Standard & Poor’s has cut its outlook to “negative” from “stable” on seven major Canadian financial institutions including Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia, attributing the change to soaring consumer debt levels and the increasingly fragile global economy.
h/t LAS
Read the last paragraph – things are well but they might go bad so we down grade. Right. This sounds more like Obamas new executive order stating punishment must be equal among all groups.
“soaring consumer debt levels and the increasingly fragile global economy”
Let me correct that to read “bank exposure to European debt (default)”.
Coming up…bank run.
I suspect that Glengarrian nails it. But of course they would never report it this way and this blunt.
And they singled out Canadian banks? And you believe this? From a Wall Street rating agency whose friends are getting their lunch eaten by the Canadian banks in the retail banking sector?
Interesting.
Say now, S & P didn’t happen to take a peek at Farm Credit Corporation’s stability, did they?
You know – the amount that FCC has lent out on sound investments: milk quota, $11,000 per acre farmland, stuff like that. I think it’s called exposure to domestic debt.
Not that taxpayers – who hold the liability – should be concerned or anything…heck no.
I follow banking news fairly closely as I invest in banks. Mt take on this is that their bottom line will suffer, not that their customers deposits are at risk. Canadian banks have done very well since 2008, and from everything I have seen before this are still doing well. If the economy slows down, so does the banking business. A total collapse of Europe, which is an event I am confident will happen will obviously have an effect on the banking business here. I wouldn’t however worry about my deposits AT THIS TIME.
Canadian banks negative instead of stable? S & P clearly has no clue. Canada barely had a recession and will do well as long as our growing oil exports aren’t disrupted. The only way we’re going down is hari kari.
lunch eaten by the Canadian banks.
cgh-
–
Just finished watching Fox News Business,
Ben Stein is thrilled with his Canadian investments.
Low Business Taxes,
Mineral and Oil Futures,
?Banking and Insurance.
He said:
“We used to laugh at Canada”
those days are over.
–
Now Oblamer is the joke.
Euro debt exposure is the real question – not just for cdn banks but all banks. And it isnt just via direct debt holdings but probably more significantly holdings of entities and debt in companies or countries that directly hold euro debt.
But the companies that is see being in real trouble are the Cdn insurance cos. low interest rates are killing them. And new frs rules are already devasting their product lines and thus long term sales and margins. RBC has already largely abandoned the life business as a result.
Gord, the thing is that S&P singled out Canadian banks. Euro exposure hurts everyone, so it’s not that. It suggests to me that the US banks are feeling heat in the retail banking sector in the US, and their good friends at S&P knee-capped the competition for them.
Hello.
Could my earlier post be freed from the filter, please?
It may be in there twice.
Thank you in advance.
Cgh: cdn banks are just the last to get downgraded. But i think it is plausible that cdn banks are more exposed to euro debt than us banks are.
Cgh: cdn banks are just the last to get downgraded. But i think it is plausible that cdn banks are more exposed to euro debt than us banks are.
Migosh! Canada sends the United Nations minions scurrying away in a huff and then they go and talk to Builderberg (or something) and the next thing we find is Canada is being sent to the cloakroom for being unruly.
I am with cgh @2:53 p.m.Cheers
Robert’s Rating (RR) of Standard & Poor has decreased from RR Ignorant- to RR Bullshit+
Who gives a darn what this corrupt organization thingks?
Obama . . . Garbage in Garbage out.
http://www.businessinsider.com/chart-of-the-day-the-us-garbage-indicator-economy-2012-7#ixzz21kvqeWsP
S&P are becoming like the UN,the Euro/Britzone, and the Zero.Whatever they say,do and believe the exact opposite,and you will be fine.Remember,these clowns make their living off of scaring others,and sucking politicians,especially socialists,into doing stupid things,that pad their wallets,not yours.
If it’s not in your pocket, you don’t own it! – Gerald Celente.
Currency controls are being tightened daily. Yet the sheeple do not see the cliff ahead, even when they are directly warned. Before the banks go under, they will own everything that the government doesn’t already have. The sheeple will be slaves.
Wow a whole lot of whining and whistling. I give you people good info and you just cry about it.
Fact is, Canadians are up their elbows in debt. Excessively low interest rates in Canada have done just what they did in America. A similar outcome is inevitable. Our housing bubble is bursting right now.
Funny coincidence, I have just moved a good chunk of my nest egg money from a Canadian bank in the list to a Canadian bank not in the list…
Not that I believe any Canadian bank is really in any trouble; our economy is one of the least affected by the economic situation around the world.
Harper gets some credit for this.
Now if he could turn off the “money spout” to the CBC…
I agree with cgh. Never trust anyone’s judgement, unless your analysis reaches the same conclusion. Particularly credit rating agencies; it’s a rigged game.
LAS — 9:46 p.m.:
No whining or whistling here — the downgrade and the information surrounding it need to be reported and internalized (kudos for helping us all with that).
The part I have been wondering about is the (I think) $600 billion CAD insured by CMHC — an amount larger than the federal government’s “debt”, which I take to mean outstanding GOC bonds, less net working capital position (basically). How does any write-up or write-down (marking to market, say, and on what schedule) of the CMHC amount get reported in the Public Accounts, and by extension and more importantly, what’s the mechanism for burden-sharing in the event of default (beyond the obvious end result of a taxpayer bail-out)? Beyond that, what is CMHC’s total insurable limit?
These would be good questions, IMO, for any self-respecting Conservative bankbencher to take on now, without letting Messrs. Mulcair, Rae, Goodale, Brison, etc. get a jump on the issue.
Can someone explain to me what a run on banks means …or a run on currency means please?
Paul in Calgary at July 29, 2012 12:32 AM
A bank run is when all the depositors line up at the doors of their bank branches before opening time and all of them withdraw everything they have in their accounts, in cash or until the bank runs out of cash and then again the next day and so on until the bank becomes totally insolvent.
Not to worry, the folding cash will be worthless before the banks become insolvent.
(;^D
Hello Kate?
Could my earlier post(around 6 PM on the 28th) be freed from the filter, please?
It may be in there twice.
A run on a bank means most people lose faith in the bank and want to withdraw their money right now. The problem is banks have a tiny percentage of their assets in cash. If the bank can convince everyone it’s solvent, I assume it could borrow necessary funds from the Bank of Canada. Runs are less likely today because $100,000 is insured for each depositer.
LAS @ 9:46;
A lot of Canadians seem to be living in a fool’s paradise when it comes to debt levels. Canada is in no better shape than the USA IMO. Not only is all level of government debt predicated on GDP growth rates that are unattainable but individual and business debt is addicted to abnormally low interest rates.
When the crunch comes as it must Canada’s cash cow, commodities, will dry up. We can then rely on those stalwart politicans like Clark and Redfern to bail us out! PMSH is the only ace we have!
ct: “PMSH is the only ace we have!”
Maybe but thank God for that. Harper is the only decent and capable Western leader of the bunch. Canada may get pounded on at the Olympics but we’re going to have a good chance at gold in the financial gymnastics event – we’ll have to nail the soft landing off the bottom of the uneven markets to win.
Firstly, S&P downgrade equals buying opportunity. The Canadian banks are in better shape than anything else on offer out there.
Second, yes, obviously the S&P downgrade is BS, because Canadian banks are in better shape than anything else out there. The markets are rigged, anyone who thinks they aren’t hasn’t been paying any attention.
Third, LAS is 100% right, the Canadian banks are sitting on top of a huge real estate bubble, and anybody out there thinking of buying right now should be aware that their purchase is not going to go on appreciating in value forever.
A not-very-nice row-house in Toronto that bought for an obscenely over-priced $500K ten years ago, sold for an insane ~$750 three years ago, and is now valued at ~$900. Same house with no upgrades, neighborhood considerably less salubrious than it was ten years ago.
Tell me how the bank is going to recoup that when the next owner finally cracks under the strain of making the monthly minimum on a million bucks for a house that is actually worth maybe $300.
Multiply that by every single house in Toronto and Vancouver, and most of Montreal. That’s a big lump of fail for Canada to swallow, if it pops too quick.
And the Canadian banks really are in better shape than anything else out there. Are we concerned yet?
The 100,000$ deposit insurance is a double edged sword. Yes, it is reassuring that a nest egg won’t be wiped out in a bank failure but it is the friggin’ taxpayers on the hook for the money.
What is burning a blister on my ass is how the banks keep shovelling money out the door for real estate loans that they know can’t/won’t be repaid and because CMHC has “guaranteed” those loans the banks are off the hook for the loss and that loss is piled onto the taxpayers back.
As a taxpayer I feel the banks should be held a helluva lot more responsible for making easy credit available…but why should they?…the poor sap with a pay cheque will pick up the loss tab so the bankster party continues.
BTW…the smell of the LIBOR scandal is wafting in the wind also…
Thank you DS. I’m not sure what the exact CMHC mechanism is, but I know how it end: you and I are on the hook. The CMHC can go bankrupt, but Harper WILL bail it out no questions asked. Oh yeah that stalwart idiot Harper increased the CMHC’s purchase limit a few years ago, so the bailout will be even bigger.
An analysis group called Capital Economics came out with a report recently forecasting a 25% drop in Canadian home prices. Vancouver’s sales are plummeting. It’s happening right now.
Phantom. Yes, we’re on the leading edge of one of the greatest financial corrections ever. Demographics are causing it (1st boomers turn 65 this year) and spendthrift individuals and politicians will make it evern worse. If depression type deflation were to happen then never mind, we’re all in the food line together.
Interest rate rises (inevitable folks, the Q is by how much) will trigger real estate declines. Banks stockholders will get hit too, plus the poor bastards invested in bonds.
But life goes on so what should we do?
IMO the trick will be to, while clearing debt, seek value in real and high quality assets, rather than questionable gold/silver speculation and high cost deworsification. Doing nothing or selling is usually a bad decision too.
Of course fixed income and deposit assets might start to look better and there may be perfect storm where on a 10 yr basis they outperform quality investments, but that will be tricky.
Canada is the only decent investment market with much of, but not all, its risks priced into the market already.
Anyone who took PMSH’s advice in the election before last and bought, for example some bank stocks (yes they have additional loan risk, but a birdie tells me BMO is in the best shape here – and charging obscene credit card interest helps them all), would be up around 50% by now.
Prudent risk taken to exploit true opportunity is the way to make money, and that process has already started, and will continue for at least another decade as western economies deal with demographic induced productivity gaps.
Every smart investor I know has money in Canadian banks going back before 2008.
The risks that these banks are exposed to are far less of an issue than what the rest of the world has allowed to be taken on.
In terms of risk Canadian banks are 90% more secure than every other.
If you want to make money …. sell those hoarded gold shares now and be ready to buy in when the Banks get attacked by the chicken littles and the shortsell gamblers.
Could my earlier post(around 6 PM on the 28th) be freed from the filter, please?
I’m no expert but I have been studying intensively the stock market for the last 3 years or so, and for what it is worth, in my humble ( arrogant?) opinion,
I think we are heading for hard times.
The trouble in Europe will reach us eventually like the wave of a tsunami and of course affect us negatively.
yes if a Republican is elected in the next USA election, the damage will be somewhat controlled but we will still be in bad shape economically (If Obama is re-elected there is a 99.99% probability it will be even worse as he is an incompetent hard left socialist and hates the USA)
,because as you all know, when the USA is in trouble we feel it here in Canada in good part because the USA buys over 80 % of everything we produce.
Laugh at me if you want but I think within the next few years gold will go down to around $1200 an ounce( now at around 1600 )
Silver will go down to around $18 an ounce ( now at around $27 )
As I said I am no expert, just a “little nobody”, but I think the next two or three years will be quite rough.
I am quite sure of that despite being just little unimportant me.
Don’t rely on Dow jones, Nasdaq and S&P 500 indexes, they do not reflect reality.
Don’t believe me?
Go on google finance and pick a stock at random, then below its graph you will find a list of ten stocks in the same category
To the right of these stocks there is a
little graph, pick the one year graph.
you will see;
most stocks have been going down for the last year or so – despite the DOW, S&P and Nasdaq being up.
then pick a stock in another category( oil, charcoal, gold , electronics goods, health research, finance etc….), and do the same thing, in most cases you will get the same results; most stocks have been going down for over a year now, yet the Dow, S&P and Nasdaq have been going up since about a year or so.
I have stopped relying on the Dow, nasdaq and S&P when I realized that “discrepancy” a few months ago.
Things are going south and fast and will get worse.
If this site is still up and running two years from now, I will come back and either admit I was completely wrong or…will say ” I told you so”…
“Coal” not “charcoal” of course.