Today we kick off with Ryan’s Rant on the clumsy implementation of BC’s new 15-per-cent foreign buyers real estate tax, in our Your Stock Our Take Segment we review a viewer question on Inspira Financial and in our Stars and Dogs of the week we review Bombardier and Magna International
If this is your first time listening, then thanks for stopping by. This podcast is produced every week for your enjoyment and show notes are found at www.keystocks.com. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter @KeyStocks and Facebook. Now, let’s dig into the show.
I would like to welcome again, myhost, KeyStone’s Senior Equity analyst, father of 1, and a man who has more balls than any player in the short history of PokemanGO, Mr. Aaron Dunn,
In case you have been stuck down a well or screen stunned by PokemonGO over the past few weeks, the British Columbia government implemented a new 15-per-cent tax on real estate purchases by foreign buyers this Tuesday.
Love or hate the policy (that is another rant to itself) – the execution, was awful.
The big issue I have is the fact that deals signed before the July 26th announcement which closed after this past Tuesday, were not “grandfathered in” and are now subject to the full 15% tax.
We now have a situation where homebuyers or investors have entered into a legal deal at a specified price – after doing all their research on the total costs for the transaction – and through no fault of there own have had the landscape change after they signed the agreement and are now forced to pay 15% more.
That is garbage policy. It is like being the kicker in the Super bowl, you are 2 points behind and there is 1 second left on the clock, you line up the kick, boot it and the ball is travelling straight through the goalposts for a 1 point win – but wait the NFL decided to make a rule change mid-kick and shrink the size of the goalposts – your kick flies wide – too bad you loose….
Ridiculous.
Look, we are not talking about the goal of the policy – I get what is trying to be accomplished, but the lack of foresight into potential problems is shocking.
It is just another reason why voters become disenchanted with politicians – I understand you have to set a date, but to not implement a grandfather clause or even anticipate this issue…really? Who is on the committee to set this policy – I am assuming someone sat down at some point to hash this one out – the problem is I am picture Lloyd Christmas (Jim Carrey) and Harry Dunne (Jeff Daniels) from dumb and dumber over a couple of martinis in Yaletown – so does anyone see any issues with this 15% tax thing? Anyone, anything at all….alrighty then….let’s down these and go so it we still have a chance with Mary Swanson.
The non-grandfathering was also optically stupid from a political standpoint – you just knew a few tragic stories would appear immediately after the announcement – enter Hamed Ahmadi – who’s story has been all over the news in BC over the past couple of days.
Hamed was living the Canadian dream – in May, after an exhaustive search, he and his girlfriend found a $360,000 condo in May, and paid $18,000 as half the 10 per cent down payment. The other $18,000 was supposed to be paid today, when the deal is set to close. Despite the fact Hamed entered into the contract under the previous taxation rules in May, because his deal closes after the magical August 2nd deadline, he is suddenly on the hook for an extra $54,000 in unforeseen taxes. He does not have the additional cash.
I am going to go out on a limb here – Hamed is not the type of buyer the tax is supposed to target. His $360,000 family home purchase is not moving any markets. He appears to be a hard working man, educated man who moved here from Iran in 2012 to earn his PhD in electrical and computer engineering from the University of British Columbia, and landed a job at BC Hydro immediately after graduating. From there, Ahmadi decided it was time to purchase a home. He couldn’t afford anything in Vancouver (many can sympathize with this), and even turning to the suburbs required some help from his retired parents back home, for which he’s very grateful.
Grandfathering the tax would have solved all of this. Full stop – a little common sense here would have gone a long way – common sense and political policy are not often spoken in the same breath.
Bombardier – Dog – funny, we are 3 episodes in and this Canadian maker of planes, trains and no automobiles is making its second appearance as a Dog.
Why? You ask, well this morning the company posted another huge loss in its second quarter of this year. Bombardier lost $490 million – almost half a billion in the three-month period – remember this is a company that recently went hat in hand to the Quebec government for $1 billion in funding. Well the company managed to lose half of that amount in 3-months – impressive.
Bombardier blamed “significant softness” in the market for smaller size business aircraft and its spending on the company’s new crown jewel – C-Series planes.
Of course, the company will tell you the future is bright through its investment in its new C-series long-range business aircrafts – the same C-series that is overtime and well over-budget. And on the company’s conference call the CEO said Bombardier was still in talks with the Canadian government about further investment or bailout however you want to frame it. Time will tell if Justin will get this funding decision right.
Bombardiers shares are up from its all time lows entering 2016 – but even a dead cat will bounce if you drop it from high enough – this consistently unprofitable stock is down over 90% from its highs in 2000 and over 60% over the past 5-years. It continues to produce negative cash flow and find new and inventive ways to miss deadlines and induce government funding to keep it afloat – in the end, the company continues to destroy shareholder value – we do not consider it investable.
Despite all this, only 1 of 21 analysts recorded as covering the stock have a SELL on it at current prices.
