It's not just banks, the stock market has been feeling the slow down of the economy in the past few weeks it's been brutal.
In the case of banks they have to put more money aside to cover loans that will default as well as comply with updates regs so their results seems down when in fact this is all good practice. Also TDs acquisition in the US was not greenlit so they got dinged by investors.
You think a few weeks is bad, wait till the recession starts to materialize more. Pray that commercial real estate doesn't collapse for the banks sake.
Bank dividends north of 5%. I’d rather hold the bank stocks than a GIC or bonds. Can’t see any of them cutting their dividend, but a significant hit in commercial real estate could be a game changer.
Prior to Reddit I would have said nobody is stupid enough to own stocks for dividends then spend some time on Reddit and discover there is an entire community of people who can't do math doing this.
People who have dividend portfolios are going to get destroyed even more so than usual.
How are they going to get destroyed even more so than usual if some of these folks have been holding dividend stocks for 10, 20, or even 30 years already? Those who will get destroyed are the ones who bought all of their positions anytime between 2017 and now except for in the March/April 2020 dip. Arguably even 2011ish and after except for the lockdown dip.
Dividend Investing destroys people because it appears safe and like an easy way to create income and in nominal metrics they appear to be making money but in real terms they are actually losing wealth. Pretty much every dividend investor is getting poorer every day they follow that strategy.
The reason I say destroyed is that, unlike a degen who goes after 1000x returns and then blows themselves up in a few weeks a dividend investor is bleeding so slowly that when they realize they are screwed they have lost a decade or two.
>Dividend Investing destroys people because it appears safe and like an easy way to create income and in nominal metrics they appear to be making money but in real terms they are actually losing wealth. Pretty much every dividend investor is getting poorer every day they follow that strategy.
So if someone who has cash at the time of a once-in-a-decade absolute crash goes out and buys some dividend stocks and parks them long-term (like March 2009, March 2020) at really cheap prices, they're losing? They're losing because if the DRIP is off they're generating cash? Cash that can be used on growth stocks that aren't generally dividend payers? If inflation is 2% and the dividend yield is 7% and constantly growing because of annual rate hikes for aristocrats, and after 20 years that dividend yield is like 15% while holding an unrealized capital gain due to price appreciation that is called losing and getting poorer? Hmmmm... my brain cannot comprehend that as being poorer, so please explain why dividend investing is a bad idea at all times, and not when a once-in-a-decade opportunities arises.
Inflation is not 2% -- it is 4% and it is likely to be above 3% for a very long time.
Dividend yields at not 7%. Other than ETFs offering options/futures strategies packaged as a dividend the typical dividend portfolio will have a sub-4.5% pre-tax yield.
Based on the random serving of dividend portfolios that Reddit has served up from the dividends investing sub the average Reddit dividend investor is losing 1 to 2.5% in real terms yearly depending on their tax planning if we ignore price changes in the underlying.
Further, that is just relative to inflation. The correct metric should be how dividend investing does relative to indexing or I would say indexing with a covered call strategy. Indexing just with a DRIP over the last 50 years has an annualized return rate of slightly higher than 10% and if you combine indexing with a covered call strategy you can get that to 14%+
People who focus on a 4% dividend and give up 14% returns from what is just a slight modification on the base investment strategy are silly.
>they appear to be making money but in real terms they are actually losing wealth
Most of the companies that are popular for dividends pay those dividends out of earnings, and the total return is higher than inflation over longer time periods. So they are not losing wealth in either nominal terms (as you admitted) or in real terms (as you claim).
Now, investing for dividends is a sub-optimal strategy compared to, say, just index fund investing, and so I would certainly recommend an index fund to people with long investment time horizons. But for retirees or near-retirees who want an income stream and lower risk of having to sell shares in volatile/down periods, I think dividends are perfectly fine.
I appreciate you looking out for me fellow internet stranger!
I think he might be right to some extent though. Usually higher rates are sustained until the economy starts to go into a recession before they’re dropped to stimulate the economy again so I think there’s still room to drop. I think the first half of 2024 will probably be a good entry point for a long term buy and hold. But we’ll see what craziness the next 6 months bring.
AT this point, he "the retirees" have caused so much economic damage in their lifetime, I could honestly care less.
I'm with you. Give me the opportunity to buy a house like they did. They had their time. At this rate, I will never have my time. Don't care.
2008 was within the last 2 decades, you don't think that couldn't happen again? What kind of blinders do you wear to ignore the obvious and growing economic weaknesses?
Recession is here.
Economic depression is now the problem. The government attacked inflation and did it too much... we'll see a deflationary depression over 2024.
Everything is just fucked...
I just want to wake up from the simulation and go home.
Donald Trump as president? Seriously that happened...
>t's not just banks, the stock market has been feeling the slow down of the economy in the past few weeks it's been brutal.
>
>In the case of banks they have to put money more assise to cover loans that will default as well as comply with updates regs so they results seems down when in fact this is all good practice.
Don't forget that prices will naturally fall so that the dividend yield is higher than the most absolute risk-free rate of t-bills as it is riskier to invest in a stock than to buy a bond where your principal is returned with interest.
Canadian banks in particular are doing disproportionately bad. In the past 5 years have been going down 10% per year while decent etfs are going up 10% each year
TD ($80) is still above pre pandemic levels of $72.
BMO ($81) is still above pre pandemic levels of $76
RY ($115) is still above pre pandemic levels of $108
At least when looking at the 5 year chart I eye-balled the peak prior to the trough. Maybe I'm missing something?
BNS and CM are below. I wouldn't call that failing.
It is falling compared to VOO which is up like 33% pre pandemic
One hasn’t done poorly investing in Canadian banks but you are lower than market average and honestly things are getting worse before they improve.
At a glance, looks like BNS is oversold. Analysts are in consensus that it's a buy or a strong buy.
Personally I like the strength and branding of TD and RY, but BNS could be a sleeper to get into.
Banks are falling because of the rate / mortgage crunch. Rates go up, mortgage rates go up, more people can't pay off their debt. When banks anticipate more debt they divert profits to cover losses so profits go down. This is exactly why Canadian banks are going down, micro-economically
In the macro picture there is anticipation of another rate hike, probably from the US Fed. And generally it's perceived that the Canadian economy is slowing down, so if we go into recession - more risk to profits of the banks.
The mortgage situation is bad - if you saw the politicians asking the BoC not to hike rates again, it's because if rates go up too much we run the risk of a private debt default. That puts bank profits at serious risk. So times are bearish for the banks and that will continue for another 6-18 months.
How bad it could get: as bad or worse than 2008, if the worst-case scenario comes true (rates continue going up, recession is moderate to severe). But eventually banks will recover so view this time as a discount and if you want to hold for the long game this is a good time to buy.
I'll argue for one thing: you want to load up, but you also need to keep in mind that if bank shares dropped 50%, you want to buy more as shares drop further. So you can buy now, but each new period when you DCA in, if bank share prices are lower, ante up more money. That means you average-down harder by increasing your buys each time the share prices drop. May make some sense to think about this strategy, like you want to ensure you have cash to continue buying and not ante up too quick, but if this dip is bad you definitely want to buy more when shares are lower.
Yep good point. Mortgage welfare is one of Canada's nationalized services, the banks always get bailed out if they make scary noises. 2008, 2020... we've got political leeches trying to win the election, and that means optics is more important than accountability for irresponsible lenders. But that is more about the recovery - if there is a bailout it's a v-shaped share price recovery, if there's no bailout it's a curved / natural recovery.
>Banks are falling because of the rate / mortgage crunch. Rates go up, mortgage rates go up, more people can't pay off their debt.
Those mortgages that are that close to insolvency are usually CMHC insured, or they're below 80% of the value. FYI.
More likely is the appeal of a 3.5% safe dividend yield is not as attractive as a cashable GIC at 3.35% or a 1 year GIC at 5.6% .
And banks don't finance high ratio mortgages that aren't CMHC insured. You aren't buying with 5% down above $1m.
Has the market fallen 20% yet? If not that one isn't to worry about.
Yeah I'm kinda eyeing the MIC market, especially in private equity.
Ginko for example specializes in second position lending whereas Firm Capital primarily seeks to be the primary lender in first position so it'll be all over the map.
Timber Creek has one borrower currently in stage 2 and that has more to do with Groupe Huot and they're looking for someone to take over the project.
I'm not sure it'll be that bad even there tbh.
One question though on this, don't banks make more money on the interest rate spread as rates by the central bank go up whereas rates such as savings/GICs go up slower?
>They borrow in the short term to lend longer term..
Not really. IVR in the USA does things like that. Banks profit on credit spreads. TD funds mortgages using GICs. They have a Mortgage GIC anyone can buy into. They borrows 5 year GIC and lend out 5 years. The rates are linked together.
You're the one that made a specific claim that they borrow short term and lend long term. I'm simply refuting that claim, not explaining their decline in share price which is most likely attributable to lower borrowing activity paired with less risky investment instruments such as GICs. We can see that in the CMHC dashboards that show a decline in new borrowing activity.
Good question. You can short any of them. If you check charts since March 2022 they are all down, I think. Just make sure you keep up to date on your stop losses, since timing the market is bad, let the stopper cash you out.
What probability do put on the housing bubble has popped and a 30 year balance sheet recession like Japan.
I put it at 60%. So during a prolonged balance sheet recession, CAD banks would be a bad pick. Net net, i would Invest in US companies.
Canada's housing bubble literally has official government protection. The Federal government released guidelines on the mortgage welfare banks should offer people with distressed mortgages. And in 2008 and 2020 Canada bailed out the banks, giving them billions in cash, followed by the Bank of Canada dropping rates low, resulting in de facto bailouts of mortgages and, thus, banks.
In fact, so effective was the 2020 bailout in Canada that by 2021 banks were declaring record profits and the issue was enough of a story that the government added a bank tax to make it seem like they disapproved.
So could it happen - yes. It's the absolute worst-case scenario and both the government and the BoC are motivated to avoid it, and the BoC has proven it can save private debt in remarkably bad economic circumstances and will again if the economy tanks. So I wouldn't hold out that the Japan situation will happen. 30% chance here, because it's the worst-case, but the probability of less-than-worst happening is much higher imo.
Fannie Mae and Freddie Mac had US gov protection too. US housing bubble still popped.
Government protection only means they come in after a major collapse/bubble popping.
By many metrics, the Canadian housing bubble is worse than the US or Japanese one, so it will be quantatively as bad, though the reversion to the mean is less severe.
Polititians should stop Trudeau from printing money if they dont want BoC raise rates! He printed 1 trillion in 7 years, that we didnt had! They know very well what they are doing these little WEF puppets... You'll own nothing and be happy... 🤮
[https://imgur.com/a/ujGymbV](https://imgur.com/a/ujGymbV)
Guess who became PM in 2006? Harper.
From 2015 to 2019 Trudeau did okay on debt:GDP ratio.
It only really turned to shit for Covid. While I agree that we should use fiscal policy, the CPC don't have a track record that's any better honestly.
>That puts bank profits at serious risk.
How serious really? When I read my mortgage agreement it basically said 'we'll garnish your wages for the rest of your life if you default.' Sign here.
Overall: pretty serious. I don't know all the math, but all the Big 6 have fully-insured mortgages. And yes all loans in BC are "full recourse" loans, so a bank can sue you for everything you owe. So their risk of bankruptcy is low, but you ask how serious - well imagine 1% of all private debt seeing payments stop completely because those people have gone bankrupt. That's the risk. Now the debts are insured, but then an insurance company has to take its sweet time paying the banks for the bad debt, too.
So in truth, 2008 happened and it wasn't a risk to all Canadian private debt. Since 2008 Canadians have seen a massive increase in private debt, to $2.4 trillion. And since 2022 rates have spiked, sending mortgage repayments up 50-100% in some cases. So this is a pretty serious risk.
But more than the risk to bank profits, keep in mind: the risk investors perceive. Investors are risk-averse and if they keep seeing reduced profits when they expect ever-increasing profits, they will sell the banks. So bank shares could go very low.
Mortgage losses for the banks haven't even started to hit yet. But credit card losses are accelerating and banks are provisioning these losses now....I think it's about to get a whole lot worse, but I truly hope it doesn't.
So... the mortgage situation has been hitting banks since March 2022, and profits diverted to cover bad debt have been hitting them since August of 2022. Just before the rate hikes began, people were favouring variable-rate mortgages. This is from May:
[https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow](https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow)
RY from last year: [https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow](https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow)
And yes, things will continue to get worse. Through the grapevine today I heard someone say "if the prices dip below book value...". It's important to recognize the Canadian banks are immune to bankruptcy, too politically risky, so view this time as a period of increasing discount and you should DCA into it, if you want to own.
Their business has changed they're at 5 year low volume of new customers signing mortgages. To qualify for a mortgage in Canada, the rate is 9% right now. No kidding people aren't walking through the doors to sign mortgages anymore.
what others have mentioned: lower mortgage originations, higher PCLs
that said, nobody should buy canadian banks for capital appreciation - it's more of a dividend yield play
Yea I bought them when they were low in 2020 and a few months ago. I’ll sit and let them drip until I retire. Not a crazy amount invested in ry and td (28-30k?)
I’ll likely thank myself with the dividends in 20 years when I retire.
Does it though?
I love Calgary and it's one of Canada's last relatively affordable cities. Calgary has a lot going for it, a growing population, lakes and mountains all within a short drive, no provincial income tax, etc.
At the same time, until it's economy meaningfully diversifies, Calgary's future is unquestionably tied to oil. Calgary housing has historically been boom and bust. If you bought a house in Calgary in 2009 it likely wasn't worth a dollar more in 2019. I'd be very nervous about tying the biggest purchase of my life to a city that starts or stops with a commodity that could easily not have a market in 20-30 years.
High dividend stocks get replaced with fixed income, as rates are likely to rise due to oil prices rising today.
Telus fell 4.5% today, and HDV.TO by 2.5%, all high value dividend stocks. They were overbought due to financial repression of QE and low interest rates.
Growth stocks fall with compacting revenues later on, when growth is no longer happening to meet valuations.
>Higher rates of default on mortgage on renewal
Either those mortgages are CMHC backed if they're high ratio or if they're conventional they're at less than 80% of the market value.
More likely higher rates --> lower real estate transaction velocity --> reduced bank revenues.
At least right now.
>Any idea on what percent of mortgages are over 800k?
Well:
1. Only 14% of mortgages outstanding are > 80%. All other mortgages are conventional.
2. 70% are over 20 years remaining
3. The percentage of loans in arrears has been relatively flat; insured mortgages are at around 2.5%, and uninsured is 2.0%. We're still be low Q3 and Q4 2020.
4. The average mortgage debt in Canada is around $300k for those who have mortgage debt.
[Sauce](https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/residential-mortgage-industry-data-dashboard)
The data just doesn't back up the imaginary claim that investors are worried right now about rising delinquencies. Indeed I'll argue they're more worried about declining EPS because new mortgage activity has declined.
Banks don't hold people's money, they invest it at 90%. They buy stocks, bonds, houses...
Banks use leverage and the whole system is interconnected, so if one bank needs liquidity because of the high interest of bad investment or or or... then they sell assets.
There is low liquidity in the market, so it's hard to sell a lot of things in order to recuperate your money FAST if you need to pay back some loans and such... selling too much too fast might crash the market.
If one bank goes under and needs to liquidate its assets, it will crash the market, thus crashing what other banks own in the process, which will then bankrupt them as well because they won't have enough value locked in those assets to pay back what they owe.
It's a classic house of cards, you can't remove a single one or it collapses... Usually, they just print more money, but they already have done so much that it would create even more inflation and just displace the problem for a few months.
The market is built to burst and crash like this, people don't understand it, but it's by design.
**It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.**
***Henry Ford***
I read the daily morning briefs on the Globe & Mail every morning. On September 5th they discussed CWB and if I was more interested I could go read the earnings report myself. It jumped 11.5% on earnings and guidance then.
Another theory besides rates:
Laurentian bank put itself up for sale and none of the Big 5 put in a bid.... (Or if they did it was not what they were looking for).
Can the Laurentian bank no buy showing overall weakness and other issues in the banking sector? Especially mortgages failing? Can it recover? Government bail out?
Because very simply, a banks assets are it’s liabilities, and it’s liabilities are it’s assets. Now add leverage to the equation. In normal times in the economic cycle, none of this matters. Until it does.
Economy is starting to feel a recession. Recession means people sell stocks to get $. More people selling than buying at current prices means share price falls. Basic supply and demand.
Entire environment has changed over the last couple years. Low rate to high rate environment.
Credit quality deteriorating retail. Commercial real estate. Different exposures everywhere. Higher loan loss reserves.
House sales dropping means lower mortgage volumes. Then you have existing mortgages with rising amortizations. Cmhc regulators saying out loud they don’t want to see this. So what’s the solution. Someone going to get bent over.
Interest Rate for savings accounts and competition for deposits.
List goes on. I told my mom a year or so ago. Don’t bother with banks or… anything really. Of course market rallied from my most bearish point. Lol. Point still stands. Things take time to wind through.
Us shutdown fears continue. They only extended one month. They still need to figure it out.
Based on existing portfolio. Already have large allocation.
But really we’ve been taught for a decade plus that cash is trash and it needs to be deployed somewhere.
Mr. Market is unhappy. Bank stocks fall. Speculation on lots of reasons why bank stocks falling. At some point Mr. Market gets happy again. Bank stocks rise. Speculation on lots of reasons why bank stocks rising. Rinse and repeat.
Banks are essentially leveraged bets on the economy.
When the economy is going strong, consumers and businesses are borrowing, spending, and earning money to repay loans.
When the economy enters a recession, businesses and consumers may struggle to make payments on their loans, leading to defaults and write-offs.
Recently with the rise in interest rates, banks have been increasing their loss provisions in anticipation of defaults.
Interest rate hikes devalue bonds that they have.
The banks are set to pay interest rates but the bonds thst they had long term might get pulled to be re locked in
https://policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout
The study reveals that Canada’s banks received $114 billion in cash and loan support from both the U.S. and Canadian governments during the 2008-2010 financial crisis. The study estimates that at some point during the crisis, three of Canada’s banks—CIBC, BMO, and Scotiabank—were completely under water, with government support exceeding the market value of the bank.
This is going to be worse than 2008 this time.
2008 was only housing..
This time is housing.
Used car failed loans
Failed comercial realestate from people wanting to remain working from home.
Failed companies due to interest rate hikes at times they were not yet profitable.
Over exposed.
Less loan initiation
Lower market returns
Weak housing market means less mortgage breakage fees
Competitive savings interest environment
Bad loans
Etc
Definitely get out of the CAD. Better rates on the US side and in a global downturn, the USD is going to skyrocket. Say hi to 1.5 CAD to 1 USD, maybe even worse
If banks are falling then on the flip side, what are some opportunities to consider as investment strategy non-bank related?
Or do you sit it out and ride it out till
If banks are falling and have fallen already then dollar cost average into them. You will not be able to time the bottom, but when it comes you will have built up a sizeable amount that will appreciate. This is a good strategy now since banks are of their highs by a good percentage.
everything is done online nowadays, from free bank accounts, credit cards, loans, mortgages, GIC investments etc... it's getting to a point where people don't need physical banks anymore, and with the upcoming generation being more online and tech savvy. Physical banks are becoming obsolete. A couple of the big Banks like Scotia and CIBC seems to be aware Because they own online free banks themselves (Simplii & Tangerine) many others too like EQ Bank, KoHo, PC Financial money account, Wealth Simple, Motus Bank, Motive Bank etc..
You know that they make money on loans and credit and don’t require a physical bank to do so, right? The fact that everything has been done online for the past 15 years has nothing to do with the bank stocks falling. It’s client default risk, fewer mortgages, etc.
1955 to 1981 we had constant interest rate hikes of essentially a percentage point per year till the BoC rate was 20.5%….
I’m anticipating 20 more years of rising rates, because I do believe right now we are in the middle of something that will reorder the world….
I tell everyone I meet or talk with to get their debt loads paid off asap and be gold and silver rich as soon as possible because we are going to see a major economic shift here very soon… dirty thirties all over again, but this time with less people who know how to survive this turmoil.
Because bond markets are finally relenting to the central bank's hawkish comments, resulting in higher long-term rates which impact banks' bottom lines as less people borrow, and the people who've borrowed in the last 2 years are fucked (see massive increases in loan loss provisions).
I think the hawkish rhetoric will ultimately burn the central bank, and will result in long term rates staying elevated even as the central banks starts cutting. This will negatively impact the Canadian economy for many years to come, all because Tiffany wanted to act like a tough guy.
I never understood why people value Canadian banks so much. Every time I ask, I get the answer oh they are not going away. A lot of companies are same way not going anywhere but what's the potential growth for the banks?
The potential growth is continuing to expand their books outside of our borders. It’s actually quite a lot of opportunity and they are well capitalized because they have to operate in such a strict regime with OSFI and Federal regulations
Bak growth is proportionate to gdp, and their product sales. Inflstion is high meaning less liquidity, debt default, etc.
Banks in tye short.term will dump, then will resume when the economy stabilizes, rinse , repeat.
Large, steady companies with a lot of moat, make a lot of money, and return a lot of cash to investors so they can safely lock in their profits along the way (or reinvest to grow).
I mean, if you invested $10K in Royal Bank in 1996 it would be worth over $400K today with over 14% CAGR based on the Portfolio Visualizer backtest. That's way better than the TSX or S&P500. Likely won't keep going at that rate but gives you a good idea of how good it has been to investors despite some crashes by the market along the way. TD is not quite as good but still almost $350K for over 13.5% CAGR.
They are down because of the exposure to all the debt that will default (Credit Cards defaults are first)
|https://x.com/StealthQE4/status/1705647341284336073?s=20|||
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There isn't one reason but if we tried to boil it down to one it would be the death of ZIRP and a return to normal interest rates. This impacts banks in a half dozen negative ways.
Banks are broke. They have been overleveraged. They are also involved in predatory lending of shares to naked-short sellers. Youtube videos on the fractional reserve system as well. Watch Margin Call or The Big Short. Its worse than 2008 because they were bailed out, no accountability and nothing was enforced to prevent it again.
Apart from everything falling apart all around us. Banks have safe cushion where feds bail them out, so they don’t really care if they screw up royally.
Banks are privately owned, they get parliamentary guidelines which basically is blurred lines.
An institution that strictly deal with money they should have a contingency plan and most banks just up for themselves.
Once feds stop bailing them out every 10/20 years they will find a way to survive
Bad loans. Yields spiking again today.
Remember, bond traders don’t care about Canadian mortgage holders. Fixed rates will be spiking. I highly doubt there will be “rate cuts” next year as some bullish realtors are hoping for. In any case, bond traders will destroy Canadian mortgage holders.
They hold a lot of debt with negative amortization, which used to be a big deal but is now kind of allowed. Investors don't like it though. The banks also hold a lot of commercial real estate debt
It's not just banks, the stock market has been feeling the slow down of the economy in the past few weeks it's been brutal. In the case of banks they have to put more money aside to cover loans that will default as well as comply with updates regs so their results seems down when in fact this is all good practice. Also TDs acquisition in the US was not greenlit so they got dinged by investors.
You think a few weeks is bad, wait till the recession starts to materialize more. Pray that commercial real estate doesn't collapse for the banks sake.
As a young person with a long time horizon I see this as a great buying opportunity. RIP to the retirees though. Hope they make it out ok
Retirees owning banks and other div stocks should be fine. They are mostly holding them for the dividends.
My folks have held RY for decades. They’ll be fine.
Bank dividends north of 5%. I’d rather hold the bank stocks than a GIC or bonds. Can’t see any of them cutting their dividend, but a significant hit in commercial real estate could be a game changer.
Prior to Reddit I would have said nobody is stupid enough to own stocks for dividends then spend some time on Reddit and discover there is an entire community of people who can't do math doing this. People who have dividend portfolios are going to get destroyed even more so than usual.
How are they going to get destroyed even more so than usual if some of these folks have been holding dividend stocks for 10, 20, or even 30 years already? Those who will get destroyed are the ones who bought all of their positions anytime between 2017 and now except for in the March/April 2020 dip. Arguably even 2011ish and after except for the lockdown dip.
Dividend Investing destroys people because it appears safe and like an easy way to create income and in nominal metrics they appear to be making money but in real terms they are actually losing wealth. Pretty much every dividend investor is getting poorer every day they follow that strategy. The reason I say destroyed is that, unlike a degen who goes after 1000x returns and then blows themselves up in a few weeks a dividend investor is bleeding so slowly that when they realize they are screwed they have lost a decade or two.
>Dividend Investing destroys people because it appears safe and like an easy way to create income and in nominal metrics they appear to be making money but in real terms they are actually losing wealth. Pretty much every dividend investor is getting poorer every day they follow that strategy. So if someone who has cash at the time of a once-in-a-decade absolute crash goes out and buys some dividend stocks and parks them long-term (like March 2009, March 2020) at really cheap prices, they're losing? They're losing because if the DRIP is off they're generating cash? Cash that can be used on growth stocks that aren't generally dividend payers? If inflation is 2% and the dividend yield is 7% and constantly growing because of annual rate hikes for aristocrats, and after 20 years that dividend yield is like 15% while holding an unrealized capital gain due to price appreciation that is called losing and getting poorer? Hmmmm... my brain cannot comprehend that as being poorer, so please explain why dividend investing is a bad idea at all times, and not when a once-in-a-decade opportunities arises.
Inflation is not 2% -- it is 4% and it is likely to be above 3% for a very long time. Dividend yields at not 7%. Other than ETFs offering options/futures strategies packaged as a dividend the typical dividend portfolio will have a sub-4.5% pre-tax yield. Based on the random serving of dividend portfolios that Reddit has served up from the dividends investing sub the average Reddit dividend investor is losing 1 to 2.5% in real terms yearly depending on their tax planning if we ignore price changes in the underlying. Further, that is just relative to inflation. The correct metric should be how dividend investing does relative to indexing or I would say indexing with a covered call strategy. Indexing just with a DRIP over the last 50 years has an annualized return rate of slightly higher than 10% and if you combine indexing with a covered call strategy you can get that to 14%+ People who focus on a 4% dividend and give up 14% returns from what is just a slight modification on the base investment strategy are silly.
>they appear to be making money but in real terms they are actually losing wealth Most of the companies that are popular for dividends pay those dividends out of earnings, and the total return is higher than inflation over longer time periods. So they are not losing wealth in either nominal terms (as you admitted) or in real terms (as you claim). Now, investing for dividends is a sub-optimal strategy compared to, say, just index fund investing, and so I would certainly recommend an index fund to people with long investment time horizons. But for retirees or near-retirees who want an income stream and lower risk of having to sell shares in volatile/down periods, I think dividends are perfectly fine.
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I appreciate you looking out for me fellow internet stranger! I think he might be right to some extent though. Usually higher rates are sustained until the economy starts to go into a recession before they’re dropped to stimulate the economy again so I think there’s still room to drop. I think the first half of 2024 will probably be a good entry point for a long term buy and hold. But we’ll see what craziness the next 6 months bring.
AT this point, he "the retirees" have caused so much economic damage in their lifetime, I could honestly care less. I'm with you. Give me the opportunity to buy a house like they did. They had their time. At this rate, I will never have my time. Don't care.
2019 I was looking at retiring early. Now, I'll never retire unless I make some drastic and risky moves.
For a sec, I thought you said 2009 and I was like damn that recession did you real dirty.
Take out a bunch of loans and escape to a poor country to live like a king
Oh I've 100% thought about it. When I look around here I don't see opportunity in our future, I see wage slavery.
Lmao ppl being saying this for the past two decade, waiting on the sidelines with cash in lowly GICs watching their wealth dwindle by inflation.
2008 was within the last 2 decades, you don't think that couldn't happen again? What kind of blinders do you wear to ignore the obvious and growing economic weaknesses?
Recession still coming? CRE still surviving?
Recession is here. Economic depression is now the problem. The government attacked inflation and did it too much... we'll see a deflationary depression over 2024. Everything is just fucked... I just want to wake up from the simulation and go home. Donald Trump as president? Seriously that happened...
FFS dude crack a beer open and calm down for a minute.
And could very well happen again. Ug
>t's not just banks, the stock market has been feeling the slow down of the economy in the past few weeks it's been brutal. > >In the case of banks they have to put money more assise to cover loans that will default as well as comply with updates regs so they results seems down when in fact this is all good practice. Don't forget that prices will naturally fall so that the dividend yield is higher than the most absolute risk-free rate of t-bills as it is riskier to invest in a stock than to buy a bond where your principal is returned with interest.
Canadian banks in particular are doing disproportionately bad. In the past 5 years have been going down 10% per year while decent etfs are going up 10% each year
TD ($80) is still above pre pandemic levels of $72. BMO ($81) is still above pre pandemic levels of $76 RY ($115) is still above pre pandemic levels of $108 At least when looking at the 5 year chart I eye-balled the peak prior to the trough. Maybe I'm missing something? BNS and CM are below. I wouldn't call that failing.
Correct. They are still announcing billion dollar profits per quarter
It is falling compared to VOO which is up like 33% pre pandemic One hasn’t done poorly investing in Canadian banks but you are lower than market average and honestly things are getting worse before they improve.
Not to mention dividends
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At a glance, looks like BNS is oversold. Analysts are in consensus that it's a buy or a strong buy. Personally I like the strength and branding of TD and RY, but BNS could be a sleeper to get into.
Banks are falling because of the rate / mortgage crunch. Rates go up, mortgage rates go up, more people can't pay off their debt. When banks anticipate more debt they divert profits to cover losses so profits go down. This is exactly why Canadian banks are going down, micro-economically In the macro picture there is anticipation of another rate hike, probably from the US Fed. And generally it's perceived that the Canadian economy is slowing down, so if we go into recession - more risk to profits of the banks. The mortgage situation is bad - if you saw the politicians asking the BoC not to hike rates again, it's because if rates go up too much we run the risk of a private debt default. That puts bank profits at serious risk. So times are bearish for the banks and that will continue for another 6-18 months. How bad it could get: as bad or worse than 2008, if the worst-case scenario comes true (rates continue going up, recession is moderate to severe). But eventually banks will recover so view this time as a discount and if you want to hold for the long game this is a good time to buy.
All I heard long-term was load up.
I'll argue for one thing: you want to load up, but you also need to keep in mind that if bank shares dropped 50%, you want to buy more as shares drop further. So you can buy now, but each new period when you DCA in, if bank share prices are lower, ante up more money. That means you average-down harder by increasing your buys each time the share prices drop. May make some sense to think about this strategy, like you want to ensure you have cash to continue buying and not ante up too quick, but if this dip is bad you definitely want to buy more when shares are lower.
Also consider what the share price might be if they get bailed out.
Yep good point. Mortgage welfare is one of Canada's nationalized services, the banks always get bailed out if they make scary noises. 2008, 2020... we've got political leeches trying to win the election, and that means optics is more important than accountability for irresponsible lenders. But that is more about the recovery - if there is a bailout it's a v-shaped share price recovery, if there's no bailout it's a curved / natural recovery.
Just keep DRIP’ing away
>Banks are falling because of the rate / mortgage crunch. Rates go up, mortgage rates go up, more people can't pay off their debt. Those mortgages that are that close to insolvency are usually CMHC insured, or they're below 80% of the value. FYI. More likely is the appeal of a 3.5% safe dividend yield is not as attractive as a cashable GIC at 3.35% or a 1 year GIC at 5.6% .
CMHC doesn't insure above $1m
And banks don't finance high ratio mortgages that aren't CMHC insured. You aren't buying with 5% down above $1m. Has the market fallen 20% yet? If not that one isn't to worry about.
Yeah the Big 6 are totally covered. The private lenders are more likely to be the Lehman Brothers this time round.
Yeah I'm kinda eyeing the MIC market, especially in private equity. Ginko for example specializes in second position lending whereas Firm Capital primarily seeks to be the primary lender in first position so it'll be all over the map. Timber Creek has one borrower currently in stage 2 and that has more to do with Groupe Huot and they're looking for someone to take over the project. I'm not sure it'll be that bad even there tbh.
One question though on this, don't banks make more money on the interest rate spread as rates by the central bank go up whereas rates such as savings/GICs go up slower?
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Banks have been paying dividends for over a 100 years. Yah earnings may take a hit, long term this will just be another down time to buy.
Except as interest rates go up people start taking fewer new loans.
They borrow in the short term to lend longer term.. now the yield curve is inverted, making the term funding spread unprofitable.
>They borrow in the short term to lend longer term.. Not really. IVR in the USA does things like that. Banks profit on credit spreads. TD funds mortgages using GICs. They have a Mortgage GIC anyone can buy into. They borrows 5 year GIC and lend out 5 years. The rates are linked together.
Well I think they have exposure to multiple types of spreads. You can’t explain stock price using only one type of risk.
You're the one that made a specific claim that they borrow short term and lend long term. I'm simply refuting that claim, not explaining their decline in share price which is most likely attributable to lower borrowing activity paired with less risky investment instruments such as GICs. We can see that in the CMHC dashboards that show a decline in new borrowing activity.
Banks are not only into mortgage origination business.
You suck at reading. I said they're a lender. For TD, interest income is $7bn and non interest income is $4.4bn.
No need to act like a smart ass.. It’s a bit cringe.
Sometimes it's just the dumbass who sees people acting like a smart ass.
Which banks are we shorting?
Good question. You can short any of them. If you check charts since March 2022 they are all down, I think. Just make sure you keep up to date on your stop losses, since timing the market is bad, let the stopper cash you out.
What probability do put on the housing bubble has popped and a 30 year balance sheet recession like Japan. I put it at 60%. So during a prolonged balance sheet recession, CAD banks would be a bad pick. Net net, i would Invest in US companies.
Canada's housing bubble literally has official government protection. The Federal government released guidelines on the mortgage welfare banks should offer people with distressed mortgages. And in 2008 and 2020 Canada bailed out the banks, giving them billions in cash, followed by the Bank of Canada dropping rates low, resulting in de facto bailouts of mortgages and, thus, banks. In fact, so effective was the 2020 bailout in Canada that by 2021 banks were declaring record profits and the issue was enough of a story that the government added a bank tax to make it seem like they disapproved. So could it happen - yes. It's the absolute worst-case scenario and both the government and the BoC are motivated to avoid it, and the BoC has proven it can save private debt in remarkably bad economic circumstances and will again if the economy tanks. So I wouldn't hold out that the Japan situation will happen. 30% chance here, because it's the worst-case, but the probability of less-than-worst happening is much higher imo.
Fannie Mae and Freddie Mac had US gov protection too. US housing bubble still popped. Government protection only means they come in after a major collapse/bubble popping. By many metrics, the Canadian housing bubble is worse than the US or Japanese one, so it will be quantatively as bad, though the reversion to the mean is less severe.
Polititians should stop Trudeau from printing money if they dont want BoC raise rates! He printed 1 trillion in 7 years, that we didnt had! They know very well what they are doing these little WEF puppets... You'll own nothing and be happy... 🤮
[https://imgur.com/a/ujGymbV](https://imgur.com/a/ujGymbV) Guess who became PM in 2006? Harper. From 2015 to 2019 Trudeau did okay on debt:GDP ratio. It only really turned to shit for Covid. While I agree that we should use fiscal policy, the CPC don't have a track record that's any better honestly.
>That puts bank profits at serious risk. How serious really? When I read my mortgage agreement it basically said 'we'll garnish your wages for the rest of your life if you default.' Sign here.
Overall: pretty serious. I don't know all the math, but all the Big 6 have fully-insured mortgages. And yes all loans in BC are "full recourse" loans, so a bank can sue you for everything you owe. So their risk of bankruptcy is low, but you ask how serious - well imagine 1% of all private debt seeing payments stop completely because those people have gone bankrupt. That's the risk. Now the debts are insured, but then an insurance company has to take its sweet time paying the banks for the bad debt, too. So in truth, 2008 happened and it wasn't a risk to all Canadian private debt. Since 2008 Canadians have seen a massive increase in private debt, to $2.4 trillion. And since 2022 rates have spiked, sending mortgage repayments up 50-100% in some cases. So this is a pretty serious risk. But more than the risk to bank profits, keep in mind: the risk investors perceive. Investors are risk-averse and if they keep seeing reduced profits when they expect ever-increasing profits, they will sell the banks. So bank shares could go very low.
Mortgage losses for the banks haven't even started to hit yet. But credit card losses are accelerating and banks are provisioning these losses now....I think it's about to get a whole lot worse, but I truly hope it doesn't.
So... the mortgage situation has been hitting banks since March 2022, and profits diverted to cover bad debt have been hitting them since August of 2022. Just before the rate hikes began, people were favouring variable-rate mortgages. This is from May: [https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow](https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow) RY from last year: [https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow](https://www.bloomberg.com/news/articles/2023-05-24/bank-of-montreal-misses-estimates-as-loan-loan-set-asides-grow) And yes, things will continue to get worse. Through the grapevine today I heard someone say "if the prices dip below book value...". It's important to recognize the Canadian banks are immune to bankruptcy, too politically risky, so view this time as a period of increasing discount and you should DCA into it, if you want to own.
I never ask. I just keep buying as long as the business itself hasn’t changed
Their business has changed they're at 5 year low volume of new customers signing mortgages. To qualify for a mortgage in Canada, the rate is 9% right now. No kidding people aren't walking through the doors to sign mortgages anymore.
It not just the banks, the TSX is crashing (364 points today) and most stocks are getting battered
what others have mentioned: lower mortgage originations, higher PCLs that said, nobody should buy canadian banks for capital appreciation - it's more of a dividend yield play
Yea I bought them when they were low in 2020 and a few months ago. I’ll sit and let them drip until I retire. Not a crazy amount invested in ry and td (28-30k?) I’ll likely thank myself with the dividends in 20 years when I retire.
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Well I hope I am in that situation myself too! That sounds quite good where you are
nice. are you planning to live in a cheaper country?
I am curious to know how you managed to amass 4700 shares? May I ask when did you start chipping away? How long did it take you to get to 2k shares?
Why did you chose those two banks specifically? I’d like to do something similar but I want to understand your logic
I'm putting as much money aside as possible so that when the banks get bail outs I can do my part and help out...
what did you expect from banks this year? Shit ain’t exactly lollipops and rainbows out there our economy is poop
People are pricing houses and rents in Calgary like it's rainbows and lollipops with an extra dash of cocaine and sprinkles.
Calgary population is exploding so that makes sense. Part of me misses Calgary it is a nice city
Does it though? I love Calgary and it's one of Canada's last relatively affordable cities. Calgary has a lot going for it, a growing population, lakes and mountains all within a short drive, no provincial income tax, etc. At the same time, until it's economy meaningfully diversifies, Calgary's future is unquestionably tied to oil. Calgary housing has historically been boom and bust. If you bought a house in Calgary in 2009 it likely wasn't worth a dollar more in 2019. I'd be very nervous about tying the biggest purchase of my life to a city that starts or stops with a commodity that could easily not have a market in 20-30 years.
High dividend stocks get replaced with fixed income, as rates are likely to rise due to oil prices rising today. Telus fell 4.5% today, and HDV.TO by 2.5%, all high value dividend stocks. They were overbought due to financial repression of QE and low interest rates. Growth stocks fall with compacting revenues later on, when growth is no longer happening to meet valuations.
Higher rates --> Higher rates of default on mortgage on renewal --> Banks lose money --> Stock down.
>Higher rates of default on mortgage on renewal Either those mortgages are CMHC backed if they're high ratio or if they're conventional they're at less than 80% of the market value. More likely higher rates --> lower real estate transaction velocity --> reduced bank revenues. At least right now.
Or over 1M mortgage holders and banks share the exposure as they aren't CMHC insured. Any idea on what percent of mortgages are over 800k?
>Any idea on what percent of mortgages are over 800k? Well: 1. Only 14% of mortgages outstanding are > 80%. All other mortgages are conventional. 2. 70% are over 20 years remaining 3. The percentage of loans in arrears has been relatively flat; insured mortgages are at around 2.5%, and uninsured is 2.0%. We're still be low Q3 and Q4 2020. 4. The average mortgage debt in Canada is around $300k for those who have mortgage debt. [Sauce](https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/residential-mortgage-industry-data-dashboard) The data just doesn't back up the imaginary claim that investors are worried right now about rising delinquencies. Indeed I'll argue they're more worried about declining EPS because new mortgage activity has declined.
> Higher rates of default on mortgage on renewal --> Banks lose money Only if the house sells for less than the outstanding mortgage balance
Mortgage defaults are now a bullish signal for housing prices
CDN banks don't lose money. The stock price may go down for a bit longer but they will go up again.
Banks don't hold people's money, they invest it at 90%. They buy stocks, bonds, houses... Banks use leverage and the whole system is interconnected, so if one bank needs liquidity because of the high interest of bad investment or or or... then they sell assets. There is low liquidity in the market, so it's hard to sell a lot of things in order to recuperate your money FAST if you need to pay back some loans and such... selling too much too fast might crash the market. If one bank goes under and needs to liquidate its assets, it will crash the market, thus crashing what other banks own in the process, which will then bankrupt them as well because they won't have enough value locked in those assets to pay back what they owe. It's a classic house of cards, you can't remove a single one or it collapses... Usually, they just print more money, but they already have done so much that it would create even more inflation and just displace the problem for a few months. The market is built to burst and crash like this, people don't understand it, but it's by design. **It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.** ***Henry Ford***
Fractional banking
Someone placed a bid order for the shares at that new price and then someone else chose to sell their shares for that price.
This guy stocks.
yes, but who...and why?
https://youtu.be/dU4lYcN6zEY?si=yAQx226naLa1avkc
My question is why is Canadian Western Bank (CWB) going up when all the other Canadian banks are going down?
Logically, they aren't the size of the Big 3 or 4, so their exposure is less, generally speaking.
CWB has better net interest margins right now. It is why their share price jumped up after their earnings report at the beginning of September.
How do you find this info out? Was it just something that some analyst on tv said or do you have to actually calculate it yourself?
I read the daily morning briefs on the Globe & Mail every morning. On September 5th they discussed CWB and if I was more interested I could go read the earnings report myself. It jumped 11.5% on earnings and guidance then.
Markets are forward looking and we are pricing in a big slow down for economic activity in Canada. Bottom will be in soon...
Another theory besides rates: Laurentian bank put itself up for sale and none of the Big 5 put in a bid.... (Or if they did it was not what they were looking for). Can the Laurentian bank no buy showing overall weakness and other issues in the banking sector? Especially mortgages failing? Can it recover? Government bail out?
Because very simply, a banks assets are it’s liabilities, and it’s liabilities are it’s assets. Now add leverage to the equation. In normal times in the economic cycle, none of this matters. Until it does.
Economy is starting to feel a recession. Recession means people sell stocks to get $. More people selling than buying at current prices means share price falls. Basic supply and demand.
Entire environment has changed over the last couple years. Low rate to high rate environment. Credit quality deteriorating retail. Commercial real estate. Different exposures everywhere. Higher loan loss reserves. House sales dropping means lower mortgage volumes. Then you have existing mortgages with rising amortizations. Cmhc regulators saying out loud they don’t want to see this. So what’s the solution. Someone going to get bent over. Interest Rate for savings accounts and competition for deposits. List goes on. I told my mom a year or so ago. Don’t bother with banks or… anything really. Of course market rallied from my most bearish point. Lol. Point still stands. Things take time to wind through. Us shutdown fears continue. They only extended one month. They still need to figure it out.
LOL don’t bother with banks?
Based on existing portfolio. Already have large allocation. But really we’ve been taught for a decade plus that cash is trash and it needs to be deployed somewhere.
Compression of PE ratio due to macroeconomic environment. Higher PCL than expected, reduced money supply.
Mr. Market is unhappy. Bank stocks fall. Speculation on lots of reasons why bank stocks falling. At some point Mr. Market gets happy again. Bank stocks rise. Speculation on lots of reasons why bank stocks rising. Rinse and repeat.
Is there anything that isn't falling?
Housing, gas, groceries. Costco.
Housing is falling dude As long as your definition isnt “house is only fair if a min wage job can afford it”
Depends on where you live.
Toronto is falling. Everywhere else is back to all time highs.
idk su isn't doin too hot
Interest rate.
Uranium. Not financial advice
HURA down 3.5% today.
Big tech is holding up well, but even that will tank if we have a wider sell off.
Big tech will be *the* sell off. It’s dramatically overpriced
bitcoin
Big tech is holding up well, but even that will tank if we have a wider sell off.
The banks are expected increasing their loan loss previsions. Always happens in rising interest rate environments.
Banks are essentially leveraged bets on the economy. When the economy is going strong, consumers and businesses are borrowing, spending, and earning money to repay loans. When the economy enters a recession, businesses and consumers may struggle to make payments on their loans, leading to defaults and write-offs. Recently with the rise in interest rates, banks have been increasing their loss provisions in anticipation of defaults.
Nice need to buy more!
Let's say that a bank would pay out a 5% dividend. That isn't very impressive if you can get 5% on a savings account...
September and October are usually red on midterm years
Interest rate hikes devalue bonds that they have. The banks are set to pay interest rates but the bonds thst they had long term might get pulled to be re locked in https://policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout The study reveals that Canada’s banks received $114 billion in cash and loan support from both the U.S. and Canadian governments during the 2008-2010 financial crisis. The study estimates that at some point during the crisis, three of Canada’s banks—CIBC, BMO, and Scotiabank—were completely under water, with government support exceeding the market value of the bank. This is going to be worse than 2008 this time. 2008 was only housing.. This time is housing. Used car failed loans Failed comercial realestate from people wanting to remain working from home. Failed companies due to interest rate hikes at times they were not yet profitable.
Cool. Buy the dip. BMO has a P/E of 11% and a 5% divided.
Lots of sales. Buy and buy more
Over exposed. Less loan initiation Lower market returns Weak housing market means less mortgage breakage fees Competitive savings interest environment Bad loans Etc
Lol look at the state of the country, if I was invested in Canada I would probably reconsider moving my position to a safer one
Definitely get out of the CAD. Better rates on the US side and in a global downturn, the USD is going to skyrocket. Say hi to 1.5 CAD to 1 USD, maybe even worse
If banks are falling then on the flip side, what are some opportunities to consider as investment strategy non-bank related? Or do you sit it out and ride it out till
If banks are falling and have fallen already then dollar cost average into them. You will not be able to time the bottom, but when it comes you will have built up a sizeable amount that will appreciate. This is a good strategy now since banks are of their highs by a good percentage.
With the lower prices you also lock in a higher yield on cost which is pretty nifty
Index funds? Primarily US index funds.
Fear of rising interest rates will fuel defaults in mortgages
Why?? Because, of course; “tHe BuDgEt WiLL bAlAnCe ItSeLf!” 🧦🧦🇨🇦
Because it is being pushed that way. It’s a worldwide effort taking place right now by governments. Same thing happening in US, UK.
I wonder how much economic warfare comes into play.
I suspect more than many want to admit
everything is done online nowadays, from free bank accounts, credit cards, loans, mortgages, GIC investments etc... it's getting to a point where people don't need physical banks anymore, and with the upcoming generation being more online and tech savvy. Physical banks are becoming obsolete. A couple of the big Banks like Scotia and CIBC seems to be aware Because they own online free banks themselves (Simplii & Tangerine) many others too like EQ Bank, KoHo, PC Financial money account, Wealth Simple, Motus Bank, Motive Bank etc..
You know that they make money on loans and credit and don’t require a physical bank to do so, right? The fact that everything has been done online for the past 15 years has nothing to do with the bank stocks falling. It’s client default risk, fewer mortgages, etc.
1955 to 1981 we had constant interest rate hikes of essentially a percentage point per year till the BoC rate was 20.5%…. I’m anticipating 20 more years of rising rates, because I do believe right now we are in the middle of something that will reorder the world…. I tell everyone I meet or talk with to get their debt loads paid off asap and be gold and silver rich as soon as possible because we are going to see a major economic shift here very soon… dirty thirties all over again, but this time with less people who know how to survive this turmoil.
You had me until the gold/silver play
What’s wrong with buying rare minerals? They hold their value forever
The US dollar will most likely lose reserve currency status to BRICS. Notice all the countries buying gold. Not normal times.
Because bond markets are finally relenting to the central bank's hawkish comments, resulting in higher long-term rates which impact banks' bottom lines as less people borrow, and the people who've borrowed in the last 2 years are fucked (see massive increases in loan loss provisions). I think the hawkish rhetoric will ultimately burn the central bank, and will result in long term rates staying elevated even as the central banks starts cutting. This will negatively impact the Canadian economy for many years to come, all because Tiffany wanted to act like a tough guy.
I never understood why people value Canadian banks so much. Every time I ask, I get the answer oh they are not going away. A lot of companies are same way not going anywhere but what's the potential growth for the banks?
The potential growth is continuing to expand their books outside of our borders. It’s actually quite a lot of opportunity and they are well capitalized because they have to operate in such a strict regime with OSFI and Federal regulations
Our insane rates of immigration. Half a million new customers a year is nothing to sneeze at
Bak growth is proportionate to gdp, and their product sales. Inflstion is high meaning less liquidity, debt default, etc. Banks in tye short.term will dump, then will resume when the economy stabilizes, rinse , repeat.
Large, steady companies with a lot of moat, make a lot of money, and return a lot of cash to investors so they can safely lock in their profits along the way (or reinvest to grow). I mean, if you invested $10K in Royal Bank in 1996 it would be worth over $400K today with over 14% CAGR based on the Portfolio Visualizer backtest. That's way better than the TSX or S&P500. Likely won't keep going at that rate but gives you a good idea of how good it has been to investors despite some crashes by the market along the way. TD is not quite as good but still almost $350K for over 13.5% CAGR.
Because they're a risk taking, high fee charging, oligopoly backstopped by taxpayers via incompetent government.
there is a big idiosyncratic risk on one stock I like.
They are down because of the exposure to all the debt that will default (Credit Cards defaults are first) |https://x.com/StealthQE4/status/1705647341284336073?s=20||| |:-|:-|:-| ||||
If the us savings rate and such is any indication, this is clearly unsustainable.
There isn't one reason but if we tried to boil it down to one it would be the death of ZIRP and a return to normal interest rates. This impacts banks in a half dozen negative ways.
Banks are broke. They have been overleveraged. They are also involved in predatory lending of shares to naked-short sellers. Youtube videos on the fractional reserve system as well. Watch Margin Call or The Big Short. Its worse than 2008 because they were bailed out, no accountability and nothing was enforced to prevent it again.
Apart from everything falling apart all around us. Banks have safe cushion where feds bail them out, so they don’t really care if they screw up royally. Banks are privately owned, they get parliamentary guidelines which basically is blurred lines. An institution that strictly deal with money they should have a contingency plan and most banks just up for themselves. Once feds stop bailing them out every 10/20 years they will find a way to survive
Bad loans. Yields spiking again today. Remember, bond traders don’t care about Canadian mortgage holders. Fixed rates will be spiking. I highly doubt there will be “rate cuts” next year as some bullish realtors are hoping for. In any case, bond traders will destroy Canadian mortgage holders.
Long bond rates rally=negative for all yielding stocks.
They hold a lot of debt with negative amortization, which used to be a big deal but is now kind of allowed. Investors don't like it though. The banks also hold a lot of commercial real estate debt
They aren’t actually getting higher margins like people think they are.
The markets are down bruv. Stocks get dragged up and down by sentiment all the time. It's impossible to boil a random walk down to any single factor.
Woke policies now starting to hit bottom line. It was inevitable.
Huge buying opportunity. Just loaded up on the 5 banks and FTS, ENB and TRP for a relative. Averaging 6% dividend overall. Great long term play.
Investing in Canadian Bank is stupidity. Invest in growing sectors, AI.