income
tax
40
Spendable
income
30
20
10
0
33
35
37
39
41
43
45
47
49
51
53
55
57
59
61
Age of older spouse
the globe and mail, Source: the rule of 30,
frederick vettese
Spending breakdown
Spendable income as a percentage of gross pay in working years
100%
Retirement saving
90
Work-related
80
Child-raising
70
60
Mortgage
50
Income tax
40
Spendable income
30
20
10
0
33
35
37
39
41
43
45
47
49
51
53
55
57
59
61
Age of older spouse
the globe and mail, Source: the rule of 30, frederick vettese
Is there an ethical case against using credit cards with reward points?
By offering reward points or cash back to users, credit cards have become the most popular way to pay for things and a big money-maker for banks. But, as Rob Carrick notes, credit cards are also a force for inequality in that they suck money away from those who can least afford to pay their ridiculous interest charges and transfer it to the wealthiest. A MarketSense survey found that about 55 per cent of card users carry a balance regularly or from time to time, and interest paid by cardholders is just one way card issuers generate revenue. If you follow the money, you’ll see that households paying 20-per-cent interest on card debt incurred to buy groceries and a tank of gas are directly or indirectly helping to finance reward points used for flights, hotel rooms and high-end merchandise.
Bitcoins linked to QuadrigaCX mysteriously transferred
Bitcoins worth approximately $2.4-million that were previously held in inaccessible virtual wallets linked to defunct cryptocurrency exchange QuadrigaCX have been transferred four years after the death of the company’s founder led to its collapse. It is not clear who moved the 104 bitcoins, nor how anyone could access them, Joe Castaldo and Alexandra Posadzki report. When Quadriga Fintech Solutions Corp. founder and chief executive officer Gerald Cotten died in 2018, he was the only person with the passwords needed to access the digital wallets in which customer funds were kept. As a result, about 76,000 users were owed $215-million when he died.
Rules for federal ban on foreign homebuyers unveiled
Ottawa unveiled details on how the two-year ban on foreigners buying homes in Canada will work – two weeks before the law is set to take place on Jan. 1. They include a narrow set of exemptions for foreigners to buy residential real estate such as recreational properties and housing with a minimum of four units, writes Rachelle Younglai, but experts are skeptical whether the rules will actually help Canadians access more housing. The Prohibition on the Purchase of Residential Property by Non-Canadians Act was unveiled in the federal budget in April, when home prices were cresting near their peak and buyers were still able to qualify for a large mortgage. However, it is unclear that foreign buyers are still a major source of demand in the market.
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Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.