Too safe to fail?

Beemo
US blogs speculate BMO going down. Credible?

When the storm hit last autumn, Bank of Montreal has $6.9 billion in cash. At the same time it had an obligation to pay, on demand, $65 billion to business and government for deposits, and another $65.5 billion to folks like us.

Taking into account the cash the bank also had on deposit with other banks (including the Bank of Canada) plus cheques which had not yet cleared the system, BMO could muster a quick $21.1 billion. But, added to the money it owed Canadian depositors, it also owed another $115 billion to American customers.

In short, deposit liabilities of $397 billion. Cash assets of $21 billion.

It doesn’t take long to see why a run on a bank is certain death.

Puts beat calls 13-1, but no collapse

If enough people believed the bank was in trouble, and only 5% of the deposits it had taken in could be repaid tomorrow in cash at the wicket, queues would appear in an instant. That’s just what happened with Northern Rock in the UK last year, as it did with IndyMac in California. In both cases, the banks were taken over by government to avoid public panic.

Over the last few days rumours have been circulating, fed by breathless US financial blogs, that Beemo is going down. The point of ignition is supposed to be Tuesday, when quarterly results are announced. According to the current merchants of fear, BMO will announce it’s missing a fat dividend payment of $1.5 billion. That will cause the stock to drop like a stone, and start a cascade of cash exiting the bank.

The words being used to hype this event are worth noting. This is from Stockgumshoe.com:

On Monday, August 24th, at noon, Dan Amoss will expose the biggest banking lie of the past 64 years. Given the past 21 months of market action — that’s no small claim. If recent mainstream headlines make you believe that banks have weathered the storm. You better think again. Dan’s caught another major bank he thinks is lying about being able to pay their massive $1.5 billion dividend scheduled for 2009. He believes this bank’s using every shady accounting trick possible to hide losses from their shareholders.

Amoss adds this, on Pennysleuth.com:

If you think Canada escaped the downward trend in U.S. banking, think again. While the country may not have plunged headfirst into subprime mortgages, it did dip heavily into risky derivatives. The leverage it took on generated impressive returns on equity in good times, but that same leverage is set to wipe out equity today.

Shareholders in one “safe” Canadian bank will have to rethink their loyalty. Its looming solvency crisis practically guarantees a dividend cut. And that’s our catalyst for this month’s short play action – offering us a chance for 200% profit potential.

Accounting secrets have not yet obliterated Canadian bank earnings – like those of U.S. banks – because the Canadians have not yet accounted for the coming tsunami of mortgage, consumer loan, and corporate loan losses. Here’s how they loaded those loan books with hidden risk.

A Canadian bank failure would, of course, be global news, coming just months after our financials were touted as being among the best capitalized and most secure in the world. American stock bloggers are salivating over this story since the US banking sector has been shattered in the past year, and come close to de facto nationalization. As you might imagine, a collapse of one of the Big Five – even a run on its stock, let alone its assets – would be ruinous for Bay Street, for the federal government, for shareholders, bondholders and the value of the dollar. In short, we’d all be reamed.

.
So, what are the facts?

Without a doubt BMO’s been stressed by the financial tsunami we’re living through. Its last quarterly results showed that – net income of $358 million was down a massive $284 million from the same period a year earlier. The money it had to set aside for doubtful loans shot up by over $220 million to a whopping $372 million.

And since then, it’s believed the situation has worsened – for all the Canadian banks.

When earnings flow this week, analysts expect the saddest numbers in some time with BMO down another 14%, CIBC off 16% and Royal lower by 20%. It’s widely believed we may see the bottom of the earnings curve for all these guys, thanks largely to commercial real estate. Since that sector sucks up huge bank loans, and lags the residential market, the impact of empty offices and cancelled condo towers is just now hitting balance sheets.

So should you worry if you own BMO stock, or have an RRSP sitting there?

I guess we’ll see on Tuesday.

But I’d say this web ‘alert’ is crap. BMO has managed to stay within about 6% of its year-ago performance and still earned a pre-tax return of half a billion in the last reporting period. It (and CIBC, the other bank with large US exposure) has been scoped continuously by the Bank of Canada and the Finance Department guys. The banks have sold bushels of stock in recent months to bolster their capital positions and, as you know, received tens of billions in cash for swapping CMHC-insured mortgages with the feds.

The odds of BMO crumbling are akin to Stephen Harper asking me over for a beer. Just ain’t gonna happen in this lifetime.

In any case, do your own research.

Here is the bank’s latest annual report. It is required by law to be as transparent as Paris Hilton.

Here is the transcript of the conversation between senior bank execs and Bay Street analysts following release of its last quarterly.

And here is how you can monitor the situation in real time this week.

Finally, ask yourself why guys like Don Amoss and sites like GumShoe and PennySleuth engage in this kind of stuff.

Right. They ran out of US banks.

146 comments ↓

#1 Dean-oh on 08.23.09 at 7:02 pm

Pssst, brethren, ticker hfd. You didn’t hear from me!

#2 Future Expatriate on 08.23.09 at 7:17 pm

A lot of people predicting a great deal of havoc tomorrow.

Just one:

The Mother of All Bank Runs?

#3 Repatriated Expat on 08.23.09 at 7:40 pm

Ohhhh, The picture before the blog is way too tantalizing.

The possibility of BMO going under. With the “it’s different in Canada” mantra going on in the background wrt banks and housing prices.

I actually think it would do the public good if BMO went under. It would be a wake-up call to reality of a never ending prosperity. Perhaps as several bloggers have alluded to, this may be the precipitating factor that finally drives a nail into consumers confidence in the housing market.

#4 rick on 08.23.09 at 8:19 pm

I have been hearing rumours of BMO a walking dead bank. In fact months ago when the crash just started i read an artical to pull out all your money from BMO. I did just that and also CIBC as i think both of those banks are Canada’s worst. Anyone with accounts should run to the bank on monday. IMO

#5 Jmack on 08.23.09 at 8:23 pm

81 have failed in America this year alone.

#6 squidly77 on 08.23.09 at 8:35 pm

we have some rough waters ahead, the coming days or months could be horrible..be careful folks..we are going to places that our generations alive today have never been

#7 kitchener1 on 08.23.09 at 8:35 pm

I have heard rumors about this as well for quite a while. It will NOT fail, possibly cut its divdend or as a worst case scenerio down the road it would be absorbed by either TD or Royal.

Here is a link from Aug 16 regarding BMO

http://www.stockgumshoe.com/2009/08/the-next-major-bank-stock-set-to-crash-dan-amoss.html

If this pans out im going to be kicking myself for not shorting this.

#8 squidly77 on 08.23.09 at 8:40 pm

the above link contains 2 charts you really need to see
but won’t necessarily feel very comfortable looking at

cheer-leading politicians only go so far and realty is about to strike
its no longer just about housing and we have reason to feel to fearful

#9 [email protected] on 08.23.09 at 8:45 pm

You can tell when any organization is about to fail when they put on their front cover the message that customer service is their main objective

#10 Chris L. on 08.23.09 at 8:48 pm

Oh the suspense.

#11 Grumpydawgs on 08.23.09 at 8:52 pm

There have been over 3600 bank failures in the US this year.

#12 Paul on 08.23.09 at 8:58 pm

http://www.theprovince.com/business/Irish+boom+turns+economic+gloom/1916429/story.html

Does this sceniro sound a bit like what’s install for Canadas (Vancouvers) future?

I think so…

#13 Arthur Kurwa on 08.23.09 at 9:46 pm

All the banks in Canada wouldn’t have to fail. Just one. That could be a tipping point. People would take their money out of the other banks ‘just in case’. Absolutely no one in Canada would put Canada’s Bank/Banque health over their own finances, not even Carney. I bet he has a dirty sock under the bed that doubles up as a cash cache.

Then again, not like Canadians have anything in the savings account. It’s all tied up in debt and R/E.

#14 PC on 08.23.09 at 9:54 pm

BMO downgrade? Dividend Cut?

check the updates…

http://whispersfromtheedgeoftherainforest.blogspot.com/

#15 PC on 08.23.09 at 9:57 pm

Here it is kids…

http://whispersfromtheedgeoftherainforest.blogspot.com/2009/08/is-bank-of-montreal-about-to-fail.html

Sorry Garth. Timing is everything.

#16 Future Expatriate on 08.23.09 at 10:01 pm

Have NO fear, Peeps! Obama and Geithner will be coming out tomorrow on national TV in a surprise announcement before that morning bell, holding hands and announcing they’re an item, have been for quite awhile, and not to fear, they’re merely totally remaking the US and world financial banking system in the biggest darned HGTV makeover anyone’s ever seen!

DOW index will zoom up to over 15,000 on sheeple confidence alone!

And just WAIT for the Big Reveal… here’s a hint:

A “smart” desert camouflage color scheme, complete with nuclear fallout masks!

#17 robert on 08.23.09 at 10:13 pm

I found this very interesting article “Is the Bank of Montreal About to Fail?” posted in Virtual Nonsense on December 24, 2008. Hmm.

http://renaud.ca/wordpress/?p=74

#18 Peter Wiener on 08.23.09 at 10:24 pm

# 16

lol!

#19 Albertaboy on 08.23.09 at 10:35 pm

Oh – well as long as the Government says everything is ok, then I can rest my head on my pillow at night. *BARF*. The same Harper who is allowing an ex-Goldman Sachs employee to head the BoC is the same individual we should trust to look out for the “best interest of the people”?

Give your head a shake Garth – you’ve been too close to the game for too long. To imply that the Federal Gov’t and our banks aren’t in bed is an absolute lie. Not only are they in bed – but Obama & Geitner have been invited over for a foursome!

Government has absoultely no business being in business. The fact that the Gov’t bought CMHC investments to try and infuse cash into the system is living proof that they will do the same as their US counterparts – whatever it takes to protect the interests of their wealthy friends while screwing the little guy.

And if BMO does go under – who is going to pick up the tab? Poor working slobs who are already some of the highest taxed individuals in the world. Feudalism at its best.

#20 WillsDad on 08.23.09 at 10:41 pm

Funny how none of this is being reported in the MSM. Not even a peep of a mention about banks reporting tomorrow. Mums the word.

#21 Evangeline on 08.23.09 at 10:43 pm

Thanks for that Garth. Much appreciated.

It’s about time the zombie banks were outed. There can be no real economic recovery until that happens.

#22 Crash on 08.23.09 at 10:43 pm

My advice: get out of equities for the remainder of this year. There is not much, if any, upside now, and the risk of a major implosion in the markets is very real. The markets have overshot their zenith. Cash (and gold as a hedge against a currency collapse or future inflation) is the place to be.

#23 Shawn Allen on 08.23.09 at 10:49 pm

Ya say they had “whopping” loan losses of $372 million last quarter?

Yeah but that’s on loans of some 215 billion so that’s noit whopping at all.

It is true banks by nature are leveraged very highly and a 10% loss on assets tends to wipe out the equity.

But like you said there is no evidence here that BMO is in trouble.

A dividend cut is cause for share owners to worry, not cause for a run on the bank for gosh sakes.

Someone is going to take quotes from this article and accuse you of scare mongering or worse – perhaps justifyably so, even though you recant in the end.

Hope the banks are down all week though ’cause I don’t own any and I do have a large position in the double bear TSX, although overall I am long the market and not short.

#24 Bogdan on 08.23.09 at 10:49 pm

“So should you worry if you own BMO stock, or have an RRSP sitting there?

I guess we’ll see on Tuesday.”

Well… I have my RRSP with BMO. Does it really matter? I have at least 35 more years of active work… what are the chances to see anything from my retirement funds in 4 decades? Close to zero if we continue to live like this.

WTSHTF will be fun anyway… and I don’t think is going to start with BMO, but directly with the governments.

Nice thinking Garth… I guess we’ll see on Tuesday if you’re right :-)

#25 EJ on 08.23.09 at 11:15 pm

This news has become a bit too public, with everybody betting on the failed dividend payout. My guess is that BMO will do everything in its power to make sure the dividend gets paid, just to keep up the illusion of solvency. Beg, borrow, or steal, they’ll come up with the money.

The day of reckoning will be pushed off into the future once again, and the stakes will be raised. It’s all that government and banks seem to be able to do. Dealing with the real problem will expose them all as frauds, and be too painful for the public to deal with. We must maintain the lie!

#26 HouseBuster on 08.23.09 at 11:22 pm

With headlines like: “This $3 Utah Company Could ‘Bring Down’ OPEC”, gumshoe doesn’t sound very credible.

#27 $fromA$ia "Garths Nugget Boy" on 08.23.09 at 11:45 pm

See, I told you about the Canadian bank dividend trap!

#28 Republic_of_Western_Canada on 08.23.09 at 11:46 pm

#16 Future Expatriate –

And duct tape. Don’t forget the duct tape.


“There’s only so many places at the table, gunny! Now are you in or are you out?”

#29 Samantha on 08.23.09 at 11:51 pm

Interesting positioning at CPPIB re their investments in our banks. Information is from end of March 2009.

Link:

http://www.cppib.ca/files/PDF/CDN_Equity_Holdings_March31_2009_ENG.pdf

1) Bank of Nova Scotia: 1,294,000 shares – value CAD 40 Million
2) TD Bank: 941,000 shares – value CAD 41 Million
3) Bank of Montreal: 426,000 shares – value CAD 14 Million
4) Royal Bank: 386,000 shares – value CAD 14 Million
5) CIBC: 293,000 shares – value CAD 13 Million

#30 Eduardo on 08.23.09 at 11:54 pm

There’s still plenty of US banks to collapse Garth. If they ran out they aren’t looking.

>500 bank failures is likely. We are at ~150.

#31 Nostradamus Le Mad Vlad on 08.24.09 at 12:41 am

“. . . the banks were taken over by government to avoid public panic.”

Dome Petroleum, Nortel, Enron and many others were also too safe to fail, most took the public for a ride while going belly-up yet there was no public panic. Sure shareholders got screwed, so now it could be the public’s turn.

“Right. They ran out of US banks.” — So, where to next? Either south to Mexico or north to us.

Surprisingly, there is more than one continent on this planet, and there’s plenty of stuff going on which we don’t get to hear or see, until one day we wake up and notice everything has gone haywire.

We’re edging ever closer to that point.
——
Does China know something the rest of us don’t? Chances are these two are bound hand and foot. —
http://thenexteconomy.blogspot.com/2009/08/china-aggressively-reducing-us-debt.html
http://www.reuters.com/article/newsOne/idUSTRE57K4XE20090821
——
It seems like this — http://www.globalresearch.ca/index.php?context=va&aid=14884 — is the ‘October Surprise’ in the US.

“A growing number of doctors, other health professionals and citizens are attempting to prevent the humanitarian disaster [ planned for this October ] when the new H1N1 vaccine is to be deployed in a grand scale, military, war on terror manoeuvre.”

Having different things happen at roughly the same time, esp. if the H1N1 and fiscal bank holiday happens within days of each other, raises the possibility of Martial Law and curfews being introduced.
——
Economic Recovery? Hah! Bumbug! —
http://www.hellenicshippingnews.com/index.php?option=com_content&task=view&id=61550&Itemid=79
http://www.boston.com/realestate/news/articles/2009/08/20/foreclosure_proceedings_skyrocket_in_mass/?s_campaign=8315
http://www.bloomberg.com/apps/news?pid=20601109&sid=awQopeDIR2X8

First para. of last link is reminiscent of Canada’s growing debt load.
——
#16 Future Expatriate on 08.23.09 at 10:01 pm — “A “smart” desert camouflage color scheme, complete with nuclear fallout masks!”

You may be on to something with the NOO-Q-LAR theory. The Mossad was in the news this past weekend, and Israel wants to ‘wipe Iran off the face of the Earth’ (ain’t gonna happen).

http://onlinejournal.com/artman/publish/article_5031.shtml
http://translate.google.com/translate?hl=en&langpair=ar|en&u=http://islammemo.cc/akhbar/arab/2009/08/22/86838.html&rurl=translate.google.com

#32 taxpayer like you on 08.24.09 at 12:46 am

for Wills Dad @20

http://finance.sympatico.msn.ca/investing/news/businessnews/article.aspx?cp-documentid=21316315

#33 nonplused on 08.24.09 at 1:01 am

I don’t think there will be a run. Canadians are too out of shape! That said, they are all walking zombies with a liquidation value less than zero. The good news is cmhc and cdic stand ready to jump in, and we already know how to bail having watched the American experiment. The big abnks will get bailed and the currency absorbs the difference. They want the currency weaker anyway, God knows why.

#34 Mike (Authentic) on 08.24.09 at 1:08 am

For those following this big Canada/USA story:

“Calgary real-estate agent, who was wanted on a Canada-wide arrest warrant, was found in a motel in Hope, a small town east of Vancouver on the Trans Canada Highway.”

http://www.straight.com/article-248988/rcmp-say-fugitive-ryan-jenkins-found-dead-motel-hope

Mike

#35 Munch on 08.24.09 at 2:10 am

Sell!

Sell!

Sell!

Thanks for listening.

Munch

#36 TaxHaven on 08.24.09 at 2:33 am

Kelowna realtors said “it’s different here.”
“The recession is over.”
“Australians say “our banks are better capitalized.”
“Canadians say “our banking system is fundamentally sounder”
“All real estate is local”
“Inflation is coming”
“Gold is not money”
“Prices are moving up”
“Lock in now while rates are low”
“BMO is safe”

Oh, sure…

#37 Mike (Authentic) on 08.24.09 at 3:25 am

Excellent video:

Joe Saluzzi on Bloomberg TV The Close 08 20 09

http://www.youtube.com/watch?v=nErPRSSoZ8o

Good factual reporting on CNBC, “The Close”.

I like the point 400,000 about the cars purchased under the Cars for Clunkers program were “100% paid for” and now there are 400,000 new car loans out taking $200-300/month away from the economy and that 8 out of 10 cars were purchased from foreign companies.

Mike

#38 Industrial Guy on 08.24.09 at 6:28 am

Why doesn’t the main stream media report this stuff?

1. They report only verifiable facts. A lot of this is speculation, rumours and maybe a few lies. Never let the facts get in the way of a good story, eh? Just imagine what would happen if CBC reported that BMO was close to failing? The lines of paniced account holder would be down the street and around the block. Bank deposits are insured by the Government of Canada so the vast majority of Canadian are not in danger of losing their money.

2. Would the Government of Canada let one of it’s major chartered banks collapse? Get real. No Way. The stock market would crash. The value of the Canadian dollar would be equal to Monopoly money. Since so much commercial paper is traded between the chartered banks ….. the run on the BMO could become a shared experience by all.

3. Is Canada about to experience the same fate as Ireland? Maybe. Maybe not. Ireland doesn’t have a diversified, resource rich economy. The financial situations of each government is quite different. Our national credit card isn’t close to maxed out ….. yet. It’s true, their low interest policy made certain that every Greater Fool had skin in the game. Ireland’s relationship with the EU is a unique situation with its own set of problems.

#39 Onemorething on 08.24.09 at 7:06 am

oh man! I love listening to Steve Keen out of AUS. This guy gets it and warning Aussies about the future for them. Aussies like Canucks seem to think they are different too.

See the video on MISH and just consider this for CANADA EH!

http://globaleconomicanalysis.blogspot.com/

GLOBAL DEBT BUBBLE AND SOLUTIONS!

#40 MrC on 08.24.09 at 7:34 am

Interesting speculation, but I don’t think we will see any dividend cuts this week. Sounds like some of these bloggers are trying to make up a story. I think this week will come and go and the banks will still be around next Monday with valuations more or less the same as they were on Friday.

#41 My Blahg » REPENT FOR THE END IS NIGH on 08.24.09 at 7:39 am

[…] is one scary rumour. Over the last few days rumours have been circulating, fed by breathless US financial blogs, that […]

#42 dd on 08.24.09 at 8:32 am

#16 Future Expatriate

“DOW index will zoom up to over 15,000 on sheeple confidence alone!”

Mostly on cheap money.

#43 Future Expatriate on 08.24.09 at 8:49 am

#42 – Don’t you mean on housewarming gifts for the happy new couple? And our own HGTV special housewarming present for closing the deal:

A framed Hawaiian long form birth certificate, hot off the CIA printing presses, just perfect for above the living room fireplace mantle.

#44 Peter Wiener on 08.24.09 at 9:17 am

To Mike Hunt

Hey Mike here is a new thread for you to continue your ranting on and wasting your time on.
Have at it sicko!

I think you guys should take it outside. — Garth

#45 Nostradamus jr. on 08.24.09 at 9:22 am

#147 rory—#138 Nostradamus jr.

>>Only 3 ways in by road – 2 by bridges and a 3rd thru the mountains down from Whistler…easy to control access and keep the riff-raff out …it is like one very large gated community …so he may be on to something.<<

…West/North Van, Has it's own water supply too.
…Cote d'Azur has no similar fresh water supply, and sits across the pond from Libya, Algeria, Egypt and Morroco.

dd & Peter Weiner,
Hastings and Main (5,000 citizens) is not West/North Van…you are very desperate.

…BMO….say goodbye to Quebec and the Atlantic Provinces economies.

Nostradamus jr.

#46 Bob on 08.24.09 at 9:24 am

if bmo fails or collapse, it will be a disaster for Canada.

#47 Peter Wiener on 08.24.09 at 9:29 am

To Garth Turner,

I agree and if you read my last couple of posts, I have suggested several times that Mike not bother with me, but rather restict his comments to the real estate topic, but he just keeps coming. I do not want to waste your blog space and my second previous posting was short and sweet to relect that.

If you prefer that I don’t post, I will obviously refrain from attempting to do so.

Your posts are worthwhile, as are his. But concentrate on the topics, not the man. Then the conversation is of interest to us all. — Garth

#48 Munch on 08.24.09 at 9:32 am

So is there a bank run on, or not, or what?

Nothing like the smell of napalm in the morning …

#49 Michael on 08.24.09 at 9:34 am

I just want to know whether I should remove myself from my mortgage or stick it out. Damn you Kelowna.

#50 artisuseless on 08.24.09 at 9:48 am

This actually strikes me as rather tinfoil-hattish. While I believe (actually, I know) that the banks hide a lot of crap, this government has for decades existed primarily to serve their interests. Also, stocks have rallied just stupidly since March – so I’d actually expect some ‘profits’ this quarter. Heck, Manulife cut their dividend last Q & their stock still went UP.

They’ll bury the trash until it bursts out of everywhere like that Simpsons episode where they ended up having to move the whole town. When will that happen? Who knows – so long as it’s the problem for the next guy and of course, the taxpayer.

#51 Rai on 08.24.09 at 9:48 am

So what will happen to our RRSP’s and RESP ? Garth, you say wait till tuesday ….so if all hell breaks loose and BMO does go down ……..are you suggesting us to wait in anticipation and see Harper bailing out BMO and then get our money?

No. I’m saying this is not a credible scenario. — Garth

#52 Peter Wiener on 08.24.09 at 10:00 am

To Garth Turner,

Will do.

#53 Got A Watch on 08.24.09 at 10:08 am

Dan Amoss is NOT a credible source. He is part of the always hysterical ‘Agora’ group, whose main specialty seems to be spamming your inbox with teaser ads that strongly remind me of late night TV pitchmen – “not only do you get this, this and that, but if you order right now you will receive a bonus other with a retail value of $___!!! Pick up the phone and call right now and we’ll also throw in a free other!!!”

Theirs is a “newsletter” style straight out of the ’80s, and it seems they are stuck back there. Today, the internet has made this type of “financial newsletter” almost totally obsolete, as you can get better and more timely investment facts from free Blogs any time of day.

These guys need some panic to peddle, and this is what is on today’s menu. Credibility is not in their inventory.

All this is not to say Canadian Banks will run into balance sheet troubles. But politics dictates there will be no “collapse”, Ottawa will spend unlimited taxpayer funds as necessary to support them. Dividends may be cut and share prices decline, but that is to be expected in a recession.

I’d say Garths’ position on this is about right. I do have an account at BMO, and I have no plans to move it, I actually like them, sort of. In general I have found BMO to have some of the best customer service among the Big 5, I have had problems which were swiftly resolved to my satisfaction, unlike other Banks, such as the one with the lion on the sign. I still have an account there too, though I don’t like them at all, it is just convenience.

# 44 PW – your comments say far more about you, and so do MH’s, your foil, than any point you are trying to make. Highly revealing, in a most negative way. What is the point? I have no doubt you have some knowledge of what you speak on real estate etc, but the tone and phrasing render that moot. Nobody cares what people with attitudes like yours have to say. Start your own Blog if you can’t stop running off at the mouth. MH should show some class, and just ignore you completely, and you could certainly do the same. And both of you should grow up and get some adult nicknames, you are not 14 years old anymore (I hope), and this is not X-Box Live chat. Garth should just ban both of you, I certainly would if it was my Blog. Just because you have “free speech” does not mean you should inflict your sad version of it on others.

#54 wjp on 08.24.09 at 10:15 am

BMO will not fail, there isn’t a credible analyst out there suggesting it will. As for the stock market (the mugs game), time to get out I believe. If oil breaks $75.00 and escalates, you will see the double dip Roubini is touting.

#55 Larry on 08.24.09 at 10:36 am

New rule from Ireland for credit unions.
http://www.independent.ie/breaking-news/national-news/new-deposit-regime-for-credit-unions-1868129.html
This nonsense about BMO failing will not happen period, govt would never let it happen.

#56 Sharky on 08.24.09 at 10:38 am

Nothing’s going to happen to BMO. It’s all rumours and fear-mongering, but the feeding frenzy on here was worth it!

#57 wjp on 08.24.09 at 10:44 am

Well the first salvo against the poor and not so poor (former middle class), the U.S. has decided to freeze Social Security payments to pensioners (and others) for 2 years.
Thought the Obama administration was only going to tax those with incomes above $250,000? Oh, I know this isn’t a tax but, in effect, it takes away an entitlement under Social Security. What will the next shoe be to drop?
Maybe a possible reduction for present recipients? Who knows!

#58 Keith in Calgary on 08.24.09 at 10:48 am

Every Canadian bank is insolvent Garth if you truly take into account the reality of our economic landscape.

But doing so doesn’t get you elected as an MP in any party, because it undoes “the great lie” we are all being told.

#59 Peter on 08.24.09 at 10:50 am

I dont think we have a bank run but a run within themselves because people nowadays will drain their savings account and possibly rrsp, resp or tfsa (to pay down bills or get thru their unemployment stage). I would say now most Canadians are underwater because 1) They all bought homes and thought home prices will go up and rates will never go up. 2) They owed more to the banks and credit card than owning something liquid. 3) Canadians tended to have 99 % of their assets in their HOME minus Mortgage & Home Equity = net position. Personal RRSP, RESP or TFSA is minimal compared to their company’s retirement plan thru fidelity or other fund companies.

#60 Peter on 08.24.09 at 10:52 am

Perhaps if you say who are worrying about it if this blue bank fails would be some Visible Minority who just arrived here and bulking tons and tons of other BRIC currencies and converted into CAD$ GIC in the bank and thought the banks will guarantee unlimited amount of deposits inside.

#61 Peter Wiener on 08.24.09 at 10:57 am

# 52 Got A Watch

1) It is not your blog, and Garth has already interceded, but thanks for your high and mighty attitude anyway.

2) The handle I have chosen is reflective of the email address (Garth can attest to this) I use. I have had it for years and is not intended nor has ever been intended to have any sexual connotation – it refers to my family background – as in from Vienna or “Wien” in the native dialect, as in to be from Wien or a “Wiener”. Besides, the term for ‘hot dog’ is spelled weiner if I am not mistaken. As my mother would have said – get your mind out of the gutter please. I presume you are above apologizing for disparaging my ethnicity.

I guess this just proves the old adage about the word assume.

3) I ignore the postings of some of the posters here that annoy me for various reasons, perhaps you should consider a similar course of action.

Have a nice day.

#62 PTDBD on 08.24.09 at 11:24 am

Watch the preferreds to give you an indication of Bank stock downturn. Before and during the credit crisis the preferred shares declined first.

#63 char on 08.24.09 at 11:47 am

The gov. of Canada does NOT insure bank deposits!

Multiple deposits up to 100k are insured by the CDIC provided they are in separate ‘entities’ (banks the bank owns). The CDIC is financed (like the FDIC) collectively by the banks. Will the CDIC survive more than one failure? Who knows. Perhaps the gov. will rescue the CDIC, but this has never been tested. Also I can’t get a straight answer (in writing) on whether RRSP’s are insured separately from cash in one ‘entity’.

I agree, Agora financial is tacky.

#64 Whats Happening!! on 08.24.09 at 11:51 am

Some folks are buying the story. BMO is the only one of the 5 banks that has seen a drop in its share price today.

Click my name for stock quote

#65 Peter Wiener on 08.24.09 at 11:55 am

# 57 Keith in Calgary

Do you have a source, reference or link to support your assertation of big 6 canadian bank insolvency? I have not been able to find any analysis that supports that view, though there may be some credence to it. Please post if you have anything because I and probably others here would be very interested, After all, its where most of us keep our money.

#66 debtfree on 08.24.09 at 11:58 am

man is it getting tough to gain useful info out of this blog . On bnn it’s allot about the banks . The excuse factory is in over drive . Some one here asked is there anywhere to make money anymore another says equities are not the way to go …. that is so wrong . I’ve made buckets of cash in the markets this year . A double in lloyds banking my money out and free shares in my account (bmo ) I could list five more that have done even better at 6 baggers ,10 baggers . There is lots of money to be made . I liked the shorting of re makes perfect sense to me but then I’m a trader. Love your blog garth ,looking forward to your next book . I hope those personal attackers can settle their ego issues.

#67 Don of the Basement on 08.24.09 at 12:00 pm

Garth,

Why this post in the first place? You give weight and credence to the subject merely by making a post about it and then at the end say that you think this is

“akin to Stephen Harper asking me over for a beer. Just ain’t gonna happen in this lifetime”

I think it’s a bit of a bait and switch. Seems a bit like you want to spread the fear (and the hit to consumer confidence) a bit while at the same time distancing yourself from actually supporting the plausibility of the claims.

Perhaps i’m just in a paranoid frame of mind today….just tell me what the purpose of this post was?

As with all posts here, to irritate you. — Garth

#68 Peter Wiener on 08.24.09 at 12:03 pm

# 53 wjp

You might want to look at the negative press that Roubini is getting and the compromises he may have made lately in order to inveigle his colleages into Obama’s new regime. I believe zerohedg.com tars him and RGE Monitor (his firm) with this brush. He is certainly not helping himself by claiming anti-semitism when criticised of late (about his parties and dubious taste in female genitalia themed art – and I am NOT making a joke here). I’ll post the link if I can find it again.

#69 Peter Wiener on 08.24.09 at 12:03 pm

sorry, zerohedge.com

#70 Evangeline on 08.24.09 at 12:11 pm

A few months ago I had a vivid dream about the BMO being bombed, literally. The sky was full of airplanes and bombs were crashing down all on one target. I wondered at the time if it might be a premonition.

Anyway, after reading the buzz here last night, I called my financial advisor first thing this morning and asked him to unload my BMO shares; surprisingly he thought that was a good idea; (he doesn’t alway agree with my ideas.)

Even if BMO shares climb sky high in the next few months, I won’t regret selling my shares. I did make a small profit on the sale, and the peace of mind I now have is invaluable.

You’re scaring me. — Garth

#71 Don of the Basement on 08.24.09 at 12:20 pm

…Okay Garth, I think I see…you think that the fragility of BMO is totally plausible but that it isn’t going to happen purely because of gov’t intervention. Articles like this on the blogosphere sure do help self-fulfill such predicted outcomes though don’t they? This blog post sure sent a ripple through me to get out of BMO despite the beer-with-harper disclaimer and I take a leap to think I’m a bit more rational than average. On a macro scale the effect would be a run (if this blog and others had that breadth of readership.) And then of course, being rational and knowing that a run was inevitable all the rational people who didn’t originally think there was any danger (because Harper only drinks baby’s blood not beer afterall) would then HAVE to follow suit and run to the bank too…

So I guess I have come full circle again…what was the need for this post?

I do enjoy your analysis and I am not being cynical I just wonder if you’d share some insight into the motivation for this post.

We all need to be aware. Follow the links, and learn. — Garth

#72 jussupow on 08.24.09 at 12:48 pm

So Garth. Why did you ban me? Is it that not quite everyone’s “contribution” is welcomed? I mean what did offend you in my post? That my views on economy are so different from yours (despite the fact that I am a bear too… though somewhat disillusioned)? Or that I have briefly criticised the blog? You know I am not the first (or last) and you may find another reader expressing similar thoughts just a few PgUp-s on this thread. OR could it be that I took on the mr. hotdog pornographic message (you see I like cheese danish and could not take it up my …err.. could not take it lightly. There’s only two things I hate in this world. People who are intolerant of other people’s cultures and the Dutch.) and his outright yard school bully attitude spewing venom left and right? That was a few threads ago and since then he certainly showed his colors. Others took exception and the moron shall just shut up.

Please let me in… I’ll behave…, baby.

#73 robert on 08.24.09 at 12:57 pm

Did any of you folks read that link I posted (#17)? No Dan Anus style hyperbole. For everyone that says it is impossible for BMO to fail there were probably ten saying Wachovia would never go down. Perhaps the author of this article is early or even misinformed, I don’t know. All I’m saying is he presents an interesting comparative for a possible failure and does so in a rather matter of fact way. This article also appeared when stock markets were rallying quite strongly. Any bank accounting analysts out there care to comment?

#74 Munch on 08.24.09 at 12:58 pm

“Mr Sharky, white courtesy telephone please”

This thread just reminded me of Laurie Anderson’s “Home of the Brave” album

#75 Makeorbreak on 08.24.09 at 12:58 pm

Home > Quotes & Charts > Charting

Looks like the volume is very high today:

Bank of Montreal (BMO-T)
Last: Change: Volume: 1:20 PM ET
49.400 -1.460 (-2.87%) 1,869,833 August 24, 2009

#76 David on 08.24.09 at 1:05 pm

Ottawa’s banking regulators primarily focus on Tier 1 capital ratios. Assessing the wisdom of BMO or any other financial institutions management decisions is best left to others. Not paying or reducing dividends payouts is one method for an institution to preserve capital. Long faced investors do wind up punishing the share price, undoubtedly due exposure to poor risks and acquisition of toxic assets. There is a substantive difference between being capital impaired and totally insolvent, rational intelligent investors do know the difference.

#77 Joshua on 08.24.09 at 1:06 pm

so when are the RE housing prices supposed to drop. I keep hearing dates like August 22, 2009 which just past and nothing was announced about the Swine Flue. Now I hear some big crash in October…I think on this blog.

Does anyone have any legitimate predictions on this15 to 20 percent drop in RE happening. Does anyone think it may occur this fall? I need to find a house despite what I hear on this blog. A low interest rate and a big down payment make it a good idea to buy in Calgary at least.

#78 Makeorbreak on 08.24.09 at 1:17 pm

http://finance.yahoo.com/news/More-shoppers-thinking-twice-apf-754236751.html?x=0&sec=topStories&pos=7&asset=&ccode

#79 smw on 08.24.09 at 1:18 pm

As many noted above, this won’t effect the average customer of BMO, just the investor.

But we’ve been talking about Canadian banks cutting their dividends on this site for some time now. This isn’t a surprise, just more bullets in our belts.

Banks are as high of risk of any “company” at this point to drop in value, probably more when you consider the lack of future borrowers.

Just like 15000 on the TSX was the high water mark for 2007 and 2008, 11000 is it for 2009 and 2010.

In real estate related news, I sent a couple listings a few weeks back of homes in my immediate neighborhood, not selling because they were above the capability of new home buyers to obtain financing or too high for any sane boomer to get into mortgage debt near retirement.

We’ll, in 6 months, I’ve watched a 520K asking in the spring drop to where its currently at, 470K.

The 800K is still sitting at 670K.

That’s -10% isn’t it(On the original listed at 520K)?

Even if it dropped another 10% its a perfect example of how the average price can still move up while the medium to high end home prices moves down.

All this and being in the fail-safe government town, Ottawa.

Why?

Could it be that with an impending election government has frozen spending? So much for “Ottawa” is different.

#80 bigpictureguy on 08.24.09 at 1:21 pm

Garth perhaps you can ask Meredith Whitney’s opinion on BMO and CIBC? The new CEOs, who replaced their former, of both banks were highly embarrassed uncovering a succession of additional mess “unbeknownst” to them.

Whitney predicts more than 300 bank failures in USA
http://www.financialpost.com/story.html?id=1917263

Now if the once highly respected and loved financial institution, Manulife Financial, can cut dividends by 50%, why is it so improbable a Canadian Bank is infallible?

Dominic D’Allesandro’s solid reputation and successful global growth expansion and acquisition legacy has been tarnished by one bad decision – guaranteeing client future returns assuming that the market will rise forever. Sound familiar?

All it takes is a confluence of events like in Oct 2007 and a flake of fear & doubt snowball into a panick “bank run” on the weakest link of the gang and the dominos will fall. Highly improbable? Perhaps. But not impossible.

#81 smw on 08.24.09 at 1:21 pm

Link that relates to my previous…

#54 smw on 08.11.09 at 10:14 am

http://www.greaterfool.ca/2009/08/10/harmonize-this/#comment-38418

#82 wjp on 08.24.09 at 1:23 pm

#56 should have read freezing any increases, sorry about that, re-reading it, I might have left the impression they were not going to make the payments…it is the cost of living allowance that they are not going to pay over the next two years..my apology for any misunderstanding I may have created.

#83 smw on 08.24.09 at 1:24 pm

This unit was the one with the asking at $520K.

http://orebweb3.oreb.ca/mlssearch/frm_SearchMlsDetails.asp?x_mls_num=733548

#84 andrew black on 08.24.09 at 1:31 pm

Garth,

You might get that beer with Stephen Harper. BMO stock dropped 3% in last 2 hours.

#85 Whats Happening!! on 08.24.09 at 1:38 pm

Put options in Bank of Montreal (BMO.TO) (BMO.N) are attracting heavy interest for the second time in three sessions.

Its U.S. listed shares fell 2.27 percent to $45.87 in afternoon trade. In the options market, about 21,000 puts
traded, more than 23 times the daily normal put volume.

Click my name for Reuters report…

#86 PTDBD on 08.24.09 at 1:43 pm

23 times normal Put volume on BMO..considerable nervousness out there

#87 Gordon on 08.24.09 at 1:51 pm

This would put pressure on the government to approve a merger between BMO and RBC. Do you think the owners of the banks are that smart to take advantage of the fear in the markeplace to achieve a merger than they have been after for the last decade?

#88 rory on 08.24.09 at 1:57 pm

#165 dd from S.I yesterday

“#147 rory …easy to control access and keep the riff-raff out …Did you happen to mention that Hasting and Main is the poorest postal code in the country. Yup, Nj always overlooks the issues.”

Umm, dude … don’t know where you are from but Hastings and Main is not in North or West Van …it is in Vancouver proper and the only way to the ‘other’ side is by bridge, ferry or swimming …so again easy to keep the riff-raff out and Hastings and Main does have its share of impaired individuals.

#89 Peter Wiener on 08.24.09 at 1:57 pm

# 70 Jussupow

I haven’t shut up fella, but I do think it speaks to Garth’s tolerance letting you post words like “hate” even in jest.

#90 saanichtonian on 08.24.09 at 2:09 pm

For all the guessers of U.S. bank failures this year,
#5 Jmack is the winner with 81.

http://www.fdic.gov/bank/individual/failed/banklist.html

#91 Denis on 08.24.09 at 2:10 pm

#73 Makeorbreak on 08.24.09 at 12:58 pm

Home > Quotes & Charts > Charting

Looks like the volume is very high today:

Bank of Montreal (BMO-T)
Last: Change: Volume: 1:20 PM ET
49.400 -1.460 (-2.87%) 1,869,833 August 24, 2009
———
Check out the put activity!

“Put options in Bank of Montreal (BMO.TO) (BMO.N) are attracting heavy interest for the second time in three sessions. The Canadian bank is due to report third-quarter results on Tuesday. Its U.S. listed shares fell 2.27 percent to $45.87 in afternoon trade. In the options market, about 21,000 puts traded, more than 23 times the daily normal put volume. Only 1,227 calls
traded. According to Trade Alert, sentiment based on order flow was 63 percent bearish. The Dec $40 and $45 puts are the busiest contracts, but action is also being seen in the Sept $45 and $40 puts, said WhatsTrading.com option strategist Frederic Ruffy. He noted the Dec $40 and $45 puts were also busy last Thursday. Like Thursday, the activity seems to include a mixture of buyers and sellers, Ruffy said.”
http://uk.reuters.com/article/idUKN2435091120090824

#92 Keith in Calgary on 08.24.09 at 2:16 pm

Peter Wiener……

Of course I, nor anyone else I’d imagine, has a single Canadian analyst on record as saying that, because if there was one who’d done so, he’d be in the EI line right now.

I am a former commercial banker (ex National Trust and RBC from teh early to mid 80’s). When I decided to sit down and review all the annual reports of the Canadian banks a year ago, as I had mid 6 figures on deposit, and I made the decision to transfer 80% of my net worth out of the country.

Our fiat currency, fractional lending and their derivative exposure was enough for me to decide what to do.

#93 dd on 08.24.09 at 2:23 pm

Garth,

Why your love with the banks? You mentioned numeruous times that banks shares will be one place with a bright future. Why?

#94 dd on 08.24.09 at 2:26 pm

#75 Joshua

Natural gas prices keep falling. Oct prices are predicted to be $1.50-2.00.

#95 kitchener1 on 08.24.09 at 2:37 pm

#75

When will RE prices drop. No one really knows they are all guess at best.

In my opinon, the drop will start sometime in winter to early spring. All the bank of Canada did by lower interest rates was to push the demand for housing forward depleting the demand in the future.

Many people only purchased homes because the interest rates were low, the BOC just pushed future sales into this year. Same as the cash for clunkers program, people brought cars now but it will effect their future sales in 2010.

For RE to start to fall there has to be a build up of inventory like in Jan/Feb of this year. If the recession turns out to be a W shape instead of a V, the price drop will be more significant because it will kill whatever confedience the consumer has left.

Here is a breakdown of the 1990-1995 market that was posted on this blog by someone(i forget the author now) as I only saved the numbers and percentages.

1990 to 1991, there was an 8.1% drop.
1991 to 1992, there was an 8.25% drop.
1992 to 1993, there was a 3.9% drop.
1993 to 1994, there was a bear market rally and the market actually increased 1.18%.
1994 to 1995, there was a 2.82% drop

#96 David on 08.24.09 at 2:37 pm

Big Picture Guy, you are wrong. Manulife targeted widows and sold useless and overvalued policies to people that did not need them. D’Alessandro deserves to roast in a very warm place in a boiling pot of excrement. That execrable company deserves exactly what if gets. My Dad is dying and those so called agents are “praying” over him and urging my mother to buy useless policies to protect the grandchildren. Say What? Universal life policies were wildly over priced by any actuarial standard and still they messed up. A major pox upon them. People do not buy fart insurance, police insurance or kindergarten insurance and they sure as hell do no not need Manulife Insurance. Good riddance to these people who produce nothing of value.

#97 Argentum Aurum on 08.24.09 at 2:41 pm

Garth,

In one of the previous posts, you mentioned real return bonds as a protection from inflation. There are few points I hope you can clarify:
1) increase in inflation would mean increase in the interest rate to fight the inflation => wouldn’t any bond price drop as a result, resulting in the loss of the principal amount?
2) CPI, if flawed, would understate inflation

What do you think?

Thank you.

#98 blobby on 08.24.09 at 2:45 pm

EEEK!! Am I right in my knowledge that if bmo goes down, only my savings (if i had any) would be safe?

Would my RRSP be toast? If so – i’d best move it!

#99 kitchener1 on 08.24.09 at 2:46 pm

I was at my mom’s house in Toronto this weekend doing some rearranging and small repairs. She purchased in 2000 but still kept all of the listing that she viewed.

It was phenominal going through the listing from 9-10 years ago, some really nice houses in south/west etobicoke( W6,W7,W8,W9).

Single detached homes that are today selling for 450-500K were 250K, tons of homes in the 120-200K range. The homes were sitting on the market for 60-90 days before sales.

I remeber the market sentiment back then was nothing like today. RE is driven by market sentiment and emotions. If the DOW or TSX have a substanial drop this fall, that is it for market sentiment.

Govt’s worldwide have already thrown everything they have to perseve the markets, if their attempts turn out to be futile we will be in for the biggest bear market ever in stocks and RE.

It may turn out to be a generational game changer just as the 1930’s change attitudes for ever.

I am hoping that the markets maintain some sort of posistive gain, but, by anyalize my metrics I just don’t see it happening, to much of a disconnect between mainstreet and wallstreet/bay street.

IMO, things will get much worse before they get better.

But, PLEASE keep in mind that things will get better, it will just take longer then we anticipated.

#100 blobby on 08.24.09 at 2:47 pm

This might be a double post – my machine just died on me.

Am I right in my assumption that in the event of bmo going under – any chequeing/savings i have would be safe up to 100k.. but my rrsp wouldnt be?

#101 bigpictureguy on 08.24.09 at 2:49 pm

#63 Peter Wiener on 08.24.09 at 11:55 am
# 57 Keith in Calgary

An analyst working for a Bank or institution with close ties to banking would never blow the whistle due to preserving organizational/industry self interest and most importantly employment/career preservation.

It would have to be an truly independent objective shop Analyst to make this call. Because Bay St is an much smaller community with a strong culture of toeing the line with the cozy old traditional boys network vs Wall St, it would be career suicide to make this call.

#102 jess on 08.24.09 at 2:50 pm

without transparency everyone guesses!

Update on US banks
For smaller banks, those not among the 19 stress tested bank holding companies, troubled assets pose special challenges that have not been acknowledged. These banks’ troubled assets are generally whole loans, which are not currently being addressed by Treasury’s PPIP program. These banks also hold greater concentrations of commercial real estate loans, which pose a threat of high defaults. These banks also have more difficulty accessing the capital markets, which heighten concerns about their stability.

Treasury and relevant government agencies should move toward greater disclosure of the terms and volume of troubled assets on banks’ balance sheets. Because banks typically disclose few details about the toxic assets on their books, it is difficult to gauge the magnitude of the risk that these assets pose to the financial system. Greater transparency would allow for better judgments about the scale of the problem and the adequacy of the government’s response.

If the economy worsens beyond the levels considered in the recent stress tests, these tests should be repeated. Stress tests have the potential to gauge the impact of troubled assets on bank capitalization and to measure the risk that troubled assets could once again trigger instability. The Panel recommends that stress tests be adapted to consider the challenges facing smaller banks, including the adequacy of these banks’ capital.
http://cop.senate.gov/blog/ (elizabeth warren)

#103 Nostradamus jr. on 08.24.09 at 2:57 pm

Politicians are the worst prognosticators.

…Garth, you should do very well back in Ottawa.

I’m sure your platform will lead you to the Prime Ministership of the new Eastern Half of Canada, after Manitoba west and beyond SECEDE.

ps….Take dd with you…

#104 JoeK on 08.24.09 at 3:07 pm

#75 Joshua

Predictions: My mom’s psychic predicted 2012 to be a realy bad RE market in Canada and recommended getting out of real estate until then. Add THAT to what is going around on this blog. Works for me.

If the above doesn’t do it, U can always get a sacrificial chicken and read the entrails.

Low interest rate + high down + high purchase price = mortage
High interest rate + high down + lower purchase price = maybe NO mortgage

U do the math.

#105 ECDomain Article Directory » Too safe to fail? — Greater Fool – The Troubled Future of Real Estate on 08.24.09 at 3:15 pm

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#106 Whats Happening!! on 08.24.09 at 3:19 pm

All Canadian banks are taking a beating today. But BMO leads the pack – down 3% as we hit the closing bell. Click my name for latest quote from google finance.

Did that Don Amoss “stock tip” have an effect. All I know is those put buyers this morning made a killing on his advice.

#107 Industrial Guy on 08.24.09 at 3:24 pm

#62 char on 08.24.09 at 11:47 am “The gov. of Canada does NOT insure bank deposits!”

This was copied directly from the CDIC web site……

“CDIC — Who We Are and What We Do”
“Canada Deposit Insurance Corporation (CDIC) is a federal Crown corporation created by Parliament. CDIC insures Canadians’ savings in case their bank or other CDIC member institution fails or goes bankrupt. CDIC is NOT a bank. CDIC is NOT a private insurance company.”

I was right……………..

#108 Firma on 08.24.09 at 3:26 pm

…and where that would be? Luxmenburg, Switzerland?..where is the safe place on the this crazy planet?

#109 lili on 08.24.09 at 3:26 pm

I don’t know about you but this one’s got teeth. Anyone else unload in the late market action? Wowzers…

#110 Peter Wiener on 08.24.09 at 3:30 pm

#90 Keith in Calgary

Thanks for getting back on this subject.

While I hear you on bank analysts ending up unemployed for that type of analysis, I thought you might know of an independant source (newsletter, etc.) that might have covered the topic in depth. I am in no way discounting your analysis of course.

My concern with international banking has been that in the locales reviewed, a resident / citizen seems to have ‘different’ status from a foreign depositor/customer should something untoward occur and this seems not be limited solely to deposit insurability amounts. Additionally, their fee schedules commissions for anything other than straight deposits / transfers, etc. seem pretty onerous if you were to trade markets, for example.

Is not your last paragraph in #90 posting really applicable to all banks in most 1st world locales or perhaps you’ve found a place where those elements are somewhat less of a threat? (less leverage and/or derivative exposure, is there any major currency that is not fiat?)

It almost sounds like you’ve gone to gold and physical gold at that. Is that what you are referring to?

Thanx in advance for any light you can shed. I am rahter sceptical about Canadian banks as I’m pretty sure bankers all over the world, regardless of nationality, always find a way to blow up (as in destroy) their balance sheets.

#111 Men With Hats on 08.24.09 at 3:30 pm

Beware the ‘Black Swan’ :

Unpredictable,random events that have life shattering consequences .
It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge.
It lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence .
The BMO debacle fits nicely into this paradigm .
If humans were capable of learning we would not be experiencing a world wide collapse of financial markets.
There is more negative evidence than positive with regards to Canada’s banking industry .
The only certain thing is uncertainty .
Of course the government(?) swore up and down there would be no recession nor deficit .
Predicted with outdated fraudulent info .
Epitome of a ‘Black Swan ‘ event .

Nassim Nicholas Taleb.

#112 Brico9 on 08.24.09 at 3:47 pm

I never would have thought a former CDN MP (who had major past responsibilities too!) would have a blog and post that there are rumors about a a major bank going down. Wow. I have never considered the possibility. Real scary.
The real scary part is: I have had 9 (RIP BMO) emails from different business and personal unrelated friends across the country. It may not be true, but credible people are talking about it and it is getting around real fast. The BMO trash talk could do real damage.

Yeah, MPs are supposed to be mute eunuchs. Got it. — Garth

#113 Azza on 08.24.09 at 4:00 pm

“Cash is king right now,” said Glen Bell of Keller Williams Realty in Berkeley. For foreclosed homes, “a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as important to banks as price. The prospect of a property being tied up longer, still on their books and then falling out is costly.” Cash offers close escrow quickly and easily, while offers with a mortgage now often take 45 days or longer to close and can fall through if the financing hits any snags.

The result is that average consumers say they are being shut out because they can’t compete against deep-pocketed investors snapping up homes to rent out or flip. The situation could have long-term repercussions as neighborhoods shift toward more heavily rental, and it has frustrated many who hoped that low interest rates and increased affordability would let them gain a toehold in the market.

All-cash sales are most common where prices are low and bank-owned properties account for the lion’s share of listings. In foreclosure-ridden Pittsburg, for instance, 42.7 percent of home sales in the first three weeks of July had no record of a purchase loan, according to county data analyzed by MDA DataQuick. The median price for those transactions was $105,000. For the same period in San Pablo, 45.1 percent of sales appeared to be cash transactions; their median price was $110,000. In the Bay Area overall, 22.2 percent of sales in the July period looked like cash transactions; their median was $200,000, DataQuick said.

#114 Calgary_rip_off on 08.24.09 at 4:09 pm

Joshua:

No one has the answer about prices dropping in Calgary. If anything, they’ll probably increase as all the sellers/realtors/newspapers in this city are manic in a manic mode where everything is wonderful.

There doesnt seem to be a reason to increase interest rates for the government, so housing is likely to continue its increase.

Calgary is a major city with lots of jobs. There are plenty of jobs so people desire to live here.

These reasons equal a vulture tendency for anything listed below its market value. If a house is listed as low its likely a foreclosure, and even so, there will likely be 4 offers in the matter of hours and 15 realtors at the open house. Even if the place is a dump, expect this.

The only real solution to this if you want to buy a place is follow what is happening on the mls website. Be prepared to see a lot of overpriced dumps. The current market values have no basis in reality for what places are actually worth. The whole mls pricing isnt made by the realtors but by what has happened in the market here since 2004. Its the most arrogant injust crap Ive ever seen.

Perhaps it would be better if you contact Stephen Harper and tell him to jack the interest rates, say to 18%. That ought to fix the current Calgary fiasco quite quickly. Get rid of the riff raff and all the marble countertop orgies.

Let Garth know how that goes in future posts please.

#115 Peter Wiener on 08.24.09 at 4:43 pm

re #99 bigpictureguy

Thanks, I was aware of those conflicts of interest.
I was looking for independant, non-industry analysis untainted by direct or indirect ties to the big 6 Canadian banks. Normally I am pretty good at locating data on any financial topic, but have been stumped on this. I can read financial statements, but someone who specializes in finance/banking analysis would be able to better question the results than I. I guess was hoping for a “Sprott” type of analysis to disprove what I saw which was starting to alarm me, for confirmation of my fears.

#116 The 'VULTURE' on 08.24.09 at 4:46 pm

The Great Reckoning

When will Stephen Harper step in and raise the CDIC insurance to $250,000.00 per account???

The States raised their FDIC late last year I do recall.

Pulled a chunk out of BMO today…

Thanks Garth for the awesome heads up….

Hope to sleep better tonight than last night!

Raced to the closest BMO branch today to get my loot!

Nice and safe in another more stable bank…

until Garth’s next heads up…..Then I am scrambling…aces high…

Thanks to all the comments today guys and gals…interesting times….once in a lifetime stuff going on….unnerving to say the least….Something sinister in the air tonight….

#117 ASpencer from Canada on 08.24.09 at 4:48 pm

If its all crap, why repeat it? Is this an ever so slight way of doing your own bit of fear mongering, again? At least you are finally coming to your senses and using slightly less alarming language. Now its a “correction”, delayed for a few years, which is a life time in the market. Methinks you have seen the error of your ways and just wont admit it. Canadians will not run on a bank because dividends are cut in half and the stock takes a 10% hit. No dividend and a plunging stock would be required and that will not happen, as you note! So where did all this fear mongering get you in the last year? Nowhere, and not back in the House either, I bet!

I love people who use more than 100 words to tell me I don’t matter. — Garth

#118 lgre on 08.24.09 at 4:56 pm

#98 blobby on 08.24.09 at 2:47 pm

you RRSP should be insured by CIPF for up to a million

http://www.cipf.ca/c_find_active.asp

#119 jussupow on 08.24.09 at 5:23 pm

#87 Haha. Blame Nigel Powers for that!

Garth’s tolerance lately is telling. Unloading serious filth in the last couple of days… and you still around! Wise fella this Garth. Sooner or latter you would have took on someone who would call you on it. I “blame” him for not giving you to me. Would swallow and regurgitate ya at my discretion (be sure – frequently). In the end a steamy pile of you would have been the end of it. I mean whacking left and right and freaking ppl out works… until someone with bigger balls shows up. Hehe and how predictable – after playing the role of a punching bag for a while what d’ya do? Calling for order! Expletive. Bigger Expletive. That is the appropriate resolution. I do not quite like got a watch’s “if I had a rocket launcher” approach. Guys like you should be put where they belong. In the gutter. Please note I am not against ppl making fun of each other (or themselves) not even an occasional ‘moron’ flying my way. I’ll just do the same. It is all in good fun. Or in a spirited debate.

#97 yeah, things will get worse before getting better. In regards to RE that means prices stay insane for a log time (falling re prices is good, right?). Good ain’t happening this winter. Or the next. Or one after. Slow bleeding for a prolong timeframe. Not sure about other areas but w8 was very expensive in 2000. Got a chart (avg/med) for that one for 10 years or so. Can post it, I guess (if I knew how).

#120 ASpencer from Canada on 08.24.09 at 5:51 pm

You don’t matter! That better!

Apparently I matter enough for you. — Garth

#121 Nostradamus Le Mad Vlad on 08.24.09 at 5:52 pm

#114 The ‘VULTURE’ on 08.24.09 at 4:46 pm — “Something sinister in the air tonight….”

In The Air Tonight is a great song by Phil Collins — Auntie Beeb banned it during the first Gulf War — but the first two words make it a little better, as there is more than enough trash being bandied around by the always clueless and useless m$m.

This is an 8:59 clip. When he speaks re: #’s 1 & 3, I guess that ties in with the link last night about the WH increasing the deficit by US$9 trillion over the next decade.

“Proof that the NEW WORLD ORDER has been planned by the elite. Robert Welch, Founder of The John Birch Society, predicted today’s problems with uncanny accuracy back in 1958 and prescribed solutions — Mind blowing speech by Robert Welch in 1958 predicting Insiders plans to destroy America”

http://www.youtube.com/watch?v=AZU0c8DAIU4

Does China know something the rest of us don’t? Chances are these two are bound hand and foot. —
http://thenexteconomy.blogspot.com/2009/08/china-aggressively-reducing-us-debt.html
http://www.reuters.com/article/newsOne/idUSTRE57K4XE20090821
——
Remember the pandemic stuff? Mass. has taken it a step further. Comments at the end are good. —
http://thebirdflupandemic.com/archives/1000-per-day-fine-and-30-days-in-jail-for-refusing-the-swine-flu-vaccine-in-massachusetts

#122 timbo on 08.24.09 at 5:54 pm

http://www.youtube.com/watch?v=RAXdie_gifI

tisk,tisk. Make the rumours run wild forcing down the stock and when the truth is revealed a rally will bring the stock back up. The smart money has bought just before the release of the Tue report as all it was was a lie.

just speculation. Too many leaks fuel sheep rampages.

#123 jess on 08.24.09 at 5:55 pm

meanwhile up in alaska…although i feel longer time should fit these crimes.

Lockard was the ninth and last defendant to be sentenced for his role in the largest mortgage fraud investigation in Alaska’s history. In total, nine individuals and one corporate defendant were convicted and sentenced for their roles in a widespread, three-year long scheme to defraud some 13 mortage lenders and banks in 57 different loan transactions netting over $1,700,000 in profits and over $2.5 million in losses to the financial institutions. United States District Court Judge Ralph Beistline, who presided over the case, sentenced the nine defendants to a total of 14 and ½ years of imprisonment, and imposed fines of over $90,000 and restitution of over $2.5 million dollars.

The defendants convicted as a result of the scheme are: Lance Lockard, of Anchorage, age 34, Gary Paterna, of Anchorage, age 62, Charles Carlson, of Anchorage, age 74, Holli Stroud, of Chugiak, age 30, Jonathan Ruf, of Anchorage, age 33, Keith Facer, of Anchorage, age 41, Don Murray, of Anchorage, age 35, Cerise Sanders, of Anchorage, age 31, and Alaska State Mortgage Company, Inc., of Anchorage.

Lockard, a licensed real estate investor and the lead defendant pled to 64 counts and was sentenced to 70 months and ordered to pay 2.5 million in restitution. Lockard also admitted

http://www.ktva.com/ci_13194109

#124 Whats Happening... on 08.24.09 at 6:08 pm

Bloomberg news reports…

“Bank of Montreal dropped 3.6 percent to C$49.01. The Canadian lender founded in 1817 fell the most since May after a short seller said a “major” 192-year-old bank is “set to crash.” Dan Amoss of the Strategic Short Report also said the nation’s fourth-biggest bank may cut its dividend.

The speculation may have contributed to Bank of Montreal’s decline, said John Aiken, an analyst at Dundee Securities Corp. in Toronto. He said he believes the bank’s dividend is safe.

Bank spokesman Paul Deegan declined to comment”

We will see if their is any truth to the rumours when they release results tomorrow. Will they cut the dividend?

Click my name for full Bloomberg report

#125 Dan on 08.24.09 at 6:24 pm

Had a little trouble pulling some of my money from BMO today as you need to call them in advance when you want anything over $3000 . Was able to wire money to another bank account at another bank. Thanks garth for the heads up. Those in who claim everything will be ok are BMO shareholders or account holders and hope they don’t lose everything tomorrow. Glad I am out.

#126 Bubba on 08.24.09 at 6:30 pm

I think i’m going to start a blog, spread some rumours, and trade accordingly.

That strategy seems to be working given the comments on this posting.

Really people, try to find some credible sources.

#127 Chillax on 08.24.09 at 6:51 pm

Why is it that RE bulls cannot string two coherent sentences together (e.g. #117) and use proper English? It really erodes the credibility of their “arguments” and statements…

#128 Joshua on 08.24.09 at 6:56 pm

Thanks to all who responded to my questions.

Well we all know the rumors around the BMO is in serious trouble and that news is supposed to come out based on Garth Turner’s research. I find Garth to be a credible person who really knows his stuff and is great at researching and analyzing information.

However, what if tomorrow comes and BMO reports profits and is doing the opposite of whats been rumoured. Does Garth Turner lose some credibility as a result of this entry. Id hate to see that because I feel his entries have a lot of credibility but at the same time, he was a politician and we can never trust politicians.

I hope I’m wrong.

Don’t worry, you are. My conclusion was that BMO is fine. Try reading before you comment next time. — Garth

#129 Future Expatriate on 08.24.09 at 7:10 pm

Bottom line: Far TOO many people have WAY TOO much money in investments. I’d give anything to get the entire system back to the early 1900’s when only the uber-riche were in the market because they were the only ones who could afford the risk. The only thing getting more people into investing has done is increase the wealth of the folks at the top of the food chain. Sure, the rich were preying on the middle class and poor before their entry into the markets too, but it wasn’t being HANDED to them on silver platters.

All one has to look at was the US Bush/GOP “plan” to gut social security by putting it into the stock market right before it tanked. Like their desperation to ram that through wasn’t a direct knowledge the crash was coming and inevitable.

Line up, suckers.

#130 Bruce on 08.24.09 at 7:24 pm

I was listening to talk radio show over the weekend. I can’t remember the guests name for the life of me, but he was explaining that the ONLY solution to get the global economy back on track is to the put the ENTIRE SYSTEM into bankruptcy restructuring. Yes it would be painful and there would plenty of unrest and uncertainty, but it’s the only way. The bottom line is that we can’t keep printing billions of dollars of money based on nothing and backed by nothing. It just ain’t gonna work folks.

This thing is NOT over by a long shot. My neighbour works as a loan officer for Scotiabank, and there are rumours circulating among the “insiders” of something big going down in October. It may be the month you want to stay inside or hide your money in a safer place. Things can get ugly REAL quick if people start getting the impression that the Feds have lost control… REAL UGLY.

#131 john m on 08.24.09 at 7:54 pm

Great post Garth.sort of a wake up call i think….i find it shocking their assets in relation to their obligations.but things are different in Canada right Steve and your lackies? Well the future is obvious…….hundreds of thousands of dollars pumped out to individual home buyers with little or no security and winter is coming jobs are evaporating………when spring rolls around i think we are going to get a whole different view on Harper’s “things are different in Canada”.

#132 ottawa pete on 08.24.09 at 8:05 pm

Spoke with a family member last night who lives in Brantford Ont. He says that everyone is expecting a massive shitstorm by the end of Sept. due to EI running out. He mentioned that many companies he works with have gone under recently (manufacturing services, parts etc.) and the rest are starving. This is no where near from bottoming folks. And he mentioned a friend’s kid as a first time home buyer buying a house in Brantford for over $400K. That’s has to be like a $700K house in Ottawa…at least! The kid wouldn’t listen to reason apparently. Speaking of Ottawa, every single listing under $400K has sold in Kanata and Stittsville. These aren’t palaces folks. Anything above $480K is languishing. Above $600K forget it. No buyers. The builders have been blowing out their inventory.

#133 chris on 08.24.09 at 8:06 pm

“The odds of BMO crumbling are akin to Stephen Harper asking me over for a beer. Just ain’t gonna happen in this lifetime.”

LOL. All canadian banks are expected to be reporting weaker earnings. In the US, AIG, FRE, Fannie all reported “better” results with a giant footnote about losses. They all rallied on the stock market.

#134 Dan in Victoria on 08.24.09 at 8:20 pm

Holy Crap ! Go away for a few days, get back and the sky is falling! How many of you people are prepared for anything?This is more than likely a rumour that has morphed into something it isn’t,we’ll see shortly though.I would hate to see what happens in a real life situation,how prepared some of you are.Smarten up!

#135 john m on 08.24.09 at 8:28 pm

Banks are in the business to make money,we walk in and give them our money so it is secure…………they just keep the doors open for a regulated number of hours a day and people line up to give them their money,they do not even have to walk out the door to get it………in fact their obligations to a certain extent are guaranteed by us the taxpayers-sweet deal!………mortgages now there is a real sweet deal..we the tax payers insure them no matter how incompetent their lending practices are. Interest rates are at the bottom…people are still walking in..lining up..to give them their cash…the friendly bankers are encouraging them to lock in with their cash and have security in desperate times……..yeah right the rates are going to go up and your money is going to make them a hell of a lot of money……….as a very smart friend of mine told me years ago….the only time a Bank will help a small independent business man or anyone else is if you don’t really need it if you liquidated some of your assets………personally i can speak from experience as a real estate developer and you get overextended….the banks will never help you and leave you at the mercy of the private lenders and the high interest payments.but when you score they offer you the world…….in my opinion the Banks in Canada are a hindrance to progress and the most mismanaged financial institutions on the planet.

#136 jess on 08.24.09 at 8:32 pm

so what was the event that unraveled Bernie M. ?
JPM Chase was Madoff’s cash custodial bank .They took over Bear Stearns, they gained access to the trading side of Madoff’s operation (which cleared through Bear Stearns)
…makes ya go hum….

#137 Nostradamus jr. on 08.24.09 at 8:46 pm

#106 Firma

“”…and where that would be? Luxmenburg, Switzerland?..where is the safe place on the this crazy planet?””

That’s easy…North America’s Cote d’Azure……West Vancouver B.C….aka the Vancouver’s largest private gated community, the North Shore (North & West Vancouver.

Nostradamus jr.

#138 saanichtonian on 08.24.09 at 9:43 pm

#133 john m on 08.24.09 at 8:28 pm posted:
“Banks are in the business to make money,we walk in and give them our money so it is secure”

I know I am pickin’ nits here, however when you put money into your bank account, you are lending them your money (thus theoretical interest paid). Your balance is not what you have there, but what they promise to pay you back.

For a little more info on this, the video “Money as Debt II : Promises Unleashed” (2009), is quite informative.

http://www.youtube.com/watch?v=_doYllBk5No&feature=related

#139 dd on 08.24.09 at 9:56 pm

#123 Dan

… there is a thing called depositors insurance.

#140 dd on 08.24.09 at 10:06 pm

#112 Calgary_rip_off

…No one has the answer about prices dropping in Calgary….
Natural gas prices are hitting record lows. Bad, bad news for Calgary

…city are manic in a manic mode where everything is wonderful….
You work downtown? I am in the energy sector and there are more layoffs everyday. Not good.

…There doesnt seem to be a reason to increase interest rates for the government…
In the short run yes. However the governemnt has very little control over longer term rates. Rates have to go up to attact investors to buy bonds. And there is going to be a lot of bonds floated in the world in the next couple of years.

…The current market values have no basis in reality…
True.

…Perhaps it would be better if you contact Stephen Harper and tell him to jack the interest rates…
He doesn’t set the rates. The BOC does.

#141 dd on 08.24.09 at 10:08 pm

#107 lili

…I don’t know about you but this one’s got teeth. Anyone else unload in the late market action? Wowzers…
Your post yesterday said that the Banks were solid and that your banker friends were doing well.

#142 jess on 08.24.09 at 10:12 pm

The Bank of Israel raised its benchmark interest rate, becoming the first central bank to tighten monetary policy.

#143 jess on 08.24.09 at 10:32 pm

August 18, 2009
NASAA Identifies Top 10 Investor Traps
WASHINGTON (August 18, 2009) – With a new school year about to begin, the North American Securities Administrators Association (NASAA) reminds investors to take stock of their financial education and arm themselves with the knowledge to sidestep this year’s Top 10 Investor Traps.

http://www.nasaa.org/NASAA_Newsroom/Current_NASAA_Headlines/11129.cfm

#144 supersocco on 08.25.09 at 2:18 pm

Thank god I don’t take advice from Munch

#145 BC revenues about to crash on 08.30.09 at 3:06 pm

Victoria faces free-fall in resource revenues

‘It’s the great disappearing act,’ says Business Council of B.C.’s Finlayson

http://www.vancouversun.com/business/Victoria+faces+free+fall+resource+revenues/1933032/story.html

#146 silver lining on 09.07.09 at 10:36 am

Always the gloom and doom…….there is money to be had in any type of market.