# Banks are heading in the wrong direction,maybe time to top up in the next bit of time



## 1980z28 (Mar 4, 2010)

nice solid dividend for the long term


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## Pluto (Sep 12, 2013)

I'm not really sure of my opinion, but right now I'm assuming it is a bit too early. Stock market is weak, sick. Seems like it is going to get sicker. 
Even so, if you average into them, and can hang on if things turn bad, you will do OK. Anyway, I'm not biting yet. This is a kids market, and I'm an old guy.


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## HaroldCrump (Jun 10, 2009)

I agree with Pluto re. the bank stocks.
If this is the beginning of a downtrend, then it is too early.
If not, they haven't fallen far enough to buy under these circumstances.
I would do nothing at this time with bank stocks...if you have a relatively low cost base, hold on.
If you don't own, no rush to buy just yet.


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## dogcom (May 23, 2009)

Most likely until the Fed makes some sort of move then you can play the bounce game to make some money here. At this time we are facing a classic TA roll over that points to down until something changes that. The Fed by supposedly stopping QE and talking about raising rates is going to keep the banks down.

The other thing with the oil collapse and the Swiss breaking the peg hurting hedge funds and the Greeks threatening to exit the Euro there is to much bad news coming to hold them up at this time.


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## HaroldCrump (Jun 10, 2009)

dogcom said:


> the Greeks threatening to exit the Euro


No, they are saying the exact opposite.
They are saying they _want_ to stay in the Euro, don't want to re-structure their debt, don't want to cut public spending (which, btw, they never did), won't support sanctions against Russia, etc.
Basically they are asking the ECB and other creditors to "forgive" a big chunk of their debt in exchange for sanctions against Russia.


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## dogcom (May 23, 2009)

Sorry to be wrong on that but still one of the headaches anyway.


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## HaroldCrump (Jun 10, 2009)

Yes, for sure...this has introduced a lot of uncertainty in the global markets.
The risk of Syriza contagion spreading to Spain & Italy is high.
To boot, France is essentially in a recession.


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## KaeJS (Sep 28, 2010)

I'd like to see a good 5-10% correction for the banks.
I've been waiting to pick some up, but they're not all that attractive. Love the yield and all... but there's no sense buying for yield if you can lose 5% over the next little while in value.


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## dogcom (May 23, 2009)

The only problem is when we get a significant correction it signals something very bad.


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## bayview (Nov 6, 2011)

Or it may represent a golden opportunity. There are many shades of grey.

Truly, interesting times ahead!


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## james4beach (Nov 15, 2012)

I'm quite a bit more bearish on the Canadian banks. Let me explain why:

They have enjoyed tremendously good times due to three main factors
(1) domestic credit expansion
(2) strong Canadian housing market
(3) low volatility in global markets which allows for much derivatives growth & profits

As you all know, credit expansion in Canada has been pretty crazy for a few years now, and we've gotten to something like 160%+ debt-to-income ratios. Housing is a big part of it, but the persistent uptrend in housing is huge for the banks.

Factor (3) is often ignored. The big banks are derivatives machines and this almost generates profits out of thin air, as long as system volatility is low. It's all financial engineering and the side effects (risk) gets thrown off of the balance sheet, where it sits like a ticking time bomb. Notional derivatives exposures of Canadian banks is up 23% year-on-year, which is just nuts. The notional total typically grows at just a couple percent every year. RBC is now at about $10 trillion notional derivatives, TD nearing $6 trillion. These are contracts on everything ranging to interest rates to equities, foreign exchange and European & junk bonds.

So here's why I'm bearish: the tide has turned against all of the primary factors that the banks have relied on. Canadian credit growth is still high, but the down-turn in commodities definitely threatens this. If the housing market stops expanding, the game is over. And finally global markets are becoming more volatile, which threatens the derivatives side of the equation. Just think of that 30% move in the EUR/CHF and sharp movements in junk bonds as two recent examples.

I'm most concerned about the insane derivatives growth of the banks. This is an interesting factor since it's off balance sheet, and hidden. Everything is fine unless something goes wrong and large positions blow up. This is what happened in 2007 when ABS/MBS/CDS credit derivatives started blowing up. The off balance sheet derivatives have been growing like CRAZY in the last 2 years. +10% in 2013 and +20% in 2014


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## james4beach (Nov 15, 2012)

I'll also add that if credit continues to expand and housing doesn't fall, the banks will do well... barring some kind of blowup in derivatives.

Worst case scenario is if credit contracts and/or housing falls. The banks are very highly leveraged at 28:1 and absolutely can't handle contraction/deflation. A deleveraging scenario will implode these banks and make all you dividend-chasers cry... fear of this is why the Bank of Canada is much, much more likely to cut interest rates than raise them. An entity leveraged 28:1 can not tolerate declining assets.


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## Oldroe (Sep 18, 2009)

Another finely crafted string of facts wozen into a load of BS.


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## My Own Advisor (Sep 24, 2012)

Well, next month if I can save more cash, I'm buying.


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## KaeJS (Sep 28, 2010)

Getting ready to buy this week...

Looking at a buy on Tuesday or Wednesday if the beginning of the week is red for financials.


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## Eder (Feb 16, 2011)

I bought more RY...it makes people rich over time. The world has always been full of worry, if you wait for the all clear you will miss all profit.


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## 1980z28 (Mar 4, 2010)

For the last 6 weeks I have purchased a 100 shares per week,will buy 200 more,down over 10% to date


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## Causalien (Apr 4, 2009)

I am with James4, sold all banks about 2 years earlier expecting exactly the current scenario. (Took a lot longer to manifest)

I am also waiting one more quarter to see if any of them got caught red handed in oil futures or CHF squeeze. These two are black swam events.


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## Oldroe (Sep 18, 2009)

I need a 30% correction to have any interest in buying the banks.

So you bought this load of crap 2 years ago and lost the 50% run up that would protected your investment. 

Never follow anybody with no skin in the game.


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## fatcat (Nov 11, 2009)

Causalien said:


> I am with James4, sold all banks about 2 years earlier expecting exactly the current scenario. (Took a lot longer to manifest)
> 
> I am also waiting one more quarter to see if any of them got caught red handed in oil futures or CHF squeeze. These two are black swam events.


what about the black swan event that will loom two quarters from now after you have once again become the proud owner of a piece of one our fine banks ? ... are you going to sell in the 3rd quarter ?


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## Causalien (Apr 4, 2009)

fatcat said:


> what about the black swan event that will loom two quarters from now after you have once again become the proud owner of a piece of one our fine banks ? ... are you going to sell in the 3rd quarter ?


wow, we are quite protective of our banks. 

If you look at the "what are you buying" thread, you'll see that I entered banks around 2008. TD was my last stake that I sold at around $46. I missed out on $4 profit for 2 years. That money was invested in something else (SLF). Because I was expecting an interest rate rise. Still SLF did great without it.

BMO was sold in 2011 since I only bought it for the recovery play. This one I did miss on the 50% upside. I forgot what the money was used for afterwards.

Yes, after Q2, i will probably buy in. But I am expecting usd to cad of 1:1.5 like in 1980. I will convert my usd holdings to cad then. Of course, any hint if a black swan that might be connected to banks will see mee getting out of banks. Housing, oil and chf. too many big macro events that makes me jittery while interest income is at crappy levels for banks due to the fed fund rate.

I am of the opinion that CMHC and Canadian's traditional trust in banks is what is keeping the stocks up. Not trying to talk it down, but I'd like to tule out at least 2 of these possibilities before considering.


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## Causalien (Apr 4, 2009)

fatcat said:


> what about the black swan event that will loom two quarters from now after you have once again become the proud owner of a piece of one our fine banks ? ... are you going to sell in the 3rd quarter ?


wow, we are quite protective of our banks. 

If you look at the "what are you buying" thread, you'll see that I entered banks around 2008. TD was my last stake that I sold at around $46. I missed out on $4 profit for 2 years. That money was invested in something else (SLF). Because I was expecting an interest rate rise. Still SLF did great without it.

BMO was sold in 2011 since I only bought it for the recovery play. This one I did miss on the 50% upside. I forgot what the money was used for afterwards.

Yes, after Q2, i will probably buy in. But I am expecting usd to cad of 1:1.5 like in 1980 so that will play a factor. I will convert my usd holdings to cad then. Of course, any hint if a black swan that might be connected to banks will see mee getting out of banks. Housing, oil and chf. too many big macro events that makes me jittery while interest income is at crappy levels for banks due to the fed fund rate.

I am of the opinion that CMHC and Canadian's traditional trust in banks is what is keeping the stocks up. Not trying to talk it down, but I'd like to tule out at least 2 of these possibilities before considering.


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## fatcat (Nov 11, 2009)

Causalien said:


> wow, we are quite protective of our banks.
> 
> If you look at the "what are you buying" thread, you'll see that I entered banks around 2008. TD was my last stake that I sold at around $46. I missed out on $4 profit for 2 years. That money was invested in something else (SLF). Because I was expecting an interest rate rise. Still SLF did great without it.
> 
> ...


i'm less concerned about our banks and more concerned about your fear of black swans :biggrin:

to me, the way to "protect" yourself from a black swan (which are always flying overhead, never to be seen until it's too late right ?) is to practice good cash management, be diversified among sectors and between equites and bonds and worry less about where and when it will appear

we have a perfectly good example of a black swan now, while you were protecting yourself from the banks it took a dump on our oil equities

the definition of a black swan is that we have no idea what it will be


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## Oldroe (Sep 18, 2009)

50% plus a 4% div. or 10% plus a 4% div. keep looking for the black swan.


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## KaeJS (Sep 28, 2010)

Getting a little bit annoyed. I had actually expected a red day for financials today. I am eager to buy, but I still want to see a bit more of a decline. Not by much. 3% would be nice.


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## james4beach (Nov 15, 2012)

To me, the banks are just too highly leveraged to be safe investments. They are businesses that do tremendously well during expansion, but are at high risk during contraction.

Also from what I see, the banks didn't learn anything from the '08 crisis. If anything, they learned that as long as they pretend to be solvent long enough, the CMHC and central banks will lend them enough money so that they never have to experience pain. They have also increased, not decreased, their overall derivative exposures.


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## bayview (Nov 6, 2011)

KaeJS said:


> Getting a little bit annoyed. I had actually expected a red day for financials today. I am eager to buy, but I still want to see a bit more of a decline. Not by much. 3% would be nice.


I wouldn't try to time a 3% movement. Good luck.
Nothing goes down or up in a straight line. Banks are a proxy of the economy. I think you will get your chance to buy at much lower prices.


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## bayview (Nov 6, 2011)

james4beach said:


> To me, the banks are just too highly leveraged to be safe investments. They are businesses that do tremendously well during expansion, but are at high risk during contraction.
> 
> Also from what I see, the banks didn't learn anything from the '08 crisis. If anything, they learned that as long as they pretend to be solvent long enough, the CMHC and central banks will lend them enough money so that they never have to experience pain. They have also increased, not decreased, their overall derivative exposures.


These are the people's banks, not owners owned. I don't think the senior bankers care as long as they have locked up juicy contracts no matter what happens as long as not criminal or unethetical. As long as they are deemed too big to fail, the bankers are emboldened to take risks to the extreme to reap the extra payoff beyond their stock options.


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## Causalien (Apr 4, 2009)

fatcat said:


> i'm less concerned about our banks and more concerned about your fear of black swans :biggrin:
> 
> to me, the way to "protect" yourself from a black swan (which are always flying overhead, never to be seen until it's too late right ?) is to practice good cash management, be diversified among sectors and between equites and bonds and worry less about where and when it will appear
> 
> ...


I don't know. I actually managed to predict the current oil by looking at the 80's. It's just took two years longer than I projected. I got lucky. In any case, my experience investing and trading through 2008~2011 taught me that if a black swan does indeed occur, I have 2 years to position myself. I am the investor on the sideline with black powder that you guys should be convincing to buy in, but it feels a lot more hostile based on the comments here why is that? Is it an emotional response? I am not the short that is driving the stock down.

The black swan event would be bank failing due to CHF or oil futures that was unhedged. If BNS gets caught red handed in it. I am expecting other banks to announce it too. Like 2008, no banks want to admit it until it gets too hard to hide. If IB had to declare loss from client betting on CHF, you bet there's going to be other less well managed brokerages that got caught too. They just haven't reported it yet.

Oldroe: SLF did well and rised like the banks with dividends in the past two years. So I chose this stock because it should rise with the interest rate rise and has no connection with banks or oil. This is how I reposition to a similar prosuct in order to remove blackswan possibilities In places I think will generate downard pressure. SLF rising in the current sucky rate environment is again, luck. The 50% I missed from BMO, well, I didn't miss it much cause I probably put it in something a lot better knowing what happened to my portfolio in 2011. Again, we are just picking dates here. Did BMO really rise 50% taking into account the recent fall? Will my portfolio still do better tjan CDN banks in 5 years?


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## Oldroe (Sep 18, 2009)

The problem with SLF is if the banks correct 25% . Something to get my attention. SLF will correct 30-40% and take longer to recover. You run from market corrections I love market correction.

You can make good money on 2-3% moves on bank stock. You need about 30k buy 100 lots on drops and sell on 1-2% gains. I did 27% over 10 months with bmo. It's just to much computer time for me. And you need $9-10 trade cost. The key is if you get caught in a real correction you don't mine holding.


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## Causalien (Apr 4, 2009)

Oldroe said:


> The problem with SLF is if the banks correct 25% . Something to get my attention. SLF will correct 30-40% and take longer to recover. You run from market corrections I love market correction.
> 
> You can make good money on 2-3% moves on bank stock. You need about 30k buy 100 lots on drops and sell on 1-2% gains. I did 27% over 10 months with bmo. It's just to much computer time for me. And you need $9-10 trade cost. The key is if you get caught in a real correction you don't mine holding.


I don't know where you get the impression that I run from market corrections. Do you not understand what it means to have traded and invested through 2008~2011 and come out alive mean?


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## Oldroe (Sep 18, 2009)

Because you don't understand what happens in a correction. You do seem interested in research.

I've been thru 6 correction and the same thing happens. By sector the banks fall the smallest amount and they are the first come back.

So I don't think you have ever been in a correction.


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## Causalien (Apr 4, 2009)

Oldroe said:


> Because you don't understand what happens in a correction. You do seem interested in research.
> 
> I've been thru 6 correction and the same thing happens. By sector the banks fall the smallest amount and they are the first come back.
> 
> So I don't think you have ever been in a correction.


LOL? What drug are you on? Anycase. Go to what are you buying thread and look up the posts in around 2009. My trades "in the biggest correction since the depression" is in black and white. Don't recall seeing you back then though.

Of course that's not the first time I've been in one either, otherwise I would not be here still. And the banks actually fell the most amount in our last correction. If we are comparing dicks. I already posted my performance back somewhere in a thread about performance using TD's performance tool. So no cheating or playing with numbers.


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## fatcat (Nov 11, 2009)

james4beach said:


> To me, the banks are just too highly leveraged to be safe investments. They are businesses that do tremendously well during expansion, but are at high risk during contraction.
> 
> Also from what I see, the banks didn't learn anything from the '08 crisis. If anything, they learned that as long as they pretend to be solvent long enough, the CMHC and central banks will lend them enough money so that they never have to experience pain. They have also increased, not decreased, their overall derivative exposures.


NO, they are not at risk during contractions james .... canada has had all kinds of economic pullbacks, hiccups and recessions ... i don't see any bank failures ... canada's record of (non) bank failures is sterling

from wikipedia: http://en.wikipedia.org/wiki/Banking_in_Canada



> According to the Department of Finance, two small regional banks failed in the mid-1980s, the only such failures since 1923, which is the year Home Bank failed. *There were no bank failures during the Great Depression compared to 9000+ in the US.*


your uber-bearish bias is impeding your understanding of the history of canada's banks


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## fatcat (Nov 11, 2009)

Causalien said:


> I don't know. I actually managed to predict the current oil by looking at the 80's. It's just took two years longer than I projected. I got lucky.


that isn't a black swan event ... it is (was) a prediction that oil would hit the skids


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## Oldroe (Sep 18, 2009)

I think you need to look back I was here and buying. Banks went down 50%. Everything else got crushed. Jr oil and gas still down huge. And who lead the recover banks. The same as every other correction.

You are only looking to a possible correction in 2 more years and you have waited 2 years. You are showing a complete mis understand of Canadian economics.


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## blin10 (Jun 27, 2011)

like I wrote in the other thread:
there's always something: houses overprices wouldn't touch banks, pipelines overprices wouldn't touch pipeline stocks, interests rates going up wouldn't touch reits, potash prices going down wouldn't touch potash, energy prices going lower wouldn't touch energy stocks, telecom might have 4th player wouldn't touch telecom stocks, etc, etc... while people like me bank on it and laugh at all those "analysts"....


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## gibor365 (Apr 1, 2011)

KaeJS said:


> Getting a little bit annoyed. I had actually expected a red day for financials today. I am eager to buy, but I still want to see a bit more of a decline. Not by much. 3% would be nice.


I expected 2  for majority of the last week had limit buys for TD and NA .... I'm practically fully invested in banks, but was too tempting .... anyway missed both by couple of cents....


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## KaeJS (Sep 28, 2010)

^ Yep.
I'm pretty annoyed to say in the least. But, it happens.
I'm looking to buy BMO below $73. Missed my shot on Friday since money was not in my brokerage account until today.

Unfortunately, BMO is $76 today, so I am not willing to buy...


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## 1980z28 (Mar 4, 2010)

Got my 600 shares,100/week ,from dec 2014,up 4.00 dollars plus a dividend

May add another 400 soon


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## Oldroe (Sep 18, 2009)

Had a quick look at bmo doesn't look like 73 is happening for you. I've used my credit card at different times in your situation. Non registered. In 2009 I maxed my LC and my CC for 2 weeks waiting for a gic to come due.


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## hboy43 (May 10, 2009)

Oldroe said:


> Had a quick look at bmo doesn't look like 73 is happening for you. I've used my credit card at different times in your situation. Non registered. In 2009 I maxed my LC and my CC for 2 weeks waiting for a gic to come due.


I don't know why everyone doesn't just get a margin account. Nobody says you have to borrow as a matter of policy on a regular basis, but it makes such inconveniences as above disappear.

hboy43


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## 1980z28 (Mar 4, 2010)

I did leverage in 2008 and 2009 for over 100k

Worked for me

I still do it but keep it around 20k


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## Oldroe (Sep 18, 2009)

I didn't need a margin account. I wanted my money into the markets now. No time and no desire for margin. 3 weeks later paid my LC and my CC off with my GIC. That's why I have cash.


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## hboy43 (May 10, 2009)

Oldroe said:


> I didn't need a margin account. I wanted my money into the markets now. No time and no desire for margin. 3 weeks later paid my LC and my CC off with my GIC. That's why I have cash.


I don't follow this in the context of my point, but I don't have to. Carry on.

hboy43


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## Oldroe (Sep 18, 2009)

You like margin I like cash. The is "k" lost a buy on a timing. 1-2 days I likely would have used my sources.


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## Ethan (Aug 8, 2010)

james4beach said:


> Worst case scenario is if credit contracts and/or housing falls. The banks are very highly leveraged at 28:1 and absolutely can't handle contraction/deflation. A deleveraging scenario will implode these banks and make all you dividend-chasers cry... fear of this is why the Bank of Canada is much, much more likely to cut interest rates than raise them. An entity leveraged 28:1 can not tolerate declining assets.


How are you calculating your leverage ratios? I assume you're referring to debt/equity (excluding NCI). I calculate debt/equity for the banks as follows:

BMO - 553,255/34,313 = 16.1:1
BNS - 756,455/47,899 = 15.8:1
CM -396,120/18,619 = 21.3:1
RY - 886,047/52690 = 16.8:1
TD - 888,511/54,682 = 16.2:1


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## Ethan (Aug 8, 2010)

james4beach said:


> I'm most concerned about the insane derivatives growth of the banks. This is an interesting factor since it's off balance sheet, and hidden.


If derivatives are off balance sheet and hidden, what does the "derivatives" line on the balance sheet under both assets and liabilities refer to?


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## KaeJS (Sep 28, 2010)

Oldroe said:


> Had a quick look at bmo doesn't look like 73 is happening for you.


If it hits $74, I will purchase.

I just don't feel comfortable purchasing at $75. I feel the upside is somewhat limited and I don't want to be stuck carrying the stock while on leverage.


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## james4beach (Nov 15, 2012)

I calculate leverage as assets to tangible common equity aka CET1 capital under Basel III. I found this methodology (using tangible common equity) gave the most meaningful figures in the past. It's also been heavily endorsed by FDIC people and some central bankers too.



Ethan said:


> If derivatives are off balance sheet and hidden, what does the "derivatives" line on the balance sheet under both assets and liabilities refer to?


I'm not sure exactly what those lines are, but they definitely are not showing the entire derivatives book. Perhaps they are showing a form of net exposure after all netting. These calculations are a black art and it's been proved time and again that what shows up on the balance sheet is not indicative of actual risk. The evidence of this is surprise events (e.g. European bonds, US mortgages, etc) that have created _far greater losses than the balance sheet ever implied._

There's another great example, a recent mutual fund that vaporized an $800 million fund -- it went to zero when EUR/CHF moved the wrong way. This happened despite showing seemingly small derivative positions on the balance sheet. It shows precisely the problem with derivatives: what shows up on the balance is misleading and just a tiny slice of the true risk possibility.

The entire notional derivatives positions are shown in extra notes to the financial statements, and easier to find at the OSFI's pages. Derivatives are a mystery to everyone -- including accountants -- so I think the best thing to do is look at notional derivative exposures to get a sense of how much derivatives the bank is dabbling in.


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## KaeJS (Sep 28, 2010)

Bought 500 BMO yesterday at $75.64. (Yes, a little higher than I wanted) but I anticipated it would probably go up again today.

Just sold all 500 shares for $76.42.

I will repeat this if it comes back to $75 range.


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## oob (Apr 4, 2011)

KaeJS said:


> Bought 500 BMO yesterday at $75.64. (Yes, a little higher than I wanted) but I anticipated it would probably go up again today.
> 
> Just sold all 500 shares for $76.42.
> 
> I will repeat this if it comes back to $75 range.


Pretty small spread...


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## rsyl (Aug 15, 2014)

oob said:


> Pretty small spread...


$400 is $400. There are more difficult ways to make money.


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## Oldroe (Sep 18, 2009)

When I was buying and selling the banks I was looking for between 3-4 % so after expense 2-3.5 %. So 8-10 turns and you are at 30% plus I would hold for div. I bought 200 at a time and a couple times buy 3 times before they head back up.


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## rsyl (Aug 15, 2014)

Oldroe said:


> When I was buying and selling the banks I was looking for between 3-4 % so after expense 2-3.5 %. So 8-10 turns and you are at 30% plus I would hold for div. I bought 200 at a time and a couple times buy 3 times before they head back up.


Nothing wrong with that. That's how I normally work.

I was just responding to oob's comment about the small spread. If you can make $400 in a day on a 1% gain in the market and do that every day the markets are open (admittedly unlikely) you would earn $100,000 a year from it, which is nothing to sneeze at.


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## KaeJS (Sep 28, 2010)

You're right. Small spread.

But I want to lock in that 1% gain.

I will do it again in the near future. I wish I hadn't sold it so early in the day, as I could have made $600+. But hey, I lost confidence in the market and there was no way of knowing it would go as high as it did, so I settled for $76.42.

What will really suck is if it goes up another 1% tomorrow.

I am hoping we see a down day tomorrow, especially being a Friday, but it's (obviously) too early to tell yet.


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## peterk (May 16, 2010)

KaeJS said:


> You're right. Small spread.
> 
> But I want to *lock in that 1% gain*.
> 
> ...


This all seems like ridiculous speculative mumbo jumbo. I have no idea if or how you make any money at it and I am baffled by your take-1%-gains trading strategy. How often do you make these micro trades with a majority chunk of your investable assets?


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## bayview (Nov 6, 2011)

peterk said:


> This all seems like ridiculous speculative mumbo jumbo. I have no idea if or how you make any money at it and I am baffled by your take-1%-gains trading strategy. How often do you make these micro trades with a majority chunk of your investable assets?


Gosh, I'm surprised too. Earlier i thot why would someone want to micro- time a 3% stock price movement for a medium-long term investment. Now it seems they are talking about day trading. Extremely high risk- like tossing a coin - 50% chance of losing according to Buffett. Different strokes for different folks.


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## supperfly17 (Apr 18, 2012)

bayview said:


> Gosh, I'm surprised too. Earlier i thot why would someone want to micro- time a 3% stock price movement for a medium-long term investment. Now it seems they are talking about day trading. Extremely high risk- like tossing a coin - 50% chance of losing according to Buffett. Different strokes for different folks.


Why are you guys judging him that way? Its not like he lost 400$. Its obviously working for him, hes making volatility into his own profits. You should applaud him.


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## KaeJS (Sep 28, 2010)

How is this extremely high risk, bayview?

For one - Look at the chart on the stock. It's not as if I am buying at $84. I bought at $75 with over a 4% yield. We don't even need to get into the financials. I have looked at them, but we all know without even looking at the financials that the EPS is nice, P/E is nice, Balance Sheet & Cash Flow is nice, etc. They are a more strict lender than some of the other banks and they are not going to be up **** creek like BNS might be. They also have a developing presence in the US, something that both BMO and TD have been doing well while RY pulled out of the US Market years ago and is now trying to re-enter.

Nobody has a crystal ball. If I did, I wouldn't have sold it at 76.42, I would have sold over $77 (which was the high for today). *The whole point of the trade is that I am swing trading with a company I wouldn't mind owning long term.* The point is that you can make more money by trading your favourite long term holds than you can by just holding them. Had the price gone down to $74 today, I wouldn't have sweat a single bullet. You know the stock is going to be over $75 again in the future, it's just a matter of time. In which case, you just sit and wait and collect the 4%+ yield until you can sell at an eventual profit. This was like my post I made months ago when I said BBD.B was a "guaranteed trade". Everyone started flying off the handle. Turns out it was a guaranteed trade (at the time, of course. BBD has taken a **** lately and I am too scared to touch it. Though, it will *most likely* be over $3 again and that's a "guaranteed" 2% )

My thoughts are that BMO stock will be $75 again before it's $80. You are right - I COULD be wrong. But even if I am, I still ended up making 1% for tying up money for 24 hours. This money is now liquid which I could use for other opportunities instead of being tied up.

If I didn't sell it today, what would happen if tomorrow it went to $75.50? Then I would have missed out on profit altogether and my money would still have been tied up.

I think this is hardly a high risk buy. I don't think you could tell anyone buying BMO at $75 with a 4%+ yield is "extremely high risk".
For investing in stocks, this is about as LOW RISK as it gets.

If my trade was high risk, then I don't know what you'd say to someone buying HOD right now.

peterk, you've been around long enough and have been active on the forums enough to know how I operate by now. This should be no surprise to you if you've been paying attention over the years.


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## donald (Apr 18, 2011)

It's highly unlikely and i have done some swing trades,the thing that always puts me on point is a 'world' event.
Like a terrorist attack on canadian ground-where the entire market just goes into free fall(like the cn tower being blown up)highly unlike but def not inconceivable)
I might be the only one though lol
good on you kae,i totally have the same thought process as you on swing trades with large caps,charting(though i will hold longer than 1 day,i do this in my non reg portf)


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## KaeJS (Sep 28, 2010)

donald,

There is always the possibility of a black swan event - but the truth is that a black swan event will happen whether or not you are buying & holding or you are swing trading. Either way, you (and I would imagine all of us) are probably going to be in trouble!

Nothing wrong with holding for longer than 1 day. I do that a lot, too.


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## humble_pie (Jun 7, 2009)

i for one often like to read james4beach as he warns about banks.

not that i necessarily agree that the end of the world is creeping up on our chartered big 5 banks, along with all their minions.

but banks are notoriously difficult if not impossible to understand. They might as well be reporting from the next galaxy. Remember cmf member square root? he said one of his responsibilities at the bank where he was a VP was to assist in writing the annual financial report. However, he himself never precisely understood the material that he was actually writing about, he told us.

a poster who offers a thoughtful critique with plenty of meat for thought, as james4 regularly does, is greatly to be thanked imho.

i agree with james4 that derivatives are not fully reported & collectively are likely to be the worst risk. 

these concerns have not inspired me to sell one single bank stock, though. In fact i added a few ING this week in anticipation the dutch behemoth will restart its dividend in 2015.


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## donald (Apr 18, 2011)

True Kae
The thing is i 'except' this in my rrsp and tfsa(a complete meltdown,if it were to happen,as it is long-term)
My non reg portf not so much-i would rather not get 'caught' with a long term hold because of bad timing
a function of different portf's
i only to trades in my non reg(i do not do many though,but a few a yr)


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## KaeJS (Sep 28, 2010)

^ That makes more sense.


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## Getafix (Dec 29, 2014)

@ KaeJS,

Are you doing these trades in your non-reg account? How much tax do we have to pay on capital gains made by these swing trades?


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## KaeJS (Sep 28, 2010)

Getafix,

I am doing these trades in a Non-Registered account. Capital Gains Tax is the same in this situation as any other. 

So, in my example above, my profit was $380. I cut that by 50% ($190) and pay tax on that $190 at my marginal rate. If my marginal tax rate is 35%, then I am paying $190 x 0.35 = $66.50

This means my after tax profit is $380 - $66.50 = $313.50


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## james4beach (Nov 15, 2012)

humble_pie said:


> but banks are notoriously difficult if not impossible to understand. They might as well be reporting from the next galaxy. Remember cmf member square root? he said one of his responsibilities at the bank where he was a VP was to assist in writing the annual financial report. However, he himself never precisely understood the material that he was actually writing about, he told us.
> 
> a poster who offers a thoughtful critique with plenty of meat for thought, as james4 regularly does, is greatly to be thanked imho.


Thanks for that, humble_pie. And I respect your decision to hold bank stocks. You've considered the risks and decided after considering many factors.

For those of you wondering what humble_pie and I are rambling on about, see this great cover story from The Atlantic magazine. It talks about the accounting complexity of banks and how even the experts can't figure out their books.

The Atlantic: What's Inside America's Banks?


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## james4beach (Nov 15, 2012)

By the way, humble, it appears that I may ditch ETFs in favour of individual stocks -- just as you suggested for years. The IRS will require horrendous reporting on ETFs (and mutual funds) so it appears that individual Canadian stocks may be the only way I can go forward.


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## bayview (Nov 6, 2011)

KaeJS said:


> How is this extremely high risk, bayview?
> 
> For one - Look at the chart on the stock. It's not as if I am buying at $84. I bought at $75 with over a 4% yield. We don't even need to get into the financials. I have looked at them, but we all know without even looking at the financials that the EPS is nice, P/E is nice, Balance Sheet & Cash Flow is nice, etc. They are a more strict lender than some of the other banks and they are not going to be up **** creek like BNS might be. They also have a developing presence in the US, something that both BMO and TD have been doing well while RY pulled out of the US Market years ago and is now trying to re-enter.
> 
> ...


Good morning KJ,

1. You are confusing stock/sector selection vs strategy.:biggrin:
2. You swing/ swung trade an established bank stock ( eg BMO ) to eked out 1-3 % over 1-2 days. To me this is a HIGH RISK strategy (the odds of winning is 50:50) vs one who buys the same stock same time as you to hold for the LONG TERM. 
3. Your backstop is you don't mind owning the stock for the longer time if you cant profit take within 1-2 days. To me this is closet long term buy and hold strategy.
4. I'm not 100% agreeable with your thesis that your total return is higher by trading your favourite stock rather and just buy and hold, assuming it is a fundamentally a good stock. It depends on the time frame you are using.

All the best!


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## Oldroe (Sep 18, 2009)

I think you did well for a first turn around, as you go forward you will get a six sense or a feel. All very scientific. 

Just make sure you have the money to avg. down if you get caught in a correction. If it corrects 25% 38000* .25 is now worth 28500. You will need 120k to avg down. Not very realistic but some cash back is nice.

I think this is the only way you make 25-30% on banks in the short term.


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## Getafix (Dec 29, 2014)

KaeJS said:


> Getafix,
> 
> I am doing these trades in a Non-Registered account. Capital Gains Tax is the same in this situation as any other.
> 
> ...


Thanks for the details. My marginal tax on capital gains is 10%, so only 5% considering you pay tax on 50%. Which is not as much as i had imagined. I've already maxed out my TFSA and would like to keep a small amount for swing trades, so i guess keeping 95% of the gains isn't too bad after all.


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## CPA Candidate (Dec 15, 2013)

Getafix said:


> Thanks for the details. My marginal tax on capital gains is 10%, so only 5% considering you pay tax on 50%. Which is not as much as i had imagined. I've already maxed out my TFSA and would like to keep a small amount for swing trades, so i guess keeping 95% of the gains isn't too bad after all.


The lowest federal bracket is 15%.

I picked up some RY when it was downgraded the other day at $72. Today trading over $76. If it stays flat for the next year, still a 10% return. Love downgrades.


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## Getafix (Dec 29, 2014)

I was just following the figures on this website (first 40'922):

http://www.taxtips.ca/taxrates/on.htm


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## OptsyEagle (Nov 29, 2009)

CPA Candidate said:


> The lowest federal bracket is 15%.


and let's not forget about the provinces. They are always happy to take a little piece of your good fortune as well.


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## 1980z28 (Mar 4, 2010)

Just sold 600 shares of td all gone at this point


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## 1980z28 (Mar 4, 2010)

Looking at banks again


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## Getafix (Dec 29, 2014)

RY seems like a good buy today.


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## My Own Advisor (Sep 24, 2012)

Why not buy and hold and when the prices drop, just buy more? Bank stocks or other dividend payers?


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## GoLong (Feb 21, 2015)

Don't have much faith in the earnings reports coming out this week and when you look at it, Canadian banks don't have much going for them at the moment compared to US apart from the div.


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## Oldroe (Sep 18, 2009)

US banks are a whole different animal. They can and do go bankrupt on a monthly bases.


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## 1980z28 (Mar 4, 2010)

In the next couple of quarters ,will see a good buy and hold working out

So one could leverage 1000 shares and do well with td or ry IMHO,I am running out of free cash,so leveraging I will go,or sell ????


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## 1980z28 (Mar 4, 2010)

BMO oh no misses


Who`s next


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## KaeJS (Sep 28, 2010)

^ The market only cared for one day about the earnings miss.

It's as if it never even happened...

I thought it might have had two down days, but it did not. I missed out on an easy trade.


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## 1980z28 (Mar 4, 2010)

Heading into the buying range again


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## fatcat (Nov 11, 2009)

1980z28 said:


> Heading into the buying range again


from my td alerts:



> *As commodities lag, portfolio managers turn to banks* (RTGAM)
> 
> LUKE KAWA
> 
> ...


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## 1980z28 (Mar 4, 2010)

I will short 1000 shares of td @ 53 range or ry @ 75 range for 750 shares


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