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Brokerage investment savings accounts
April 18, 2023
2:10 pm
mustang
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Other than one's potential concern re not being CDIC insured, any other reasons why one might prefer, say, TDB8150 (at 4.05%) to TDB2914 at 460%?
None immediately occur to me-- but I confess to not even being aware of this before

April 18, 2023
2:22 pm
AltaRed
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Money market mutual funds are never likely to break $1 (or $10) as the case may be. While they are not CDIC insured, it is pretty certain any high profile issuer of these would have a reputational meltdown if these things suffered a loss* in NAV. I don't believe there is an instance of a MMF ever suffering a loss of NAV.

I have owned MMFs a number of times in the past when the rates were materially better than a number of alternatives., but normally I prefer HISAs and brokerage ISAs.

* I seem to recall a few writings from years ago that a MMF portfolio manager has sometimes cut their management fee in times of financial crisis to ensure NAV is protected.

April 18, 2023
3:01 pm
svg1234
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I've been a financial advisor for close to 35 years. In all those years, yes, I have seen an MMF lose its NAV at least twice that I can remember. But they were not purely invested in Canadian instruments & currency. They weren't small funds either, so AUM doesn't necessarily make the difference. One that I can immediately recall was a major fund company's "North American" MMF that had a higher yield due to investing mainly in Canada, but with some American and Mexican exposure. Safe as can be, right? And then the Mexican peso crisis hit in I think around 1994? The fund NAV lost about 20%! They wound it up almost immediately after the crisis hit, which I thought was awful of them, because what would have been temporary losses became permanent losses.

In the case of the aforementioned MMFs, I strongly urge you to take a look at the holdings before investing, but the odds of anything bad happening to them is extremely small. Yet, the possibility does exist. The TD MMF and CIBC T-Bill fund are both invested mainly in very secure, Canadian federal and provincial govt paper. While I would rate the CIBC MMF as still very secure, I think it's a bit less so than the other two, hence the higher yield and slightly greater risk. Thus, I have less invested in that fund versus the others.

Yes, AltaRed, you are correct. Many MMFs cut their mgmt fees (some to zero) during ZIRP years. The MERs were way too high (versus yield) anyway for a MMF.

Best advice I can offer: always diversify in many different ways. Watch your correlation. Diversify by financial institution too. For example, in these "modern times", although very unlikely, an institution could come under cyber attack (which could prevent you from accessing your funds) or have other tech-related problems. Recall what happened to the NYSE not that many months ago. Never put too much in any one product or investment type or company or country or currency, etc. You just never know what can/will happen. If (when?) the SHTF, it happens very quickly, and at that point it's too late to do anything about it. Even those HISA ETFs that have become so popular (e.g. PSA), which I do own a bit of, can have problems under certain circumstances.

It really doesn't take much effort these days to diversify and reduce risk.

April 18, 2023
3:24 pm
AltaRed
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Thank you for that insight. I wouldn't be picking a MMF that had holdings scattered into developing economies but none the less, it goes to show there can be a loss.

For myself, I certainly don't fret about 10-20bp here or there, at least when it comes to Cash ETFs or MMFs. The highest yields have to be taking some extra risk for that bit of juice and it is not worth the trouble for me. Right now I have no interest in being anywhere other than brokerage ISAs DYN6004 (4.5%) and BMT104 (4.35%), nor would I be concerned about exceeding $100k CDIC.

April 18, 2023
4:43 pm
mustang
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Thanks, svg1234, and altared, for your contributions here
Very enlightenting

April 18, 2023
4:58 pm
Frieda
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Though I am sure I have had bigger losses in the junior market, i recollect losing one gold developer (Redcorp) that was invested in the ABCP market.

Unrelated, but perhaps a cautionary lesson there somewhere.

https://www.theglobeandmail.com/report-on-business/abcp-anatomy-of-a-panic/article4296101/

April 19, 2023
4:06 am
kesa
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perhaps best summarized by:

"it’s important to chase yield, but know what you own"

April 22, 2023
8:28 am
Doug
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svg1234 said

Alternatives to TDB ISA that I use.
These are *NOT* CDIC covered.
Check out the holdings and do your own DD to see if these are suitable for you.

TD Money Market Fund Class D TDB2914. Current yield is 4.60%.

CIBC CIB238 Money Market Fund F-class Premium (over 100k). Current yield 4.95%.

CIBC Canadian T-Bill Fund CIB127. Current yield 4.25%.

No commissions charged by TDDI and no minimum holding period.
T+1 settlement.

*Not a recommendation to invest and I am not liable or responsible for your investment decisions.  

Wow! I hadn't paid attention to the money market mutual fund market lately. 🙂

Cheers,
Doug

April 29, 2023
6:32 am
Frieda
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Scotiabank, National Bank HISA's safer?

I've been concerned of Canadian banks exposing themselves (and us) so far as there will be bail-ins. So I try to look for cracks. Of course I'm a naive and unsophisticated investor. Currently renting, so looking to move my HISA's to real estate at best price.

Today I see an article about, ""Canada’s Big Six Banks Suddenly Have A Lot of Mortgages With Long Remaining Terms"

I quote, that Scotiabank and National Bank have perhaps less risk to this. Of course they may have huge exposure elsewhere.

"More than half of Big Six banks have a large share of mortgages with 30 or more years to go. Topping the list was BMO, with nearly a third (32.4%) of their portfolio having 30 years or more remaining as of Q1 2023. Not far behind was CIBC (30.0% of its portfolio), TD (29.3%), and RBC (27%).

It’s worth emphasizing that these aren’t mortgages with 30 year terms. They’re mortgages with at least 30 years of repayment left. Many with significantly more, but we’ll come back to that.

Before we do, it’s important to understand this isn’t a problem seen at all banks. The share at Scotiabank (1.5%), and National Bank (1%) remain similar to any other year. At the very least, this tells us it’s not a widespread banking issue but one at those specific banks. "

https://betterdwelling.com/canadian-banks-are-extending-amortizations-over-35-years-to-avoid-defaults/

April 29, 2023
7:25 am
AltaRed
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The banks do this because mortgage defaults are such a tiny portion of their business, and they are having to compete with each other for business. Until the regulator steps in and stops this variable rate nonsense where it is possible to add unpaid interest on to the mortgage balance. It is a sickness permitted by our politicians and regulators. It is quite incomprehensible by any economic logic.

Homeowners will do almost anything, including going without food, to pay enough on their mortgage payments to keep their house. It is hard to imagine how naive people can really be getting themselves into such situations but there is minimal risk to the banks. They simply carry the loans indefinitely ringing the cash register each month as interest payments are due. Variable mortgage rates will start to come down by this time next year and these snowballed homeowners can start to dig themselves back out of this hole. They'll just carry mortgage balances into retirement.

April 29, 2023
10:01 am
smayer97
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AltaRed said
The banks do this because mortgage defaults are such a tiny portion of their business, and they are having to compete with each other for business. Until the regulator steps in and stops this variable rate nonsense where it is possible to add unpaid interest on to the mortgage balance. It is a sickness permitted by our politicians and regulators. It is quite incomprehensible by any economic logic.

Homeowners will do almost anything, including going without food, to pay enough on their mortgage payments to keep their house. It is hard to imagine how naive people can really be getting themselves into such situations but there is minimal risk to the banks. They simply carry the loans indefinitely ringing the cash register each month as interest payments are due. Variable mortgage rates will start to come down by this time next year and these snowballed homeowners can start to dig themselves back out of this hole. They'll just carry mortgage balances into retirement.  

Aside for from the homeowner that may not be able to pay the mortgage using this mechanism to lower their monthly payments, there are other scenarios that take advantage of this. One such scenario is investors in real estate, where they add unpaid interest to their mortgage because in a lower interest rate environment, they can get far far higher returns from the unpaid interest by investing it elsewhere, even into more real estate.

April 29, 2023
3:45 pm
Frieda
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Many of the Electricians I know, own 2 or more properties. And I've read a few times, that the multi unit owner crowd is a pretty high percentage in Canada.
So for sure it's likely that this type, would also be part of the herd extending their loans,... whatever their motives.
This fellow has an interesting chart, and explanations.
https://www.tiktok.com/@millennialmoron/video/7222140633002151173

April 29, 2023
9:37 pm
Norman1
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Length of mortgage's amortization just affects how much of the principal is repaid during the term of the mortgage. It has no bearing on the risk of the mortgage.

No, Scotiabank and National Bank deposits are not safer. Bank of Montreal, Bank of Nova Scotia, CIBC, and National Bank of Canada all have a DBRS debt rating of AA. Royal Bank of Canada has a slight higher DBRS rating of AA(high).

April 30, 2023
2:54 am
RetirEd
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And that's why many people are told by their financial advisers (the salesthing type, not proper financial advisors) that it's normal now to have debt to the end of one's life. The more financial advantage provided to home buyers, the more unaffordable those homes will become, and the more distant the wealthy and the less wealthy will become in Canada. And the more polarized our electorate will be.

I can remember a steady stream of real-estate pimps (er, excuse me, we are supposed to call them realtors) advising our governments that getting more people into the market was the answer to unaffordability. I wonder if anyone didn't laugh at that self-serving bovine poop pile.

Home-building is a slow process. So is population control. More people per residence and slower population control is the only reasonably possible until those can be achieved. Room-mates, lodgers, co-housing and joint ownership are viable ways to ameliorate the shortage.
RetirEd

RetirEd

April 30, 2023
5:05 am
savemoresaveoften
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Frieda said
Scotiabank, National Bank HISA's safer?

I've been concerned of Canadian banks exposing themselves (and us) so far as there will be bail-ins. So I try to look for cracks. Of course I'm a naive and unsophisticated investor. Currently renting, so looking to move my HISA's to real estate at best price.

Today I see an article about, ""Canada’s Big Six Banks Suddenly Have A Lot of Mortgages With Long Remaining Terms"

I quote, that Scotiabank and National Bank have perhaps less risk to this. Of course they may have huge exposure elsewhere.

"More than half of Big Six banks have a large share of mortgages with 30 or more years to go. Topping the list was BMO, with nearly a third (32.4%) of their portfolio having 30 years or more remaining as of Q1 2023. Not far behind was CIBC (30.0% of its portfolio), TD (29.3%), and RBC (27%).

It’s worth emphasizing that these aren’t mortgages with 30 year terms. They’re mortgages with at least 30 years of repayment left. Many with significantly more, but we’ll come back to that.

Before we do, it’s important to understand this isn’t a problem seen at all banks. The share at Scotiabank (1.5%), and National Bank (1%) remain similar to any other year. At the very least, this tells us it’s not a widespread banking issue but one at those specific banks. "

https://betterdwelling.com/canadian-banks-are-extending-amortizations-over-35-years-to-avoid-defaults/  

The article just points out the obvious. That shift in amortization is totally expected, it’s just more pronounced this time due to rapid rate hike. Rather than forcing a disclosure and fire sale, it enables the bank to earn more in total on the same mortgage with the same risk profile. Obviously it requires the borrowers to have a job, which is the big IFs if a deep recession does happen.
Those mortgage advisors should be shameful when they kept pushing
Variable rate in 2021 and early 2022 to make the mortgage looks more manageable just to get to book a new customer.
The stress test that govt imposed helped cushion the blow I believe, if anything it’s the lenders like credit unions that are not bound by the stress test a bigger worry in my mind.

April 30, 2023
10:05 am
Frieda
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Yeah. I guess this became news about 5 months a go.
Personally, I've been struggling over shopping for gas & power. I can't imagine the angst some have with their mortgages.
A mortgage has been pretty much unattainable for me. However, government policies expose me to the risk, just the same.
I appreciate everyone's comments.

May 2, 2023
7:10 am
Frieda
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Monthly settlement date?
I was wondering why this month my DYN6004 settled on April 28th?. Therefore only 28 days of interest. Last month March 31.
Not a big deal, just wondering.

May 2, 2023
7:20 am
Norman1
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We found previously that the Scotiabank ISA's pay interest on the last Friday of the month.

May 2, 2023
7:23 am
AltaRed
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I believe it was discussed elsewhere that these DYN ISAs go from last Friday of the month to last Friday of the month. Mar 31st was a Friday. Apr 28th is a Friday. So will May 26th and June 30th be a Friday.

May 2, 2023
7:48 am
Frieda
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So simple. Thanks Norman, and AltaRed.

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