Of Bank Failures and Bailouts.
Just so you know, Canada’s banks are in fine shape. Not the sort of ‘fine shape’ that US banks were in last year, but real, honest to goodness fine shape. But just in case, Ottawa is considering options to aid Canadian banks if the current global economic crisis persists.
And news from around the globe hasn’t been real great lately. A number of large US banks have failed, a record setting US bailout bill has been passed and the US government is now considering taking an ownership stake in banks (because what restores confidence more than government ownership?).
Meanwhile in the UK, they’ve already taken the step of partially nationalizing their banking system. The fallout from the global credit boom is turning bust in a bad way, look at whats happening in Iceland for just one example. The IMF has just announced the activation of an emergency funding scheme that was last used during the 1995 Asian economic crisis.
From previous discussion on this site I know that many of you are sitting on a cushion of cash, some above the $100k CDIC insured limit. Are you worried about the health of the Canadian economy and our banking system? Do you understand the ins and outs of CDIC insurance? Are you making any changes to your banking habits to prepare for possible problems?
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MickeyFinn Says:
October 9th, 2008 at 11:36 am
This is a real issue the all of us should take seriously. There is no guarantee that one or more of the Canadian banks will not get dragged down into the financial malaise that we are witnessing globally.
This is also an easy issue for which you can make some quick changes and provide yourself with increased security.
In my case, I have spread my deposits out over multiple institutions. All of the banks now offer high interest savings accounts: like HSBC which pays me nearly 3% in an account they call the “Direct Savings account” which is HSBC’s way of competing with ING – where I have another account. As an aside, HSBC justifies their ability to pay a high rate of interest on this account by not providing any signifianct amount of services with it. What that translates to is that to transfer money into or our of their Direct Savings account you need to make the transfer online (big deal).
Similarly, I have money at each of my brokerage accounts placed into bankers’ acceptances (I’m not advocating bankers’ acceptances in particular but in general I am willing to accept the risk as these instruments are from the big Canadian banks like Royal, Scotia, TD etc. and at least for now they seem stable enough and in any event a bankers’ acceptance can be sold anytime without penalty.)
In the plainest of terms what you want to do is spread your money amongst multiple institutions and take advantage of the $100,000 of deposit insurance protection and or the investment dealers insurance that you receive per institution.
For those of you who are TD bank fans, TD has a number of separate legal entities and as a result you can have separate accounts with each of these entities and get the $100k protection times 4 while doing alot of banking at TD!
By the way, for those of you who have a spouse, you can have a second and third account at each bank by opening separate personal accounts as well as a joint account… each account benefits from its own $100k of deposit insurance protection.
Put your money away safely and patiently wait for the real estate train wreck to unfold. As I have mentioned previously, the train is picking up speed by the day and it is already out of control.
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AnneW. Says:
October 9th, 2008 at 11:49 am
For everyone who has more than $100,000 to worry about splitting among banks… just take a minute and be thankful for all that you have! Many of our peers don’t have this “problem” to worry about!
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ant Says:
October 9th, 2008 at 11:53 am
Thanks Mickyfinn! I was skeptical about the 3 accounts in one institution being covered for a couple (2 single accounts and 1 joint account) so I went to the CDIC site to try to get confirmation and found this handy CDIC insurance calculator:
http://www.cdic.ca/index.cfm?c.....mp;la_id=1
It does appear to be true, which is good to know. I’ve been procrastinating opening an account at a new bank, now I know I just have to move my money around with our existing accounts and each one will be covered up to the $100k limit. I’m going to do that now, thanks for the info!
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ant Says:
October 9th, 2008 at 11:57 am
AnneW, oh I’m thankful alright, but I don’t attribute it to ‘luck’ or anything like that – there have been times in the last few years I’ve felt like giving in, taking on some of that easy credit and signing up for more debt than I can handle.
.
That no longer looks like such a good idea
And since I intend to keep the money I’ve been able to save, I’m glad this topic came up for discussion!
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Anonymous Says:
October 9th, 2008 at 1:19 pm
Worried about bank accounts above $100k? Geez, I wish I had your guys problems!
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Gadwin Says:
October 9th, 2008 at 1:22 pm
“Credit crisis hits Canada
Thursday October 9, 2:07 pm ET
By Rob Gillies, Associated Press Writer
Canadian finance minister looking for ways to keep credit flowing
TORONTO (AP) — The global credit crisis is starting to restrict the ability of Canadians to obtain loans for mortgages, cars and investments, Canada’s finance minister said Thursday. Finance Minister Jim Flaherty said he is looking to increase liquidity in the market but declined to release details.”
source: http://biz.yahoo.com/ap/081009.....risis.html
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Nesday Girl Says:
October 9th, 2008 at 1:25 pm
I had all my future house savings in ING and decided to split off half to Coast Capital last week as the financial fiasco unfolded in the States. I wanted to use banks that still offered high interest with no service charges. I also though it best to continue to build up my relationship with Coast Capital (where my chequing account is) so when it comes time to get that first mortgage, I will be in a better position to get accepted.
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beta Says:
October 9th, 2008 at 1:33 pm
Thank Mickey & ant…I was pretty sure I was covered in different accounts, but it’s always reassuring to get further confirmation.
ant – I felt like capitulating more than once, but now the long wait is finally over and there’s no temptation whatsoever.
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Vansanity Says:
October 9th, 2008 at 1:40 pm
I just have to get something off my chest… there’s been people here that say some of us are cheering for a recession or worse. No, we’re not cheering for it, we saw it coming and prepared ourselves for it. To us, it’s just fascinating to watch it all happen from our savings accounts and cheap rental units.
When others laughed at the thought of a recession or housing downturn and instead incurred massive debt, we bit our tongues and waited. How often did you read the quote on here: “when the tide goes out we’ll see who was swimming naked”? What did you think we were talking about?
Just to name a few, over the past few years we saw:
real greed and propaganda;
1) lending become far looser than it had before;
2) HELOC and 0 down mortgages;
3) interest rates held extremely low, far too long;
4) a housing boom;
5) inflation numbers not fitting what we saw in our lives;
6) jobs numbers climb when main industries were crashing;
7) new products come on the market to keep prices climbing;
9) A BUBBLE both in real estate and in commodities;
10) an inevitable bust just waiting to happen.
Those that made money and are out of the speculative buying of both housing and equities, we tip our hat to you. Remember bulls make money, bears make money and piggies go to slaughter.
So don’t give me this BS that we’re so naive, all of the sudden, that we’re “cheering” for a recession or worse. We left that type of ignorance to you. We warned and you laughed and called us bitter. Spare me this BS. We know we’re all affected by what is happening now, some of us just better prepared for it because we saw it coming.
If you think you’ve seen it all, just wait for the housing meltdown to really gain some momentum locally, or maybe I’m just bitter because I “missed” the boom.
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Gadwin Says:
October 9th, 2008 at 2:10 pm
No sane bear was cheering for a recession. We are merely PREDICTING a recession because of the unfolding U.S. financial meltdown.
Fortunately, those that expect the sh*t to hit the fan have prepared themselves in advance of the economic downturn.
Canada won’t escape the financial carnage in the U.S. I can’t even imagine how much BC real estate prices will fall in 2009 … specuvestors, look out below!
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Ed Says:
October 9th, 2008 at 3:15 pm
Any reasonable speculation on the impact of a total lockup in the USA on the system here in Canada? I would expect to see delayed paycheques, shortages of foods and other essentials in the US, and so on, but what would be the impact here?
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dingus Says:
October 9th, 2008 at 3:46 pm
More joy from the Globe and Mail
Real estate industry seeks to quell fears
http://tinyurl.com/476hy2
There has been a real sea change in reporting these days, no?
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Drachen Says:
October 9th, 2008 at 3:52 pm
Ed
Well it’s not too likely to have a direct impact. Unless your employer uses an American bank account. The problem will come if things get worse and the Americans try to halt a run on the banks by offering 100% protection, that’s what happened in the Great Depression and it’s happening right now with Ireland and Great Britain. In the current case on the Isles the problem created is that many British account holders have moved their money to the 100% guaranteed Irish accounts sucking money from the British banks. Hopefully the Americans don’t pull that crap but if they do it could mean serious trouble up here as banks lose capitalization.
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Mold City Says:
October 9th, 2008 at 4:05 pm
Nice link dingus.
Low mortgage rates and more prudent lending regulations have helped prevent Canada from a U.S.-style meltdown, Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, said on the call.
This includes the pending elimination of 40-year and zero-down payment mortgages when the government pulls its backing for these products on Oct. 15, he added.
So the key example of our prudence is our policy of closing the barn doors after the horses have left?
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Anonymous Says:
October 9th, 2008 at 4:14 pm
“Well it’s not too likely to have a direct impact. Unless your employer uses an American bank account”
wasn’t there problems brewing at the golden ears bridge and the athlete’s village? financials are getting hammered here too, so wouldn’t they be cutting back on lending and all that? no more variable mortgages for new customers, no more zero down, no more 40-year mortgages…
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Deja Jay Says:
October 9th, 2008 at 4:16 pm
jaybanks Says:
March 11th, 2008 at 5:36 am
As the Vancouver condos become more and more popular people goes mad about not to miss the opportunity to buy one on presale if it`s possible. The advantages of living in one of these is quite understandable especially for young couples buying their first home. The project that has been canceled created a taut situation so one should hurry up not to miss the great deals.
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satan Says:
October 9th, 2008 at 4:17 pm
Mark my words. There will be no independent canadian banks left standing after this is over. They will most likely be nationalized.
I have been saying this for over the last 2 years. Some of you foolishly believe that there is some magical shield around canadian banks, or that they have low exposure to c**p or that they are better capitalized. How can you take them for their word! They are lying..
Even TD is going to go under. It may be pulled under before it’s time. What is happening in the world is far beyond what most of you can comprehend. Essentially the banking model of the last 150 years is dead. A new model will have to be created. I am guessing that that new model will see commercial banks as utilities, moderately profitable but heavily regulated with substantial oversight.
No western nation will be able to do things any other way.
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Anonymous Says:
October 9th, 2008 at 4:18 pm
“To us, it’s just fascinating to watch it all happen from our savings accounts and cheap rental units.”
Thats pretty cruel vansanity, I’m suprised your not embarrased to share your lack of caring about retirees whose investments are crashing and people losing their jobs. just because you’ve been fortunate doesn’t give you any right to lord it over everyone else.
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This Autums is going to be good! Says:
October 9th, 2008 at 4:18 pm
Vancouver ReMax real estate agent Says:
August 15th, 2008 at 5:41 am
Ha-ha-ha…
You had me at the 4th link (buy our BC home, we’ll give you cash), and the last one really cracked me up (buy one new home, get one free)! How do you see the future of the Canadian RE market?
I think this autumn’s gonna be a great one!
Cheers from ReMax Vancouver,
Jay
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MickeyFinn Says:
October 9th, 2008 at 4:27 pm
I was just at a coffee shop in downtown Vancouver called Sciue, which is next door to a currency and bullion exchange. There was a crowd of men in the bullion exchange and when I asked someone what was up it was explained to me that they were lining-up to buy gold coins.
Is it just me or is this getting a bit worrisome?
Part of me wants to believe that this is all going to work itself out (in fact, I question if this isn’t akin to the Y2K fiasco that left us all on pins and needles at midnight December 31, 1999 expecting the world’s financial system to crash over a couple extra zeros in the date range in computer programs: when in reality all that happened was one woman’s fax machine in Australia needed to be reprogrammed and some kid working in a video store in North Carolina had to calculate the correct change by hand) but another part of me wonders if we’re really going to experience some major upheaval across the board?
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DaveD Says:
October 9th, 2008 at 4:31 pm
“just because you’ve been fortunate ”
Excuse me? Does being fortunate now mean “having put up with six years worth of snide comments and pitying looks as we refused to join in on the insupportable hysteria?”
I guess we were very fortunate.
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human778 Says:
October 9th, 2008 at 4:38 pm
http://en.wikipedia.org/wiki/W.....sh_of_1929
Read this and substitute 2008 for 1929…
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Gadwin Says:
October 9th, 2008 at 4:51 pm
People, we are in some serious sh*t. The U.S. consumer has been going on credit for too long and we’ve had possibly the biggest real estate bubble in the last 50 years.
We’re not just going to have a typical recession – if we had a typical recession, we’d have gotten away from this with a “slap on the hand.” The impending recession will be that much worse – and it’s possible that we may face another Great Depression. Let’s hope that we don’t have a second Great Depression, but with what’s going on, don’t count that out.
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Clam Chowderhead Says:
October 9th, 2008 at 4:51 pm
I remember Y2K well, I was that person that had to wait an extra 5 minutes while the kid learned how to use a calculator so I could get my change back after renting a copy of Planet of the Apes.
Smart people will make alot of money on this crisis, but most will lose money. This one will pass soon as the world ramps up again in time to prepare for the next crisis.
Wonder if December 2012 will be the next one.
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alexcanuck Says:
October 9th, 2008 at 4:57 pm
just because you’ve been fortunate doesn’t give you any right to lord it over everyone else.
Sheesh!
We haven’t been “fortunate”. We’ve worked hard, saved our money, stayed out of debt, especially debt to buy toys and houses we can’t afford, kept ourselves educated and aware of the global forces affecting us. Many of us missed out on speculative (and risky) profits by being rather “stodgy” in our investment vehicles.
You know, all that boring stuff that older and wiser people drone on about. The bulls have had one heck of a run, which always leaves one heck of a mess behind. Now it is the turn for the bears to clean up the mess. And clean up while cleaning up. Nobody made you drink the kool-aid, in fact we warned you. Loudly, repeatedly.
We were mocked and ridiculed. Both in the media and at dinner parties, until we learned to bite our tongues. I will not mock and gloat over my friends and family, that’s not what civilized people do. But to you, anonymous stranger who won’t even make up a name?
Nyaa, nyaa, told you so! You deserve everything you’ve got. At least everything you’ll have left once the storm is over. I will have less than I, (and you also) would have had if we had all worked together to build a better future. But I will have more than you.
Too bad I don’t want want any of the juvenile toys you went so deep into debt to buy, some screaming hot deals on power boats and massive pick-up trucks to be had soon.
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BBY Says:
October 9th, 2008 at 5:08 pm
Smart people will make alot of money on this crisis, but most will lose money. This one will pass soon as the world ramps up again in time to prepare for the next crisis.
Wonder if December 2012 will be the next one.
Oh thanks. I feel so much better now. You’re probably as right about this prediction as one of those bulls on this blog glibly dismissing the prospects of a housing correction, or of a recession even.
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Dave Says:
October 9th, 2008 at 5:42 pm
Gadwin, I hope we don’t have another Great Depression as well and I also don’t think we can count that possibility out. The failure of many large banks is very concerning and every past depression has had a liquidity crunch, massive bank failures and deflation. However, I believe that central banks will do anything and everything to avoid deflation. They have already stated as much.
I have gone out to restaurants and coffee shops a lot this past week and all I hear are people talking about their concern for the economy. I hear words like gold, Ron Paul, the Federal Reserve, AIG, etc… I am amazed at how tuned in people are to this situation. Not only that, I am amazed that the level of understanding is quite high.
Clearly, this is going to impact consumer confidence, which will in-turn impact our local economy. People are going to spend less and avoid big purchases. Yes, that includes housing. If this situation keeps getting worse and doesn’t stabilize, then all my housing predictions are off the table. Housing will obviously not perform well in a recession or depression.
I still believe that the fundamentals of our country are sound, as is our province. We have everything here and there is no reason we can’t have the best economy in the world. That said, having the best negative growth isn’t anything to be happy about.
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RJB Says:
October 9th, 2008 at 5:47 pm
The Barclay is now in Phase II! I know because the sign out front says so!
What could Phase II be? A fresh coat of brown paint? Removing the dead shrubs? I can’t wait!
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Gadwin Says:
October 9th, 2008 at 5:47 pm
>People are going to spend less and avoid big purchases.
>Yes, that includes housing. If this situation keeps
>getting worse and doesn’t stabilize, then all my housing
>predictions are off the table. Housing will obviously not
>perform well in a recession or depression.
Congrats Dave. Good to see you are coming to some common sense! It’s not over yet … the crisis seems to be spreading to South Korea and Indonesia now. When you think it has stopped, you turn on the news and hear another disaster story
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Anonymous Says:
October 9th, 2008 at 5:51 pm
MickeyFinn, you have been mislead! What these people are lining up to buy is not gold, it is promise of gold delivered some time in the future, with no guarantee of exactly when. Now that is really screwed up!
Go inside of VBCE and read the notes they have posted on all windows. And to have people lining up for that…
P.S. in case you are wondering why they are not buying gold coins- it’s because there are none available! First silver disappeared, then gold. This has been going on for more than a month now. If you want to buy silver coins you have to pay well over 2x “market” rate for silver.
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alexcanuck Says:
October 9th, 2008 at 5:55 pm
Asia markets open. Nikkei down 800 after 1/2 hr of trading. OMG. I am so glad to be in cash, HXD and HOD. A bit of gold bull as well. This is NOT business as usual, and the rules have been changed. New bailout tomorrow? They can’t let it go like into the weekend, come Monday a fuul-blown panic will be upon us.
Ps. The new bail-out won’t work.
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George the Third Says:
October 9th, 2008 at 5:56 pm
RJB:
I walked by the Barclay today. Some kid was raking up the leaves. Must be doing good ’cause the sign says 50% sold. I think I’ll check back when its 50% off.
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Dave Says:
October 9th, 2008 at 5:57 pm
Anon, if somebody wants silver at 2X market, I just might be willing to sell some. $35 for a Maple ounce or $350 for a 10 ounce bar sounds good to me.
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Anonymous Says:
October 9th, 2008 at 6:06 pm
“If this situation keeps getting worse and doesn’t stabilize, then all my housing predictions are off the table. Housing will obviously not perform well in a recession or depression.”
going into CYA mode, i see…
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Dave Says:
October 9th, 2008 at 6:13 pm
Anon, not at all. Some of my earliest posts have said as much. I have been clear that a significant external economic event would affect the housing market. I didn’t hear many of my detractors predict massive bank failures and the DOW dropping under 9000. This has nothing to do with CYA and everything to do with taking in new information that most people did not predict. I am not going to blindly stick to past analysis based on old information. I have to consider new info and the last couple weeks significantly changes my outlook.
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Gadwin Says:
October 9th, 2008 at 6:14 pm
This is crazy. Asia is having another big sell off, after the Dow tanked today. It’s a frenzy I tell ya.
Seriously, if there are any people here trying to sell their real estate, just cut price NOW and get out while you can. It’s not a financial crisis anymore, it’s a financial meltdown.
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punface Says:
October 9th, 2008 at 6:22 pm
George the Third: I noticed the signs on The Barclay were replaced today and now read “Phase 2 Now Selling.” There were 67 units for sale originally, and I don’t see how they could have added more since it was a condo conversion.
Selling units that have been sitting on the market for almost a year as “Phase 2” seems almost fraudulent to me.
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Anonymous Says:
October 9th, 2008 at 6:35 pm
“Anon, not at all.”
Wow. I was almost convinced you were a realtor. In case you are and things don’t work out for you, may i suggest a career in politics?
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Strataman Says:
October 9th, 2008 at 6:57 pm
Dave Said; “I didn’t hear many of my detractors predict massive bank failures and the DOW dropping under 9000. ” No that is true but the difference is we said (the BEARS) that we follow the US in lockstep generally two years behind. The Vancouver Bulls constantly, continuously said we have nothing to do with the US. Dosh a perfect example (seems to have disappeared). Vancouver has absolutely NOTHING special about it nothing zip and in many respects is way worse off then many American cities (Miami, Las Vegas, San Diego and way way worse of then San Francisco.) Dave the problem with you is for some unknown reason you think a town bit town in the middle of no where is “different”. I love this town cause its my home; internationally it’s not even on the measuring stick!
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Anonymous Says:
October 9th, 2008 at 6:59 pm
Gadwin, it is not a meltdown, this is just the beginning. Real economy has not felt this yet. When it does, it will feed back into the financial markets and then it will all really go down. That is provided the markets stay open.
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Anonymous Says:
October 9th, 2008 at 7:06 pm
Dave, would you really sell your silver now for 2X the artificial price? Think about it, if you can’t buy anything at this price, why would you consider it to be “market” price?
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Stubblenut Says:
October 9th, 2008 at 7:14 pm
I’ve been slowly building up my pantry over the past while, and I’m now at the point where I could keep the family going for a couple of month if it were needed. Probably won’t be, but I’m not going to get caught out and be unable to feed us if it is.
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Anonymous Says:
October 9th, 2008 at 7:22 pm
Stubblenut, good thinking!
What’s your plan for the month #3?
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Raincouver Says:
October 9th, 2008 at 7:33 pm
*
I just wanted to say, appropos to nothing: where are all the Bulls of yesteryear, long ago…like a couple months ago? They declared Vancouver is a Fortress – unrelated to USA real estate or the tides of American finance? Different, special, hosts of the Winter Games, impervious to market forces. Where are they now?
Pisses me off. Where have all the blow-hards disappeared to…
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freako Says:
October 9th, 2008 at 7:36 pm
I didn’t hear many of my detractors predict massive bank failures and the DOW dropping under 9000.
Somewhat. Your detractors were on the right track. We discussed Fannie and Freddie needing a bailout as early as 2005. Most long time bears have been very negative on equities, and have advocated cash for some time.
No we didn’t predict massive bank failures, but we thought the high chance of soft landing predictions that your esteemed experts were predicting laughable.
The ironic thing is that it is HOUSING that has caused these financial troubles. We said that the trouble would spread into the U.S. economy and beyond. You’d be surprised how many disagreed with this.
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betamax Says:
October 9th, 2008 at 7:37 pm
“If this situation keeps getting worse and doesn’t stabilize, then all my housing predictions are off the table. Housing will obviously not perform well in a recession or depression.”
Housing’s dead anyway, and no one gave your predictions any credence.
“I didn’t hear many of my detractors predict massive bank failures and the DOW dropping under 9000.”
Bank failures aplenty were predicted and lots of people foresaw the macro effects of a housing crash despite not making specific predictions about the DOW.
Here’s an article about HSBC’s $17B writedown in March; the writing was on the wall for banks then for anyone with eyes to see it and a brain to think it through:
http://tinyurl.com/4dyet8
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Dave Says:
October 9th, 2008 at 7:37 pm
Dave, would you really sell your silver now for 2X the artificial price?
I am not so quick to buy into conspiracy theories, which is where I think you are going with this. There is a shortage of Maples and 10 ounce bars to be sure, but I believe you can still find 100 ounce sizes relatively easily.
So to answer your question, I think I would sell for 2X and then go and buy higher weight silver with the proceeds.
I guess I could just stand in front of VBCE and hawk my silver.
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freako Says:
October 9th, 2008 at 7:38 pm
Pisses me off. Where have all the blow-hards disappeared to…
Don’t know, but the “hoocouldanode” schtick won’t work here, so perhaps they have gone to pump in more bullish pastures.
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freako Says:
October 9th, 2008 at 7:49 pm
If Nasdaq goes below 1172 (that is far far way still), it will be a 12 year low. Imagine that, PRE tech bubble prices. The real returns must be pathetic.
Nasdaq peaked around 5000 in 2000. Now 8.5 years later, it is worth a third of that. Ouch.
Vancouver housing will get is so bad, it is mind boggling. I wonder if the banks will turn chickensh*t and limit Vancouver mortgage lending. That would decimate prices NOW.
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Raincouver Says:
October 9th, 2008 at 7:51 pm
Gadwin, it is not a meltdown, this is just the beginning. Real economy has not felt this yet.
People figure they can just by-pass the Crash, and go to the next stage of…prosperity is just around the corner.
The money meltdown still has to make its way into the real economy made up of real people…we haven’t started yet. Some like to imagine this is the bottom, thinking ‘Whew, we dodged that bullet’.
It’s not going to happen like that.
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Anonymous Says:
October 9th, 2008 at 7:51 pm
Dave, no conspiracy theories. Simply difference between paper “markets” and real markets. And no, you can’t buy 100 oz silver, not since a month ago. Not just Vancouver, but anywhere in North America. 100 oz is retail size, and all retail products are long gone.
Yes, i am sure you can sell your silver at VBCE doors at a very healthy premium, except that this premium would be calculated relative to an artificial price.
Look at it from this perspective- the market price is supposed to be the result of a balance found between all sellers and all buyers. So how is this “market” price if there are hundreds of thousands if not millions of willing and able buyers blocked off the market?
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Dave Says:
October 9th, 2008 at 7:54 pm
The Nikkei is down 10% already today. It’s nearing a major support level of 7,600. I think everything is now oversold and it’s probably a good time to pick up some bargains.
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Stubblenut Says:
October 9th, 2008 at 8:00 pm
“What’s your plan for the month #3? ”
Huntin’ and fishin’. If it actually got bad enough that three months in we still needed supplies we’d pretty much be in Road Warrior territory anyway.
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Dave Says:
October 9th, 2008 at 8:01 pm
Anon, Border Gold has 100 ounce listed for sale. You can find them on Ebay easily as well.
http://cgi.ebay.ca/Silver-Bull.....286.c0.m14
I think I will head down to VBCE and sell some metal.
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freako Says:
October 9th, 2008 at 8:07 pm
Topically, Reuters has an article out entitled “Canada rated world’s soundest bank system: survey”.
Dave, so we have you on record as bullish on stocks. You may be right, though don’t think it was all psychology. The drop would have happened anyway, though at a much more measured pace. We long wondered why the bond market seemed to have priced in a recession but the stock market hadn’t. We concluded that the stock market was much less efficient, and I think recent events support that notion. It is just a wake up to reality. Will it overshoot? Probably.
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freako Says:
October 9th, 2008 at 8:09 pm
It’s nearing a major support level of 7,600
Do you really believe such arbitrary bullsh*t? The component stocks are traded based on supply and demand. Do you think this is impacted by some arbitrary support line in the aggregate index?
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Dave Says:
October 9th, 2008 at 8:15 pm
I think the DOW still has some downside with major support somewhere between 7,600 and 8,200. If it breaks under 7,600, then stick a fork in it because it won’t be heading up anytime soon. If it bounces, then we should be back above 10k in no time. I think some of the dividend staples on the DOW are good buys (e.g. GE, DD, JNJ, WMT).
If we don’t fall into a Depression here, I think the DOW will be back to 14k within a few years and then make another low under 10k two or three years after that. I think the recent downturn confirms that we are in a secular bear market similar to the one in the period of 1966 to 1982.
Put me on record.
Who’s ‘we’? I’m not sure about different efficiencies between bonds and equities.
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Dave Says:
October 9th, 2008 at 8:20 pm
Yes, I do believe in support levels. I don’t think the market looks at the index and makes fundamental decisions above itself. Obviously stocks are traded individually. But, I do believe the performance of major stocks are interlinked consistent with the ‘Dow Theory’.
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Anonymous Says:
October 9th, 2008 at 8:35 pm
Dave, let us know how your silver selling and stock buying works out. Thanks
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Anonymous Says:
October 9th, 2008 at 8:37 pm
Stubblenut, good plan actually! You got it all figured out, just remember to stock up on ammo and fish hooks
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Anonymous Says:
October 9th, 2008 at 8:42 pm
Can anyone explain why the us dollar is so much higher than the Canadian dollar right now?
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stagnate Says:
October 9th, 2008 at 8:47 pm
#61- appears the outflows out of canada are greater proportionatly than the u.s. a staggering amount of money must be leaving.
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freako Says:
October 9th, 2008 at 8:54 pm
But, I do believe the performance of major stocks are interlinked consistent with the ‘Dow Theory’.
I think such theories are total crap. They cannot possible predict the endless stream of random changes in fundamental variables that are the true drivers of the market. Anyhow, that is getting a little OT.
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freako Says:
October 9th, 2008 at 8:58 pm
Who’s ‘we’? I’m not sure about different efficiencies between bonds and equities.
The collective group of bears who have endlessly discussed every nook and cranny of this here housing bubble.
Clearly the inverted yield curve of 2006 was predicting something that the stock markets didn’t. One had to be wrong.
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Strataman Says:
October 9th, 2008 at 8:58 pm
“Can anyone explain why the us dollar is so much higher than the Canadian dollar right now?” The Canadian dollar is pretty well linked to oil and to a lessor extent gold, and then mineral/metal prices. Where those prices go so does the Loonie. As a commodities dominant economy that makes sense! Industrial and high tech industries make up an in signifigant portion of the Canadian economy.
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betamax Says:
October 9th, 2008 at 8:59 pm
Pisses me off. Where have all the blow-hards disappeared to…
No worries, they’re feeling it more than you are…
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Dave Says:
October 9th, 2008 at 9:02 pm
Clearly the inverted yield curve of 2006 was predicting something that the stock markets didn’t. One had to be wrong.
Clearly?
Yes, every recession has been led by an inverted curve, but not every inverted curve has led to a recession. It is right only about 1/2 the time.
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dbcooper Says:
October 9th, 2008 at 9:05 pm
why is everyone refusing to discuss the subject du jour which is: cannibalism?
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freako Says:
October 9th, 2008 at 9:12 pm
Yes, every recession has been led by an inverted curve, but not every inverted curve has led to a recession. It is right only about 1/2 the time.
Huh? Why would stocks keep setting record highs if one of our most reliable recession indicators suggests that there is a 50% chance of recession? You don’t see a divergence?
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Dave Says:
October 9th, 2008 at 9:14 pm
I think such theories are total crap. They cannot possible predict the endless stream of random changes in fundamental variables that are the true drivers of the market.
Yes we are getting off topic, so this is my last say on this. First, the Dow Jones was created to be an index based upon his theory. Second, it has been around for a century. If it was total crap, then it probably wouldn’t still be around.
I agree with your point that each stock drives trades on it’s own fundamentals. But, you can’t ignore that there is a huge systemic component to the economy. If manufacturing drops off, then surely, transportation will as well. The principles of his theory are fairly simple and they are reasonable assumptions.
But, let’s agree to disagree on this.
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freako Says:
October 9th, 2008 at 9:22 pm
First, the Dow Jones was created to be an index based upon his theory. Second, it has been around for a century. If it was total crap, then it probably wouldn’t still be around.
Oh, there is lots of crap that has been around for a century. If there is a sufficient supply of willing fools, nothing goes away. Maybe you can agree with that. Over and out.
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Anonymous Says:
October 9th, 2008 at 9:22 pm
“Second, it has been around for a century. If it was total crap, then it probably wouldn’t still be around.”
Lehman Bros was around for 158 years before people figured out it was crap.
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patriotz Says:
October 9th, 2008 at 9:24 pm
There was a crowd of men in the bullion exchange and when I asked someone what was up it was explained to me that they were lining-up to buy gold coins.
People lining up to buy gold coins? Hey,just like in 1980. Come to think up it, people were lining up to buy condos around that time as well.
So what happened over the next few years?
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patriotz Says:
October 9th, 2008 at 9:29 pm
MOVE ALONG FOLKS, NOTHING TO SEE HERE!
http://www.reportonbusiness.co.....m_mostview
The real estate industry has gone into damage-control mode to try to quell fears Canada’s housing market could enter into a U.S.-style freefall.
Industry representatives held a conference call Thursday to challenge a recent report by Merrill Lynch Canada Inc. that made headlines by suggesting Canada’s housing market could be heading for the same perils as that of the United States.
“We want to draw attention to the fact that despite some recent stories that suggest the Canadian housing market is heading for a crash similar to the States, that just isn’t in the cards,” Gregory Klump, chief economist at the Canadian Real Estate Association (CREA), said on the call.
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Brittanny Says:
October 9th, 2008 at 9:48 pm
9:46 PM :
Nikkei (-888.48)
Oil $82.49
Canucks/Flames 3-0
Gonna be an interesting day in the makets tommorrow.
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jesse Says:
October 9th, 2008 at 9:51 pm
Ottawa admits it must act on the economy
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Brittanny Says:
October 9th, 2008 at 9:58 pm
9:58 PM :
Nikkei (-862.48)
Oil $82.00
Canucks/Flames 4-0
Gonna be an interesting day in the makets tommorrow.
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Ed Says:
October 9th, 2008 at 10:19 pm
Oil $82.00
Hey cool, so gas should be about $0.82 per liter real soon now, right? Right?
Anyone? Bueller?
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Partisan Spectator Says:
October 9th, 2008 at 10:30 pm
I recall it was freako betting few years ago (on VHB?) that oil would be back to $50. Once it tipped the mark and bounced back. Today it looks like $50 is not the limit. All good and bad news are now considered bad. Not so long ago all good and bad news were deemed good…
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Anonymous Says:
October 9th, 2008 at 10:32 pm
“Can anyone explain why the us dollar is so much higher than the Canadian dollar right now?”
It’s not “so much higher”. To put things in perspective look at AUD- less than three months ago it was almost equal to USD, and now it is trading at 1.51… Don’t be surprised if CAD follows the same trajectory.
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patriotz Says:
October 9th, 2008 at 10:33 pm
A plan originally earmarked for Friday morning would see the government assume some mortgages currently held by the banks by giving them to the Canadian Mortgage and Housing Corp., a Crown corporation.
CMHC has been doing this for years (Canada Housing Trust). So just what is new about this?
http://www.financialpost.com/s.....mp;k=20957
But is that really the right thing to do? I think the last thing Canada needs right now is to supply more cheap capital to an overvalued asset class – housing.
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Raincouver Says:
October 9th, 2008 at 10:34 pm
Jesse quotes #76
A plan originally earmarked for Friday morning would see the government assume some mortgages currently held by the banks by giving them to the Canadian Mortgage and Housing Corp., a Crown corporation. In turn, the banks might receive CMHC paper – possibly bonds – against which they could use as collateral for their own loans from other banks.
Oh, this looks real good. Banks are “giving” mortgages to CMHC. How fabulous is that?
Thanks for the link, man.
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Anonymous Says:
October 9th, 2008 at 10:37 pm
Strataman, it’s not CAD that is responsible for the recent change in the exchange rate, it is a USD rally against pretty much every other currency out there. CAD is worth less than USD not because oil is down, but oil is down because of the same reasons why USD is up. Hope this makes sense. Basically as long as current wave of market fear continues to feed on itself CAD will keep going down relative to USD.
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John Says:
October 9th, 2008 at 10:39 pm
I can’t believe you fools are talking about bank failures in this country. Please please please read up on the CMHC and our Bank Act and you’ll see that a bank failure is next to impossible. I know there’s not much that will convince you but whatever like I’ve said I’m preparing for an early retirement to Mexico.
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The Van Man Says:
October 9th, 2008 at 10:51 pm
This banking crisis had happened before! In fact, if you google Japan ten years recession, you will read an explanation as to why the economy faltered and went into a serious decade long depression and asset deflation. But if you read the cause and effect, you will notice that it is “VERY SIMILAR” to what our central bankers around the world are doing!!
1, Nationalizing banks
2, Buying up toxic loans
3, Propping up dead businesses and faulty banks instead of letting them go
4, Preventing the housing bust and the asset price deflation by keeping people in homes that they can’t afford
All of that Japan had done so for 10 long years! That’s 10 years and still they couldn’t fix it. We were laughing on the tube when we heard Japan said they were cutting interest rates with the rest of the banks. Yeah, from 0.1% to what?!?
We are saddened to see that all the central bankers had done were to try and inflate the money supply again in the desperate attempt to jump start the economy. But if there is anything to learn from Japan is that, banks weren’t afraid to lend money. It is the borrowers who the lenders believed have no credibility whatsoever to lend to. This is happening now. We just recently came back from our vacation and visited our bank and spoke with our bank manager. She had this to say..
1, Loans of all kinds will be more difficult to obtain.
2, Interest on loans will be prime rate + 1% or more
3, Loans will be evaluated via traditional lending terms and determination (the old fashioned way)
4, Credit line will be chopped to high risk borrowers without notice
If many of you think our economy is in good footing, why are banks now so unwilling to loan money easily?!? Isn’t this an omen to possible trouble coming ahead..
What happens to individuals and businesses that rely on line of credit to run their daily operation?!?
Again, this happened in Japan and is ongoing, because all the excessive liquidity sloshing around were used to build up a cash reserve against the mounting bad debt and failing asset bubbles (inflated real estate) that deprive lending capital to other growth businesses around.
When growth businesses are starved of running capital, they will capitulate and wither.
We are in this stage that we rather see the economy stagnate and wither slowly rather than a big chop on the head if the Fed and the US government didn’t approve the rescue package. Either way, we are sinking Canada included. There’s no escaping as our Canadian banks will keep its liquidity in check to hold their own fort. With Canadians saving nothing, it means Canadian banks will have no way to raise extra capital to finance other private capital projects. Which leaves only the government to fund projects, and when they do, they will ALWAYS fund to those of the elected and well connected business associates, which then further distorts the economic reality.
Again, this had happened in Japan..
I suggest that everyone learn from what happened in Japan and prepare yourself for it.
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Dan in Calgary Says:
October 9th, 2008 at 10:59 pm
I recall it was freako betting few years ago (on VHB?) that oil would be back to $50. Once it tipped the mark and bounced back. Today it looks like $50 is not the limit. All good and bad news are now considered bad. Not so long ago all good and bad news were deemed good…
Partisan Spectator, What do you mean? I’m admittedly old, and … well I just don’t get what your message is here.
87 X Tokyo - Other information | Worlds Biggest Cities Says:
October 10th, 2008 at 4:52 am
[...] Comment on Of Bank Failures and Bailouts. by The Van Man [...]
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no-lympics Says:
October 10th, 2008 at 7:49 am
Hmmmm:
I am old enough to recall the days (not that long ago)when one received double digit interest for a basic savings rate.
When the interests rate became laughable ie 1/2 to 1/3 of what they one were….many people shifted their investment focus.
Many were literally forced to enter the stock market, and later the real estate market, in order to attempt to acquire returns on par with what they once had with “safe” bank deposits.
In my view, this forced rampant speculation, ie we saw this over the past 20 years is based on (i) phoney money with the ink still wet “off the presses” that is also ( ii )lent out cheap. This is the equivalent of a loaded gun to a drunk.
The only ones that gained were the ones who pimp it…ie Gov’ts with bogus economies to placate the masses,and stock brokers and realtors, whose vested interests is to sell this fantasy and walk away like this was an economic equivalent of a one night stand.
When I see the CEO of Lehman brothers before Congress and admitting they will walk home with $400 Million for running a 100 + year old company that is now , finito…history…thats pretty much sums it up.
Solution is to raise the interst rates and keep the speculation D-O-W-N !!!!
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Partisan Spectator Says:
October 10th, 2008 at 9:27 am
Dan in Calgary,
My message was about sharing few observations with readers of this blog. Everyone is free to interpret them.
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freako Says:
October 10th, 2008 at 6:48 pm
I am old enough to recall the days (not that long ago)when one received double digit interest for a basic savings rate.
When the interests rate became laughable ie 1/2 to 1/3 of what they one were….many people shifted their investment focus.
You are forgetting that it is real interest rates that matter, not nominal. What good is 13% savings rate when inflation is 12%?
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ReductiMat Says:
October 10th, 2008 at 11:31 pm
Freako, I’m not an economist, nor do I play one on TV.
That said, isn’t one of the major components of our grief right now because of easy credit, ie., low interest rates?
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freako Says:
October 11th, 2008 at 1:24 pm
That said, isn’t one of the major components of our grief right now because of easy credit, ie., low interest rates?
Not necessarily. Our grief is the result of excess liquidity and the related bad lending and excess consumption.
Low rates need not be bad. If productivity is high, we can have low rates AND a strong economy. This is the missing link that all the talking heads are oblivious of.
Productivity growth is THE true reason why we have had a rising standard of living, and is truly the fruit we’ve been picking. But how many times do we hear it in debates? Never. Instead it is about consumers driving the economy, RE going up up and up just because. Tragic really.
Our problem stems from Greenspan’s miscalculation. He felt that he could keep rates lower than what previously was thought prudent because he felt that productivity would increase sufficiently to provide goods to absorb all the liquidity. He though this because of:
a) The IT revolution finally bearing fruit.
b) The fall of communist Soviet Union.
He calculated WRONG and we are all paying the price.
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freako Says:
October 11th, 2008 at 2:00 pm
Another related point is that high rates aren’t necessarily bad, nor is high inflation bad. Everything is relative.
What is generally thought of as undesirable is UNEXPECTED inflation. Even that isn’t as bad as thought. Contrary to popular belief (and what gold bugs and coin collectors like to tell you), it doesn’t devour wealth. It simply redistributes wealth between long term lenders and long term borrowers. That leads to nervousness and excessive risk premiums, but other than that no big deal.
High inflation does “tax” cash, so one has more incentive to keep as little around as possible (think hot potato). If inflation is TOO high, we do risk an inflationary spiral, but that is fairly extreme and easily remedied. The other danger is of course a deflationary spiral, which I think is a tangible risk at this time. In one of those, nobody buys anything because prices are falling, stalling the economy. Cash literally earns a real return (and tax free to boot).
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ReductiMat Says:
October 11th, 2008 at 5:03 pm
Great stuff, thanks Freako. Care to expound on why everyone and everything are doing their best to fight deflation? What’s wrong with it?
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freako Says:
October 11th, 2008 at 5:50 pm
Care to expound on why everyone and everything are doing their best to fight deflation? What’s wrong with it?
Like I said, people stop spending because prices are dropping. Would you buy anything non-essential if you knew it would be cheaper next week? It is almost the exact reverse of hyperinflation (where people rush to buy things before price goes up). Since people aren’t buying, business slow production, leading to unemployment, even less demand, lower prices still. And so on.
The whole idea is to keep inflation reasonable, which is not too high, not too low. Too close to zero risks deflationary spiral. Too high is unpopular, and may risk hyperinflation.
As many have pointed out, it is possible to simultaneously have high consumer inflation, but deflating investment assets. That is bad, because your home is going down while food may be going up.
Again, I can’t under emphasize the role of productivity. All the other stuff isn’t nearly as important. Can we as a society influence productivity? Hard to say, but bubbles hurt it by misallocating resources. As do protectionism, strong labour laws, high taxation etc.
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Frank Says:
October 12th, 2008 at 7:14 pm
I have total confidence in George Bush, Hank Paulson and Ben Bernanke. They are working feverishly right now to solve this problem and we should not worry our little heads about any of it. All of you should be sleeping soundly, knowing that your interests are being well looked after. Of course Mr. Harper should also be mentioned, along with Mr. Flaherty. People, we are in good hands, just as the old Allstate commercial used to say. This is just a big deal at the top, where a bunch of international banksters and bigwigs have ransacked not only the cookie jar, but everything else in the cupboard as well – therefore it has to be solved by other people at the top, which is being done now. Be happy that we have such marvellous leaders who will see us through these rocky waters!e