Canadian banks

[Roadmap2Retire]

(07-22-2015, 08:00 PM)rayray Wrote:

(07-22-2015, 06:17 PM)Roadmap2Retire Wrote: Hi rayray,
Canadian banks provide great value here. As you pointed out, most of them are attractively valued.

I wrote an article earlier this year that the banks would face continued weakness through the year and would be a great time to build good positions for long term holding. Article post here.

An update since then:
- Canada is already in recession, although Bank of Canada is using every word in their vocabulary to avoid using the R-word.
- The most recent interest rate cut came last week after the cut in Jan 2015. The banks have decided to take a bigger cut by increasing the spread between overnight interest rate and prime rate. See some of the details I shared last week when I added to my TD position.

Also pay attention to the risks - the Canadian housing market is extremely overheated and even the Bank of Canada has acknowledged that the market is probably 20-30% overvalued and is hoping for a soft landing.

To answer your oil question: See this article from earlier this year. According
to this BMO analyst, oil makes about 3% of total lending portfolio and about 10% of the Capital Markets division. Ive read some reports saying that BNS has a higher exposure and BNS took a bigger hit than the others - but BNS was also seeing some issues with its Latin American operations last year and closed some operations and laid off ppl.

R2R,

Good info here, I'll have to read your posts and posted articles more thoroughly. These investments are something really good to look at as an investor. The way I look at it is that there are always values to be bought but an investor sometimes has to pay attention to what the market is throwing at us. If we take what the market is giving us, good valuations, one doesn't have to worry about the market being overvalued or even diversification, everything will take care of itself with good investments and time.

I watch a lot of the home improvement shows and I'm blown away how much real estate costs in Canada! I didn't know that Canada was in a recession? This could be a great opportunity for DGI's!

Good luck with the recession R2R--hopefully it doesn't affect you and your family too much.

Well, I dont think the official classification is recession yet. There was contraction in the first quarter, and I think second quarter will probably see the same - but there are few different things at play here. BoC does not want to use the word recession and when asked by reporters, Stephen Poloz quipped that its not really helpful to use that word. Some economists are also commenting along the same lines saying that a recession is not just a contraction over two consecutive quarters, but also has to be accompanied by job losses - which we arent seeing yet. But I know for a fact that the western provinces are hurting - esp Alberta. We'll have to wait and see how things play out.
There have also been rumours saying that there is also pressure from the federal government...this being an election year, they are pushing the BoC to ease the monetary policy - so that a full blown recession is atleast delayed until the elections are done. The current election date is tentatively Oct 19, but again there are rumours that an early election may be called.

These are great times for building solid positions in Canadian banks. Like you know, Canadian banks are well run, much more conservative than the rest of the financial industry, and long term prospects are always their top priority. The institutions have a spectacular record of continuous dividends paid since 1829 (BMO), 1832 (BNS), 1857 (TD), 1868 (CM), 1870 (RY).