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Ottawa extends 15% tax credit for mining sector by 1 more year

Written By doni icha on Senin, 02 Maret 2015 | 22.39

Diavik open pit

A diamond mine in Canada's north is shown. On Monday, Ottawa announced it plans to extend a tax credit for the industry first implemented in 2006 by another year. (CBC)

The federal government says it wants to extend a tax credit for junior mining companies by an extra year, into next year's tax season.

At the Prospectors and Developers Association of Canada conference in Toronto on Monday, the government said it wants to extend the 15 per cent Mineral Exploration Tax Credit until March of 2016.

It's set to expire at the end of this month.

Since 2006, Ottawa says the tax credit, which targets investors in flow-through shares, has helped junior mining companies raise more than $5 billion to fund exploration and development.

Flow-through shares are investments that allow companies to pass on the tax credits they accrue from their expenses to investors who want them to offset their taxable income.

Last year's tax year, 250 companies issued flow-through shares eligible for the rebate to more than 19,000 individual investors.

In a statement, Finance Minister Joe Oliver says the tax credit is part of the government's effort to support the mining industry and the 380,000 jobs it creates.


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Warren Buffett says Berkshire Hathaway has 'right person' as successor

In his 50 years at the helm of Berkshire Hathaway Inc, Warren Buffett has transformed a failing textile company into a sprawling conglomerate that has vastly outperformed most of the rest of corporate America.

But he now says: Do not expect a repeat of that outperformance in the next 50. In the 84-year-old's annual shareholder letter released on Saturday, Buffett said Berkshire has grown so large — 751,000 times its original net worth per share — that the future pace of gains "will not come close" to those of the past.

"The numbers have become too big," Buffett wrote. "I think Berkshire will outperform the average American company, but our advantage, if any, won't be great."

Within 10 to 20 years, Buffett said, Berkshire's girth could require whoever then runs the Omaha, Nebraska-based company to consider steps he has resisted, such as paying dividends or conducting "massive" share repurchases.

Buffett, also addressing one of the more pressing topics at Berkshire, said he and his board of directors "believe we now have the right person to succeed me as CEO," likely for a decade or more, and who in some respects "will do a better job than I am doing."

Gender shouldn't decide who becomes CEO, Buffett says

While Buffett did not name that person, Berkshire Vice Chairman Charlie Munger, 91, said Greg Abel and Ajit Jain, two top Buffett lieutenants, would be prime candidates.

Abel, 52, runs Berkshire Hathaway Energy. Jain, 63, has been Buffett's top insurance executive for three decades.

A successor could also be female: Buffett said "gender should never decide who becomes CEO."

And Todd Combs and Ted Weschler, who run some Berkshire investments, "can be of particular help to the CEO in evaluating acquisitions," he added.

"You've got such good candidates," said Thomas Russo, a principal at Gardner, Russo & Gardner, which invests 12 per cent of its $10 billion of assets in Berkshire. "I think they'll adopt a different capital structure approach, which will include a healthy, healthy large dividend."

Buffett is preparing in May to celebrate 50 years of running Berkshire, whose market value is now $363 billion. 

On Saturday, Berkshire also reported a 17 per cent drop in fourth-quarter profit, to $4.16 billion, or $2,529 per Class A share, from $4.99 billion, or $3,035, a year ago, as investment gains and results from insurance underwriting declined.

Operating profit rose five per cent to $3.96 billion, or $2,412 per share, from $3.78 billion, or $2,297.

Some problems despite big numbers

For all of 2014, profit rose two per cent to $19.87 billion, while operating profit increased nine per cent to $16.55 billion. Revenue rose seven per cent to $194.67 billion.

Book value per share, which Buffett considers a good measure of Berkshire's worth, rose 8.3 per cent to $146,186 but lagged gains in the Standard & Poor's 500 for the fifth time in six years.

Despite the big numbers, Berkshire had some problems.

Buffett lamented the performance of the BNSF railroad, saying it "disappointed many of its customers" with congestion on its rail lines caused by bad weather, amid rising oil shipments and a bumper grain harvest.

He also said he was "embarrassed" by taking too long to exit a $2.3 billion investment in Tesco Plc, a British retailer that became mired in an accounting scandal.

Berkshire lost $444 million on Tesco, but Buffett said that's just 0.2 per cent of its net worth.

Berkshire owns more than 80 companies, such as Geico insurance and Dairy Queen ice cream, and $117.5 billion of equity investments in such companies as Wells Fargo & Co , Coca-Cola Co, American Express Co and IBM Corp. 

America remains 'mother lode' of opportunities

Buffett remains on the prowl for acquisitions, and with $63.27 billion of cash could make big purchases, which he calls "elephants," while preserving a $20 billion cash cushion.

Despite spending $7.8 billion on 31 acquisitions in 2014, Berkshire has not bought an elephant since paying $12.25 billion to buy half of ketchup maker H.J. Heinz Co in 2013.

BERKSHIRE-RESULTS/

Commemorative Heinz ketchup bottles with Warren Buffett and Charlie Munger's picture on the bottles are on sale at the exhibition of Berkshire Hathaway companies at the annual meeting in Omaha, Nebraska May 3, 2014. Warren Buffett's Berkshire Hathaway Inc on Friday said quarterly profit declined 4 percent, falling short of analyst forecasts, as earnings from insurance underwriting declined and bad weather disrupted shipping at its BNSF Railway unit. (Rick Wilking/Reuters)

And while Buffett has said he may shop more in Germany, after on Feb. 20 agreeing to buy a German motorcycle accessories retailer, Berkshire's main focus will remain at home.

"Though we will always invest abroad as well, the mother lode of opportunities runs through America," he wrote.

Buffett's letter retained the folksy tone that have helped make him popular among investors.

Talking about his See's Candies business, which requires little capital investment, Buffett compared the company's profits to "rabbits breeding."

And Buffett said that at Berkshire's annual meeting last year, part of a weekend he calls "Woodstock for Capitalists," shareholders bought 10,000 bottles of Heinz ketchup with Buffett or Munger on the labels. (Buffett's cost $2, Munger's $1.50.)

This year, Buffett said Heinz will also be selling mustard as well as ketchup. "Buy both!" he exhorted.


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Samsung Galaxy S6 and S6 Edge: A closer look

Samsung's new Galaxy smartphones improve in two major areas: design and picture quality.

Samsung ramped up its camera technology in last fall's Galaxy Note 4, and the camera is even better in the Galaxy S6 and S6 Edge announced Sunday. More importantly, the new phones have a more stylish design.

I had less than 90 minutes to try out the new phones in controlled settings, so it's too early for a definitive assessment. But I'm impressed with what I've seen so far. The phones will start selling in April, at prices not yet determined.

Design

For years, Samsung phones have had removable backs made of plastic. That allowed for battery replacement, but made the phones look cheap. I'm glad to see the metal frame and glass back in the new phones. The phones are lighter than before, even with metal.

The main S6 model feels boxy in my hands. More recent iPhones have smoother, curved edges. The S6 Edge curves on the left and right sides to create side displays, so it feels better. But boxy or not, I prefer Samsung's new design over its old models.

Camera

The Note 4 camera was excellent for producing images rich in colour. However, the colours sometimes felt unnatural, especially with indoor shots. The S6 phones seek to fix that by using their infrared sensors (normally used for heart rate tracking) to better detect and adjust for specific lighting conditions. This sounds promising.\

The S6 phones also sport better focus, borrowing technology from Samsung's stand-alone NX1 camera. You already can focus on a person by touching that part of the screen. But if the person walks away, the focus is off. With the new technology, the focal point moves with the person. It worked in my limited tests, though the subjects were still blurry because of poor lighting conditions. I may get better results outdoors.

One handy feature: Double tap the home button anytime to open the camera app quickly, so you don't miss shots.

Battery

You can no longer replace the battery with a spare, but there's fast-charging technology to get you from zero to 50 per cent in a half-hour. Although I didn't get to test this with the S6 phones, a similar feature worked well on the Note 4.

Spain Wireless Show Flagship Phones

JK Shin, CEO of Samsung's mobile division, showed the new Galaxy S6 and S6 Edge, during a Samsung Galaxy Unpacked 2015 event on the eve of this week's Mobile World Congress wireless show, in Barcelona, Spain, Sunday, March 1. (Manu Fernandez/Associated Press)

With wireless charging, you can place the phone on a special mat to charge it. No cords needed. This will be handy when coffee shops and restaurants start making these mats available. Until then, I don't mind the cord, especially as wireless charging is slower.

Side displays

The S6 Edge model has curved sides, similar to last fall's Note Edge phone. The S6 Edge improves on the Note by having the display curve over both the left and right sides. The Note Edge's side display was on the right only, making some features awkward for lefties.

With the S6 Edge, you can assign colours to important contacts — such as red for your spouse. With the phone face down, the side will flash red when a call from your spouse comes in. You can decide without rudely lifting the phone whether you really need to take that call.

Mobile pay

When it launches this summer in the U.S. and South Korea, Samsung Pay will let people pay with a tap at retail stores. The service promises to work at more places than Apple Pay because it has backup technology that replicates the magnetic-strip signals on plastic cards. However, based on Samsung's descriptions, Samsung Pay will require a few more steps than Apple Pay at checkout.

Other 'touches'

The S6 phones have improved fingerprint sensors. Before, you had to swipe down on the home button; the phone wouldn't unlock if you didn't swipe correctly. Now, you simply touch the home button, just as you do on iPhones. The fingerprint ID will authorize mobile payments too.

Samsung also streamlined the software interface. Currently, the menu of additional options is accessed by tapping on the three vertical dots on the top right. Why three vertical dots? Who knows? That's been replaced with the word "MORE."

Little touches like these will help make the phones more accessible to customers.


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TFSA tinkering, high fund feeds and inflation: BUSINESS WEEK WRAP

One of our most popular stories this week was this one, by reporter Aaron Saltzman and CBC's Marketplace, telling you about instalment loans, one of the fastest growing sectors of debt in Canada.

Functioning a bit like a payday loan, only for more money and a slightly longer term, instalment loans are unsecured high-interest loans given out to borrowers with poor credit, often at rates approaching the legal maximum allowed.

There's about $132 billion of such debt in Canada, a little under 10 per cent of the total. But it's growing. The industry says it fills a niche of serving people who've slipped through the cracks of the banking industry, helping them get back on their feet. But others, including one former employee we spoke to, say most customers don't understand the true cost of borrowing.

Regardless of where you stand on the issue, it's a great read and well worth your time.

Fund fees can cost you years

Another story that resonated with our readers this week was this one, based on a report from think-tank the Canadian Centre for Policy Alternatives, that says high mutual funds are costing many Canadians years of their retirement, or forcing them to live on less.

According to the report, mutual funds that charge in the range of one per cent, two per cent or more to manage the money for a year slowly erode investment returns. A two per cent MER on a fund may not sound like much, but it adds up over time — hundreds of thousands of dollars over a working life.

Over time, that might mean a typical mutual fund investor will have to retire several years later than they'd like, in order to beef up capital.

The solution? Pensions, the report claims. Pension fund managers ostensibly do the same thing mutual fund managers do, but for a fraction of the costs, with the average pension fund withdrawing less than 0.4 per cent of their funds to pay the bills last year.

TFSA debate rages on

Few government programs have ever been met with as much universal support as TFSAs did when the federal government introduced them in 2009. But now, with rumours abounding that the feds are about to double the contribution rate to $11,000 a year, many have started to question the wisdom of that. 

groceries fruits vegetable inflation retail

The cost of living increased by 1 per cent last month, but how do they calculate that anyway? The CBC's Peter Armstrong set to figure that out in one of our most read stories this week. (Andrey Rudakov/Bloomberg)

Two separate reports this week said doubling the limit would result in a larger tax break for Canada's richest savers who are already benefiting from the program, but do nothing for most people. A report from one of the economists who advised the government to create the accounts in the first place said if Canadians are allowed to put in twice as much every year, it will eventually cost the government $15 billion a year in lost tax revenue in 40 or 50 years.

That sounds like a good deal for citizens, but the flip side of those savings is the price to be paid in the form of reduced services.

It's a complex issue, which explains why no less an authority than the Parliamentary Budget Officer weighed in this week. And he, too, said doubling the rate would be a ticking time bomb in lost taxes.

Inflation falls, but how do they know?

Canadians are going to need every penny they can get their hands on for their retirement, thanks to the cost of living increasing the way it usually does. On Thursday, Statistics Canada reported that Canada's inflation rate dropped to 1 per cent last month. The main reason was cheaper gasoline, because virtually everything except energy prices ticked higher.

The monthly inflation figure is often a source of much skepticism, as the official rate often feels way off from what people witness in their own lives. So how can we be sure StatsCan knows what it is talking about? Thanks to an army of price checkers across the country who diligently go out every month and compare prices for thousands of items. 

The CBC's Peter Armstrong interviewed one of those price checkers this week, and the result was this story explaining it all. It's a great piece of video if you haven't seen it, and gives a fun glimpse into how they come up with a number that almost everyone has heard of, but few people understand.

Other stuff

Those were some of our big stories this week. Be sure to check out our website often for more, and don't forget to follow us on Twitter here. In the meantime, here's some more of our best work this week.

Monday:

Tuesday

Wednesday

Thursday:

Friday:


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8 things you need to know before claiming new family tax cut

Call it income splitting-lite. The version of the family tax credit announced by Prime Minister Stephen Harper last October was a tweaked version of a family income-splitting announcement he'd first made in the throes of the 2011 election campaign.

The tweaks were aimed at addressing earlier criticism that the measure would only serve to worsen the growing gap between the country's rich and poor, with the biggest tax benefits reserved for the richest families.

But even after the tweaks, critics say it's a goodie that will benefit only 15 per cent of Canadian families. And independent analysts have said the biggest tax savings will still go to families with incomes of more than $233,000 a year.


Changes to the universal child care benefit

  • Benefit rises from $100 to $160 a month for each child under age 6, effective Jan. 1, 2015.
  • New benefit of $60 a month for each child between ages 6 and 17, effective Jan. 1, 2015.
  • Above benefits will not be reflected until the July 2015 payments, resulting in a retroactive adjustment.
  • The enhanced UCCB will replace the current child tax credit as of 2015. But the UCCB changes will not replace the Canada child tax benefit (CCTB) you may currently receive.

The government counters that the other parts of its family tax-relief package — enhancements to the universal child care benefit (UCCB) and increases in the child care expense deduction — will benefit all families with children under the age of 18.

But the changes in those two measures will only take effect this year, with the first lump sum payments arriving in July 2015, just a few months ahead of an expected fall election.

Only the income-splitting part of the family package is in effect for the 2014 tax year. So, it's something Canadian families need to familiarize themselves with now as they prepare to file their returns.

Here are the broad strokes of the family tax cut:

  • It applies only to two-parent families with at least one child under the age of 18 — so, no single parents, no families where both parents are in the same tax bracket, and no childless couples need apply.
  • It allows the higher-income spouse or common-law partner to effectively transfer up to $50,000 of taxable income to their lower-income partner.
  • The amount of tax that could be saved by this transfer becomes a non-refundable tax credit that can be claimed by either spouse.
  • The credit is capped at $2,000.
    Federal tax brackets — 2014 tax year
    Income     Tax Rate
Up to $43,953       15%
$43,954 – $87,907       22%
$87,908 – $136,270       26%
Over $136,270       29%
Source: CRA

Some of the popular annual tax preparation books that are on the shelves now don't mention the family tax cut as it wasn't announced until late October. But all of the CRA-certified tax software programs take this income-splitting measure into account. So, for those who've been reluctant to use tax software, this may be the year to bite the bullet and start familiarizing yourself with the programs.

father-children-tax-cuts

Single parents, couples who both have roughly the same income and couples without children will not benefit from the new family tax credit. But they will benefit from other family-friendly tax measures that take effect in 2015. (Sean Kilpatrick/Canadian Press)

That's because critics say the new family tax credit isn't the easiest thing to figure out. "Gaining access to income splitting will also require the correct calculation of up to 85 new steps in the 2014 tax forms," says a report from the Canadian Centre for Policy Alternatives, an Ottawa-based think tank. "Given the complexity of the benefit — not only of the calculations but even of its basic understanding — it will almost certainly be misunderstood by tax filers."

Here are some other wrinkles that might not be immediately apparent:

  • The family tax credit results from what's called a "notional" transfer of income, not an actual split (as with pension income splitting). Income isn't actually transferred from one spouse's return to the other's. Since each individual's actual net income and taxable income doesn't change, there will be no provincial tax savings. This is a federal tax benefit only. Another implication of this "notional" transfer is that benefits that are based on a tax filer's net income, like the GST/HST credit, the Canada child tax benefit and the age amount will not be affected.
  • It doesn't matter how many children under age 18 the family has. Having one child or 10 makes a big difference to a family's financial picture, but it makes no difference for the purposes of this credit.
  • To be an "eligible" family, there must be at least one child under the age of 18 at the end of the year, and that child must reside with the couple throughout the year. But there are exceptions. If a child is born, adopted or dies during the year, the credit can still be claimed. If one of the spouses or common-law partners dies, the credit will still be available.
  • Even though the implementing legislation for the family tax credit hasn't been passed yet, the CRA takes the position that the measure is already the law of the land.
  • Both spouses must file 2014 tax returns and be Canadian residents to claim the credit.
  • Both spouses must also not split any pension income they may have.
  • If either spouse has declared bankruptcy, neither can claim the family tax credit in the year bankruptcy is declared.
  • If a child lives with both parents through the year, either parent may claim the credit — but not both.

Sources: CRA, Ernst & Young, KPMG, H&R Block, Canadian Centre for Policy Alternatives


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Attempt by brands to capitalize on #TheDress met by mockery, derision

Written By doni icha on Minggu, 01 Maret 2015 | 22.39

[View the story "Brands embarrass themselves by trying to capitalize on #TheDress" on Storify]

Storified by CBC News Community· Sat, Feb 28 2015 01:23:08

Always quick on the uptake when it comes to Tumblr trends, Denny's was in fact one of the first brands to mention the dress.

*stops furiously scribbling amidst dozens of coffee cups* there is no dress. it is not the dress that changes colors, it is only yourself.Denny's

IHOP, which was clearly refreshing Buzzfeed's homepage compulsively in an attempt to learn cool teen slang yesterday, posted this tweet just minutes after the website's dress article went live:

idk what color that dress is but pancakes are definitely gold and butter is definitely whiteIHOP

A lot of brands came up with the exact same original idea of "seeing" the dress in their own logo or product's colours.

Definitely Red and White! #HaveAbreak #TheDress #breakfromthedress #TeamRedAndWhite http://t.co/BFVVMRGn5mKITKAT

Trust us, #TheDress is white.Clorox

We see it as blue and yellow, but we may be a tiny bit biased. #TheDress http://t.co/JGs4XuyiZ8Cirque du Soleil

#TheDress might look better in red and white.Coca-Cola

You're not the only ones @Cirque! We see blue & yellow too :) #TheDress http://t.co/jOcsQrOCUNIKEA USA

Clearly it's copper and black. #TheDressDuracell

Proud to be black & white, or is it white & black? #TheDress --- Drinkaware.ie http://t.co/Turyk9zYfcGuinness Ireland

#TheDress looks silver and blue to us.Coors Light

It's white and gold. http://t.co/OqrPgKx6r4Pizza Hut

We see #blueandyellow...of course. Bring out #TheDressHellmann's

Let's settle this once and for all, it's blue and white. #Effortless #TheDress http://t.co/EndigfjSVBAT&T

You all have it all wrong. It's red & red. #TheDressFireball Whisky

This is awkward, it's actually white and red. http://t.co/DpCKsBkPiIDomino's Pizza

White and gold? Black and blue? All we see is white and red. #TheDressbarefootwine

White and gold, black and blue... We only have eyes for silver. #TheDress #AvGeeks http://t.co/byFXj746SdAmerican Airlines

I have no idea what you guys are talking about. It looks Rainbow to me. #TheDressSkittles

Some brands fared a little bit better, going the extra centimeter to create cute custom graphics and gifs illustrating how hip they are.

Why does everyone keep calling us Gold and White now? What's going on, Internet?! #TheDress #WhatColorsAreThisDress http://t.co/Hz4xGr7DzZM&M'S® Brand

Looks like a problem when you don't use Tide Plus ColorGuard. #TheDress #DressGate http://t.co/yvUudF50mtTide

Heavy debate, but we decided: both. What do you see? #thedress #FordMustang http://t.co/M3CbQ5k10bFord Motor Company

All we see is comfortable. #TheDress #CrocNation http://t.co/vZfuW9DgEJCrocs Shoes

#whiteandgold or #blackandblue? We found a way around science- you can have both! #TheDress #dressgate http://t.co/5oj3ZTqOWkLEGO

No matter what color you see, there's no denying our Ram trucks look great. #TheDress http://t.co/1HSwZpp3XXRamTrucks

It doesn't matter which color you see, we've got you covered. #TheDress http://t.co/v5lJOCydVpBehr Paint

You don't need to pick a side. #thedress http://t.co/DsL5Y4vet1L'Oreal Paris USA

Blue. Black. White. Gold. We see them all. #GalaxyS5 #TheDress http://t.co/feXKWkSQeGSamsungMobile

If u see blu n blak, u shood eat chikin. If u see whyte n gold, u shood stop eatin burgerz. #TheDress http://t.co/oSP7OSLe5wEat Mor Chikin Cowz

Doesn't matter if it's blue/black or white/gold, they still taste delicious. #thedress http://t.co/Oq8srrAKndDunkin' Donuts

The dress is blue and black. #thedress #teamblueandblack http://t.co/J822wJAvWbSnapple®

Others just kind of posted tweets promoting their own products and services under hashtags associated with the dress.

Definitely not blue #TheDress http://t.co/Z1dIE9Atoakrispykreme

It's black. End of discussion. #ElevationEdition #TheDress http://t.co/LbY2S5iN59GMC

The dress is white & gold...time to get over it & watch the #VSSwimspecial!!Victoria's Secret

Hey internet, you obsess over a dress when you're hungry. #DressGate #BlackandBlue #WhiteandGold #EatASNICKERS http://t.co/5Tc20A06GFSNICKERS®

Whether you're #TeamWhiteandGold or #TeamBlueandBlack — everyone is on #TeamBreadsticks. #TheDress http://t.co/P04bjXgzEDOlive Garden

Less concerned about #thedress and more concerned about the #lastchobani in the fridge.Chobani

Fashionably late? #TheDress http://t.co/qGVecgt4mzOreo Cookie

No filter. #TheDress http://t.co/U1A8A6pNsdMiller Lite

Uh... okay.


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China's central bank cuts interest rates as slowdown deepens

China's central bank cut interest rates for the second time in three months Saturday, another sign the country's leaders are worried the economic slowdown is deepening too sharply.

The People's Bank of China announced a rate cut on one-year loans by commercial banks by 0.25 percentage point to 5.35 per cent. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.50 per cent.

Rates were last cut on Nov. 22. The new rates take effect Sunday.

Last year, China's economic growth fell to 7.4 percent — the lowest since 1990. It is expected to decline further this year, and a steep economic decline can raise the risk of politically dangerous job losses.

The latest round of cuts follow a string of tax reductions and other measures aimed at propping up growth. The government cut business taxes last week and has announced a pay hike for civil servants.

'We're talking about slower global growth, not another 2009.'- Jay Bryson, Wells Fargo Securities

The lower rates are expected to reduce financial costs for state companies and are a signal to state-owned banks to boost lending to them.

Economic growth in the world's second-largest economy has slowed down steadily over the past two years, mostly as a result of government efforts to steer the economy to more self-sustaining growth based on domestic consumption and to reduce reliance on trade and investment.

Eswar Prasad, an economics professor at Cornell University in Ithaca, N.Y., noted that China has been a primary driver of global economic growth and that the slowdown will have a negative ripple effect throughout the world.

Still, Jay Bryson, global economist for Wells Fargo Securities in Charlotte, N.C., emphasized China's economy is still growing, just at a slower rate.

"China is not collapsing. You're looking at a country that was growing at double digits, and now it's only going to grow six to seven per cent," he said. "We're talking about slower global growth, not another 2009," he added, referring to the global financial crisis.

The impact of the slowdown will vary depending on a country's exposure to China.

In the United States, Bryson said, most people won't notice the impact at all. While U.S. exports to China total about $100 billion a year, he said that's less than one per cent of the gross domestic product of the U.S., which has a $17-trillion economy.


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TFSA tinkering, high fund feeds and inflation: BUSINESS WEEK WRAP

One of our most popular stories this week was this one, by reporter Aaron Saltzman and CBC's Marketplace, telling you about instalment loans, one of the fastest growing sectors of debt in Canada.

Functioning a bit like a payday loan, only for more money and a slightly longer term, instalment loans are unsecured high-interest loans given out to borrowers with poor credit, often at rates approaching the legal maximum allowed.

There's about $132 billion of such debt in Canada, a little under 10 per cent of the total. But it's growing. The industry says it fills a niche of serving people who've slipped through the cracks of the banking industry, helping them get back on their feet. But others, including one former employee we spoke to, say most customers don't understand the true cost of borrowing.

Regardless of where you stand on the issue, it's a great read and well worth your time.

Fund fees can cost you years

Another story that resonated with our readers this week was this one, based on a report from think-tank the Canadian Centre for Policy Alternatives, that says high mutual funds are costing many Canadians years of their retirement, or forcing them to live on less.

According to the report, mutual funds that charge in the range of one per cent, two per cent or more to manage the money for a year slowly erode investment returns. A two per cent MER on a fund may not sound like much, but it adds up over time — hundreds of thousands of dollars over a working life.

Over time, that might mean a typical mutual fund investor will have to retire several years later than they'd like, in order to beef up capital.

The solution? Pensions, the report claims. Pension fund managers ostensibly do the same thing mutual fund managers do, but for a fraction of the costs, with the average pension fund withdrawing less than 0.4 per cent of their funds to pay the bills last year.

TFSA debate rages on

Few government programs have ever been met with as much universal support as TFSAs did when the federal government introduced them in 2009. But now, with rumours abounding that the feds are about to double the contribution rate to $11,000 a year, many have started to question the wisdom of that. 

groceries fruits vegetable inflation retail

The cost of living increased by 1 per cent last month, but how do they calculate that anyway? The CBC's Peter Armstrong set to figure that out in one of our most read stories this week. (Andrey Rudakov/Bloomberg)

Two separate reports this week said doubling the limit would result in a larger tax break for Canada's richest savers who are already benefiting from the program, but do nothing for most people. A report from one of the economists who advised the government to create the accounts in the first place said if Canadians are allowed to put in twice as much every year, it will eventually cost the government $15 billion a year in lost tax revenue in 40 or 50 years.

That sounds like a good deal for citizens, but the flip side of those savings is the price to be paid in the form of reduced services.

It's a complex issue, which explains why no less an authority than the Parliamentary Budget Officer weighed in this week. And he, too, said doubling the rate would be a ticking time bomb in lost taxes.

Inflation falls, but how do they know?

Canadians are going to need every penny they can get their hands on for their retirement, thanks to the cost of living increasing the way it usually does. On Thursday, Statistics Canada reported that Canada's inflation rate dropped to 1 per cent last month. The main reason was cheaper gasoline, because virtually everything except energy prices ticked higher.

The monthly inflation figure is often a source of much skepticism, as the official rate often feels way off from what people witness in their own lives. So how can we be sure StatsCan knows what it is talking about? Thanks to an army of price checkers across the country who diligently go out every month and compare prices for thousands of items. 

The CBC's Peter Armstrong interviewed one of those price checkers this week, and the result was this story explaining it all. It's a great piece of video if you haven't seen it, and gives a fun glimpse into how they come up with a number that almost everyone has heard of, but few people understand.

Other stuff

Those were some of our big stories this week. Be sure to check out our website often for more, and don't forget to follow us on Twitter here. In the meantime, here's some more of our best work this week.

Monday:

Tuesday

Wednesday

Thursday:

Friday:


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The McDonald's slump: Are golden days of golden arches over?

McDonald's has been making headlines lately, but for all the wrong reasons, sparking speculation that the golden years of the golden arches are over.

Food industry analysts don't think McDonald's will go the way of the Woolworth's lunch counter, but one of the most recognizable brands in the world, with 36,000 locations globally and 1,400 in Canada, is in decline and scrambling for a new strategy under new leadership.

"The biggest challenge McDonald's faces is remaining relevant as a generational retailer," said Canadian retail executive George Minakakis.

McDonald's warned in January that business would be weak in the first half of 2015 and said it would cut its annual construction budget to the lowest in more than five years as it opens fewer restaurants in struggling markets like the U.S., Japan and Australia. 

The company is scaling back openings in emerging markets like China and Russia, too.

The burger giant reported a 21 per cent drop in fourth-quarter earnings, faced a food-safety scandal in China and named a new CEO in January, tasked with finding a strategy to regain momentum. 

Don Thompson, who took the global helm in July 2012, is being succeeded by chief brand officer Steve Easterbrook on March 1. 

The Chipotle effect

The chain's problems are not as simple as a shift in food tastes and heightened health consciousness. 

Don Thompson

McDonald's CEO Don Thompson is leaving the company at the end of February to be succeeded by chief brand officer Steve Easterbrook. (Adrees Latif/Reuters)

Shares in the fast-casual burger-and-fry chain Shake Shack, David to McDonald's Goliath, more than doubled in its first day of trading in January, in a pointed contrast with the lacklustre performance of McDonald's, whose shares are down 1.3 per cent over the past year.

The buzzword "millennials" is thrown around by analysts as a segment of consumers that can't be ignored. Younger restaurant goers tend to prefer customization over standardization.

Restaurants like Chipotle and the Freshii franchise in Canada let diners build their meal and customize orders, while promising fresher ingredients.

"There's been a shift in consumer preferences," said R.J. Hottovy, a restaurant analyst at investment management firm Morningstar. "People have moved towards healthier, fast-casual places like Chipotle and Panera."

Thompson started to roll out a customized "Create Your Taste" menu, but orders could take five to seven minutes, compared with just a couple of minutes for regular items, and it was panned by franchisees across the board.

McDonalds Sales

The world's biggest hamburger chain is struggling to adapt to changing eating habits. "The quality of the burgers they serve is within their control," says restaurant analyst Howard Penney. (Gene Puskar/Associated Press)

While Thompson said the plan would allow McDonald's to become more like Chipotle and Subway by letting customers select sandwich toppings, Richard Adams, a former McDonald's franchisee who now consults current ones, said the reaction by franchisees has been "A chorus of No's."

The answer isn't in copying the customized meal approach of competitors, but by reducing the number of menu items and doing them better, franchise owners say.

"There's a younger consumer, but they eat burgers," said Howard Penney, managing director and restaurant analyst at Hedgeye Risk Management. "I don't think they have a millennial problem, they have a food problem."

Back to basics?

Struggling franchise owners are encouraging corporate to innovate by going back to basics.

More than 80 per cent of McDonald's restaurants are owned by entrepreneurs, individuals and families.

In the '60s, '70s and '80s if you could round up the capital to open a McDonald's franchise it was a licence to print money, according to CBC business commentator Michael Hlinka.

'Someone will figure it out. Someone will get the brand to a place that changes consumers' perception.' - Restaurant analyst Howard Penney

But today, while margins may be reasonable at McDonald's Corporate, franchisees operate restaurants with margins rarely exceeding three per cent, said Sylvain Charlebois, a professor of food distribution and policy at University of Guelph.

"Even operators who own more than one outlet struggle to increase margins due to mounting royalty fees," he said.

In interviews, franchisees and advisers to restaurant owners say they hope new CEO Easterbrook will shrink McDonald's growing menu to concentrate on burgers and fries. 

While most franchisees are reluctant to speak to the press, they offered blunt recommendations in a survey published in January by Janney Capital Markets analyst Mark Kalinowski.

Change is "moving too slow, let's bite the bullet," one survey respondent said.

They suggested dropping McCafe espresso drinks, which critics say don't sell enough to pay for the electricity used by the machines that make them.

Streamline the menu

They also want to cut the number of Happy Meal options and get rid of the hard-to-make McWraps and other poorly performing menu items.

Ronald McDonald

Some analysts argue that marketing for McDonald's in-store experience should expand from targeting families to targeting younger, single millenials. (Katherine Holland/CBC)

"They need to commit to a more streamlined menu — reducing the menu options — fewer but more impactful items," said Hottovy.

This isn't the first time McDonald's has faced pressures like this.

"In 2002 and 2003 you'd be asking the exact same questions: Is it broken? Is it forever gone? Someone will figure it out. Someone will get the brand to a place that changes consumers' perception," said Penney.

In 2002, McDonald's was losing market share and shares were in serious decline. The company managed to implement a strategy that turned it around. 

Shake Shack model

But, the environment is different now.

"This might not be the worst they've ever faced, but the blueprint for recovery isn't what it was," said Hottovy.

Minakakis thinks the chain needs to target a wider segment of the population. "Simply an increase in traffic is key to long-term success," he said.

The Shake Shack model is one that is working to attract a wide, and younger, crowd.

Older fast food chains advertise on TV while Shake Shack has taken to social media, according to a report by Goldman Sachs. The company is appealing to a younger customer base and developing a strong following online.

It has far more followers on Instagram relative to its size than McDonald's, Taco Bell and KFC.

The burger chain markets cheaply via social media, and while it only operates around 70 locations worldwide, as the company grows and opens more locations, the demand is already there.

On mobile? See the tweet here. 

But the veterans aren't going anywhere.

"McDonald's will definitely come back. The question is, when? And who's going to do it?" said Penney. "The new CEO's got some work to do to change the perception of the food or the quality of the food. "We don't know yet what that plan is or what his time frame is."


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Warren Buffett says Berkshire Hathaway has 'right person' as successor

In his 50 years at the helm of Berkshire Hathaway Inc, Warren Buffett has transformed a failing textile company into a sprawling conglomerate that has vastly outperformed most of the rest of corporate America.

But he now says: Do not expect a repeat of that outperformance in the next 50. In the 84-year-old's annual shareholder letter released on Saturday, Buffett said Berkshire has grown so large — 751,000 times its original net worth per share — that the future pace of gains "will not come close" to those of the past.

"The numbers have become too big," Buffett wrote. "I think Berkshire will outperform the average American company, but our advantage, if any, won't be great."

Within 10 to 20 years, Buffett said, Berkshire's girth could require whoever then runs the Omaha, Nebraska-based company to consider steps he has resisted, such as paying dividends or conducting "massive" share repurchases.

Buffett, also addressing one of the more pressing topics at Berkshire, said he and his board of directors "believe we now have the right person to succeed me as CEO," likely for a decade or more, and who in some respects "will do a better job than I am doing."

Gender shouldn't decide who becomes CEO, Buffett says

While Buffett did not name that person, Berkshire Vice Chairman Charlie Munger, 91, said Greg Abel and Ajit Jain, two top Buffett lieutenants, would be prime candidates.

Abel, 52, runs Berkshire Hathaway Energy. Jain, 63, has been Buffett's top insurance executive for three decades.

A successor could also be female: Buffett said "gender should never decide who becomes CEO."

And Todd Combs and Ted Weschler, who run some Berkshire investments, "can be of particular help to the CEO in evaluating acquisitions," he added.

"You've got such good candidates," said Thomas Russo, a principal at Gardner, Russo & Gardner, which invests 12 per cent of its $10 billion of assets in Berkshire. "I think they'll adopt a different capital structure approach, which will include a healthy, healthy large dividend."

Buffett is preparing in May to celebrate 50 years of running Berkshire, whose market value is now $363 billion. 

On Saturday, Berkshire also reported a 17 per cent drop in fourth-quarter profit, to $4.16 billion, or $2,529 per Class A share, from $4.99 billion, or $3,035, a year ago, as investment gains and results from insurance underwriting declined.

Operating profit rose five per cent to $3.96 billion, or $2,412 per share, from $3.78 billion, or $2,297.

Some problems despite big numbers

For all of 2014, profit rose two per cent to $19.87 billion, while operating profit increased nine per cent to $16.55 billion. Revenue rose seven per cent to $194.67 billion.

Book value per share, which Buffett considers a good measure of Berkshire's worth, rose 8.3 per cent to $146,186 but lagged gains in the Standard & Poor's 500 for the fifth time in six years.

Despite the big numbers, Berkshire had some problems.

Buffett lamented the performance of the BNSF railroad, saying it "disappointed many of its customers" with congestion on its rail lines caused by bad weather, amid rising oil shipments and a bumper grain harvest.

He also said he was "embarrassed" by taking too long to exit a $2.3 billion investment in Tesco Plc, a British retailer that became mired in an accounting scandal.

Berkshire lost $444 million on Tesco, but Buffett said that's just 0.2 per cent of its net worth.

Berkshire owns more than 80 companies, such as Geico insurance and Dairy Queen ice cream, and $117.5 billion of equity investments in such companies as Wells Fargo & Co , Coca-Cola Co, American Express Co and IBM Corp. 

America remains 'mother lode' of opportunities

Buffett remains on the prowl for acquisitions, and with $63.27 billion of cash could make big purchases, which he calls "elephants," while preserving a $20 billion cash cushion.

Despite spending $7.8 billion on 31 acquisitions in 2014, Berkshire has not bought an elephant since paying $12.25 billion to buy half of ketchup maker H.J. Heinz Co in 2013.

BERKSHIRE-RESULTS/

Commemorative Heinz ketchup bottles with Warren Buffett and Charlie Munger's picture on the bottles are on sale at the exhibition of Berkshire Hathaway companies at the annual meeting in Omaha, Nebraska May 3, 2014. Warren Buffett's Berkshire Hathaway Inc on Friday said quarterly profit declined 4 percent, falling short of analyst forecasts, as earnings from insurance underwriting declined and bad weather disrupted shipping at its BNSF Railway unit. (Rick Wilking/Reuters)

And while Buffett has said he may shop more in Germany, after on Feb. 20 agreeing to buy a German motorcycle accessories retailer, Berkshire's main focus will remain at home.

"Though we will always invest abroad as well, the mother lode of opportunities runs through America," he wrote.

Buffett's letter retained the folksy tone that have helped make him popular among investors.

Talking about his See's Candies business, which requires little capital investment, Buffett compared the company's profits to "rabbits breeding."

And Buffett said that at Berkshire's annual meeting last year, part of a weekend he calls "Woodstock for Capitalists," shareholders bought 10,000 bottles of Heinz ketchup with Buffett or Munger on the labels. (Buffett's cost $2, Munger's $1.50.)

This year, Buffett said Heinz will also be selling mustard as well as ketchup. "Buy both!" he exhorted.


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