The Smith Manoeuvre Debt Swap is Irrelevant When Rates are Low!

Google “Smith Manoeuvre” and you’ll find dozens of articles saying that the point of SM is to convert non-deductible mortgage debt into deductible HELOC debt. Even Robinson Smith himself repeatedly emphasizes this point in his sales pitch as a guest on many Canadian finance podcasts. He tells people to pump all disposable income into the mortgage to pay off the mortgage faster and convert as much as possible.

But it astounds me that nobody mentions that this idea is nonsense when rates are low! Here’s an example using real numbers from today’s low interest rate environment (March 2021). 

5-year fixed mortgage rate = 1.5%

HELOC rate = prime + 0.5% = 2.45 + 0.5 = 2.95%

Say your marginal tax rate is 43%. This means the HELOC rate after the tax deduction is 2.95 x (1-0.43) = 1.68%.

It makes no sense to convert 1.5% debt into higher 1.68% debt. 

If your mortgage rate is higher, then yes it can be a true debt swap. But you have to run the math. 

I don’t mean to say SM only makes sense when rates are higher. I mean to say it makes no sense to pay more than your normal mortgage payment when rates are low. It’s still valuable, no matter what, to reinvest your home’s dead equity via SM.


Why Being a Teacher is Hard

It’s collective bargaining season in Ontario and the recent announcement of teachers’ work-to-rule strike has led to much debate about the worth of public school teachers and the resources and working conditions they require for adequate job performance. I’ve observed a lot of misinformation on this topic so I aim to summarize the common misunderstandings the public has, based on insights from my partner (who teaches grade 5) and 5 other teacher friends. (I am not a teacher).

Contention in public opinion seems to be rooted in a few main areas:

  1. Misunderstanding the teachers union’s requests of the government. It’s not about a salary increase.
  2. Misunderstanding the totality of a teacher’s set of responsibilities. Teachers do vastly more than impart academic knowledge and skills, namely in the way of character education.
  3. Misunderstanding the degree of difficulty in successfully executing the above responsibilities. The set of daily challenges teachers face in today’s world are also largely unknown to the public.
  4. An inability to economically determine appropriate compensation (salary) for a public-school teacher due to the near impossibility of measuring their fiscal impact to society. This instead leads to compensation being determined by opinion, both public and political. Salary-by-opinion obviously lends itself to heated debate.

Let’s dissect each one-by-one.

Why Are They Striking?

Without researching the answer it’s easy to assume that the root of any labour dispute is pay. To be fair, I think this was true of many historical strikes across many sectors (not just teaching). In 2019 the root issues are about improving the educational system for students. How do I know? The high school union actually published their bargaining requests this time! Apparently this is uncommon in collective bargaining. [link][local copy of PDF][news summary]. Their main asks are:

  • Reverse the recent increase to average class size. The government increased it from 22 to 28 students. The union claims this ask is supported by 70% of parents.
  • Have adequate numbers of support staff, especially for the most vulnerable students.
  • Deeply study the merits of the recently implemented e-Learning program, which replaces 4 high school classes with mandatory online courses. The concern is a significant degradation in quality of learning compared to in-person classes.
  • Increase salary with inflation (tied to Consumer Price Index).

Yes the last point is about salary but all of us, no matter what industry we work in, expect our pay to increase with inflation, otherwise our real-dollar wages decrease.

Misunderstanding the Job

Beyond imparting academic knowledge (as in, teaching the subjects), teachers have another major and underappreciated daily responsibility: character education.

This area largely has to do with teaching students to be good, responsible human beings.

The school is like a miniature society with the students and teachers as its citizens. In school, students learn to:

  • Respect the school, their peers, and their teachers.
  • Build and participate in a collaborative community with their peers.
  • Behave in social norms (they learn appropriate vs. inappropriate behaviours).
  • Deal with conflict.
  • Speak up against bullying and other damaging, societal behaviour.
  • Enjoy life-long learning and general curiosity.

A teacher spends a surprising amount of time and energy (and on some days, the majority of their effort) on character education. School is the place where kids regularly go to learn and practice being a positive member of society.

It’s easy to think teachers are just providing instruction on math, science, and language, and wonder how hard that can be. In reality, a huge part of the job is character education. This comes in the form of handling and educating disrespectful or violent students, correcting inappropriate behaviour, encouraging and teaching resilience and self-confidence to students who are struggling, and facilitating the growth of a healthy and thriving community in the classroom. Character education is undeniably a moral activity and it requires teachers to actively, and consistently, model good citizenry in their own behaviour.

Character education is not only the job of parents at home. Much of it falls on the teacher at school.

Beyond building good citizens, teachers also proctor clubs, organize field trips, and coach sports teams. These are called extracurriculars because they are literally outside the scope of the legal government curriculum. It’s crucial to understand that teachers are not obligated to take on these initiatives but they do anyways out of passion.

Misunderstanding the Difficulties

So if the job of a teacher is to impart academic skills and knowledge, build good citizens through character education, and encourage well-rounded development through extracurriculars, why is the job tough? How hard can it be to manage a class of 25 kids? There are several misunderstood challenges.

Student Differentiation

Simply put, every student is different. They are different in terms of:

  1. How they learn and process new concepts and knowledge.
  2. How they best express their understanding of new concepts, for the purpose of assessment.
  3. Level of development, academically, in character, and emotionally.

Point #1 requires teachers to present a given concept in multiple ways to cooperate with the varied learning styles across students. For example, when teaching basic multiplication, some students grasp the idea immediately from a simple chalkboard drawing. Other students must be taught to think in terms of adding-and-grouping. Some students benefit from examining physical objects and “seeing” multiplication in front of them. And a few simply need a little more time and one-on-one tutoring. Developing and executing multiple approaches to instruction, for nearly every piece of information, every single day, is very challenging to do well.

Point #2 requires teachers to assess each student in a unique way. For some students a simple worksheet with quiz-like questions is sufficient. While this is an efficient and easy assessment method for the teacher, it may not work well for all students. Some may struggle with language or writing, but can instead demonstrate their understanding verbally or through live and interactive examples. Identifying and facilitating the best assessment method for each student requires skill, time, and energy.

Point #3 speaks to the fact that some students are operating below the level expected in their grade, either academically or behaviorally. This a reality of life and there’s nothing fundamentally wrong with it. However, in a class of 25, a below-level student always commands much more than 1/25th of the teacher’s attention. The challenge in today’s world is that there are enough below-level students in the average classroom that the teacher simply does not have enough time and resources to adequately respond to these students’ out-of-proportion attention demands. This becomes especially challenging with students who are below-level in behaviour as they tend to take precedence over students who are below-level in academics. This is simply because a teacher usually cannot proceed with academics in the face of a student who is being disruptive, disrespectful, inappropriate, or uncooperative. The display of poor-character must be handled immediately. Said another way, behaviour trumps academic need. Furthermore, some students have an Independent Education Plan (IEP) which is an official recognition from the school board that the student is below- or above-level in some subject(s). It’s common to have 2-3 IEPs in a class of 25, requiring teachers to essentially develop a special, tailored curriculum to meet the needs of the student. This is also true for English-as-a-second-language (ESL) students for whom teachers must spend extra effort translating lessons and ensuring comprehension.

In general, much skill is required to manage time, energy, and resources to ensure that all students succeed despite their individualized learning needs.

The ON Factor

A teacher’s typical day requires a high level of engagement and energy expenditure for a long stretch of time, which is unlike most other professions. For example, grade 5 students are in school for about 6.5 hours in Toronto. During this stretch teachers are continuously highly engaged with no real break. They teach classes to 25 students, use short preparatory periods for organizing upcoming lessons, tutor kids during recess, and use their lunch break as yet again more prep time. My partner sometimes doesn’t have an opportunity to use the bathroom. In my office job, I can take breaks (physical and mental) whenever I want, typically once per hour. Being ON for 6.5 hours straight, 5 days per week, is much more challenging than 6.5 flexible hours in an office. Yes there are other jobs with a long ON factor (like hospital emergency room staff, 911 operators, and air traffic controllers) but most of the public enjoys a reasonable amount of breathing room in their job, which is why the ON factor tends to be misunderstood.

Before and after the ON period, teachers typically spend an additional 2-3 hours on other work.

Uncooperative or Under-equipped Parents

In a class of 25 it’s common to have 3 to 5 sets of such parents. “Uncooperative” means that they don’t subscribe to the attitude that a child’s success in school is a collaborative responsibility between parents and teachers. They instead believe the onus is mostly on the teacher. This belief manifests as not forcing kids to do their homework and read every day, not teaching the importance of trying their best in school while respecting their peers and teachers, not keeping them engaged at home, and blaming the teacher when the student exhibits poor character. “Under-equipped” means they believe in collaborating with the teacher but their particular life situation simply does not afford them the time or money to do their part at home. There’s nothing wrong with Under-equipped parents and I sympathize for them.

Uncooperative and Under-equipped parents, and their kids, are another source of out-of-proportion energy demand.

Constant Job Changes

In the first 5-10 years of teaching it’s common to have little choice on what grades you teach. The administrators shuffle teachers around based on need and qualifications. This is tough because a teacher who invested an entire year creating great teaching materials for their Grade 5 class has to repeat the entire exercise if teaching Grade 7 the next year.

Unprecedented Access

20 years ago teachers were not accessible via email. In 2019 teachers are expected to be reachable via email, by both parents and administrators, all the time. Teachers can only manage email after school hours and frequently at home. To be fair, email has significantly improved the ability for parents and teachers to collaborate. The point here is that the expectation that teachers be accessible via email is a time-consuming and modern twist on the job that is underappreciated.


In private, for-profit industries (like the companies many of us work for), the economic impact of a worker can be roughly estimated. The company can quantify how important a particular worker is to its profitability and therefore make an economically-rooted judgement on appropriate salary. I’m a software engineer and my company can ask itself how critical (or not) software development is to the business and how hard (or easy) it is to find good engineers. These can be roughly measured and therefore influence salary in a somewhat informed way. All private-sector jobs operate this way. A person’s compensation is tied to how rare and valuable their skill set is. Their monetary impact determines their value.

The challenge with teachers, and other public-sector workers, is their fiscal impact is nearly impossible to measure because it shows up down-the-line in very broad societal areas like:

  • General economic growth as students grow into capable adults who possess valuable, employable skills. These adults earn, spend, and save money, thereby contributing to a growing economy.
  • Reduction in government social spending like welfare and unemployment insurance, as the education system produces more employable workers who are less dependent on the government.
  • Increased civic engagement and “better” citizenry as the education system teaches kids good character.
  • Reduction in crime.

Since the fiscal impact of a teacher can’t be measured their salary becomes a matter of opinion, which of course leads to contention. If we could quantify their economic impact there would be less debate because you can’t argue with numbers.

I’m not sure how to properly set teacher compensation. But I think people who claim teachers are overpaid should at least openly acknowledge that their impact can’t be quantified.

Interestingly, in contrast, it should be possible to measure the fiscal impact of teachers in private schools since such schools are for-profit entities.

I hope this gives you a sense of why teaching is really hard and encourages you to change how you value the teacher function in our society.

Toronto Municipal Election FAQ

This weekend I’ve been trying to figure out who to vote for in the upcoming Toronto municipal election and I wondered about a few basic things. Here’s my attempt to answer them.

Is the Mayor affiliated with a political party?

No. In fact all Toronto municipal government members are non-partisan (ie. no political party affiliation). This is in contrast to Vancouver and Montreal, who have parties at the city-level.

This article hypothesizes that this year’s reduction in the number of city councillors from around 50 to 25 may actually encourage the formation of parties in Toronto in the long term. Why? This is the same question as “What are the merits of having political parties at all vs. having all candidates running as independents”, which is a big question we could spend time on. But here are some of the main reasons cited in the article:

  • The 25 new municipal wards share the same geographical boundaries as the provincial and federal boundaries, making it straightforward for a candidate to align themselves with the provincial/federal parties and candidates of that region.
  • The halving of available councillor positions means we now have double the candidates per position, meaning twice the competition. In order to be competitive, candidates may feel the need for more comprehensive and influential campaign platforms, involving alliances and official support from political parties as well as shared funding.
  • Being affiliated with a party makes it easier for voters to understand the political positions of a given candidate. For example, this year I am having a hard time understanding who to vote for since everyone is independent and I have to investigate each candidate individually to understand what they’re about. But I am left-Liberal minded so it would be much easier for me to make a choice based on parties who share this mindset. A surrogate for parties are “political action groups”, like Progress Toronto, who seem to publicly state their ideology (liberal/progressive) along with suggested candidates if you agree with that ideology, on a ward-by-ward basis. The formation of parties is also correlated with higher voter turnout.
  • At the end of a term, it’s easier for voters to evaluate the success of the incumbents if they are thought of as a conglomerate party rather than as individuals. You can make a broad judgement about if the party was effective or not because they voted together on bills. You can say things like “the Liberals pushed this XYZ legislation and I view it as a failure and therefore I want them out in the next election”. Today you instead must make a judgement on if a particular councillor was effective, which nobody does because nobody has the time to sift through the individual voting records of the incumbent councillors.

It also cites some downsides:

  • If a councillor is part of a party, they’ll need to cast the same vote as all other party members on a given bill, which means they can’t cast a conflicting vote that may be reflective of the true needs of their ward.

My dad also pointed out that a non-partisan government means that voters are truly voting for the best person for the job in a given ward, and the best person for Mayor. Though it’s not clear if this will result in a better society than voting for the best party overall.


What exactly does a school board trustee do?

It’s not straightforward to find this answer on Google. Most search hits are articles from popular newspapers that answer the question in high-level, abstract terms (my opinion). But I found this great resource that answers the question in a way that satisfies me. It’s a guide for prospective candidates. Here are some basic things I learned:

  • The school board is the organization that carries out the mandates of the provincial education act. This might be obvious to say.
  • But here’s what surprised me: the members of the board are the trustees! My (wrong) impression was that trustees are only regional advocates or lobbyists but they are actually the ones who vote on board policies. This makes them very powerful and important. I think they are analogous to city councillors in the municipal government, in that they are regionally-elected officials who in turn have voting rights on proposed policies.
  • The board of trustees has exactly 1 employee who reports to them: the Director of Education. The Director is considered the CEO of the school board and their job is to execute the policies and vision set out by the board.
  • So what types of change do the trustees cause? The list is too long and broad to write here so please see the PDF. But in a nutshell they work on policies that impact *everthing* including things like academic achievement, inclusivity and safety, the board’s budget, all while collaborating with the local communities (ie. parents).
  • There are 22 trustees; an even number. How are tied votes broken? Don’t know!

So my immediate thought is: shouldn’t trustees have deep backgrounds as educators? Shouldn’t they be former teachers or school board administrators? Wouldn’t anyone lacking such experience also lack the competency required to do this job? You get to propose and vote on important board policies after all! The incumbent trustee in my ward is Ausma Malik — I googled for 5 mins and couldn’t find any information that she has a background in education. Some of the candidates in my ward have some background in education but many do not. I find this very surprising. Perhaps I’ve grossly misunderstood the role of the trustee and maybe it doesn’t require such a background to do the job competently. Perhaps people with such backgrounds are all employed as teachers and administrators and don’t have time for the job of a trustee. Or maybe this is truly a deep flaw in the system. I’d like to spend time reviewing some of the new board policies introduced in the 2014-2018 term and try to judge if experience as a professional educator was crucial to casting a competent vote.