# Dual listed Big-5 bank stocks, why are you loyal to USA?



## MoreMiles (Apr 20, 2011)

I have made an observation today. Everyone was up / green today, Dows, S&P, TSX... but not the Canadian banks?

TSX listings today, Jul 15, 2011.
Symbol Last Change %
RY 53.05 -0.30 -0.56
CM 74.13 -0.49 -0.66
TD 79.23 -0.30 -0.38
BMO 61.16 -0.21 -0.34
BNS 57.03 -0.05 -0.09

Wait a minute?! The same stocks were up in the US exchanges. It appears that these Canadian owned and operated banks are using the USA price as basis and convert it with $CAD/US rate. So US$ dropped about 0.75% against the Cad$. With such drop, it wiped out all the gains from the Canadian bank stocks.

Why? Shouldn't it be the other way around? Canadians should trade in Canadian dollars, then those dual listed stocks can be converted later.

I was wondering why Canadian banks are doing poorly these days... maybe this is why? They have chosen to be loyal to the States by operating in their currency. They have forgotten that we use Canadian dollars here in Canada.

So I have to worry about currency risk now, even trading a stock in my own country? 

I am thinking to dump all Canadian bank stocks and ETF soon, like XFN and ZEB.


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## andrewf (Mar 1, 2010)

The shares are fungible and arbitrageurs would take advantage of any variations in share price after currency exchange. Nothing nefarious going on.


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## Square Root (Jan 30, 2010)

the OP has a poor understanding of how interlisted stocks trade. Andrew is correct. Also the interlisted stocks will tend to get priced off the exchange with the most liquidity. In the case of the banks this has always been Toronto. However, as some of the banks increase their footprint in the US (TD and BMO) it is possible that the US market will increase its share of trading and liquidity. In any event no conspiracy or lack of sovreignity going on here.


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## MoreMiles (Apr 20, 2011)

You are right. I don't understand the rationale behind those interlisted stocks. It's like saying our asset should be valued in a foreign currency first. Then why bother listing here in TSX? 

I bought Canadian stocks because I did not wish to have currency risks. Now I have to hedge US/Cad$ for a Canadian company that conducts most of their business inside Canada?

I bet most Canadians do not realize that and find this practice distasteful.


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## m3s (Apr 3, 2010)

Thinking you can avoid exposure to USD is awfully naive imo. Even if you invest in pure CAD companies, a lot of their profit or business is probably USD and high CAD probably only hurts business anyways. Hedging USD/CAD is wasted currency exchange fees imo


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## Sampson (Apr 3, 2009)

You still seem to be confused about the subject.

The value of stock traded lower, period. If you had been exposed to currency risk, you portfolio would have benefited because the CAD rose against the USD. If anything, it sounds like you wish you did have exposure to currency risk since sometimes it can be in your favour (like this situation, falling CAD bank price, and rising CAD, could be in your favor if you held the stock on the NYSE). You would have gained not because you owned bank stocks, but because you held USD.

Inter-listing is for a completely different reason, nothing to do with currencies, but exposure. If it wasn't a bank, but some other company, wouldn't you want non-Canadian monies available to run up prices if your company was about to make another equity call?


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## MoreMiles (Apr 20, 2011)

Sampson said:


> You still seem to be confused about the subject.
> 
> *The value of stock traded lower, period.* If you had been exposed to currency risk, you portfolio would have benefited because the CAD rose against the USD. If anything, it sounds like you wish you did have exposure to currency risk since sometimes it can be in your favour (like this situation, falling CAD bank price, and rising CAD, could be in your favor if you held the stock on the NYSE). You would have gained not because you owned bank stocks, but because you held USD.
> 
> Inter-listing is for a completely different reason, nothing to do with currencies, but exposure. If it wasn't a bank, but some other company, wouldn't you want non-Canadian monies available to run up prices if your company was about to make another equity call?


If you look at the equity markets yesterday, TSX, TSX Venture, Dow, S&P, Nasdaq... everyone was up, including Canadian REIT. So I don't think it's the banks that traded lower. They traded higher but got smashed by the currency exchange.


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## slacker (Mar 8, 2010)

MoreMiles said:


> If you look at the equity markets yesterday, TSX, TSX Venture, Dow, S&P, Nasdaq... everyone was up, including Canadian REIT. So I don't think it's the banks that traded lower. They traded higher but got smashed by the currency exchange.


Thinking it's true doesn't make it true. Words have actual meanings. Your assuming that a Canadian bank only operate in Canada and only has exposure to elements within Canada does not actually make it so. That this upsets you is due to no one's fault but your own.

Please educate yourself or if you have questions, we're here to help. But making assertions on something you are ignorant about is quite distasteful.


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## MoreMiles (Apr 20, 2011)

slacker said:


> Thinking it's true doesn't make it true. Words have actual meanings. Your assuming that a Canadian bank only operate in Canada and only has exposure to elements within Canada does not actually make it so. That this upsets you is due to no one's fault but your own.
> 
> Please educate yourself or if you have questions, we're here to help. But making assertions on something you are ignorant about is quite distasteful.


You can have your own opinion just like I have expressed mine. You have shifting the debate from topic discussion to name calling, which is entirely disrespectful in forum etiquette.

I am puzzled by your childish statement "it's your own fault". Why are you doing personal attack all of a sudden? Why can't you focus the discussion on this topic? If you do not wish to discuss this topic, then leave my thread! The discussion forum is for TOPIC and not PERSONAL attack!

I am an owner of these banks as I hold shares in them. As an owner, it is my right to question the operation of my investments. You may express a different point of view, if you have any, otherwise keep your distasteful, disrespectful, uncivilized, childish behaviors to yourself.


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## Sampson (Apr 3, 2009)

MoreMiles said:


> If you look at the equity markets yesterday, TSX, TSX Venture, Dow, S&P, Nasdaq... everyone was up, including Canadian REIT. So I don't think it's the banks that traded lower. They traded higher but got smashed by the currency exchange.


just because the index went up, doesn't mean every component of that index also went up. If you believe someone is manipulating Canadian bank stock prices, I would suggest you sell your holdings and invest in companies you are comfortable with.


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## slacker (Mar 8, 2010)

@MoreMiles: I am sorry for my curtness. To get back to your question about whether you should sell your Canadian bank stocks and ETF's. The answer is yes, you should sell them to avoid the currency risk that you are convinced is affecting their returns. If you don't sell them that means I am right and you are wrong. So sell them on Monday please.

Alternatively, as a shareholder of these Canadian banks, you indeed have every right to question their operation and "loyalty" to Canada. I will suggest that you bring this up at the next shareholder's meeting. I'm sure the other less informed Canadian shareholders will appreciate your insightful comments.


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## AMABILE (Apr 3, 2009)

If a canadian bank is up .50 cents (CDN) on the TSX,
shouldn't it also be up .50 cents (US) on the AMERICAN EXCHANGE ?


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## slacker (Mar 8, 2010)

@AMABILE: Generally no. A stock traded on the Canadian market on TSX for $100 (CAD), will generally trade on the NYSE at around the fair exchange rate at the time. So about $104.21 (USD) today. This will depend somewhat on the trade volume and liquidity of said stock.

Another way of looking at it, $0.50 (CAD) is not valued the same as $0.50 (USD), so it doesn't make sense for the stock to go up different amounts on different exchanges. Generally assume an efficient market. If there's advantages to be had, it generally would had been exploited by arbitrage.

See Arbitrage for more details: http://en.wikipedia.org/wiki/Arbitrage


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## MoreMiles (Apr 20, 2011)

@slacker: I love to discuss interesting ideas. No worry. Sometimes we get too opinionated / heated in our expression of idea.

I did sell all my bank holdings today when they dropped further. I lost about $3000 since I bought them... I simply could not stand the pain any more. I was hoping for a debt ceiling deal today to end the bear market. However, this may take another week so I don't think I can tolerate another 5 days of downtrend. Maybe my risk tolerance is not as good as I thought.

I am almost all in cash now.

I also saw a few talk shows on BNN. Many advisers think the Canadian banks have reached a top for the foreseeable future, as they had a great run last year.


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## KaeJS (Sep 28, 2010)

MoreMiles,

Once this whole "debt" thing blows over, everything will be right as rain again.

It is not a bad thing that you sold your bank stocks, just make sure you buy back in at a lower price... or you may be disappointed.

$3,000 isnt exactly pocket change.


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## Oldroe (Sep 18, 2009)

Seriously you should get out of stocks and stay out.

Me I watching like a hawk and getting ready to buy.


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## MoreMiles (Apr 20, 2011)

Oldroe said:


> Seriously you should get out of stocks and stay out.
> 
> Me I watching like a hawk and getting ready to buy.


I would like to stay out of stocks if I can keep my asset without losing to inflation. I don't think they will raise the interest rate in tomorrow's meeting. So at 1% GIC for a one-year term return then full tax rate as interest income, there is no choice if you want to beat the inflation.

I think a lot of people are waiting... the problem is, you may miss a rally, like July 1st one week 5% rally.

I did sell all the bank stocks now. I think I will go with a broad ETF index next time, covering everything.


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## KaeJS (Sep 28, 2010)

People have been giving you a hard time lately, eh? 

Just remember, you sold all your bank stocks after the banks have been hammered over the USA debt crisis.

What happens when _*you*_ miss the rally that will come to the financial sector (aka, the banks you just sold) as soon as the USA announces they're raising the debt ceiling?


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## MoreMiles (Apr 20, 2011)

KaeJS said:


> People have been giving you a hard time lately, eh?
> 
> Just remember, you sold all your bank stocks after the banks have been hammered over the USA debt crisis.
> 
> What happens when _*you*_ miss the rally that will come to the financial sector (aka, the banks you just sold) as soon as the USA announces they're raising the debt ceiling?


That's okay. I have changed my view on the banks at this time. I think they are too vulnerable to interest rate and mortgage problems. If our real estate is going to correct 10-15% in Toronto / Vancouver soon, bank profits and mortgage foreclosure rate would be affected. They had an amazing run last year so it's kind of expensive now.

I think gold miner stocks are better than bank stocks these days.


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## Square Root (Jan 30, 2010)

this guy should not own individual equities. he should try an index ETF


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## HaroldCrump (Jun 10, 2009)

MoreMiles said:


> I think gold miner stocks are better than bank stocks these days.


IMHO, you are letting emotion and panic drive these decisions.
You have just managed to buy high and sell low on your bank stocks trades.
Now you are considering repeating that with the gold stocks.
What if the gold stocks correct a few % points over next few weeks?
Are you then going to panic and sell those as well?

Also, BTW, some Canadian mining stocks are interlisted on the US exchanges.
Therefore, they will have the same "issue" that you think the interlisted bank stocks do.
In other words, they are disloyal to Canada as well


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## andrewf (Mar 1, 2010)

Square Root said:


> this guy should not own individual equities. he should try an index ETF


Yes. He should buy VT and XIU and enjoy his life.


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## humble_pie (Jun 7, 2009)

i would just like to say that perhaps we are all being just a tad too hard on Miles.

he may be a very young man; and if that is the case he's certainly entitled to some reverse moves without being nagged or lectured.

in addition, do all realize that english is not miles' first language. He writes english very well, but nevertheless small signs here & there reveal a non-native speaker. This makes it somewhat more difficult for miles to convey the exact nuance of what he is thinking.

when miles first appeared in cmf forum, he expressed concern over the ending of QE2 & the floating of new debt in the US. These have always been important themes for him. There is nothing wrong with having such concerns imho.

lastly, i for one don't see where miles "bought high & sold low." He said he made 3000 in bank stock capital gains, plus he would have benefited from their dividends during his period of ownership. If miles feels better being out for the time being, then he's among good company.

so i'm sending miles a message to say, We certainly hope to see you again. Oh, and one more thing. Please don't buy gold stocks right away. Please don't buy anything right away. No etfs. No nothing. Sometimes a little Time Out does wonders


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## MoreMiles (Apr 20, 2011)

humble_pie said:


> i would just like to say that perhaps we are all being just a tad too hard on Miles.
> 
> he may be a very young man; and if that is the case he's certainly entitled to some reverse moves without being nagged or lectured.
> 
> ...


Humble_Pie, you are totally right. I am amazed at your keen sense of observation. No wonder you are very successful in option trading. Option trading is, like a poker game, parimutuel... so I can see how you can read the emotional level of other players and use that to place good option bets.

English is not my first language. In fact, finance is not my profession either. But it seems that it is becoming a great distraction to me as I am spending a lot of time worrying about it non-stop. I need to concentration on my full time works. After trying to do this myself for about 6 months, I am about to give up and hire a professional / private banker.

I like your list of private banker recommendations. I have a couple of questions for you there. So I will post there to keep the message relevant to the thread.


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## HaroldCrump (Jun 10, 2009)

You are right, we can't invest like Bible thumping preachers.
There's not one here that hasn't made their fair share of mistakes and misjudgements.
I certainly hope we haven't driven Miles miles away 

'night, see ya'll tomorrow.


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## Oldroe (Sep 18, 2009)

I would suggest a step back.

Write all your concerns down and check on them in 6 months.

Even on this forum you should notice how quiet some posters are. Just 4-5 months ago they chatting about every trade. That means the difficultly level is up and their stocks are down.

For me my adrenalin is starting! Just when do I start buying...........


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## Square Root (Jan 30, 2010)

OK but his original post was strange indeed and reflected a total lack of understanding. the bank shares look pretty good today?


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## kcowan (Jul 1, 2010)

Oldroe said:


> Even on this forum you should notice how quiet some posters are. Just 4-5 months ago they chatting about every trade. That means the difficultly level is up and their stocks are down.


Many of us are patiently sitting in cash waiting for the bargain bins to fill up!


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## ddkay (Nov 20, 2010)

I'm 95% cash and writing my shopping list in the mean time. It's not abnormal..

Soros’s Quantum Holding 75% Cash Leads Hedge Funds Baffled by Instability


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## humble_pie (Jun 7, 2009)

ddkay & kcowan this thread isn't about either of you or your stock positions.

it's about the mob lynching that took place in this thread. And neither of you were, thankfully, part of it.

i would also like to say that miles was not so far off the beaten track, imho. There is an odd skewing of both usd & cad share prices that sometimes occurs in interlisted stocks that report their financials only in USD, that pay their dividends in USD. Thomson is an example. How that company classifies as canadian escapes me, since even its head office(s) are in nj & nyc.

even as exchange rates fluctuate & indexes fluctuate, this skew is not from one currency to the other. The arbs are working fine. It's a very small, very subtle skewing from, say, an index, or from a 100% american peer company.

i've never observed this phenomenon with canadian bank stocks, though. I wouldn't have thought the phenomenon would appear among canadian bank stocks. Even though a roybank treasury staffer did once forecast to me, a few years ago, that sooner or later canadian banks would begin paying their dividends in USD. I would normally expect such a skew to appear only among "canadian" stocks that are functionally, with respect to accounting standards & business profiles, US companies for all practical purposes.

miles had a good eye for anomalies. It's possible that he picked up this skew. English was not his mother language. Perhaps he didn't express his concern clearly enough for some. No doubt i'm not describing the possible skew clearly enough, either, for many in this forum. But i've seen it. Not only seen it, but i've looked for options that might themselves skew in the opposite direction.

back to the lynching. Certainly miles was a person who never offered a harmful word to anyone. He didn't deserve what happened to him in this thread.


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## Square Root (Jan 30, 2010)

i guess anything is possible. Your analogy to a lynching is a little too much in my opinion. He asked a stupid question that's all. it happenes here from time to time and the responses tend to be pretty consistent.


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## andrewf (Mar 1, 2010)

Was anyone being discourteous? It was a question that revealed a lack of understanding how the market worked, but it seemed like the responses were mostly polite explanations.

Describing it as a lynching (ie, a racially-charged extrajudicial execution by a mob) is beyond hyperbole.

Edit: To wit, I read through this thread again, and found one person who wrote some curt replies. Everyone else was offering explanations or opinions. I am stumped how anyone could describe this as some kind of mob attack.


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## Sampson (Apr 3, 2009)

andrewf said:


> Everyone else was offering explanations or opinions. I am stumped how anyone could describe this as some kind of mob attack.


agreed. at least that's what I thought my intentions were. I have to be honest, I looked only superficially at the FX and RY price movements that day and nothing seemed out of whack.

It seemed to me that the OP was suggesting that the skew was always in place and that the banks were actively pursuing methods to maintain it and hurt Canadian investors. I have no problems with these types of claims, but parsimony usually convinces me, especially considering the OP didn't provide calculations showing otherwise.

I think much of the 'barrage' was in response this is, whether done with curt or with tact - that's in the eye's of the reader


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## Eclectic12 (Oct 20, 2010)

humble_pie said:


> i would just like to say that perhaps we are all being just a tad too hard on Miles.
> 
> he may be a very young man; and if that is the case he's certainly entitled to some reverse moves without being nagged or lectured.
> 
> ...



Hmmm ... I recall one post that seemed insulting and two or three that were abrupt but most seemed to more of "there's no conspiracy - this is how it works" or discussing the view of the big 5 bank's potential for profit etc.

I suspect part what of what set the tone was moving from "I've noticed something" to "They have chosen to be loyal to the States.", before figuring out the factors involved.


It is a good point about english not being the first language. 


As for the part about "bought high & sold low", since the post said:


> I lost about $3000 since I bought them.


 I'm not sure how it could be interpreted as a gain. Dividends received would reduce the loss but it doesn't sound like the stock was held long enough for this to happen. Either way, MoreMiles knows for sure.


@MoreMiles: Don't let a few comments stop you or hold you back. Also - if you are worrying a lot of the time about the investments, then an adviser or less hands-on strategy are a good way to go. If you ruin your health or quality of life, is it really worth it?


Cheers


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