The big bail

Do you figure RBC could fail? It’s the country’s fattest bank – a financial behemoth with fingers stuck everywhere. Savings. Loans. Investments. Insurance. Mortgages. Capital markets. Global finance.

This mother has 1,200 branches, 80,000 employees and more than sixteen million clients. And it rakes in the cash. Net profits of about $1 billion a month. No wonder its stock has risen about 60% in the past three years.

But wait. What if a 2008 happened again? What if the housing market collapsed and zombie moisters defaulted en masse on their loft mortgages, going to live under bridges or at mom’s? What if equity markets globally crumbled because of a trade war, protectionism, populism defeating globalism and an unprecedented mountain of debt collapsing on consumers and economies? Plus the orange guy.

Could a bank like the Royal fail? If we all got scared and swarmed to take our money out, could it survive? After all, it may have assets of $1.2 trillion, but the bulk of those are in the form of deposits from ordinary schmucks and businesses. They can be gone in days, or hours. Could it withstand a storm?

Some people say it’s impossible, and point to the fact Ottawa had to buy out entire bank mortgage portfolios a decade ago as evidence of bank fragility.It’s also a common belief that a bank-in-trouble means serious grief for anyone with money there. “The funds on deposit are no longer the property of the depositor,” says an ‘investment’ company flogging gold bullion. “Instead the depositor becomes an unsecured creditor or lender to the bank. Banks pay you interest, but their real purpose is to use your funds to earn a spread. They put your funds at risk in the global markets through lending, syndication and trading.”

All this becomes more relevant in a few days when the first “bail-in bonds” go on sale to investors, issued by (of course) the Royal Bank.

What’s a bail-in?

The opposite of a bail-out. Unlike what Washington did after the 2008 meltdown on Wall Street – shoveling boatloads of taxpayer money into banks to keep them alive and save the financial system – a bail-in means a failing bank would be rescued by its own investors. Bailing-in got a bad rap after depositors in Cyprus-based banks were forced to hand over their cash when those institutions wobbled. So all the financial loonies and charlatans among us (there are many) say the bail-in legislation first proposed by Harper then passed by Trudeau would end up stealing your cash, wiping out your bank preferred shares, or trashing your ETF owning bank debt.

Of course, this is crap.

True, Ottawa has designated six banks as Too Big To Fail. They’re called ‘systemically important,’ which means if one of them chokes, we’re all pooched. It’s also true that federal regulators (CDIC, the deposit insurance agency, and OSFI, the bank cop) now have the authority to actually take control of a bank if they see fit, for as long as five years. And in doing so, yes, they can order that certain securities and assets be turned into bank shares, raising cash to help rescue (maybe) the institution.

But clearly this does not involve your GIC, savings account, RBC mutual funds, chequing account, corporate bond, bank preferred shares, term deposit or any ETF holding these or bank stock itself. Ain’t gonna happen, no matter what some wild-eyed YouTube moron from Calgary tells you.

The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock. Wow.

But here’s a key point that CDIC makes: “The bail-in power will not be retroactive. This means that only instruments that are issued, or amended to increase their principal value or extend their term to maturity, on or after September 23, 2018 will be eligible for bail-in conversion. The bail-in power will not apply to existing instruments…”

Therefore this statement, by the gold-humpers, is complete fiction: “Those at risk of a bail-in in the event of a failure are subordinated debt holders, bondholders, preferred shareholders and any accounts in excess of $100,000 not covered by CDIC insurance. Their bonds, preferred shares, deposits etc. would be converted to capital to re-capitalize the banks.”

And this brings us back to RBC, now first out of the gate with its shiny new Bail-In Bonds. It’s part of the global effort to ensure another 2008 doesn’t happen or, if it does, to try and save the system and not hollow out taxpayers. These bail-in securities will, by definition, be riskier than regular garden-variety bank debt because they can be converted into (worthless) equity in an emergency. So for that reason they will offer a premium return – yet to be spelled out.

Would I buy them?

In a heartbeat. No bank will fail.

141 comments ↓

#1 Hamsterwheelie on 09.20.18 at 3:42 pm

So…uh…what happens if a B-lender fails?
If your mortgage is with a lesser bank, what happens?
Do they take and then sell off your house?
Has this happened to filks who pay their mortgage on time?

Eeeek – run for the hills?

#2 Hamsterwheelie on 09.20.18 at 3:43 pm

Uh, yeah, asking for a friend ;-)

#3 Red_falcon on 09.20.18 at 3:45 pm

Bail! Money!! First!!!

#4 oh dear on 09.20.18 at 3:49 pm

banks at it again. Always thinking of ways to make money……this is disguised as ‘ to try and save the system and not hollow out taxpayers. These bail-in securities will, by definition, be riskier’

lol, can’t make this kinda stuff up

#5 cwl on 09.20.18 at 3:53 pm

Garth, would you expect such products to (eventually) become part of some plain vanilla bond ETFs, or would the interest rate premium suggest they will be included in more specialized products (high yield ETF or, perhaps, a product unto itself)? Presumably, for the short term, these will only be available by buying the bond directly? Thanks for the blog – years ago I took your advice to add more preferreds to my portfolio. These look like another worthwhile way to add some additional diversification and yield to the – balanced! – fixed income portion.

#6 Russ on 09.20.18 at 4:03 pm

If the return is a good premium is 5% too much for a portfolio?

Assuming it displaces other bonds in the “40 mix”.

cheers, R

#7 Catalyst on 09.20.18 at 4:12 pm

How exactly does this help the banks raise cash in a liquidity crunch? As I understand it, this simply allows the banks to use convert a bond (creditor) to equity BUT the money from the bond was already lent out so there is no new cash coming in. It only makes it so the bond doesn’t have to be repaid which may not be for an extended period as is. Maybe once these are laddered it helps?

#8 David Paquette on 09.20.18 at 4:13 pm

Maybe I just should shut up.

I don’t know what is worse – no Nafta or modified to the Don’s approval. I believe giving up our sovereignty is a nonstarter. I don’t want to be a national colony and I think Albertans have a lot to complain about. Nimby drives me crazy. We could have advanced as a nation. Now I think it is more important to take of our regional differences. If Quebec leaves Confederation, it clears the path the path for Alberta to do the same. I am not for provoking but then I see my money going down a sinkhole to preserve “cultures”. Prove me wrong.

My mother had a brother who lived on a reservation near Pitt Meadows. This was after her divorce (it was hard on me). She took our brood to visit him a few times. I was afraid of him as I had never seen anybody so dark. His wife had left him with 3 kids and as far I was concerned, he was poisoning with hate. I played with his kids and all they were sexually active which they thought was nirvana. They thought I was strange which I am and probably right yet I wonder where they would be with strong moral leadership. My parents delivered in spades.

In reflection, I think my mother was trying to teach me that sucking tit is a dead end. She drove that point home if I am right.

I looked at cannabis stocks back in January this year and judged them to be unworthy based on cash flow. It is a reminder that the world doesn’t care what I think. My thinking needs work – again.

#9 Catalyst on 09.20.18 at 4:15 pm

Also, this may be negative for bank profits short term. Bond holders are currently demanding the spread from a triple A rated security (bank credit rating) and now should get some premium for this risk. even 20 bps could be a big increase in funding costs for the bank profits as NIMs are currently in the 200 bps range?

#10 funy bone on 09.20.18 at 4:18 pm

Garth they are going to come at +15 to current deposit notes. so approximately +100 to the canadian 5yr bond or a yield of 3.30/3.35……me thinks there are better areas for the retail world to put their money

#11 funny bone on 09.20.18 at 4:27 pm

and as per bailing out banks when the BoC were buying the Bank secured mortgage portfolios to give the Bank liquidity…..that program was one of the most successful programs the BoC or our government has run…buying secured mortgages that hadn’t been pooled yet at Canada’s +100bps that were guaranteed to begin with to then immediately issue Canadian Bonds…I could look it up but that program made the tax payers a lot of money

#12 Stan Brooks on 09.20.18 at 4:31 pm

In a heartbeat. No bank will fail.

————————

Of course. But the currency will.

I still don’t get it why is government’s business to save banks that have zero (0) deposit requirements and ‘insure’ their risky mortgages.

With this oligopoly banks become perpetum mobile profit extraction machines with no risk having the back of BoC to provide any liquidity or currency manipulation needed.

Remind me here: Why do we need banks in first place if they bear no risk for their actions?

Peer to peer lending platform with strict lending rules will do the same job with much less expenses.

#13 Millenial falcon on 09.20.18 at 4:34 pm

Would I buy them?

In a heartbeat. No bank will fail.

I bet someone once said the same thing about lehman brothers

#14 Stan Brooks on 09.20.18 at 4:43 pm

After all, it may have assets of $1.2 trillion, but the bulk of those are in the form of deposits from ordinary schmucks and businesses.

———————————

That is incorrect, all deposits – M2 in Canada are less than that – 1.2 trillions,

It is an accounting trick for banks to record loans as ‘other deposits’ without these deposits actually existing (unless the customer attempts to withdraws it.)

Schmuck’s and Business deposits are less than half of that, look at the banks balance sheet and see how much of it is in ‘other deposits’ that are not deposits at all.

Deposits are liabilities. the asset is the mortgage…

So in real term not much of assets there, the promise for a pay by bankrupted public.

#15 domain on 09.20.18 at 4:45 pm

Two words garth:

Duration Mismatch

#16 Stan Brooks on 09.20.18 at 4:52 pm

#11 funny bone on 09.20.18 at 4:27 pm
and as per bailing out banks when the BoC were buying the Bank secured mortgage portfolios to give the Bank liquidity…..that program was one of the most successful programs the BoC or our government has run…buying secured mortgages that hadn’t been pooled yet at Canada’s +100bps that were guaranteed to begin with to then immediately issue Canadian Bonds…I could look it up but that program made the tax payers a lot of money

This is what I call brainwashing.

Banks in 2008 – 2009 had bad non-performing mortgages above their capital valuations with no deposit reserves.

BoC came to the rescue to provide ‘liquidity’ but in reality to purchase bad assets, i.e. to bail them out.

Once done BoC went on to keep rates much lower than needed for much longer then needed in order to make sure the mortgages are performing which was in essence a theft from savers/retirees.

So the inflation was and will be the big price to pay, what you quote as ‘taxpayers profit’ is not even 5 % of the losses due to inflation.

#17 funny bone on 09.20.18 at 4:55 pm

@ Stan Brooks….

you have zero idea what you are talking about

#18 Jungle on 09.20.18 at 4:58 pm

I just bought a few thousand shares of
Bns.to couple days ago, not scared one
Bit.

Like Garth says if big 5 bail, the economy will
Be toast. 3rd world
Country.

#19 Mike Tomas on 09.20.18 at 4:58 pm

It’s funny, you attack the gold guys but you yourself are doing the exact same thing but just on the other side of things. Both selling a service/ product and both sides are totally bias simply because of the product/service you sell. How about some honesty….

I don’t lie. I don’t sell anything. – Garth

#20 Stan Brooks on 09.20.18 at 5:01 pm

#17 funny bone on 09.20.18 at 4:55 pm
@ Stan Brooks….

you have zero idea what you are talking about

=======================

I do but apparently you don’t. So read it here:

https://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout

https://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout_n_1466219.html

https://business.financialpost.com/news/the-152-billion-bill-canadian-banks-and-consumers-will-have-to-pay-for-a-crisis-they-avoided

Hell, even from CBC:

https://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

=============================

You stand zero chance in the coming storm to survive with such lack of critical thinking. zero.

#21 NoName on 09.20.18 at 5:12 pm

Bail-in bonds remind me of fabulous fab and his lemonade stand…

#22 dakkie on 09.20.18 at 5:15 pm

Americans and Canadian MASSIVE Debt IMPOSSIBLE To Ever Pay Back, Now Even Worse!

http://www.investmentwatchblog.com/americans-and-canadian-massive-debt-impossible-to-ever-pay-back-now-even-worse/

#23 Linda on 09.20.18 at 5:20 pm

Seems to me that the bail-in bonds will provide a growth opportunity for investors who understand that these financial instruments come with an increased risk. Same as anyone looking to purchase high risk/high yield financial instruments today. The difference is that thus far Canadian banks have consistently provided a good ROI & I can’t help but believe the regulatory checks & balances in place will ensure those ‘risky’ bonds are less risky than most. Question is, will the ROI be worth the increased risk, or will other instruments on offer provide just as good a return w/o increased risk?

#24 Penny Henny on 09.20.18 at 5:29 pm

#17 funny bone on 09.20.18 at 4:55 pm
@ Stan Brooks….

you have zero idea what you are talking about

……………

not only that, he is also an annoying jerk.
Hey Stan, move already. Don’t worry Canada will not miss you.

#25 BC Speculation Tax on 09.20.18 at 5:32 pm

“I’ll continue to work with the communities, we’ll monitor the situation, but the speculation tax is needed to be able to address the housing crisis and it’s going ahead,” James said.

Own a second home in BC? Sucks to be you.

Enjoy your $10,000 per year new tax.

#26 Is Senator Larry hiding something? on 09.20.18 at 5:35 pm

Global News has reported that Sen. Campbell has collected more than $800,000 in cash compensation and about $2.1 million worth of shares as a board director of the company that owns the troubled River Rock Casino, Great Canadian Gaming.

Campbell also is chair of the Great Canadian Gaming committee responsible for overseeing company compliance and ethics, and whether surveillance and security at River Rock Casino is adequate.

When asked about the money laudering debacle there, his response was: “I have no idea what you’re talking about.”

Sounds about right for Canada.

#27 Sideshow Rob on 09.20.18 at 5:36 pm

Stan Brooks is exactly right. When you get a mortgage the money is created by keystroke and given to you. It then becomes your liability and the loan is the banks asset. Actual deposits are liabilities from the bank’s perspective. Deposits in our fractional reserve abused system are so small as to be not worth mentioning. Canadian banks are a great fair weather business. In 2008 our banks all had to be bailed out and Canada had zero housing and mortgage issues. But don’t worry your pretty heads. No doubt our sunny ways leader is on top of this .

#28 Shawn Allen on 09.20.18 at 5:37 pm

Not that anyone will change their view one way or the other but here is how Royal Bank of Canada’s balance sheet looked at the end of its last fiscal year.

Royal Bank Balance Sheet: (Updated Q4, 2017) The composition of assets is as follows: 45% are loans (of which 71% are categorized as retail and 29% as wholesale), 18% are assets purchased under reverse repurchase agreements and securities borrowed (short term investments), 18% are securities (58% of which are held for trading and 42% are held for investment, 8% derivatives (which appear to be mainly for risk management purposes), 4% “other” – which is mostly financial receivables and 5% cash and deposits with other banks, and just 1% goodwill.

Liabilities consist of 65% deposits (of which 33% are personal, 64% are business and government and 3% are from other banks), 8% derivatives, 12% obligations for assets sold under repurchase agreements (essentially short-term borrowing), 2.5% obligations related to securities sold short, 4% “other” – which is mostly financial payables of various kinds, 5% common equity, 1% subordinated debt and 0.5% preferred shares. In general the balance sheet shows some complexity in that loans are only 45% of assets. Common equity at about 5% is very highly leveraged which is typical of banks.

#29 Forever owned by the Big 6 on 09.20.18 at 5:42 pm

Maybe none of the big 6 banks will ever fail.

But there are a lot of banks outside of the big 6 that have a lot of bodies buried.

And no regulatory authorities, including the OSFI who consistently fail at doing their job and enforcing anything in Canada, have any idea what is going on inside of these institutions and must trust what they are told.

It is a unspoken constitutional right to have the curtain remained closed when doing business in Canada.

#30 Tony on 09.20.18 at 5:45 pm

You can always write-off the capital loss but the Credit unions in British Columbia will be the first ones to vanish. Whether or not the people with money on deposit will get lucky and insurance will cover them is another story. Why would anyone buy bail-in bonds when they can buy Israel bonds? They also pay a higher return and in theory Israel is safer than money in Canada.

#31 Shawn Allen on 09.20.18 at 5:46 pm

I agree Royal Bank is extremely unlikely to ever need to use the Bail In

At the risk of incurring wrath, I would point out that deposits form no part of the assets but rather deposits fund a large part of the assets (deposits fund 65% of the assets in the case of royal Bank). The assets are loans, repurchase agreements that are loans in substance, securities, and a bit of derivatives and 5% “cash” which is likely mostly deposits at the central bank.

In the unlikely event of big loan defaults not covered by CMHC the bank’s common equity which is thin at 5% could be depleted. Unlikely but not impossible.

I too would be comfortable investing in bail-in bonds if I were in the market for bonds.

#32 Doug t on 09.20.18 at 5:46 pm

NEVER say never

#33 ozfalls on 09.20.18 at 5:51 pm

Timmmmmmmmmmmberrrrrrrrrrrrrr!

Aussie housing market the first to fall in the global RE supercycle. Look out below, we’re next off the cliff.

https://www.youtube.com/watch?v=smPR0s2W-Ck

#34 Tony on 09.20.18 at 5:51 pm

Re: #6 Russ on 09.20.18 at 4:03 pm

You just buy 10 year Israel bonds and then wait for the worldwide financial system to implode and make a huge capital gain when negative interest rates become commonplace in every country around the world.

#35 Drill Baby Drill on 09.20.18 at 5:52 pm

#30 Tony
Israel also has nukes.

#36 Shawn Allen on 09.20.18 at 5:56 pm

Banking is A Funny and Confidence Business

Bank health depends on borrowers being able to pay interest and principle as due monthly.

And the ability of many borrowers to make those payments would crumble if the banks turned off the taps to new loans.

It all seems to work great but it is a finely tuned system. The system probably has to be kept in motion running at all times.

Any massive lack of confidence in the system would be a disaster. Garth alludes to this when he says bank deposits could flee. Indeed they could although basically they can probably only flee to other banks. Never ever will we see a bank run involving people taking out paper cash. Home Capital’s high interest savings accounts deposits went out probably nearly 100% to other banks.

Luckily most people have great confidence in the banking system. Only a tiny percentage of people lack confidence in the banks.

Stan, if you have any cash “money” do you trust it to a bank?

#37 Jungle on 09.20.18 at 5:58 pm

Environics wealthscapes reports an update on the financial health of Canadians across the country. Very positive and supports why the housing market is not crashing in the GTA, dispite higher interest rates, B20, and unfair housing plan. Heres some highlights:

Toronto avg networth: 1.2M.. (household)

Ontario (household)

Average income: 103k (wow!)
Average Debt 161K (low!)
Liquid asset& pension plans 492K (wow $$)
RE $641K (not bad)

https://environicsanalytics.com/en-ca/resources/news/2018/09/17/canadians-are-starting-to-feel-the-sting-of-rising-interest-rates

But wait..interest on debt went up $932 last year, yet average wage growth of about 3% on 103k household income gives $3090..

NO PROBLEM HERE!!!

#38 Shawn Allen on 09.20.18 at 6:01 pm

#7 Catalyst on 09.20.18 at 4:12 pm asked:

How exactly does this help the banks raise cash in a liquidity crunch?

************************
You are right, the bail in does not provide cash.

The bail-in would add to the banks common equity. Royal Bank has only a bout 5% actual common equity. (More like 9% on a risk weighted basis) but on a straight balance sheet basis its about 5%.

In the very unlikely event of big loan loses the bank’s common equity could drop too low. The bail-in turns some liabilities into equity rebuilding equity.

#39 Economic Genius Steve Keen says 2020 Recession for US on 09.20.18 at 6:04 pm

468 days away from 2020.

How the Next Downturn Will Surprise Us

In their campaign to contain the risks that caused the Great Recession, central bankers may have planted the seeds for the next global economic crisis.

#40 Proud Dreg on 09.20.18 at 6:06 pm

So much for no bail in. What I think will be the real shock to the people of the world is when they collectively find out all at the same time that banking is a scam bigger than global warming what with banks able to create money out of nothing and charge interest on the new freshly digitized money. Hence RBC making a billion a month.

The outrage will be beyond biblical.

#41 Blacksheep on 09.20.18 at 6:06 pm

Stan # 12,

“Remind me here: Why do we need banks in first place if they bear no risk for their actions?”

“Peer to peer lending platform with strict lending rules will do the same job with much less expenses.”
———————————————–
How will new $’s be created if it came down to only you, lending me $, to by my next house?

Central banks “officially” target inflation of 2-3%, but most know it higher by design, as it of course needs to be. How else will debts be reduced proportionally in relation to asset values.

Surely know one actually believes someone’s going to “pay off” that million $ mortgage?

For the economy to expand, new $’s must be created.

This is why not owning an asset that appreciates (via inflation) over the long term is a losing plan.

Where’s Shawn when you need him…

#42 Shawn Allen on 09.20.18 at 6:09 pm

What is Royal Bank?

Here is a fairly concise but still complex description:

Royal Bank of Canada is the country’s largest bank with assets of $1.2 trillion, 1376 bank branches and 78,210 employees.

Earnings by segment are 48% from personal and commercial banking (in Canada, the U.S. and the Caribbean) , 20% from capital markets (includes equity and debt origination and distribution, and structuring and trading), 17% from wealth management (mainly Canada, the U.S., the U.K, the channel islands and Asia), 9% from insurance (In Canada and reinsurance outside Canada), and 5% from investor and treasury service.

Assets are allocated 35% and equity 31% to personal and commercial banking, Wealth management allocation of assets is 7% and equity 21%, just 1% of assets in insurance (which seems too low) and 3% of equity, 12% of assets in investor and treasury services (which includes acting as custodian for many external mutual funds) and 55% of equity, 42% of assets in capital markets (which seems very high) and 29% of equity and 3% of assets in corporate services but 12% of equity.

The return on equity for personal and commercial banking is reported at a stunningly profitable 28% and was similar in the prior two years (The high ROE is presumably due to massive leverage on CMHC mortgages), 13% ROE for wealth management, 42% ROE for insurance (which seems extraordinarily high but might be explained by selling high margin insurance like life insurance on mortgages and by reinsurance which will likely occasionally have losses, 23% for investor and treasury services, and 13% ROE in capital markets.

Canada accounts for 61% of revenue, The U.S. accounts for 23% of revenue, International (37 countries) accounts for 17% of revenue. 58% of revenue is from non-interest income (investment management fees, account service charges, foreign exchange fees and card fees, insurance, underwriting and trading) and 42% from net interest income. The average net interest margin on earning assets is only 1.72%.

There is $5.5 trillion in assets under administration (Which mainly consists of assets in external mutual funds that they act as custodian for but also includes securitised mortgages and credit card receivables) but only $ 0.6 trillion in assets under management.

Overall, this bank has a heavy focus on personal banking.

#43 Jungle on 09.20.18 at 6:13 pm

If a b lender fails, (think HCG) their assets can be sold, because they are still reasonably good quality.

Unlike the NINJA loans they had in the states, those were in the ” junk” category credit risk. Meaning high chance of default, and you don’t get your money back.

#44 We Saw the Early Notices Warning about Big Jumps in Assessed BC Values on 09.20.18 at 6:13 pm

Christy signed off on this as part of the media strategy to pump the real estate agenda.

Now we can’t help but think: will BC Assessment be sending out warning letters about the 23% drop in price in lower mainland house values this year, which will come as a shock to most?

My money is on the cover-up to paper over any loss and fraudulently keep assessed values flat to ensure the tax collection stays fat.

The true letter should say: warning, we screwed up assessing values based on unknown money sources and major fraud at all levels in BC. We are sorry you overpaid and trusted regulators to protect the validity of housing. Your house is no longer worth anything near we originally thought it was a few years back. Sorry for the inconvenience and make sure to pay your taxes on time. Thank you.

#45 Lost....but not leased on 09.20.18 at 6:14 pm

#26

Senator Larry Campbell was rewarded his Senate position as a a reward by Fed Liberals for greasing the skids for Canada Line extension.

Re RiverRock casino etc….funny how (2) ex Queens Cowboys aka RCMP(Campbell and Peter German) are knee deep in controversy…whole issue needs a major investigative enema.

#46 Jungle on 09.20.18 at 6:19 pm

Credit unions run on a “not for profit ” business model, depending largely from deposits form customers in the community they serve.

They are less leveraged than chartered banks. They don’t have size and profits to take big risk.

#47 Bill Blair, federal minister of border security and organized crime reduction on 09.20.18 at 6:23 pm

Prime Minister Justin Trudeau has tasked newly appointed minister Bill Blair with curbing money laundering in British Columbia and other provinces as part of the federal government’s fight against organized crime.

“We know that the same people who arranged for money to be laundered in casinos were buying real estate.”

We do?

Looking forward to the amount being tallied up for the report on dirty BC real estate.

#48 Mike Martins on 09.20.18 at 6:25 pm

Buy Australia house.

#49 jess on 09.20.18 at 6:25 pm

Cyprus – tax haven risk
———————-

…”Thanks to a gigantic money-laundering news story, which this week brought down the head of Danske bank, we can get a sense of just how much money has been pouring out of the former Soviet Union, including cash belonging to the Kremlin elite. And it has all been happening because Britain has refused to help stop it.

The sheer volume of the cash that passed through Danske Bank’s Estonian subsidiary – €200bn – in the eight years to 2015 is overwhelming, but that is just a fraction of the sum that left the ex-USSR and headed west. Investigators estimate the deposits in Danske Bank may have been just 5% of the total held in “non-resident” accounts in the Baltic states. If the money flows in other banks were in proportion to those at Danske, as much as €4tr could have transited the three small republics – sufficient to pay off the British national debt, buy Apple, and stage the Olympics and the World Cup, with enough left over to make you the richest person alive.

Lying in corporate documents is illegal, but enforcement is nonexistent

Danske bank has been rightly lambasted for its lax checks on the provenance of the money in so-called “non-resident” accounts, and may face costly legal action from the United States, but Britain needs to look at its role too. Without us, the ex-Soviet owners of this dark money would have found it far harder to hide.
Business Today: sign up for a morning shot of financial news
Read more

The owners of these suspicious accounts repeatedly obscured their identity behind Limited Liability Partnerships (LLPs), a British corporate structure created two decades ago. A whistleblower who exposed what was happening in Estonia wrote to bank management in 2013

https://www.theguardian.com/commentisfree/2018/sep/20/britain-putin-dark-money-impunity-danske-bank

——————————————————-
Rich investors granted Canadian residency despite suspicions of fake documents and dubious assets

“‘Really shocked me’

But even as dodgy candidates were flagged, immigration officers say they felt pressure to overlook many applications with apparent shortcomings.

One former bureaucrat recalled rejecting a candidate on suspicions their assets were corruptly obtained. His boss instructed him to be more lenient next time because corruption existed in Quebec too.”

https://www.cbc.ca/news/canada/quebec-immigrant-investor-program-civil-servants-1.4830231

#50 Danny on 09.20.18 at 6:32 pm

Talk about failing.
Seems there will be more developments approved on paper with Municipalities with or without cranes up are planning to fail.
Why not!
Condo prices keep going up. So give back deposits to those who trusted the developers with their money.
Come back later under other sheep clothes and sell again at a much higher price.
Tridel latest new tower in Etobicoke ( at least 3 already under construction )…prices are at highest ever.
$600,000 for 800 square feet
$860,000 for 1,100 square feet.

If you were a developer…..why would you not declare bankruptcy or some other false fact and quit development…to come back.

See this is what “bankruptcy Trump”…..taught money lovers like him.

#51 mogulrider on 09.20.18 at 6:45 pm

#37 SAYS

Ontario (household)

Average income: 103k (wow!)
Average Debt 161K (low!)
Liquid asset& pension plans 492K (wow $$)
RE $641K (not bad)

So if 40-60% of Canadians are involved in real estate (Yeah i’d say its that high. drive through any Tims and watch the cars and trucks with real estate – type signs and one gets the sense that far more people are “in” than those who are “out” of real estate.

What about the explosion in government salaries from quadrupling of property taxes this decade,

What happens when the revenue from this pigfest disappears as assessments plummet and tax revenue from it dissolves.

Does government still pay the secretary a 100K including pension, MERC’s, salary, etc

Or do they layoff 30% of the public sector as rating agencies rip their ratings apart? Further servicing their trillions in sovereign explodes with 8% interest rates??

#52 Out Of Work CEO, Will Travel on 09.20.18 at 6:50 pm

Look for a 19th century Charles Dickens like story of meager and niggardly returns from the bowels of the tightest banking firm in the Dominion..nice girls don’t bet.

#53 Lost...but not leased on 09.20.18 at 7:17 pm

BANKS= Too Big To Fail???

No brainer….

Most G 7 or Western Countries don’t want another Depression ala 1920’s…..which BTW was purposely created by Banks and Stock Markets. (ALL WARS ARE BANKERS WARS).

We simply MOOOOOVE the “Fractional Reserve” decimal point a few M-O-R-E points to the right and keep the banks liquid, if not on perma -profit. (Nobody talks about junk bonds, derivatives etc. anymore hmmmmm).

Remember..Gov’ts allowed Banks to loan out money to literally anyone with a pulse, then cover banks @ss with those nasty rules…… OSFI, B20 , Stress Tests etc..

How this trickles down to Joe and Jane Q. Public is anyones’ guess …..as for the banks to NOT fail = someone else has to lose…that’s a given.

As a wise person once said..Banks only lend out umbrellas when the sun shines.

#54 Triplenet on 09.20.18 at 7:22 pm

Garth,
Perhaps one day “bank supply management” in Canada will go the way of the dodo bird as in dairy and poultry supply management.
Not to mention airlines, insurance, medical services etc.
Now we would be talking true global trade.
…..except in Canada eh.
However we all do enjoy the protected returns – especially the American profits of our Canadian banks.
Surely Lighthizer et al have got all that in their sights.
Profit is in protectionism.
…..the Canadian way.
And the EU, Britain, USA, China
and the rest of the protectionist world.
….not including oil. I guess.

#55 Nonplused on 09.20.18 at 7:28 pm

I don’t see any of the major banks failing unless there is a prolonged period of deflation, which we haven’t seen since the 30’s. Sure 2008 saw some pretty major corrections and wiped out a lot of paper equity, but it wasn’t something printing up a few hundred trillion couldn’t fix. As long as there is ink in the printer there will be no long term deflation.

Also, Canadian banks are in a pretty good position, even in the case of a large housing correction. They are pretty careful to keep the uninsured lending below 80% of the appraised value so they wouldn’t even start losing money until prices drop that far. Plus many of the mortgages are insured. I’d be more concerned about their commercial portfolios. But most big corporations don’t just “take out a mortgage”, they sell bonds. Even the little real estate company I used to own shares in did this. One of their major lenders was a pension fund, not a bank. They had bank loans too, but that was from a period where they weren’t big enough yet to attract funds.

#44, a rise or drop in the appraised value of a house does not change the annual income taxes. The have a fudge factor called the “mill rate” which is adjusted to ensure the desired tax rate is achieved. The whole appraisal process is designed to achieve a “fair” relative tax rate, so that a house appraised at $1,000,000 pays say 10 times more than a house appraised at $100,000. But if the city needs $110,000 in revenue they just set the mill rate at 10%. (I don’t think any cities charge 10%, 4% is probably more like it, but I’m using simple numbers so people don’t have to crack out the calculator.)

I’m not even sure this whole appraisal thing can be called “fair”. Why should a person with a $1,000,000 house pay 10 times as much as a person with a $100,000 house? Do they use the roads 10 times more? Do they have 10 times as many kids in school? Do they flush the toilet 10 times as often? If they use 10 times more electricity or water that’s metered so they pay for it already. But this is how “fairness” is understood in our society; “make the rich pay more”. Everyone keeps talking about socialism but the fact is we already have it. The “rich” pay 80% of the taxes. The only part of socialism we don’t have is where the government gives money to the “poor”. Oh wait, the do, it’s called welfare or EI. Our country is very socialist already we just don’t like to see it that way.

Property taxes should be seen for what they are, a form of wealth tax. They are an outright tax on for what people is their largest capital asset, their house. You’ve got to keep paying that 4% whether you have an income or not. But they are partially avoidable, you can always buy a smaller house.

The insidious thing about property taxes when viewed as a wealth tax is that you have to pay on the whole appraised value of the house even if you have a mortgage and don’t own the whole house. The counter argument is of course whether you own it outright or not you still use the same city services. But that argument runs counter to the idea that houses should be taxed on appraised value. But I guess they’ve got to do it somehow. If they used a flat tax of say $4,000 per house it would be more of a “pole tax” and that isn’t very socialist. In a socialist society the tax burden is placed disproportionately on the rich. That is what we do in Canada, and it runs through everything from the income tax code to property taxes to capital gains to the HST. If you’ve got money, you pay not only more taxes, but at a higher rate. If you’ve got no money they leave you alone.

But in the end of the day we all pay the taxes, because they must be added into the price charged for goods and services. Turdeau can raise the taxes on doctors all he likes, the doctors will just charge more. Since a large part of what doctors get paid is paid by the government, they will just have to raise taxes on everyone else. They get nowhere. But this is how socialism works.

Ever wonder why the shop rate when you get your clunker fixed is $140 an hour but the mechanic only gets paid $30 and hour? Some of it is the building and tools for sure. Let’s add another $30 an hour for that. There is power, heat, water and sewer too. Let’s add $10 an hour for those. So why is it that it costs $140 an hour instead of $70? Taxes. So it doesn’t matter that you only make the new minimum wage of $14 an hour and drive a clunker, because of the way our economic system concentrates taxes in certain locations you still pay 50% tax. You just give the money to Canadian Tire first and then the government hits them with the bill.

So remember all you socialists out there, when the government raises taxes on the rich, they raise taxes on everybody, even if you don’t have to send it to them directly. Prices for everything have to rise. The taxes must be paid from the price paid. There is nowhere else for the money to come from.

#56 ANON on 09.20.18 at 7:30 pm

No bank will fail.

These aren’t the droids we are looking for. Move along, move along!

#57 Lost...but not leased on 09.20.18 at 7:31 pm

Here’s a beaut !!!

Vancouver City Council has rezoned 99% of SFH properties in Vancouver to Duplex.

There are 67,000 SFH lots comprising of 52% of COV land area.

Civic elections are one month (Oct. 20 th) away, the ruling VISION party has many elected on Council NOT running this time, including Mayor Gregor Robertson.

Typical cowardly class warfare socialist move….VISION is NDP grooming school….agenda exposed !!!

This will NOT increase affordability, what a joke..it will simply enrich City Tax coffers via “higher and best use” designation.

Also note that Duplex and higher density = Strata rules apply, at least in BC aka your yards are common area.

Those with new houses are in a bit of a bind???..as they will pay higher taxes even though they can’t afford to construct new building (unless they are permitted a conversion of the existing one).

#58 Honey Dripper on 09.20.18 at 7:40 pm

What about the common shares? It’s all I own. I will eagerly await the returns on these new shiny objects. Tks

#59 MF on 09.20.18 at 7:47 pm

#40 Proud Dreg on 09.20.18 at 6:06 pm

Would it though?

Lots of people making money and using banks are happy the way they are.

So I don’t see any outrage at all.

You have employees, depositors, investors, home buyers, business owners, shareholders and so on.

Banks are in the game to make money, that’s how capitalism functions. Our banks are pretty damn stable compared to the others. That’s why I don’t think anyone is upset at how banks make money, other than a few on this forum.

MF

#60 Yanniel on 09.20.18 at 7:53 pm

“The bail-in power will not apply to existing instruments…”

So, will it apply to “future instruments”? Examples please. Thanks.

I gave it. – Garth

#61 SmokeRobinson on 09.20.18 at 8:10 pm

#20 Stan Brooks

What ‘storm’ exactly is it with your critical thinking that you think is coming??

It has been outlined day after day on this blog and the comments that being prudently invested is a great long term strategy.

The comment section on this blog thinks real-estate will crash. What planet are you on? Its all psychology. People have gotten used to house that cost 5 hundred, 6 hundred, 7 hundred k and more. They are OK with it.

There is no ‘storm’ coming. Sure there might be a few years of slower growth, and sure RE might stabilize or even drop a few percent but there is no storm on the horizon in any of these areas (stocks, RE).

You doomsayers wandering around saying the bubble is going to pop have been saying that for more than a decade. How much opportunity have you missed?

Have you ever tried looking through a lens of possibility instead of negativity? Its awesome.

:)

#62 westsider on 09.20.18 at 8:31 pm

https://www.youtube.com/watch?v=smPR0s2W-Ck
It can’t happen here???? Oh yea!!!!!

#63 Fish on 09.20.18 at 8:36 pm

DELETED

#64 ozfalls on 09.20.18 at 8:37 pm

60 SmokeRobinson on 09.20.18 at 8:10 pm

you must have missed my earlier post. bricks and slaughter has already arrived in Australia.

we are no different.

#65 John on 09.20.18 at 8:41 pm

So, RBC is too big to fail. So why buy a product which bails them out using your dough when they fail? Meaning, they’re not too big to fail? Welcome to new speak. Wait until they bundle this treat with other stuff. Stash a little in this ETF and that little ETF. Hey, it’s Canada. It’ll make a good wrapper for the reefer madness; its all in the smoke and mirrors… geeeshhh, eh!

#66 PBrasseur on 09.20.18 at 9:06 pm

Banks here will not fail because the BoC would print money like crazy to save them.

The currency would take a major hit however so we’d all be poorer.

If you think this is not possible please realize it’s already happening to some extent. Only can get worse.

#67 Tipler on 09.20.18 at 9:16 pm

Hi Garth,

When 2008 happened everyone made sure they were ” to big to fail ” A lot of governments printed money like crazy. All economics models went out the window that year. Rich survived with minor wounds. All vested parties played the theme ” it will be the great recession” . No one knows what would happen if they didn’t get bail outs. Bailouts assured the banks everywhere its ok to get bigger and screw up with little consequences. I think we should have hit the re set button that year but privileged people thought otherwise.

#68 WUL on 09.20.18 at 9:24 pm

Success on Canada’s part in the NAFTA negotiations is a certainty. I know what the strategy is and Trump’s negotiation team will cave and concede.

Chrystia Freeland is a highly educated and capable person. Unfortunately, she was handed an unfortunate voice. Absolutely painful to listen to. Grating. I was listening to an interview with her on CBC a couple of months ago and had to turn it off after a couple of minutes. Not her fault.

So, keep the negotiations going and going. Assured victory.

#69 akashic record on 09.20.18 at 9:28 pm

The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock. Wow.

https://www.torys.com/insights/publications/2018/05/final-bail-in-regulations-and-related-guidelines-published

#70 Adele on 09.20.18 at 9:32 pm

Some financial institutions richly deserve to fail.

Since Garth is eagerly awaiting my retirement, I subscribe to daily updates from a couple of retirement planning websites. In one of today’s offering a supposed commentator was commenting on a survey of retired Canadians attitudes toward downsizing RE assets. Apparently you are wary of the financial, family and social costs of such a risky strategy.

What the commentator didn’t comment on wa that the study was commissioned by Home Equity Bank. Yep, the same people who want you to stay in your home and trade half of your equity for something that they probably aren’t allowed to call an annuity.

The survey company seems to delivered exactly what they were paid for.

#71 Stuart on 09.20.18 at 9:40 pm

During the GFC the Bank of Canada bought at face value the mortgages of the banks something like 100B$ plus from each bank underwater and just kept them on their books on the condition that until the banks were sound they were not allowed to increase their dividends.

What happens is the real estate value can sink so much as to deplete homeowner equity forcing the banks to write off loans if owners stop paying which can be a long process.

Are the banks reserves adequate? Here is an expert.

“Q: What about Canada?

A: One of the potential issues with the Canadian banks is that the risk weights that are given to mortgages are exceptionally low and that’s because there have been no losses in Canada for 25, 30 years. So for example, if you look at the larger Canadian banks, you’ll see that they assume the risk rates are in the single digits — and to get to that number they assume 85 per cent of the mortgages that they have that are not government-guaranteed will produce losses of 20 basis points or less per year.”
https://www.zerohedge.com/news/2018-09-16/big-shorts-steve-eisman-greenspan-will-go-down-history-worst-fed-chairman

Now all the banks have been stress tested and according to the government they should survive. The question is how damaged will the market will penalize them if this happens.
Depends on how long and severe the housing correction lasts.

enjoy reading your good blog.

#72 unknown money sources and major fraud at all levels in BC. on 09.20.18 at 9:47 pm

“The true letter should say: warning, we screwed up assessing values based on unknown money sources and major fraud at all levels in BC. We are sorry you overpaid and trusted regulators to protect the validity of housing. Your house is no longer worth anything near we originally thought it was a few years back. Sorry for the inconvenience and make sure to pay your taxes on time. Thank you.”

The comment from above is the BEST summation of our lovely real estate bubble. Being one of the most expensive parts of Canada to begin with pre-bubble, it must have given these unknown money sources and corruption on all levels in B.C. lots of room to play during its inflation.

It was all a big fat lie sold to its vain, gullible annoyingly pompous denizens. Each time suitcases of money in need of sanitation sloshed into the real estate market they cheered, rather then wondered where all this money was coming from. Death by flattery.

Now that the market has turned, the political capital lies in finding the perpetrators, while during the bubble it was in turning a blind eye.

In the meantime, a generation of aspiring home owners were either consumed by the bubble through enormous mortgages, or continued to rent, while the communities were whored to the highest bidder. Pretty cool

#73 Vampire studies on 09.20.18 at 9:48 pm

27 Sideshow

“Actual deposits are liabilities from the bank’s perspective. Deposits in our fractional reserve abused system are so small as to be not worth mentioning”

Rob – what are “actual deposits”?

#74 Trojan House on 09.20.18 at 9:49 pm

So if banks absolutely won’t fail then why the need for bail-in bonds???

#75 Stick To What You Know on 09.20.18 at 10:02 pm

#137 Linda on 09.19.18 at 3:38 pm

‘Jim’ – all too true about how many Americans are driven to bankruptcy if they or a family member has a serious illness. Add in the fact that declaring bankruptcy DOES NOT wipe out any medical/hospital related debt. The law was amended a number of years ago (under the Bush administration as I recall) to prevent people from being able to wipe out that type of debt by declaring bankruptcy. You might be broke, but you are still liable for any hospital or medical debt you incurred.
____________________________________

Um, no, not a “fact”. See as an example:

http://www.alllaw.com/articles/nolo/bankruptcy/can-file-bankruptcy-eliminate-medical-bills.html

Excerpt:

“In bankruptcy, medical bills are considered general unsecured debts just like your credit cards. This means that medical bills don’t receive priority treatment and can easily be wiped out by filing for bankruptcy.”

#76 Doug in London on 09.20.18 at 10:04 pm

I’m not a dog person but really like that picture, it’s a classic!

#77 DON on 09.20.18 at 10:18 pm

“But wait. What if a 2008 happened again? What if the housing market collapsed and zombie moisters defaulted en masse on their loft mortgages, going to live under bridges or at mom’s? What if equity markets globally crumbled because of a trade war, protectionism, populism defeating globalism and an unprecedented mountain of debt collapsing on consumers and economies? Plus the orange guy”

The first though I had when I read this is Australia and the housing cliff they just fell off. Less nine months and the average loss is approx $200K. A young soon to be bride stated that she and hubby would continue to rent until the market hits bottom and then buy. Google The Guardian Australia housing bubble. No ones really knows where the bottom will be, but they is the expectation that it is significantly lower. And those interest only loans are becoming problematic as interest rates rise in Australia. I watched 60 minutes on Australia and then featured a family over indebted and all were working to pitch in as the rates rise and they can’t keep up with the payments on a million dollar home. The older dad (kids – working age) said he couldn’t enjoy the million dollar home. All he thinks about is the ball and chain house that won’t sell and is now set to increase in payments and decrease in value. Sad to watch…I hope he gets out. The mortgage prison…not my words.

But in Canada we are truly special. Interest rates will NOT rise because we live in the Northern Hemisphere and our government is like way more responsible and caring and would Never let that happen.

Thanks for the premium bank info Garth.

#78 Myra Andrews on 09.20.18 at 10:24 pm

Stats for Greater Vancouver from realtor Paul Boenisch

Sept 20 New 218 Sold 81 TI:13,538
Sept 19 New 227 Sold 99 TI:13,472
Sept 18 New 266 Sold 99 TI:13,418
Sept 17 New 360 Sold 93 TI:13,339

Sept 14 New 143 Sold 85 TI:13,239
Sept 13 New 225 Sold 58 TI:13,240
Sept 12 New 268 Sold 90 TI:13,147
Sept 11 New 325 Sold 77 TI:13,057
Sept 10 New 487 Sold 87 TI:12,916

Sept 7 New 197 Sold 87 TI:12,681
Sept 5-6 New 609 Sold 195 TI: 12,653
Sept 4 New 498 Sold 53 TI:12,439

Inventory at the end of August was 12,510

#79 Nick B on 09.20.18 at 10:32 pm

Couldnt a bank deposit be considered a new instrument if that account was opened after the rules come into play. As a depositor your are lending your money to the bank and have to assume some risk. I don’t think the average person understands how banking and credit creation works. The Canadian banks will be tested one day and I’m glad it will be investors and depositors on the hook and not tax payers. At least that is the goal.

#80 Oft deleted much maligned stock.picker on 09.20.18 at 10:44 pm

More for Kate #152 yesterday…..the US government has access to all you Visa card statements and monitors you for marijuana purchases. It pops up with your profile….so don’t even bother lying if you’ve bought pot with plastic. Trudeau screwed you by not telling you the consequences of his actions. You’re screwed if you have anything to do with pot…..yeah…even the lowly contract jsnitor who sweeps out the office of a business supplying electrical wiring to a pot company is related…..and banned……never take the kids to Disneyland…..what a shame. Thx for voting Liberal potheads…..you’re stuck in a welfare state making crap wages forever. Me ….I like those six month winter’s on Maui….
Soulful…….the Dents on S Kihei Rd over looking the surgery…..sublime.

https://www.narcity.com/us-border-officials-can-see-every-legal-weed-purchase-youve-ever-made-in-certain-provinces

#81 Oft deleted much maligned stock.picker on 09.20.18 at 10:46 pm

That should have read…
” The Denney’s on S Kihei Rd over looking the surf is sublime.

#82 akashic record on 09.20.18 at 11:07 pm

#73 Trojan House on 09.20.18 at 9:49 pm

So if banks absolutely won’t fail then why the need for bail-in bonds???

Securitization fear into financial products. Sticking them into index funds together with common and preferred bank stocks. The ultimate balanced Canadian banking portfolio.

#83 Ace Goodheart on 09.20.18 at 11:18 pm

Well if you’re afraid of banks failing a person could always just invest in cryptos.

The perfect investment.

Bail in, bail what? What if the exchange fails? Who makes the shareholders and the depositors whole again? Answer: no one. If the exchange fails everyone loses everything. No worries no problem. No shareholders to make whole. No one in their right mind would buy shares in a crypto exchange anyway. What do you do if your exchange fails and you lose everything? Easy. Just invent your own crypto and keeep going. Like owning a money printing press. Choose a cool name for it and it’ll be worth more.

What if your exchange gets hacked? Easy! Again, you just lose everything. Yay. Will the exchange make you whole again? Hell no. The exchange doesn’t even exist in real life. It has no geographical location. Call the police, my cryptos got hacked? Sure, and send them where? Some lanky pimple faced teen’s basement in Illinois who’s spoofing his IP address to look like it’s in the Caribbean? Is he regulated? Well his mom just gave him a curfew. So I guess that’s kind of like regulation.

What if you want to sell your cryptos? Surprise. You can’t. Why? Why would anyone in their right mind who is creating fake money out of thin air on a computer screen and selling it to dummies like you for real cash, allow you to take that cash back again? No you can’t have your money back. You can just watch as the value of the crypto (that you can’t sell) goes up and up as the creators restrict supply and keep selling it to people like you.

It’s perfect. No security whatsoever and completely illiquid. The ideal investment.

#84 DON on 09.20.18 at 11:21 pm

#33 ozfalls on 09.20.18 at 5:51 pm

Timmmmmmmmmmmberrrrrrrrrrrrrr!

Aussie housing market the first to fall in the global RE supercycle. Look out below, we’re next off the cliff.

https://www.youtube.com/watch?v=smPR0s2W-Ck
******************

opening words…loose up to 45% of house value 2/5ths in less than a year. This is actually quite surreal to watch…after what the World had already experienced via Ireland, Spain, US etc. They are also saying this will tank the economy.

#85 Wrk.dover on 09.20.18 at 11:26 pm

And legal dope will make this situation worse how?

It all ready seems to be fried people/policy in control.

#86 Oft deleted much maligned stock picker on 09.21.18 at 12:01 am

OK, what I was telling my people three months ago is finally making it into the media. I think the numbers are fudged and subject to a downward revision, but even so…the idea that Canadian GDP will be cut by a third under Trudeaus final attack on Canada mean very bad things for your portfolio….including bonds, because they fall when the dollar falls. The only way Moroneau can ride to the rescue is to do what Turkey and Argentina have done…..double digit rate hikes and devalue the paper.

https://business.financialpost.com/news/economy/potential-nafta-collapse-poses-major-risk-to-canada-group-warns

The NAFTA collapse will exacerbate the slide but not be the only issue to cause Canada to slide into recession, possibly by Xmas, definatley Q1 ’20. With the continued failure of government a cascading effect will likely drag 10% off the TSX by December.

The fall is already happening , many companies are selling up in Canada and taking the loss, meaning they’ll never coming back. AltaGas is a recent example, SME o/g in the hundreds going south… Thompson Reuters, Agrium, Trinidad Drilling…..small medium and large disappearing under Trud the Conquerer…start counting the Canadian jobs going south every day…..it’s ugly. CBC says new pot jobs are going to disrupt……yeah…..riiiiiighhhhttttt . Don’t ring the cash drawer at Royal Bank, they’re a majority US centric bank now reporting in USD….ergo US jobs, Canadian lay offs.

Kids, this is a good time to play defense…but American cash. Canadian denominated bonds , prefs and cash will be taken down 10% and possibly more as the ” Cascade Effect” drags everything into Gropers Grove.

#87 Stan Brooks on 09.21.18 at 12:13 am

#60 SmokeRobinson on 09.20.18 at 8:10 pm
#20 Stan Brooks

What ‘storm’ exactly is it with your critical thinking that you think is coming??

—————————————

Inflation in basic necessities, without ability to compensate fixed incomes and without increases in wages.

Go to the closest grocery store and tell me there is no rampant inflation. It is already here and accelerating.

Grocery store CEOs just told us that inflation is coming, despite increases in prices and product shrinkage that amounted to at least 10-15 % annually inflation for the last 2 years. Do you think they would bother warning you if the expected future price increase is 1.5 %?

There are times when it pays off to be ignorant, there are times when it kills you.

Are you really that dumb or just pretending?

=============================

People have gotten used to house that cost 5 hundred, 6 hundred, 7 hundred k and more. They are OK with it.

There is no ‘storm’ coming. Sure there might be a few years of slower growth, and sure RE might stabilize or even drop a few percent but there is no storm on the horizon in any of these areas (stocks, RE).

You doomsayers wandering around saying the bubble is going to pop have been saying that for more than a decade. How much opportunity have you missed?

It does not matter what people are conditioned to think how much a house is worth, it matter what they can pay for it in real value/money.

As for Canadian real estate, who really cares at this point? It is the biggest bubble ever, the biggest Ponzi scheme in history and will deflate no matter what you think or believe.

As for life being beautiful, tell that to every retiree out there and see what happens. And the real beauty?
You time to (not) retire is coming too.

#88 Dantheman on 09.21.18 at 12:20 am

Hey Garth, have you seen the movie “The Big Short”? If you have let me know if you liked it. :D

#89 Stan Brooks on 09.21.18 at 12:28 am

It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)

As #60 SmokeRobinson on 09.20.18 at 8:10 pm tells us life is good, opportunities are all around, people are rich, real estate is solid and stable, will not drop, there is no inflation, there is plenty of savings, banks are well capitalized and doomsayers are … well, doomed.

So why would you pay more for something that you don’t need? Enlighten me here.

#90 Stan Brooks on 09.21.18 at 12:43 am

#73 Trojan House on 09.20.18 at 9:49 pm
So if banks absolutely won’t fail then why the need for bail-in bonds???

————————————————

That is the question you won’t get answered.
I guess banks have too much money and want to share it with the ‘investors’.

You are going too deep for the intelligence of this audience.

Or maybe they see (real non CPI bull crap) inflation much higher than the projected return of 5-6 %? and decided to make some additional bucks out of that?

#91 FOUR FINGERS WATSON on 09.21.18 at 1:03 am

Would I buy them?

In a heartbeat. No bank will fail.
……………………..

……………and they can pay very nice dividends too. Tax advantaged. I backed up the truck in 2016 when NA was at $44 and paying 5%. It is now at 65. I bought the big six in 09 when everyone was bailing and made out like a bandit. Buy the big six in the dips and hold. You will do very well. I am overweight the big six. No fear.

#92 Ponzius Pilatus on 09.21.18 at 2:43 am

#46 Jungle on 09.20.18 at 6:19 pm
Credit unions run on a “not for profit ” business model, depending largely from deposits form customers in the community they serve.

They are less leveraged than chartered banks. They don’t have size and profits to take big risk.
—————
You gotta be kidden me.
VanCity is the mucho grande of CUs.
They grant mortgages with reckless abandon.

#93 Smoking Man on 09.21.18 at 2:57 am

In Vegas, saw the Trumpster tonight. Getting shit faced with fellow Deplorables. Heaven.

Can’t wait to vote in the mid terms , Yeah , California no id required to vote. Joined a democrat group. Know the enemy. Sun Tuz.

Im even getting a bus ride to the vote with free cocktails after

I love America.

#94 Buy? Curious? on 09.21.18 at 5:47 am

Hey Garth! You’re becoming the Jim Cramer of Canadian finance!

Banks’ Bail-In? Go for it! Do it! Yeah!

#95 funny bone on 09.21.18 at 7:32 am

@ stan brooks

thanks for proving my point….

“Many of the mortgages were already insured and therefore, created no additional risk for the government,” the CBA noted in an email to CBC News. The CMHC estimates that by the time the program is wound up, it will have generated $2.5 billion in profit as those mortgages are paid off, the bankers’ group noted.

Calling the CCPA report “completely baseless,” Department of Finance spokesperson Chisholm Pothier noted that the mortgage program has already generated more than $1.2 billion in net revenues for the CMHC’s coffers.

you are at best an average fear mongering troll with some degree of a high school financial background

#96 Stan Brooks on 09.21.18 at 8:04 am

#94 funny bone on 09.21.18 at 7:32 am
@ stan brooks

thanks for proving my point….

“Many of the mortgages were already insured and therefore, created no additional risk for the government,” the CBA noted in an email to CBC News. The CMHC estimates that by the time the program is wound up, it will have generated $2.5 billion in profit as those mortgages are paid off, the bankers’ group noted.

Calling the CCPA report “completely baseless,” Department of Finance spokesperson Chisholm Pothier noted that the mortgage program has already generated more than $1.2 billion in net revenues for the CMHC’s coffers.

you are at best an average fear mongering troll with some degree of a high school financial background

And you believe that crap sweetie? CBA represents the banks, what do you expect them to say?
Believing them is like believing realtors on the state of real estate in Canada? Always good time to buy, right?

Don’t get me started on CMHC, if their mortgage program was that good and profitable banks would have been doing it/the mortgage insurance themselves.

BTW you just acknowledged that a whole bunch of those mortgages underwritten by ‘the most prudent banks in the world with zero reserve requirements’ was pure crap and had to be rescued by CHMC. Then the government had to amend the mortgage rules – the infamous 0 down, 40 years ultra sub primes in order to make that crap look ‘well performing’ and keep interest at zero robbing savers and retirees while inflation rages up.

The good news is you won’t retire either,
Cheers.

#97 Tater on 09.21.18 at 8:05 am

#37 Jungle on 09.20.18 at 5:58 pm
Environics wealthscapes reports an update on the financial health of Canadians across the country. Very positive and supports why the housing market is not crashing in the GTA, dispite higher interest rates, B20, and unfair housing plan. Heres some highlights:

Toronto avg networth: 1.2M.. (household)

Ontario (household)

Average income: 103k (wow!)
Average Debt 161K (low!)
Liquid asset& pension plans 492K (wow $$)
RE $641K (not bad)

https://environicsanalytics.com/en-ca/resources/news/2018/09/17/canadians-are-starting-to-feel-the-sting-of-rising-interest-rates

But wait..interest on debt went up $932 last year, yet average wage growth of about 3% on 103k household income gives $3090..

NO PROBLEM HERE!!!
—————————————————————
Oh man. You really want to see the median numbers in a distribution that has a massive right tail.

Or put another way, you and 30 friends are in a room and in walks Bill Gates. Now, on average everyone in the room is worth 3bio. How many people in that room would you lend 500mio to?

#98 dharma bum on 09.21.18 at 8:10 am

Unless the yield on these puppies is going to be at least 15%, I wouldn’t touch ’em.

Sounds risky, and probably fully taxable at the marginal rate.

But at 15%? Maybe.

What risk? – Garth

#99 Stone walker on 09.21.18 at 8:18 am

Didn’t everyone that worked at Enron think it would never fail? same as Lehman, Fanny & Freddy? People in Greece and Venezuela probably didn’t think banks would fail either, or their government. Why would the bank be passing this bail-in stuff if they weren’t worried about failing? This is outrageous. A company that charges us to keep our money, gets miss managed by fat cats that collect interest on the money we give them, don’t do any useful work, then when it fails, we have to bail them out? how is that not criminal? oh wait, it is, that’s why Iceland threw a bunch of banksters in jail after ’08, same thing everyone else is doing. No wonder people are piling gold & silver up in there safes right next to their guns. This will be ugly when the banks start to topple. Greece was just the canary in the coal mine, any country with fractional reserve banking is headed the same direction. Only one way this can end, good old fiat currency

The bail-in framework is not the banks’ idea, but rather that of government regulators and central banks to ensure taxpayers are not on the hook if this situation occurs, which it won’t. – Garth

#100 Tater on 09.21.18 at 8:27 am

#88 Stan Brooks on 09.21.18 at 12:28 am
It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)
—————————————————————–

For a guy who pretends to know what he’s talking about you really have no clue. Talk yesterday was that RBC was trying to get these done at +10bps, but market was looking more for the 15-20bps area. So, no, not anywhere near 5 or 6%. Just like inflation isn’t at 8%.

But please, don’t listen to posters asking you to leave. Your idiocy is far too entertaining.

#101 the Jaguar on 09.21.18 at 8:29 am

Garth, isn’t this also a way to reduce other increased capital requirements with the new ifrs 9 thing coming down, i.e. having to retest the mortgage portfolio throughout the life of the mortgage, not just at approval stage, etc? If rates and household debt keep rising (canadians unable to exert any self control on their spending), and house prices continue to tank the math looks like more foreclosures and everyday folk handing back the keys. This seems like a strategy to get the public to contribute to a rainy day fund just when the banks see storm clouds on the horizon.
I love their ingenuity. Seriously. I am proud of them.

#102 mogulrider on 09.21.18 at 8:53 am

I guess my retort to you Garth yesterday was too severe. I accept that.

What I see here is complacency.
Just buy the bankruptcy bonds all is well? The government will bail us investors out?
WOW!

No where to go but up you all say. Personal and government debt are far beyond the capacity to pay back and you are loading on more?

You are agreeing to buy bonds that are worthless in a crisis.

Any sound logic of investing says this is a mug’s game.

#103 Mogulrider on 09.21.18 at 8:58 am

funny boney wrote:
you are at best an average fear mongering troll with some degree of a high school financial background.

So anyone who disagrees with you is a troll?
WOW you must be a Liberal or a social Justice Meathead.
You are the only troll here

Next you will call a differing opinion a fascist conspiracy.
grow up

#104 jess on 09.21.18 at 9:20 am

#4 oh dear on 09.20.18 at 3:49 pm

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.”

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.

Contrary to the idea that bailing out the banks helps the economy, the fact is that the economy today cannot recover without a bank failure.

MARC STEINER: Let me stop you right there, before we go on. Let’s examine that before we have to close. So what do you mean by that? What do you mean, the economy cannot recover without a bank failure? What does that mean?

https://www.nakedcapitalism.com/2018/09/michael-hudson-10-years-since-lehman-brothers-bankruptcy-did-the-economy-really-recover.html

#105 jess on 09.21.18 at 9:32 am

Search Results
Web results
SEC: Citigroup Ran a Secret, Unregistered Stock Exchange for More …
wallstreetonparade.com/2018/…/sec-citigroup-ran-a-secret-unregistered-stock-exchan…

2 days ago – By Pam Martens and Russ Martens: September 19, 2018 ~ Citigroup Was Running the Above Dark Pools and Opaque Trading Venues in 2014 Last Friday, the Securit. … Last Friday, the Securities and Exchange Commission issued a 372-word press release that carried the title SEC Charges Citigroup for …
SEC: Citigroup Ran a Secret, Unregistered Stock Exchange for More ..

=========

professors (price preditors -borg )in their basement forget the millenials!

SEC Charges Citigroup for Dark Pool Misrepresentations
Citigroup and Affiliate Ordered to Pay More Than $12 Million in Disgorgement and Penalties

FOR IMMEDIATE RELEASE
2018-193

Washington D.C., Sept. 14, 2018 —

The Securities and Exchange Commission today entered an order finding that Citigroup Global Markets Inc. misled users of a dark pool operated by one of its affiliates.

The SEC’s order found that Citigroup misled users with assurances that high-frequency traders were not allowed to trade in Citi Match, a premium-priced dark pool operated by Citi Order Routing and Execution (CORE), when two of Citi Match’s most active users reasonably qualified as high-frequency traders and executed more than $9 billion of orders through the pool.

The SEC order also found that Citigroup failed to disclose that over a period of more than two years, close to half of Citi Match orders were routed to and executed in other trading venues, including other dark pools and exchanges, that did not offer the same premium features as Citi Match. Citigroup also sent trade confirmation messages to certain users that indicated their orders had been executed on Citi Match when in fact those orders had been executed on an outside venue.

The SEC also found that CORE failed to register as a national securities exchange in connection with its operation of Citi Match.

#106 Evangeline on 09.21.18 at 9:46 am

Re NAFTA, the Americans have telecommunications and banking on the table as industries they want to send to Canada to compete. Canada’s team is saying those two industries fall under the category of “culture”. The USA sees Canadian banks operating in the USA and thinks that the USA should be able to do the same in Canada.

That the Canadian banking system is part of Canadian culture sort of rings true because Canada takes a lot of pride in its banking system.

Is it possible that a big Canadian bank could fail if American banks are given free rein to open banks in Canada?

#107 Evangeline on 09.21.18 at 10:06 am

“The powers Ottawa has assumed are incredibly broad. Effective this coming Sunday, the government has the legislated authority to take over any of the Big Six, kick out the board of directors, sell off assets or divisions, actually seize control of all the shares, rendering them worthless, or dilute them by converting assets into stock”

Could this bail-in move be preparatory to opening up the Canadian banking system to American competition?

… that the Cdn government feels more secure about more competition in the Cdn banking industry, as long as the government has more power over potential bad outcomes?

#108 jess on 09.21.18 at 10:22 am

What about in canada?

Identity theft is hitting Equifax-hack victims

all credit freezes free in all states
When you put a credit freeze on your account with the three credit bureaus, they can no longer release this report to third parties, and it becomes impossible to open a credit-card account or bank account in your name – impossible for you as well as identity thieves.

After you place credit freezes on your accounts and then want to open a new loan account or open an account with the Social Security administration (yes!), you need to first lift the credit freezes.

All this has now become a lot easier, faster, and as of September 21, free.

#109 Vanrentor on 09.21.18 at 10:27 am

Just another shyster Realturd®

https://www.straight.com/news/1139571/north-vancouver-realtor-faces-disciplinary-action-threatening-another-house-agent

#110 Evangeline on 09.21.18 at 10:27 am

In the big picture…

the right wants a good deal that will generate prosperity … but a deal that makes Canada prosper will likely mean another term for Trudeau.

Meanwhile, the left wants no deal, which will cause the Canadian economy to stagnate, and means Trudeau will be booted out.

#111 Tater on 09.21.18 at 10:42 am

#103 jess on 09.21.18 at 9:20 am
#4 oh dear on 09.20.18 at 3:49 pm

MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.”
—————————————————————-
This is pure nonsense. Banks lend to companies who are looking to expand productive capacity all the time. Whether they do it through loans, credit lines or asset backed facilities, it definitely happens. I’m guessing Hudson has never actually worked for a bank in a lending capacity.

#112 Sideshow Rob on 09.21.18 at 10:59 am

Bank failures are inevitable. Post 2008 nothing was really fixed. All the “too big to fail” banks are now even bigger. Bail ins are in place because the governments don’t want to be on the hook when the inevitable happens. They know whats going on. They helped set it up. Over the last 20 years the global banks have cross invested in each other. This was to strengthen each other so that one failure could be contained. However what they have actually accomplished is a transfer of risk. Now instead of having the risk of an individual bank failure, which is always there, we now have major systemic risk. Basically if any large bank in the world implodes, (Deutsche bank anyone?), instead of the fallout being contained to that bank, those investors and that country, now the risk is nothing less than global banking annihilation. You may disagree but that IS how the system is set up now. Please, please please keep this in mind if you are a bank stock investor. I own bank shares. The growth and dividends are fantastic. But always keep in mind the actual risks out there. My finger is always on the sell trigger if I hear of problems at a major global bank.

#113 TheDood on 09.21.18 at 11:17 am

#60 SmokeRobinson on 09.20.18 at 8:10 pm

What planet are you on? Its all psychology. People have gotten used to house that cost 5 hundred, 6 hundred, 7 hundred k and more. They are OK with it.

There is no ‘storm’ coming………

_____________________________

Good Lord! No point arguing with stupid.

#114 Dissident on 09.21.18 at 11:30 am

Yay, TREB data is out, baby.

Check out all the red dots that indicate – sold below asking.

Happy Friday!

https://public.tableau.com/profile/jacky.choi#!/vizhome/SelectGTARealEstateTrend/SalesBelowPreviousPurchasePriceBPPP

#115 Ponzius Pilatus on 09.21.18 at 11:59 am

#108 Vanrentor on 09.21.18 at 10:27 am
Just another shyster Realturd®

https://www.straight.com/news/1139571/north-vancouver-realtor-faces-disciplinary-action-threatening-another-house-agent
———-
That what happens when the pool gets smaller.
Crocs eating each other.
Only the beginning.
Get the popcorn, sit back and enjoy the show.

#116 Alistair McLaughlin on 09.21.18 at 12:03 pm

It’s funny to see Stan the right winger cite Huffpost, the CBC and the Canadian Centre for Policy Alternatives to explain the alleged bank bailouts. Sorry Stan, but they weren’t bailouts. The mortgages purchased were not “non-performing”, and the government did end up making money on the deal. They floated bonds at 2.5% and purchased mortgages from the banks paying 4% and higher. The banks were reluctant players. A Financial Post article recently explained how much work Flaherty had to do behind the scenes to coax the banks into playing along. Work that started before the crisis even hit.

The Insured Mortgage Purchase Program did exactly what it was supposed to do – improve banks’ liquidity so they could keep lending and avoid a credit freeze. And they did. In the process, they inflated Canada’s housing bubble to epic proportions. So there were very real negative consequences. But “costing the taxpayers” wasn’t one of them.

#117 Shawn Allen on 09.21.18 at 12:07 pm

Understanding Banks

#88 Stan Brooks on 09.21.18 at 12:28 am commented/asked:

It is interesting why a top tier bank would need capital at costs (maybe 5-6 %, maybe more, for sure above the preferred shares return) far above the interest rates on deposits (1%?). Why not just increase deposit rates or cut dividends if they need more capital (and what exactly do they need it for?)

**********************************
Stan those are good questions. And there are good answers. To begin to understand banks requires some accounting knowledge and knowledge about how banks work.

Banks are regulated and require minimum amounts of equity common share owner capital. And a minimum level of Tier 1 capital which includes any preferred share holder capital. And a higher amount of total capital which includes any bond investor capital.

Deposits are not capital at all.

It’s a long story but banks have loan assets of roughly 10 times or higher their total owner capital and roughly 15 times common equity capital. They make about a 1% net profit on loan assets but that turns into about 15% on common equity after considering leverage. Deposits are the most lucrative part of the leverage since they pay an average of roughly say 1% on deposits. Pref shares are a more expensive part of the leverage but are needed in order to be allowed to create / take in more deposits while maximising the leverage on common equity.

So the answers are: Deposits are not capital

And capital (common shares, preferred shares, bonds) are subject to regulatory minimums and must increase as the bank grows.

Cutting the dividend to increase capital works in theory but in practice would panic the markets and the share prices would fall.

The Canadian banks have no problem raising capital.

#118 Ponzius Pilatus on 09.21.18 at 12:08 pm

the bail in power will not apply to existing instruments,
—————–
So my collection of rare guitars is safe, then.

#119 IHCTD9 on 09.21.18 at 12:32 pm

These days, everyone needs to develop their own personal “unified field theory”. You can’t trust any news outlet anymore, totally biased, or totally fake. Politicians can’t be trusted either, especially Canadian ones. While I hope Freeland can cry her way into another trade deal – I just don’t want to waste any of my time trying to figure out how the hell any of what these airheads are doing is any good for anyone.

Thus, I’ve adopted a financial re-purposing of Newtons 3rd law of motion:

“for every government action I don’t like, there will be an equal and opposite reduction of taxes remitted”

So, if Trudeau goes to India and makes an ass of himself again – he’ll get less money. If Freeland blows up the NAFTA deal, I will add to their existing pain in spades. If Canadian tax dollars are given to foreign dictatorships, it’ll have to be a little less next time.

So now, I only need to determine for myself if the action was bad or not, then I can get back to my day (nearly) stress free.

They can find someone else to pay for their brave new world…

#120 For those about to flop... on 09.21.18 at 12:35 pm

Ana on 09.20.18 at 11:19 am
Where’s flop been? I read the blog everyday …the comments many days and haven’t seen flop lately. I enjoy his posts even though I don’t live in bC.

///////////////////////////

That’s nice of you Ana,you probably won’t get much joy out of this post not being in B.C,but here’s my most recent post from my blog and as a small token of thanks I dedicate it to you.

For Ana…

Recent sale report/ realtor assistance needed.

O.k so we have some more condo action, this one perhaps with more serious consequences.

This condo in Vancouver sold 16 days ago.

These guys picked up this place only in June of this year and immediately put it back on, only to struggle and most likely take a loss.

They paid 1.23 and at the time of sale were asking 1.18.

This is one of them ones you wonder what the real story is.

Were they totally oblivious to current conditions and get in over their heads?

They possibly tried to wriggle out of the deal once the numbers dawned on them and upon advice were told just to proceed and they will get their money back.

It does not look good for them and if it was some young person it could take a while for them to recover but something miraculous might have occurred just to keep the illusion that all is well.

Keep carving and carry on…

M44BC

2201 – 867 Hamilton Street, Vancouver, paid 1.23 June 2018 ass.1.00

Asking 1.18

https://www.zolo.ca/vancouver-real-estate/867-hamilton-street/2201

***Flag alert.
I see someone just gave me my Czech Republic flag and so thanks to that person.

I have been to the Czech Republic and enjoyed my time there.

#121 ingo shulz on 09.21.18 at 12:42 pm

We are shorting the Australian and Canadian banks who funded this bubble which is at this point twice the size of ours, united states bubble at the peak:

https://www.youtube.com/watch?v=0lrdxpKPocY

#122 KLNR on 09.21.18 at 12:43 pm

@#109 Evangeline on 09.21.18 at 10:27 am
In the big picture…

the right wants a good deal that will generate prosperity … but a deal that makes Canada prosper will likely mean another term for Trudeau.

Meanwhile, the left wants no deal, which will cause the Canadian economy to stagnate, and means Trudeau will be booted out.
_______________________

LOL its not quite that black and white.

#123 KLNR on 09.21.18 at 12:49 pm

@#102 Mogulrider on 09.21.18 at 8:58 am
funny boney wrote:
you are at best an average fear mongering troll with some degree of a high school financial background.

So anyone who disagrees with you is a troll?
WOW you must be a Liberal or a social Justice Meathead.
You are the only troll here

Next you will call a differing opinion a fascist conspiracy.
grow up
_________________________
LOL, have you actually tried to read stan brooks diatribes?
Funnybone is just calling a spade a spade

#124 jess on 09.21.18 at 12:49 pm

…”I’m guessing Hudson has never actually worked for a bank in a lending capacity?”

http://michael-hudson.com/bibliography-for-dr-michael-hudson/

========================
spaces from space
https://qz.com/india/1396785/drone-photos-capture-the-staggering-inequality-in-mumbai/

#125 IHCTD9 on 09.21.18 at 1:07 pm

#109 Evangeline on 09.21.18 at 10:27 am
In the big picture…

the right wants a good deal that will generate prosperity … but a deal that makes Canada prosper will likely mean another term for Trudeau.

Meanwhile, the left wants no deal, which will cause the Canadian economy to stagnate, and means Trudeau will be booted out.
_____

I used to think that way too, until I realized that Canadian voters were jellyfish who could be coerced over a cliff like Lemmings – just get one to jump and the rest would follow.

Logic is out, stupid is in. Trudeau will go down as the biggest mistake in Canadian Politics ever, but I would not be surprised to see him back in power again – even with a majority.

Even if he presides over the destruction of NAFTA and implementation of Auto Tariffs, all he’d have to do is talk about how the deal was no good for Canada and huge swaths of brain-dead Canadians would understand this as a good thing, and the right decision.

You could have 10% unemployment and a 10% drop in GDP linked directly to the loss of NAFTA, and Canadians would be happy about it.

We’ve got a long ways to go – and that’s why having hard left wing federal majorities is probably the best way to get the quickest voter rethinking which actually has legs. Short term pain for long term gain.

#126 Tater on 09.21.18 at 1:36 pm

#122 jess on 09.21.18 at 12:49 pm
…”I’m guessing Hudson has never actually worked for a bank in a lending capacity?”

http://michael-hudson.com/bibliography-for-dr-michael-hudson/

========================
Shocker, has never lent money working for a bank.

#127 Gravy Train on 09.21.18 at 1:40 pm

#123 IHCTD9 on 09.21.18 at 1:07 pm
“[…] Canadian voters [are] jellyfish who could be coerced over a cliff like [l]emmings[…]” Mixed metaphor? (Neat trick for a jellyfish.) :)

“Logic is out, stupid is in.[…]

“[…] huge swaths of brain-dead Canadians […]

“[…] Canadians would be happy about [a recession caused by Trump’s violation of NAFTA].[…]”

Garth, are Stan Brooks and IHCTD9 the same person? :)

#128 James on 09.21.18 at 1:42 pm

#92 Smoking Man on 09.21.18 at 2:57 am

In Vegas, saw the Trumpster tonight. Getting shit faced with fellow Deplorables. Heaven.
Can’t wait to vote in the mid terms , Yeah , California no id required to vote. Joined a democrat group. Know the enemy. Sun Tuz.
Im even getting a bus ride to the vote with free cocktails after
I love America.
______________________________________
I wouldn’t try it old man!
Is that just the whiskey talking again?
You will require ID, and just to let you know even if you have a California drivers license from the DMV there is a code with your citizenship on it that you do not know about. How do I know? I lived there longer than you. Couldn’t vote in first election and only when I received dual citizenship could I vote. They need to last four digits of your SSN to get registered. That you do not have as a TN-1 plebe.
Good luck when you hit the booth looser.

Read below old man………………………………..
Who Can Vote in California?

To register to vote in California, you must be:

A United States citizen,
A resident of California (which includes a person who was a resident of this state when they were last living within the territorial limits of the U.S. or D.C. or a citizen born outside of the U.S. or D.C., but whose parent or legal guardian was a resident of this state when the parent or legal guardian was last living within the territorial limits of the U.S. or D.C. and he or she has not previously registered to vote in any other state),
18 years of age or older on Election Day,
Not currently imprisoned or on parole for the conviction of a felony (for more information on the rights of people who have been incarcerated, please see the Secretary of State’s Voting Rights for Californians with Criminal Convictions or Detained in Jail or Prison), and
Not currently found to be mentally incompetent by a court of law.

#129 pBrasseur on 09.21.18 at 1:44 pm

@ 105 Evangeline

Re NAFTA, the Americans have telecommunications and banking on the table as industries they want to send to Canada to compete. Canada’s team is saying those two industries fall under the category of “culture”. The USA sees Canadian banks operating in the USA and thinks that the USA should be able to do the same in Canada.

Culture? Yeah right, for example the “culture” of screwing customers by charging the highest fees in the world for mutual funds.

I’ve always thought it was weird that the US allowed access to their markets while tolerating being excluded from many major Canadian industries, banking, insurance, telecom just to name a few. First time I ear this is on the table but if it is (source?) i’m glad, all those cartels are ultimately bad for competitiveness and for the Canadian economy.

#130 young & foolish on 09.21.18 at 1:44 pm

Sooo much gloom & doom today …. again!

But Evangeline brings up a good question: “Is it possible that a big Canadian bank could fail if American banks are given free rein to open banks in Canada?” Maybe not fail, but would the shine come off our banks should a new deal compromise their oligopoly?

‘No bank will fail.’ How is that doomy? As for allowing US banks to open here and compete on an equal footing. Funny. – Garth

#131 NEVER GIVE UP on 09.21.18 at 2:08 pm

David Rosenberg posited today that a US recession would start within 12 months. Where would we find safety in what ETFs in a case like that or is it best to just pull your money out and leave it in cash?

Recessions are routine. Ignore them. – Garth

#132 mike from mtl on 09.21.18 at 2:58 pm

#127 pBrasseur on 09.21.18 at 1:44 pm

Culture? Yeah right, for example the “culture” of screwing customers by charging the highest fees in the world for mutual funds.

/////////////////////////////////////////////////////////////////////

Err, apart from the funds hocked by local insurance corps, all the rest are US companies such as fidelity.

Not that I don’t agree that B(h)ell and scum Rogers should break their stranglehold, getting ATT or Verizon here won’t lead to lower prices that’s for sure. In theory it /should/ but since when does a US corp offer lower prices outside of the US?

ATT has zero footprint in say Mexico, EU elsewhere for the same reasons as here, local monopolistic regs.

#133 Marco on 09.21.18 at 3:04 pm

Comfortable warm life in the anus of USA may come to end. So what. We are Canadians, we love cold.

#134 fancy_pants on 09.21.18 at 3:18 pm

Of course the banks wont fail, the public purse strings have its back. It is nothing less than a monopoly of organized and accepted crime. Free speech and independent thought on the other hand … it’s days are numbered

#135 Shawn Allen on 09.21.18 at 3:32 pm

Meanwhile at Canada’s Largest Company by Revenue…

Forget Royal Bank, Alimentation Couche-Tard is now Canada’s largest company by revenue.

How many Canadians have heard of this company let alone would guess that it was anywhere near the largest company by revenue in Canada?

Their annual meeting was yesterday. Checking Google, I can’t find a single mention that it it is now tops in revenue. I guess that is just too boring of a story. The Globe and Mail did mention it very briefly in the Spring. I guess, yawn.

The journalists on hand instead mention that it might sell Cannabis one day.

With 87% of its sales outside of Canada, and a listing only on the Toronto stock exchange this company “imports” something important to its Canadian share owners – profits. But this goes unnoticed…

#136 jess on 09.21.18 at 3:39 pm

redneck potato: accepting your i owe you

…economists that specialise in the monetary system.

,,,”Professor Hyman Minsky once wrote “Banking is not money lending; to lend, a money lender must have money. The fundamental banking activity is accepting, that is, guaranteeing that some party is creditworthy. A bank, by accepting a debt instrument, agrees to make specified payments if the debtor will not or cannot”.

“Banking is not money lending”? Surely some mistake! Why would an economist as famous as Professor Minsky make such an outrageous sounding statement?…

http://positivemoney.org/2013/06/banks-dont-lend-money-guest-post-by-michael-reiss/

#137 Tater on 09.21.18 at 5:03 pm

#134 jess on 09.21.18 at 3:39 pm
redneck potato: accepting your i owe you

…economists that specialise in the monetary system.

,,,”Professor Hyman Minsky once wrote “Banking is not money lending; to lend, a money lender must have money. The fundamental banking activity is accepting, that is, guaranteeing that some party is creditworthy. A bank, by accepting a debt instrument, agrees to make specified payments if the debtor will not or cannot”.

“Banking is not money lending”? Surely some mistake! Why would an economist as famous as Professor Minsky make such an outrageous sounding statement?…

http://positivemoney.org/2013/06/banks-dont-lend-money-guest-post-by-michael-reiss/
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Minsky is making a very different point than Hudson. Hudson’s contention is that banks provide no loans to companies to enable them to grow. That is obviously false. He asserts that banks are lending only to corporate raiders. And yes, he has worked for banks, but never in a lending capacity, instead as an economist.

Minsky’s point is about the creation of money and more specifically what money is.

And it can be argued that the act of lending itself creates money and the bank doesn’t need to have any deposits to do it. By advancing the loan, the bank creates and asset for themselves (the loan) and a liability as well (the deposit of the funds into the customers account). Sri Thiruvadanthai talks about this a fair amount.

#138 Hamsterwheelie on 09.21.18 at 5:14 pm

Hey – thanks nobody at all, for answering my one and only question lol. Google it is then.

#139 Nick B on 09.21.18 at 6:58 pm

I’m Garth would have said that 2008 couldn’t happen either. Predictions are hard, especially about the future. We got about 6 times the HELOC leverage as compared to our US counterpart before their housing bust. I don’t see any big risks going forward.

#140 franie morre on 09.22.18 at 3:29 am

Gartho

What is going on with ZPR and CPD? Dividend yields seem to be falling even though interest rates are on the up. No capiche.

#141 Remembrancer on 09.22.18 at 9:36 am

#136 Hamsterwheelie on 09.21.18 at 5:14 pm

Yep, it happens – no receiver really wants to hold RE when they can earn interest on your mortgage…

Hey Google: mortgage taken over by another lender

This 2012 Article covers the subject and is still relevant

https://www.theglobeandmail.com/real-estate/mortgages-and-rates/dont-fear-the-small-mortgage-lender/article4462402/