Financial Markets Meltdown

[Dean2]

Originally Posted by KGB

Hey Dean, have you ever looked into the split shares like XTB or BK?

If BK is Canadian Bank Corp, I know a little about it but not a share I have ever owned or followed closely. BK, being Bank of Mellon I know nothing about. XTB I have never heard of and it doesn't come up when I input the symbol.

[ab_hunter]

Agreed the ship has sailed for certain stocks like Amazon, however depending on the timelines you input to compare, it crushes any index fund or likely any other stock. Just need to find the next Amazon, which kind of feels like gambling to me.

Originally Posted by Dean2

So to continue yesterdays discussion, and to add to raab's great point about learning how to invest can give you much better results. Here is a chart that clearly shows that picking the right stocks, you can materially beat the index. You can also significantly under perform picking the wrong ones. Eeven high flying tech stocks like amazon can do far worse than the index over the last 5 years.

[KGB]

Originally Posted by Dean2

If BK is Canadian Bank Corp, I know a little about it but not a share I have ever owned or followed closely. BK, being Bank of Mellon I know nothing about. XTB I have never heard of and it doesn't come up when I input the symbol.

Oh crap, my bad, wrong ticker, it’s actually XTD. And the other one is Canadian Banc corp.
Both stocks have very attractive dividents…

[Fisherdan]

Those Horizons ETFs look top-notch Dean.

Any insight on self directed RESP platforms in which these etfs could be purchased? The oldest of my kids won’t be hitting university for a decade. I have their RESPs set up through TD bank (all our banking is through TD). TD only offers a handful of their own mutual funds to chose from…all of which underperform these ETFs. TDB972 (Canadian dividend fund - which is what they have) has grown an average of just over 8% annually over the last ten years (which isn’t bad) but it has no US exposure.

I was thinking of contacting National Bank… they seem to have a decent platform for regular investments. Not sure about RESPs though. Any banks or platforms you would avoid altogether?

[Dean2]

Originally Posted by Fisherdan

Those Horizons ETFs look top-notch Dean.

Any insight on self directed RESP platforms in which these etfs could be purchased? The oldest of my kids won’t be hitting university for a decade. I have their RESPs set up through TD bank (all our banking is through TD). TD only offers a handful of their own mutual funds to chose from…all of which underperform these ETFs. TDB972 (Canadian dividend fund - which is what they have) has grown an average of just over 8% annually over the last ten years (which isn’t bad) but it has no US exposure.

I was thinking of contacting National Bank… they seem to have a decent platform for regular investments. Not sure about RESPs though. Any banks or platforms you would avoid altogether?

After just going through dealing with TD direct investing to setup accounts to transfer rsp and resps, for a young man I know that were with TD bank and also in crappy mutual funds I can say for sure to avoid them completely. I have helped setup new accounts for a few people recently and RBC Action Direct has been far and away the best to deal with. They also have a very advanced online capability. You should be able to open accounts and transfer from td all on line. Rbc phone support and secure messaging is also head ans shoulders better. With TD Bank we have so far made 6 trips to the branch to get this done with them.

[Fisherdan]

Originally Posted by Dean2

After just going through dealing with TD direct investing to setup accounts to transfer rsp and resps, for a young man I know that were with TD bank and also in crappy mutual funds I can say for sure to avoid them completely. I have helped setup new accounts for a few people recently and RBC Action Direct has been far and away the best to deal with. They also have a very advanced online capability. You should be able to open accounts and transfer from td all on line. Rbc phone support and secure messaging is also head ans shoulders better. With TD Bank we have so far made 6 trips to the branch to get this done with them.

Thank you. I will check them out.

[ab_hunter]

Other options include Qtrade and Questtrade.

I personally use Qtrade and have zero complaints.

[eric2381]

https://financialpost.com/fp-finance...imate-alliance


It is interesting to see the change of mentality people are having.

[Dean2]

Originally Posted by KGB

Oh crap, my bad, wrong ticker, it’s actually XTD. And the other one is Canadian Banc corp.
Both stocks have very attractive dividents…

Put those two stocks into the chart I posted over ten years, compared to RY, HXS, and HXT. NEVER buy a stock just for the dividend. It needs to pay a good dividend and grow. RY today is 133 bucks and pays 4%, if you bought it ten years ago at $66 you are actually earning an 8% dividend on the money you invested and the share price doubled. XTD is 50 bucks today, just like it was 10 years ago, and pays 6.6%. So, RY is actually earning you far more on the money you invested, and it doubled in value. Over 5 years that other stock is down 22% and has been down over 80%, while RY is up 35%.

To me, anything that stays flat that long is not a good investment. BK is nearly as bad. I don't know much about either company but I wouldn't be chasing either or putting them on my watch list. just just based on past performance unless I saw news something big had changed..

Strongly suggest you use the charts at the link below. Makes comparing stuff really easy.

https://finance.yahoo.com/quote/RY.T...J3ZWVrIn19fQ---

[bdub]

Originally Posted by KGB

Hey Dean, have you ever looked into the split shares like XTB or BK?

Originally Posted by Dean2

Put those two stocks into the chart I posted over ten years, compared to RY, HXS, and HXT. NEVER buy a stock just for the dividend. It needs to pay a good dividend and grow. RY today is 133 bucks and pays 4%, if you bought it ten years ago at $66 you are actually earning an 8% dividend on the money you invested and the share price doubled. XTD is 50 bucks today, just like it was 10 years ago, and pays 6.6%. So, RY is actually earning you far more on the money you invested, and it doubled in value. Over 5 years that other stock is down 22% and has been down over 80%, while RY is up 35%.

To me, anything that stays flat that long is not a good investment. BK is nearly as bad. I don't know much about either company but I wouldn't be chasing either or putting them on my watch list. just just based on past performance unless I saw news something big had changed..

Strongly suggest you use the charts at the link below. Makes comparing stuff really easy.

I believe both these investments are dividend split funds offered by a fund manager. The fund provider uses the funds from the offering and then splits the cash flows into a preferred share and a common share made up of a group of dividend paying companies. One will be offered as BK made up of the common shares and the other will be BK.PR.A made up of the preferred shares. They enhance the yield of the common shares by using leverage and a covered call strategy. The preferred shares are just like any other preferred share and behave more like a bond but have certain rights above the common shares if crap goes sideways, ie a big dump in the share prices of the underlying companies.

Do some googling and reading on split share corporations before investing. More risk goes along with the high yield, and a good way for the fund providers to make a living off of retail investors imo. This topic came up previously, perhaps somewhere in this thread.

[Dean2]

Originally Posted by bdub

I believe both these investments are dividend split funds offered by a fund manager. The fund provider uses the funds from the offering and then splits the cash flows into a preferred share and a common share made up of a group of dividend paying companies. One will be offered as BK made up of the common shares and the other will be BK.PR.A made up of the preferred shares. They enhance the yield of the common shares by using leverage and a covered call strategy. The preferred shares are just like any other preferred share and behave more like a bond but have certain rights above the common shares if crap goes sideways, ie a big dump in the share prices of the underlying companies.

Do some googling and reading on split share corporations before investing. More risk goes along with the high yield, and a good way for the fund providers to make a living off of retail investors imo. This topic came up previously, perhaps somewhere in this thread.

You did more looking than I did. Since these are split corps I would go as far as to say, hell no for the average retail investor. Straight forward index funds, ETFs, and common shares are complicated enough. Fancy derivatives are not a good idea for most professionals, many preferred are above the knowledge level of many advisors. You really need to be able to understand the risks of what you invest in.

[Dean2]

The major Banks are announcing their results between Friday and Mar 2. The share prices have been retreating the last few days. Seems the market is afraid the earnings results will be poor, higher Capital requirements have been put in place by OSFI, Fed extra tax kicking in this past quarter and loan loss provisions rising. I actually think that at least some of the Banks are going to surprise to the good side. All in, you may want to keep an eye on RY and TD and see if you get a chance to buy some a bit cheaper than they have been recently.

[eric2381]

https://www.aramco.com/en/news-media...-digital-forum

[MountainTi]

Originally Posted by eric2381

https://www.aramco.com/en/news-media...-digital-forum

The inconvenient truth

[Dean2]

BNS dropped $4 today on their lousy earnings results. From my perspective and what I am looking to buy, that is NOT a buying opportunity. Without going into a long dissertation, BNS is not the bank to be buying or holding, despite the 6.5% dividend. It may not drop a lot more, but it isn't going up very fast for the next few years either. I will wait for TD and RY results to come out Mar 2nd and look for a buying opportunity on them.

[bdub]

Looks like kind of a mixed bag so far for bank earnings. TD tomorrow.

[Dean2]

Royal Bank is down $6 this morning, despite announcing strong results and a strong forecast, so I picked up a bunch more shares. Net income being down 900 million is actually up from this quarter last year when you figure in Justine Truedope's, budgets balance themselves, "Recovery Surtax" just kicked in and took a Billion extra in tax this quarter alone.

Canada’s biggest lender reported overall net income of $3.2-billion, or $2.29 a share, for the quarter ended Jan. 31, compared with $4.1-billion, or $2.84 a share, a year ago.

On an adjusted basis, RBC earned $3.10 per share for the quarter ended Jan. 31, ahead of analysts’ average estimate of $2.93 per share, according to Refinitiv IBES dat

Provisions for bad loans came in at $532-million for the quarter, up from $105-million a year ago, mainly reflecting higher provisions in Personal & Commercial Banking.

Earnings from Royal Bank’s personal and commercial banking unit rose 8 per cent and wealth management profit was up 3 per cent from a year ago, driven by higher interest rates.

Canada’s central bank in January forecasted that the economy would stall and could tip into recession during the first three quarters of this year.

RBC’s rivals – CIBC (CM-T) and Bank of Montreal (BMO-T) – have reported a decline in quarterly profits as they build buffer for loss provisions amid challenging economic conditions.

In a research note, Credit Suisse analyst Joo Ho Kim said: “RY’s Q1 results beat both the Street and our estimates, as strong performance from Capital Markets more than offset higher expenses (which does have a number of moving parts in it), and softer net interest margins. On expenses, the bank reported 17 per cent year-over-year growth, which was 3 per cent higher than what we expected, and even on an adjusted basis, expense growth of 11 per cent still seemed relatively high. The other area that we focus on is net interest margins, which was somewhat softer than what we expected as well (up just 1bp at the all-bank), as a good outcome from Canadian P&C was offset by weaker-than-expected performance from Wealth Management (CNB margins were down 5bps Q/Q). We saw the bank trod on that gradual path of normalization in terms of credit (similar to its peers this quarter), and the capital ratio remained solid (albeit lower than our estimate).”

[ab_hunter]

Dean, are you not waiting until tomorrow to buy RY?

[Dean2]

Originally Posted by ab_hunter

Dean, are you not waiting until tomorrow to buy RY?

Did not wait, bought today. In my experience, lately, last 3 years, they take a big drop on the day they release results, then recover some the next day. RBC released strong results, big drop. BNS released bad results a couple of days ago, big drop. BNS has recovered some of the drop already and they aren't a good Bank. TD will announce tomorrow, they will likely show a big drop, RY will recover some tomorrow and a bit later today. Royal is already back up $1.50 to 133.85 from the low of the day, now off $4.59, I bought it off $6.00 at 132.50. TD will recover some the day after they announce.

How much they gain over the next while is a function of the quality of earnings and quality of the Bank. I am holding RY and TD and if I have some spare cash, buy more of each on weakness. You can't really time the market but this pattern is pretty consistent.

[ab_hunter]

So far you are correct, RY is trending up already. Just bought a bunch.

[Dean2]

Originally Posted by ab_hunter

So far you are correct, RY is trending up already. Just bought a bunch.

To be clear, i can't time the market. I bought some RBC back in Oct 22 for 118 a share, so that is a better deal than I got today but I used the cash I had on hand at the time. I collected more cash between Oct and now and this seemed a good price and time to deploy it. Buying in regularly at current weakness results in a pretty good average price with 4 buys over each 12 month rolling time period.

[ab_hunter]

Originally Posted by Dean2

To be clear, i can't time the market. I bought some RBC back in Oct 22 for 118 a share, so that is a better deal than I got today but I used the cash I had on hand at the time. I collected more cash between Oct and now and this seemed a good price and time to deploy it. Buying in regularly at current weakness results in a pretty good average price with 4 buys over each 12 month rolling time period.

Understood, no one can time the market. I like the strategy of buying in dips; I plan on holding RY for the next 20 years, so not concerned.

[Dean2]

TD announced good results this morning. Took a drop of over 3% anyhow, so it has followed the same pattern as all the other announcements. Royal is trading at $135+ so up 2% from yesterday's lows.

RBC Analysis of the Toronto Dominion Bank's Results

TD’s adjusted EPS was $2.23, above our estimate of $2.17 and consensus of $2.19 Results excluded a C$1,200 million after-tax provision related to the litigation against Stanford Financial Group. On a segmented basis, results were as strong in Canada and U.S. P&C. TD closed the acquisition of Cowen on March 1, 2023, but the First Horizon (FHN) acquisition is still pending approvals and unlikely to be approved by the outside date, May 27, 2023.

Total provisions for credit losses (PCLs) were $690 million, above our forecast of $716 million and the consensus estimate of $628million. The bank had performing PCLs of $137 million (down ~-16% QoQ), below our estimate of $177 million and the consensus estimate of $103 million. PCLs on stage 3 (impaired) loans increased ~22% QoQ to $553 million, higher than our estimate of $540 million.

Pre-provision, pre-tax earnings (PPPT) on a teb basis came in at $5,642 million, above our estimate of $5,477 million and consensus of $5,372 million.

Adjusted total revenues of $12,126 million (up ~5% QoQ and ~15% YoY) were above our $11,952 million forecast, with both net interest income (NII) and non-interest income above our estimates. TD's core NII was solid at $7,935 million (up ~15% QoQ and ~39% YoY), compared to our estimate of $7,207 million. Non-interest income was $4,264 million, above our estimate of $4,107 million. TD's core net interest margin (NIM) expanded 23 bps QoQ to 2.01% according to our calculations, compared to our forecast of 1.80% — our calculation excludes the noise from trading NII at the all-bank level and does not necessarily match up with TD's adjusted NIM.

Adjusted non-interest expenses of $6,541 million (up ~2% QoQ) were higher than our $6,516 million estimate. TD’s efficiency ratio (based on our calculations) was 53.9% (down -185 bps QoQ), better than our forecast of 54.5%.

The bank's reported CET 1 ratio was 15.5% (down -70 bps QoQ and inclusive of the settlement charge), lower than our estimate of 16.2%. Risk-weighted assets increased ~3% QoQ to $531,644 million, versus our estimated ~2% QoQ increase to $527,880 million.

Canada P&C earnings were $1,729 million (up ~2% QoQ and ~7% YoY), versus our $1,706 million expectation. Total loan growth was ~8% YoY, compared to ~9% YoY last quarter. NIMs increased 10 bps QoQ to 2.80%.

U.S. P&C earnings of $1,368 million (up ~7% QoQ and ~34% YoY) were above our forecast of $1,320 million. NIMs in this segment were also up 16 bps QoQ to 3.29%.

Overall, we have a positive view on Q1/23 results. Adjusted EPS was better than our forecast and consensus, and we like the good results in Canada and U.S. P&C. We look forward to hearing more details on the FHN acquisition on the conference call today.

The company will be hosting a conference call today at 1:30 PM ET. The dial-in numbers are 1-866-696-5894 or 416-641-6150, passcode 2727354#.

[Drewski Canuck]

"Overall, we have a positive view on Q1/23 results. Adjusted EPS was better than our forecast and consensus, and we like the good results in Canada and U.S. P&C. We look forward to hearing more details on the FHN acquisition on the conference call today."

REALLY??? The Mortgage Bomb is about to go off on a pile of renewals where the equity has evaporated, and Banks are already requiring borrowers to demonstrate liquidity to service debt that is worth more than the asset value.

But hey! that is what GOC and BOC wanted for us with increasing interest rates! So when we see the correction in a cooling housing market start to bite hard in 2023, the Bank has a positive view on exactly WHAT????

CMHC will pay the banks on the losses on the defaults, then CMHC will sue on the personal covenant on the loan loss, and people will be forced to go BANKRUPT to get away from the Judgement from the Mortgage Default. How does that help the Banking Industry?

This is like Mutual Fund Salesmen telling people to keep their "money in the market" as the Stock Market declines. Why do they want you to keep your Mutual Funds and not cash out? It's really simple. The Management Fee is earned on the Fund regardless of its performance. When you hear the line of possibly missing out on the "best days" on the Stock Market if you sell out, remember the best days are climbing back up to where the Stocks previously were at. You gained nothing.

If people start selling their Bank Stocks, the value is going to go down for the Options that the Executive have received as bonuses. Who are the Executives going to sell their shares to if the value is less than the Option price because the Investors sold their Bank Stock?

But if you all want to hear some real "spin" on reality for the Banking Industry, pour yourself a beer, and have a good laugh on the conference call.

Interest rates are going up in 2023, and the banks know that will crush them.

You should look forward to 2023 with all the enthusiasm of a Death Row Inmate.

Drewski

[eric2381]

I know for myself, in the current cycle and economic environment, and current prices, I would not be buying banks. Again, that’s my thoughts, I’m not reflecting this to anybody else.

[bdub]

I'm 2% CDN banks, 1.5% insurance in my portfolio. No rush here.

https://housepriceindex.ca/#maps=c11

Post Category: News and Economic Reports
January 19, 2023

Historic loss of value in the residential market
The Teranet-National Bank HPI continued to decline in December so that the cumulative drop in prices since their peak in May 2022 totaled 10.0%, the largest contraction in the index ever recorded. The current decline in prices has even surpassed the 9.2% loss in value that occurred during the 2008 financial crisis. However, there is some consolation in that the seasonally adjusted monthly decrease in prices in December was less significant than in November, going from -1.0% to -0.3%. With the Bank of Canada raising its key interest rate again in December and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still expect the total correction to be limited to about 15% nationally by the end of 2023

For some more color on CDN housing market.

[bdub]

Some more on the Canadian housing market. From the Globe.

New data from CIBC show that $52-billion worth of mortgages – the equivalent of 20 per cent of the bank’s $263-billion residential loan portfolio – were in a position where the borrower’s monthly payment was not high enough to cover even the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.
The disclosure, contained in a footnote in CIBC’s recent quarterly financial results, is the first from a major bank outlining the amount of variable-rate loans where payments no longer cover interest costs.

[raab]

I bought Coke(Symbol:KO) today for my RRSP. I feel it is a pretty good value being around the $60 mark. You will not get rich off it, but I think you will be happy with the results if you hold longterm(10-20 years). I figure the business is worth double what it is currently selling for with 5% interest rates.

[raab]

Originally Posted by bdub

Some more on the Canadian housing market. From the Globe.

New data from CIBC show that $52-billion worth of mortgages – the equivalent of 20 per cent of the bank’s $263-billion residential loan portfolio – were in a position where the borrower’s monthly payment was not high enough to cover even the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.
The disclosure, contained in a footnote in CIBC’s recent quarterly financial results, is the first from a major bank outlining the amount of variable-rate loans where payments no longer cover interest costs.

That does not sound good. I know when I looked at TD I was worried about the amount of Home Equity Lines of Credit they had loaned out. Most of those I believe are variable rate, with an older demographic using them.

IIRC TD had about 400B loaned out in mortgages and 200B loaned out in HELOCs. It is insane to me that almost 1/3 of the money loaned out by a Canadian bank for housing is in HELOCs.

[Drewski Canuck]

Home Equity Lines Of Credit was the spin by financial advisors to get more money from the investor the money buys an investment like a mutual gund that continues to generate income for the advisor in addition to the initial commission paid.

The story is that the interest paid is tax deductible so why pay it back right?

That is why in house investment advisors push HELOCs It is aWin Win for the bank

Drewski