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GICs Vs Canadian Bank Stocks
June 23, 2023
9:49 am
Dean
Valhalla Mountains, British Columbia
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.
A good little article about the Pros & Cons of GICs and Bank Stocks . . .

Note that the vids above the body of the article are 'somewhat' related.

As for myself, I've been invested in both GICs & Canadian Bank Stocks for many years now, and have done well with both.

What say you ?

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

June 23, 2023
10:17 am
Tommy Tutalidge
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Dean said
.
A good little article about the Pros & Cons of GICs and Bank Stocks . . .

Note that the vids above the body of the article are 'somewhat' related.

As for myself, I've been invested in both GICs & Canadian Bank Stocks for many years now, and have done well with both.

What say you ?

    Dean

  

The problem is the U.S. stock market affects most of the worldwide stock markets. The overvaluation today revivals or exceeds the years 1929 and 1873. Short term you could get lucky but if the U.S. stock market ever reverts to the mean stocks around the world would be obliterated and dividend cuts amass in all sectors would be the likely result. As for Canadian bank stocks I do like them as the housing ponzi in China looks intact and looks to be held up indefinably by the communist government. Therefore housing prices in Canada, Australia and New Zealand won't collapse in price. The bank's loan loss provisions is hurting their bottom line but if there isn't any defaults eventually the stock prices will start to reflect this. I also only see one direction for interest rates in the future which is lower which also should boost home prices and the banks can reduce their loan loss provisions.

June 23, 2023
3:15 pm
RetirEd
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Tommy Tutalidge:

if the U.S. stock market ever reverts to the mean stocks around the world would be obliterated and dividend cuts amass in all sectors would be the likely result.

Did you really mean to say "amass" (accumulate or build up) or did you mean "en masse" (in a large quantity, from the French)? I'm not sure what you would be meaning if the former.
RetirEd

RetirEd

June 23, 2023
4:22 pm
Dean
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.
Not to worry RetirEd ...
Mr. Tommy T has quickly become quite the 'Pontificator' here. sf-wink

How about you ... are you into Canadian Bank Stocks as well (like me), or are you strictly a GIC guy ?

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

June 23, 2023
7:15 pm
savemoresaveoften
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Mr Tommy T reminds me of the now gone forecaster who predicted a big drop in DOW that never materialize, pin point the high in interest rate which also failed.

May be it is the same person just coming back with a new handle (his membership is 3 weeks young)

June 24, 2023
6:17 am
Tommy Tutalidge
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Dean said
.
Not to worry RetirEd ...
Mr. Tommy T has quickly become quite the 'Pontificator' here. sf-wink

How about you ... are you into Canadian Bank Stocks as well (like me), or are you strictly a GIC guy ?

    Dean

  

I've been trading stocks since 1974 but have mostly day traded since the days of discount brokers. I was a buy and hold guy until the later part of 1993. From the end of 1993 to present day the U.S. stock market has just been a three ring circus sideshow. The only pure plays are in the penny stocks where its all skill. I'm 80 percent in long term bonds and GIC's and 20 percent in the precious metals.

June 24, 2023
9:03 am
Rail Baron
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I've got small holdings (five figures) in 5 of the 6 big banks, purchased over the last decade. The shares purchased last year are now below purchase price, but since I reinvest the dividends on the stocks through DRIP, and have not lost money yet. As long as I'm using DRIP, the lower share prices work in my favour to accumulate more shares each quarter. I'm not looking to spend any of this money for at least 5 years, so I am patient about the current dip in the bank share prices.

My bank stocks are worth less than half of my GIC holdings, so I feel secure in terms of the risk level in my investments.

June 24, 2023
9:32 am
canadian.100
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Rail Baron said
I've got small holdings (five figures) in 5 of the 6 big banks, purchased over the last decade. The shares purchased last year are now below purchase price, but since I reinvest the dividends on the stocks through DRIP, and have not lost money yet. As long as I'm using DRIP, the lower share prices work in my favour to accumulate more shares each quarter. I'm not looking to spend any of this money for at least 5 years, so I am patient about the current dip in the bank share prices.

My bank stocks are worth less than half of my GIC holdings, so I feel secure in terms of the risk level in my investments.  

I agree and would consider the above a well thought out strategy.

June 24, 2023
9:58 am
Norman1
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Dean said
.
A good little article about the Pros & Cons of GICs and Bank Stocks . . .

The ½% increase in CET1 capital requirements to 11½% minimum is a non-issue.

For example, BMO’s CET1 ratio was 12.2% as at April 30, 2023. The bank's CET1 was $51.4 billion. That works out to be $51.4 billion / 12.2% = $4.21 billion for each whole percent of CET1.

A ½% increase in CET1 for BMO is then $2.10 billion. That's not significant for a bank that earns more than $1 billion each quarter. That's especially insignificant for BMO which would have had CET1 of 16%, far about the 11½% minimum, if it had not decdided to acquire Bank of the West.

June 24, 2023
10:45 am
savemoresaveoften
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Norman1 said

Dean said
.
A good little article about the Pros & Cons of GICs and Bank Stocks . . .

The ½% increase in CET1 capital requirements to 11½% minimum is a non-issue.

For example, BMO’s CET1 ratio was 12.2% as at April 30, 2023. The bank's CET1 was $51.4 billion. That works out to be $51.4 billion / 12.2% = $4.21 billion for each whole percent of CET1.

A ½% increase in CET1 for BMO is then $2.10 billion. That's not significant for a bank that earns more than $1 billion each quarter. That's especially insignificant for BMO which would have had CET1 of 16%, far about the 11½% minimum, if it had not decdided to acquire Bank of the West.  

Actually the bump of 1/2% does affect the bank’s allocation of capital. It means they will end up trimming capital towards higher cost (lowest margin) product line. It has an effect of credit tightening so to speak.
They measures their capital efficiency and return in bps. 50 is a big number, just like their sensitivity to interest rate is in the tune of $10mm per 1 bp difference in rate,

June 24, 2023
10:28 pm
Norman1
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There's no impact for Bank of Montreal. The bank's CET1 ratio of 12.2% exceeds both the previous 11% minimum requirement and the current 11½% minimum requirement.

Capital efficiency and net interest margins have nothing to do with it.

The CET1 ratio is the ratio of Common Equity Tier 1 capital to risk-weighted assets. For a bank, deposit products are liabilities, not assets, and don't affect the CET1 ratio.

June 25, 2023
3:53 am
savemoresaveoften
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Norman1 said
There's no impact for Bank of Montreal. The bank's CET1 ratio of 12.2% exceeds both the previous 11% minimum requirement and the current 11½% minimum requirement.

Capital efficiency and net interest margins have nothing to do with it.

The CET1 ratio is the ratio of Common Equity Tier 1 capital to risk-weighted assets. For a bank, deposit products are liabilities, not assets, and don't affect the CET1 ratio.  

All Canadian banks runs a buffer above the min. requirement, now that buffer is reduced by 50bps. You may think it is no impact, Daryl White will say different. He may not need to raise capital, if that’s the definition of ‘no impact’.

It will 100% affect the bank’s money making ability, as it affects the amount of risk weighted assets a bank can carry. Corporate loans, non govt bonds, etc. even for deposit product, a bank will be less inclined to pay a higher rate. What they lose out on reduced RWA profit will be made up by offering less in deposit products.

June 25, 2023
5:45 am
canadian.100
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For those who follow Canadian Bank stocks and results, here are the latest Financials (source is OSFI site) for Wealth One Bank of Canada. In the 1st quarter of 2023, WOB recorded a net loss of $3,731,000. The Accumulated Losses for WOB per the Consolidated Balance Sheet are recorded at $57,719,000 .

June 25, 2023
6:59 am
Briguy
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Wealth One Bank is most likely partially owned by CCP and does money laundering for them, so they may not care about losses.

Finance Minister Chrystia Freeland is raising national-security concerns about Wealth One Bank of Canada, telling three of its founding shareholders that they could be susceptible to Chinese government coercion, according to two sources.
The shareholders are also facing allegations from other Canadian financial institutions that they have engaged in money laundering, according to a letter sent by Ms. Freeland to the three individuals late last year.

https://www.theglobeandmail.com/politics/article-chrystia-freeland-rings-national-security-alarm-about-founders-of/

June 25, 2023
7:10 am
Tommy Tutalidge
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savemoresaveoften said
Mr Tommy T reminds me of the now gone forecaster who predicted a big drop in DOW that never materialize, pin point the high in interest rate which also failed.

May be it is the same person just coming back with a new handle (his membership is 3 weeks young)  

I remember that other guy. He was correct on both calls but one month early on both as the stock market collapsed in February instead of January and interest rates put in a short term top in April instead of March. He was right on long term yields. He also said the first rate cut by the U.S. Fed or Bank of Canada would be March 2024 which looks spot on to me. If you're looking to buy Canadian banks stocks on the TSX The Bank of Montreal would be the purest play on home prices going to infinity in China.

June 25, 2023
7:27 am
Briguy
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Tommy Tutalidge said

I remember that other guy. He was correct both calls but one month early on both as the stock market collapsed in February instead of January and interest rates put in a short term top in April instead of March. He was right on long term yields. He also said the first rate cut by the U.S. Fed or Bank of Canada would be March 2024 which looks spot on to me. If you're looking to buy Canadian banks stocks on the TSX The Bank of Montreal would be the purest play on home prices going to infinity in China.  

You sure you not the other guy ? sf-laugh

June 25, 2023
7:47 am
mordko
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Tommy Tutalidge said

I remember that other guy. He was correct on both calls but one month early on both as the stock market collapsed in February instead of January and interest rates put in a short term top in April instead of March. He was right on long term yields. He also said the first rate cut by the U.S. Fed or Bank of Canada would be March 2024 which looks spot on to me. If you're looking to buy Canadian banks stocks on the TSX The Bank of Montreal would be the purest play on home prices going to infinity in China.  

While your assertions are false, they are also meaningless. Anyone predicting a crash will be “correct” if the timing isn’t considered to be part of the prediction. You were predicting the exact date, 3rd of Jan if I remember rightly. That was an important reason why the prediction was nuts. Saying “stocks will drop 3% at some point” would have been rather different.

June 25, 2023
7:51 am
mordko
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To me the linked BNN article is a click bait.

One can talk about differences between asset classes but picking specific assets within different asset classes and comparing them is very misleading as it implies similarity and unhelpful because its missing the fundamental differences between fixed income and stocks.

I do hold Canadian banks via a whole of the market ETF and some GICs as a limited part of my fixed income portfolio.

June 25, 2023
9:48 am
Doug
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Briguy said
Wealth One Bank is most likely partially owned by CCP and does money laundering for them, so they may not care about losses.

Finance Minister Chrystia Freeland is raising national-security concerns about Wealth One Bank of Canada, telling three of its founding shareholders that they could be susceptible to Chinese government coercion, according to two sources.
The shareholders are also facing allegations from other Canadian financial institutions that they have engaged in money laundering, according to a letter sent by Ms. Freeland to the three individuals late last year.

https://www.theglobeandmail.com/politics/article-chrystia-freeland-rings-national-security-alarm-about-founders-of/  

I would be careful with allegations like that. None of those allegations have been proven, and 'money laundering' is a loaded term, that can be interpreted broadly or narrowly. Interpreted more broadly, self-employed home renovation/construction contractors that offer discounts for paying in cash are engaging in 'money laundering'. Similarly, state-owned enterprises that use corporate shell games to evade local taxes may be engaging in some form of laundering of money (i.e., sovereign wealth funds, state-owned pension funds, state-owned postal services firms, etc.). Interpreted more narrowly, it would be to engage in criminal activity, possibly including the financing of terrorism. I'm not legitimizing the former activities, by any stretch, but I'm just saying there are degrees of severity.

Freeland is also woefully out of her depth as Finance Minister, as a former newspaper/periodical editor/reporter, and has made a number of critical errors. In other words, she frequently doesn't know what she is talking about and/or is the political mouthpiece for the Prime Minister. sf-cool

China and Canada have had a long-standing, and increasing, series of diplomatic spats/tiffs worsening to deteriorating relations, so both parties are very biased on this matter, and anything either says on the matter should be treated as unbashed propaganda.

Cheers,
Doug

June 25, 2023
11:02 am
mordko
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I might not be a fan of Freeland (to put it mildly) but we cannot seriously draw parallels between Canada’s government and Chinese communist dictatorship which does nothing except lie and oppress.

One of the problems with our government is that it has ignored the threat from China and abrogated responsibility to protect Canadian citizens while benefiting electorally from Beijing’s machinations.

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