1. There’s Value to be Found - We’ve heard many “experts” talk about stocks being “on sale” right now. Lower prices don’t necessarily mean that certain companies are a good value right now- it’s as likely that the July prices were overvalued as it is that the current prices are undervalued. However, there is good value to be found if you’re willing to search it out and keep conservative investment principles in mind. We will likely see further declines in 2009, but for long term value investors, 2009 could be the year that makes you a lot of money in the future.
2. Enter the TFSA - Our American brethren have enjoyed a tax-free savings vehicle for some time through Roth IRAs. As of January 1, 2009, those of us up here in the frozen wilderness of Canada can also avail of a tax free way to watch our money grow through the Tax Free Savings Account, or TFSA. You can contribute up to $5,000 per year to this account and use it to earn interest, dividends, or realize capital gains on securities. While contributions aren’t tax deductible (that’s what your RRSP is for), you don’t get taxed on the money you earn within your TFSA, and as a result your earning potential on your investments has increased by up to 50% as of January 1^st. Million Dollar Journey has an excellent primer on TFSAs for those looking for more information.  
3. Stuff is Cheap - Deflation is a bad word for most economists (and many business owners), but for consumers it can be a welcome side-effect to our current economic malaise. Many products, from lumber to food to gasoline, are coming down in price, meaning that your dollar goes a little further. If you’re in the market for real estate, buying opportunities abound as prices continue to plummet.
4. Labour is Cheaper - If you’ve been trying to hire someone to do a bit of work in the past few years, you know the frustrations that this can involve. With the economy as soft as margarine left out on the kitchen table there are more people competing for fewer jobs, giving you better choice and better prices. If you’ve been considering remodeling your home or starting a troupe of traveling acrobats, 2009 might be a great year to do it.
5. You Survived 2008 - When I was about 13, I had a spectacular crash on my bike that left me with visible scars to this day. While picking gravel out of wounds for weeks on end hurt it also taught me some valuable lessons, like always wear a helmet, and know that bikes don’t stop or turn well on loose gravel. For many of us, 2008 was a bit like a bike accident and we saw our collective asses fly over the market handlebars. Yes it hurts, but I’d like to think that we’ve learned more than a little from the experience. Lessons about the importance of strategic asset allocation, of buying based on value and not what’s “hot”, and of understanding the risks inherent in investing will stick with us for years to come. With chins bloodied and pride in tatters, our investment decisions in 2009 will be better informed and more strategic than ever before, at least until the next “hot stock” comes along.

Admittedly, these things may not make you rich, or at least not in the short term. But they do offer hope for 2009 following the doom and gloom that plagued the latter part of 2008. Here’s to a happy and prosperous new year!

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Listen

1. Fairytale of New York (The Pogues with Kristy MacColl) - A bittersweet, poetic lament for Christmas; the harshness of Shane MacGowan’s booze-soaked voice is a beautiful contrast to the sweetness of Kristy MacColl. Also, one of the few Christmas songs to use the phrase “old slut on junk”.
2. God Rest Ye Merry Gentlemen / We Three Kings (Barenaked Ladies with Sarah McLaughlin) - A jazzy version of these two classics performed by two of Canada’s top acts. You’ll be humming this version for hours after and tapping your feet to the rhythm of the double bass.  
3. The Christians and the Pagans (Dar Williams) - A fun, upbeat song that’s loosely about tolerance and the holiday spirit. What’s Christmas without a pagan lesbian couple to spice things up?
4. Baby, It’s Cold Outside (Dean Martin) - There have been a number of re-recordings of this song, but in each one the female lead comes across as slutty and the male lead as a creepy molester driving a white panel van. Only Dean Martin can pull off the class, sophistication and flirtatiousness needed to make this song work.
5. I Believe In Father Christmas (Greg Lake) - A bitter but beautiful tune with a poignant final verse - “The Christmas we get, we deserve”. U2 also released an excellent version of this song for (RED)WIRE this year that just might give Greg Lake a run for his money.  

Read

1. A Christmas Carol by Charles Dickens - The undisputed quintessential Christmas classic. It’s short enough that you could read this aloud with your family during a single sitting, and if you haven’t done so before, you really should.
2. Papa Panov’s Special Christmas by Leo Tolstoy - Short but to the point and beautiful in its simplicity, Tolstoy’s fable of Christmas is often overlooked in the English speaking world.
3. How the Grinch Stole Christmas by Dr. Suess - Although most famous for its on screen reenactment, the original text still holds its own. It’s interesting to note that the Grinch in the book doesn’t seem nearly as dastardly as his big screen cousin, while his sidekick Max is perhaps even more heartless. If I ever decide to pursue a PhD in comparative children’s pop culture themes, this just might be my thesis.
4. The Little Match Girl by Hans Christian Andersen - Unlike the other stories on my list, this somber classic doesn’t really offer any sort of redemption or happy conclusion. Nonetheless, it’s a moving read and should not be overlooked.
5. Luke 2:2-20 by God - The original Christmas story. ‘Nuff said.

Watch

1. Elf - Will Ferrell at his best. Elf is unique, hilariously funny, and perhaps the best Christmas movie from recent times.
2. A Christmas Carol (1951) - There are too many adaptations of this classic to even count, but none can compare to the 1956 version featuring Alastair Sim.
3. National Lampoon’s Christmas Vacation - The undulating story of Clark Griswold, the modern Christmas protagonist. An absolute must watch for our family every Christmas.
4. A Christmas Story - Little Ralphie’s Christmas quest for a Red Ryder BB gun. If you’re ever looking for a great Christmas gift for me, a replica of the leg lamp Ralphie’s dad receives would suit the bill nicely.
5. Scrooged - Yes, I realize that my list already has one version of the Scrooge story, but Bill Murray’s version offers a uniquely 1980’s take on this tale.

I’d like to take this opportunity to wish my readers a very Merry Christmas and a successful, prosperous, and rewarding New Year.

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In Canada, donations to registered charities, whether in the form of cash or property such as securities, are generally eligible for a tax credit. On your first $200, you get a federal tax credit of 15% as well as a matching provincial tax credit, basically giving you a benefit equal to the lowest marginal rate. However, on any donations in excess of $200, you get an increased tax credit equal to the highest marginal rate. The actual value varies from province to province based on tax rates and the credits offered by each province.

Donating securities gives you the same tax credit as if you had donated cash. Since 2006, there is an additional benefit to donating from your portfolio rather than you wallet- you avoid taxation on any capital gain. Normally, you would pay tax on 50% of any appreciation in value, but when the shares are donated to an eligible charity you get an inclusion rate of 0%. In other words, your capital gain is tax free. The practical result of this is that a donation of appreciated securities will ultimately cost you less than a cash donation in the same amount, as you enjoy the same donation tax credit but avoid the eventual capital gain taxation. The extent of the benefit will vary based on your tax rate and the amount of your capital gain, but it can become significant.

Here’s a simple example- let’s say you want to donate $1,000 to The Human Fund, a (purely fictional) eligible charity. Let’s also assume that you live in Newfoundland & Labrador and have a marginal tax rate of 42%. If you donate $1,000 cash, you will receive a tax credit valued at 42% x $1,000.00 = $420.00, so your net cost of donating is $640.00. If you choose to donate shares worth $1,000.00 instead, you still get this $420.00 tax credit, but you also get to avoid any future capital gains on those shares. If the shares have an adjusted cost base of $800.00, the normal capital gain would be (50% inclusion rate x $200 capital gain= $100.00) x 42% marginal tax rate = $42.00. Your ultimate cost of giving is now just $598.00. The larger the donation and the larger the capital gain, the greater the difference.

However, this 0% inclusion can also work against you- just as you don’t have to include any capitals gains on donated securities, you can’t claim the capital losses. Accordingly, if you’re looking to donate shares that have depreciated you’ll do better by selling the shares, claiming the capital loss, and donating the proceeds. By doing so, you’ll still get the donation tax credit but also get to offset any capital gains you may have with a capital loss.

If you’re looking for an efficient way to donate to your favourite charity this year, a donation of stocks that have appreciated in value may be an excellent option.

As always, you should conduct your own research on consult your own advisors before acting on anything you read on the interweb.

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Whatever your reason, here are a few ways to give more with less:

1. Be tax savvy - The more money you have, the more you can give. By understanding the tax implications of charitable gifts, you can give more with less. The most basic rule in Canada is that you only get a credit equal to the lowest marginal tax rate for gifts up to $200; once your total gifts exceed $200, your credit increases to the highest marginal tax rate, a fairly significant jump. Your gifts get much more tax efficient once you pass this threshold. You should allocate all your donations to one spouse to maximize your donation tax credits, and you can also carry forward donations to ensure greater amounts are entitled to the higher rate.
2. Get Receipts - Related to the first point, it is important to get proper documentation for the gifts you give. A $25 donation with no receipt costs you $25; a $25 donation with a receipt only costs you about $15. CRA generally won’t accept cancelled cheques or your good word, so get a proper receipt when you give.
3. Give Stuff- Your gift doesn’t have to be in the form of cash. There are many charities that will gladly accept in kind donations of everything from food items to office supplies to clothes and blankets. Also keep in mind that even your junk may have value- a number of charities will take abandoned cars and recyclable metals off your hands.
4. Give Securities - Another option for charitable giving is to donate shares from your investment portfolio. In addition to getting the full charitable donation tax credit, you also get to avoid capital gains on those shares.
5. Give your Time - Charities aren’t run by robots (although that would be pretty cool…)- they need people to keep things running. Find a charity you like and consider volunteering your time and skills. You can also turn this into a family activity to help teach your kids the importance of being involved in their community.
6. Give the Gift of Giving- It’s always a controversial gift move, but consider making a donation to a charity in lieu of a gift to friends or family. One of my favourite ways to do this is through the World Vision Gift Catalogue, which allows you to select a specific item to purchase with your donation, such as a mosquito net, a chicken, or even solar panels for schools. Just don’t try to pull off the George Costanza gift to “The Human Fund”.
7. Charge Admission- If you’re hosting a holiday party, consider asking guest to bring along an item for the local food bank or some other things required by local charities. We’ve done this a few times for dinner parties by asking guests to bring along an item needed by the SPCA instead of a host gift. Nobody is obliged to do so, but many people will. I’ve been told that this is “horribly tacky”, but the SPCA disagrees, and I tend to value the opinions of needy puppies over those of Miss Manners and her socialite posse.
8. Buy What Charities are Selling- Many charities host holiday sales or sell items as fundraisers. By buying from these sources, you’re checking someone else off your gift list and helping a good cause at the same time. If you’re particularly challenged when it comes to gift wrapping (as I am), there are a few charities who offer gift wrapping services in exchange for donations. It’s well worth the money!
9. Know Where Your Money Goes - Not all charities are created equal, and it’s important to know that the money you’re donating is going where it is needed most. Find out what percentage of your donation will go to the stated cause, and what percentage goes to overhead and administration. Financial information for registered Canadian charities can be found on the CRA Charities and Giving site. Use this information to make an informed decision about where your money will best be used.
10. Plan Ahead for Next Year - Finally, it’s easy to want to give generously this time of year, but charities need funding and support year round. While you’re paying attention to social causes, take the opportunity to developing a year round giving plan using strategies such as automatic donations and monthly allocations, rather than scrambling to make it onto Santa’s Nice List as the year comes to an end.

I’d love to hear any other tips that my Dear Readers have about giving during the holiday season.

* The original title for this post was “Give Like Santa, Save Like Scrooge”, but was changed to avoid  another unpleasant encounter with the Canadian Tire legal goons.

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If you’re like me, you probably thought about those industries with inelastic demand and solid business models- big tobacco, health care, and other sectors that people just won’t cut out of their monthly budgets. But would you have guessed that sex toys might fall in this category as well?

Anthony Germain, the CBC’s China reporter, had an interesting piece on Radio One this morning about how sex toy manufacturing is one of the few businesses that is actually booming in China right now. Countless factories that manufacture children’s toys have slowed down or even closed their doors, but not a single factory that makes more… ahem… prurient toys has suffered the same fate. Yes, it appears that demand for sex toys rages on unabated.

Of course, factory slow-downs tend to lag behind consumer purchasing trends, so I decided to call up a former client of mine who knows this industry better than anyone. Her “erotic tool” business hasn’t just avoided the economic downturn, but she has actually enjoyed substantial year-over-year growth over the past two quarters, and sees no signs whatsoever of a softening in demand. While other retailers are trimming prices and offering promotions to boost sales, she sees little need to do so. As she put it, “It’s going to be a very merry Christmas for both my customers and my balance sheet”.

But why is this the case? It would appear to my naïve eyes that adult toy spending would be one of the first line items to get cut from the budget when times get tough, but apparently many other don’t share my sense of frugality and Puritanism. One theory on this trend is that male libido tends to rise and fall with the Dow. When your portfolio is crumbling and your job uncertain, it may be hard to feel particularly amorous with your partner, leaving many women to take matters into their own hands. As the New York Post (I know, I know…) recently reported in an article entitled “Limp Economy“:

A recent survey conducted by the stress-reducing drug Relora showed that of the 64 percent of responders were anxious about money - and, of these, 62 percent say that they are having less sex.

“Sex is in the brain, and not between the waist and the knees,” cautions the legendary sexpert Dr. Ruth Westheimer, who reports receiving more queries on low-libido spouses since the economy tanked.

“A man’s sexual apparatus is very delicate. If something is wrong, it is very difficult for men to get or maintain an erection.”

While this may be a factor, I’m not convinced that it is the root of the phenomenon, as it makes a couple of big assumptions. First, it assumes that only men are plagued by economic worries, and that only men suffer the side effects as a result. I know as many women as men who are worried about their savings and jobs, yet a rise in female-targeted sex toys would suggest that female libido remains strong. Second, it assumes that sex toys are being purchased as a replacement for an absent lover. Watch one episode of Sex and the City and you’ll quickly learn that this is not the case- to say that women turn to sex toys when they can’t find a man is akin to saying that someone seeks out steak when they can’t find hot dogs. The lonely, dejected women and her battery powered friend is an antiquated notion, and I suspect a little offensive to sex toy aficionados everywhere.

My sex shop friend also disagrees with this assessment. Her theory is that people are staying home more, and any “home entertainment” option is going to enjoy a bit of a rise in fortunes. Rather than going out to dinner and a movie, people are increasingly choosing to stay home with a bottle of wine and a rental. If you’ve saved a little cash on the wining and dining, I guess you can justify a little splurge on the goodnight kiss. For many, sex toys can also be seen as an inexpensive luxury and a fun little distraction from the doom and gloom outside.

If you’re looking for an industry where you can park your money during these turbulent times, forget the traditional stalwarts like big tobacco and alcohol and skip the health care and funeral parlor options. The hot sector in our chilled economy might just be hiding in your bedside table.

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