# BMO Insolvent?



## Mark Schizberg (Mar 12, 2012)

There was a guy on another forum saying that BMO was insolvent... any truth to that as far as anyone knows?


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## OptsyEagle (Nov 29, 2009)

No


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## leoc2 (Dec 28, 2010)

From Redflags Elwood "I heard that some dude named Jerry Schmidt is day trading BMO short and is placing posts to try to make the price go down a few pennies."


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## KaeJS (Sep 28, 2010)

Is this a real thread?


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## ddkay (Nov 20, 2010)




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## Causalien (Apr 4, 2009)

Well... the move with the 2.99% can be seen as suspicious to the paranoid. Especially those who survived successfully through 2008.
If you look at mortgages like insurances, it does not make sense to try to grab as much costumers as possible when the premium is low. 

Someone from within BMO please clarify. Does this move come with the blessing of Mark Carney? Did BMO already passed the mortgage audit? Last time they did it, Carney phoned every bank to stop the tide. What happened since then that allows them to re-enact the 2.99%? These are questions that swelled up into my conscious the moment I heard the 2.99% is back.


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## OhGreatGuru (May 24, 2009)

"The sky is falling! The sky is falling!"


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## fatcat (Nov 11, 2009)

that rumor was floating around back a couple of years ago ...
i think it's one of those internet memes that never dies


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## KaeJS (Sep 28, 2010)

If this rumour starts floating around, I'll have to buy some shares on the cheap.


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## humble_pie (Jun 7, 2009)

yesterday the clocks sprang forward, the forum metamorphosed, the equinox loomed & a bunch of strange pilgrims arrived here.

which is kookier, The Single Best Investment
or BMO Insolvent.


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## Homerhomer (Oct 18, 2010)

Yes it's true.


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## jamesbe (May 8, 2010)

Awesome, so they go B up do I still have to pay my mortgage? Lol


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## Eder (Feb 16, 2011)

Mark Schizberg said:


> There was a guy on another forum saying that BMO was insolvent... any truth to that as far as anyone knows?


I doubt we'll see a second post...amiright?


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## crazyjackcsa (Aug 8, 2010)

Eder said:


> I doubt we'll see a second post...amiright?


Lucy is trying to make a go of it over in the other thread.


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## Dave (Apr 5, 2009)

KaeJS said:


> Is this a real thread?


+1


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## Mark Schizberg (Mar 12, 2012)

*I'm Out*

I did my due diligence and since I can't get confirmation I'm closing my accounts there tomorrow.


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## ddkay (Nov 20, 2010)

You sound like me in October after Dexia collapsed, "if RBC goes below $40 I'm closing my accounts!!" Except now BMO is 13% off the bottom. What due diligence? Are you their lawyer/accountant/employee/board member/regulator? The public isn't supposed to know non-public information, we can only speculate. Where is your concern coming from?


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## humble_pie (Jun 7, 2009)

ddkay speaking of if-rbc-goes-below-40 etc, whatever happened to your extravagant doomsday 5-day prognostications from last fall. 

stuff along the lines of if-X-foreign-country-doesn't-do-Y-by-thursday-we-are-toast. You were cassandra. It used to sound a bit louche.

somehow those threats all disappeared. I for one am happy about that. Although i don't share your enthusiasm for daniel ivandjiiski aka zerohedge.


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## ddkay (Nov 20, 2010)

What happened was Dexia got nationalized, the ECB said they wouldn't print and then changed their mind and came out with the "big bazooka" between November and December with the 3-year LTRO program. Mario Monti has also replaced that imbecile Berlusconi and has been exceptional at painting over the situation in Italy, bringing bond yields down across the curve with LTRO; however the real economy is still lagging behind, January industrial production was down and unemployment was rising. So the long term effects remain to be seen.. they bought time, which hopefully, is enough to fix the problems.


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## Homerhomer (Oct 18, 2010)

Eder said:


> I doubt we'll see a second post...amiright?


You are wrong, there is another post, and he closed his accounts.

Now it's serious ;-)


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## Causalien (Apr 4, 2009)

I think CIBC would go bankrupt first before BMO if it comes to that, but I am still puzzling over why is BMO leading the 2.99% charge.
In any case, I am staying away from both BMO and CIBC. There are other more well behaved banks.


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## KaeJS (Sep 28, 2010)

More well-behaved banks?

Causalien, I almost always agree with your posts. This one, I do not. BMO is the most conservative bank out of the Big Five.


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## Causalien (Apr 4, 2009)

You might be biased KaeJS because of your work.
There's a reason why CM and BMO got shorted the most during 2008~2009. Internally, the clear data might look pristine, but as an observer looking from outside in where everything is semi-opaque due to uncertainty about bullshitting, the reputation damage of the financial crisis is still there so the scrutinization on BMO is more severe. The charge for 2.99% really doesn't help. 
Then again, I am just the minority. Most people won't look at it like that. And probably like garth said. CMHC will cover everything IF SHTF... but I don't like to wait around for laws to do the right thing. Liquidity is king. MF Global is not.


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## Eclectic12 (Oct 20, 2010)

Causalien said:


> I think CIBC would go bankrupt first before BMO if it comes to that, but I am still puzzling over why is BMO leading the 2.99% charge.
> 
> In any case, I am staying away from both BMO and CIBC. There are other more well behaved banks.


I'm not sure .... maybe their internal economists and team project that interest rates are going nowhere for longer than BoC thinks and they want to lock up market share now? 


I'm not sure why this necessarily leads to bankruptcy ... 


Then too - if Mark Carney was burning up the phone lines, I'd have thought the 2.99% would have been cancelled by now.

Time will tell.


Cheers


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## Causalien (Apr 4, 2009)

Sorry, shouldn't have said bankruptcy. In the past it's always taken over by another bank. There's one thing that the gov won't let do, is the reputation damage of solid Canadian banking sector.

The other side of the argument, which I've been pondering a lot lately.
If you look at world class cities around the globe and placing our most bublicious against Sydney Australia, the most similar economy to ours. We are only about half way there. The only reason why there's an alarm that's being sounded is because of debt to GDP, which in essence is also because our income isn't up to par vs our debt. 

To outsiders buying CDN property, that is not an issue. At around half the price of Sydney Australia, Vancouver houses costs peanuts. If you compare to France and London it's even easier. 
So the best pair compression trade, would be to sell houses in those cities and buy houses in Vancouver, but there's no synthetic that mimics this that I can take advantage of. 
I'd like details of the 70% house ownership data. Such as how many of those people are citizens, how many spend 6 months a year outside the country. Age composition etc. But there's some benefit to obfuscating the details to Canada. For one, 70% citizen ownership says that most of the houses are owned by CDN, so the compression trade should not be possible and houses prices are at their limit. Unless we can convince the rest of the 30% (which is what, our toddlers to teenagers?) to buy. However, if the 70% rate includes these globe trotters that moves around and are buying based on international prices, then buying houses is great.

If this is what BMO is seeing, then charge ahead.


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## stephenheath (Apr 3, 2009)

I believe it was ... omg, I swear alzheimers is setting in... the mortgage brokers blog that I have bookmarked at work... anyway, they had a statistic that the vast majority of people renewing their mortgages do so at the same bank, without dickering with terms. We also have the banks, over the past few years, replacing their preferred shares and bonds with new series with rock bottom prices. Because of the way interest rate differentials work, not many people would refi to get this rate, it's only new home buyers... buying into one of the highest priced markets which over the 25 years should give increasing interest rates. These are exactly the kind of people you want to take the hit to lock in... because in 5 years, then 10 years, and so on, you're going to have them renewing at much higher yields.... and the best part is, cash is so cheap it's not even a loss leader, just a lower margin.


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## KaeJS (Sep 28, 2010)

Causalien said:


> You might be biased KaeJS because of your work.


I can see how you'd think that and I completely understand.

However, I know that is not the case.

I'm looking at it this way - BMO is grabbing clients left, right and center with this 2.99% Mortgage offer and essentially locking in clients for 5 or 10 years. Then, after the term is up in 5 years and interest rates are (hopefully) higher, where will these clients turn? Well, they'll probably renew their mortgage with BMO.

I look at it as an opportunity for BMO to "steal" market share.

Is 2.99% a little on the low side? Yes. But that's why it is only offered for a couple weeks. After that, it's back to 3.49%+ on a 5 year Fixed.

I think it's a brilliant idea, speaking from a shareholder's perspective.

If it wasn't, would Royal Bank follow suit?

In any case, I think its tough to say that a bank almost 200 years old is insolvent.


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## Causalien (Apr 4, 2009)

It makes sense if the default rate of these people are manageable and this is where being an insider helps. Who are getting these mortgages and what is their financial situation? From an outsider, the only prudent thing to do is to assume worst case scenario.


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## Argonaut (Dec 7, 2010)

Causalien said:


> From an outsider, the only prudent thing to do is to assume worst case scenario.


Worst case Ontario.


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## KaeJS (Sep 28, 2010)

Causalien said:


> It makes sense if the default rate of these people are manageable and this is where being an insider helps. Who are getting these mortgages and what is their financial situation? From an outsider, the only prudent thing to do is to assume worst case scenario.


I'm sure it's the same process to apply for a 2.99% as it is for any other mortgage, so I don't know why it would be much different. I don't understand why the concern would be here and now, and not previously. Maybe its the wise people with lots of money that are grabbing these 10 year mortgages soaking up a deal, knowing full well they won't default on the mortgages. There will always be credit checks, employment checks, ability to repay, etc etc. 

If they default - then they default. But I think that is way out in the left field. (or should I say BMO Field?) 



Argonaut said:


> Worst case Ontario.


Rofl.


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## canadianbanks (Jun 5, 2009)

Causalien said:


> If you look at mortgages like insurances, it does not make sense to try to grab as much costumers as possible when the premium is low.


I believe the BMO 2.99% 5-year fixed mortgage comes with several restrictions, including no prepayments in the 5 year period. The thing is after the 5 year term, the rates will/should be much higher and many of the BMO's customers that got the 2.99% special this year might be underwater especially if they opted for 5% down payment. The underwater customers won't have the choice to move to another bank and get more competitive rates compared to what BMO will offer them.


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## Lephturn (Aug 31, 2009)

What sucks is that it's tough to get better than that on a 5 year variable! I really hope this changes before I need to renew. Prime -.75 is still much better than 3% with extra restrictions.


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## Eclectic12 (Oct 20, 2010)

Causalien said:


> Sorry, shouldn't have said bankruptcy. In the past it's always taken over by another bank. There's one thing that the gov won't let do, is the reputation damage of solid Canadian banking sector.
> 
> The other side of the argument, which I've been pondering a lot lately.
> If you look at world class cities around the globe and placing our most bublicious against Sydney Australia, the most similar economy to ours. We are only about half way there. The only reason why there's an alarm that's being sounded is because of debt to GDP, which in essence is also because our income isn't up to par vs our debt.
> ...


Don't be too hard on yourself! 

You did imply earlier in the thread that other banks were likely to go first.


Adding another point to the "other side" point of view, a lot of my co-workers in Ottawa thought that the tech crash would add more houses to the market at cheaper (if not bargain) prices. About a year later, they gave up and paid more than they would've if they'd stuck to schedule.


IAC, while it's good to follow-up, I'm not sure there is enough evidence yet that the 2.99% mortgages are a huge problem.


Cheers


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## Square Root (Jan 30, 2010)

Not sure about " well behaved" but I agree that the other 3 generally have performed bettr and have better stategies and prospects. On the other hand wih the US showing signs of an improved economy maybe BMO's US bank will do bettr? Problem is BMO has never displayed the ability to execute these type of deals like TD has.


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## tendim (Nov 18, 2010)

KaeJS said:


> BMO is the most conservative bank out of the Big Five.





Causalien" said:


> You might be biased KaeJS because of your work.


I used to work for BMO (until 8 months ago), and I know their policies. They _are_ the most conservative bank. That was one of their issues with lending: their risk profiles were so strict that some people could never get loans or any other services. Case in point: perfect credit history, zero debt, $50,000 annual income at the time, 2 credit cards (no balance, $10,000 limit each, credit history shows they were paid off every month). _BMO would not provide me with $100 overdraft protection at the time, and I worked for them._ Things have changed, but those who were in client risk at the time knew that the profiles were jacked, which is why they were considered too conservative.


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