Don't expect him to concede Toro, he hasn't the ability.
How's life anyways there Hoff? :lol:
Canadian Banks Are on the Roll Again.
- Thread starter SirJosephPorter
- Start date
How's life anyways there Hoff? :lol:
That's actually incorrect. There was (and remains) subprime lending in Canada. It is just that it was never as widespread nor as large as it was in the US.
There may possibly have been some sub prime lending, Toro, I don’t know. Most Americanisms spill over the border, so it wouldn’t surprise me if there was some.
However, it was minimal. Even combining whatever small amount of sub prime lending was in Canada, along with whatever American sub prime loans were purchased by Canadian banks, the whole thing together did not amount to much. Canadian banks did lose some money in the sub prime fiasco, but not enough to affect their bottom line to any appreciable extent.
Even in the present quarter, most Canadian banks have put aside money for possible loan losses. So no doubt there was some of that going on, but nowhere near the scale that was happening in USA.
There may possibly have been some sub prime lending, Toro, I don’t know. Most Americanisms spill over the border, so it wouldn’t surprise me if there was some.
However, it was minimal. Even combining whatever small amount of sub prime lending was in Canada, along with whatever American sub prime loans were purchased by Canadian banks, the whole thing together did not amount to much. Canadian banks did lose some money in the sub prime fiasco, but not enough to affect their bottom line to any appreciable extent.
Even in the present quarter, most Canadian banks have put aside money for possible loan losses. So no doubt there was some of that going on, but nowhere near the scale that was happening in USA.
Yes, I do. I have been buying 100 block shares since they dropped, and now beginning to see a profit. I still will buy for a while.
Don Quixote de la Mancha of the north. Just as nutty, but wouldn't know what to do without our conscious.
Had this not happened, home prices would have fallen more and mortgage losses would have been much greater.
That is possible Toro, but unlikely. There is one big difference between USA and Canada. In USA, interest payments on mortgage loans are tax deductible, in Canada they are not. As a result, Americans tend to take out bigger mortgages than Canadians do. So mortgage losses would affect USA much more than they would affect Canada.
Indeed, when we lived in UK (where interest payments are tax deductible), we could afford to pay for our house outright. But still I took out 95% mortgage, since interest is tax deductible. I was able to invest my money and get a bigger return than the interest rate I was paying on the mortgage. With tax deductible mortgages, if your mortgage is 5% and you make 6% on your investments, you come out ahead.
But when we bought a house in Canada, I adopted a totally different strategy. I took out as little mortgage as possible. I took out a totally open mortgage, even though it was ½ % more expensive. All the salary increases, bonus I received etc. went towards paying off the mortgage. I paid off the mortgage in three years.
I think that would be typical of Canadians. With interest payments not deductible, if you have a 5% mortgage, you have to make 8 or 9% return on your investment just to break even. It is just not worth it.
So Canadians by and large tend to take out smaller mortgages compared to Americans, so mortgage meltdown wouldn’t affect Canadians as much.
That is possible Toro, but unlikely. There is one big difference between USA and Canada. In USA, interest payments on mortgage loans are tax deductible, in Canada they are not. As a result, Americans tend to take out bigger mortgages than Canadians do. So mortgage losses would affect USA much more than they would affect Canada.
Indeed, when we lived in UK (where interest payments are tax deductible), we could afford to pay for our house outright. But still I took out 95% mortgage, since interest is tax deductible. I was able to invest my money and get a bigger return than the interest rate I was paying on the mortgage. With tax deductible mortgages, if your mortgage is 5% and you make 6% on your investments, you come out ahead.
But when we bought a house in Canada, I adopted a totally different strategy. I took out as little mortgage as possible. I took out a totally open mortgage, even though it was ½ % more expensive. All the salary increases, bonus I received etc. went towards paying off the mortgage. I paid off the mortgage in three years.
I think that would be typical of Canadians. With interest payments not deductible, if you have a 5% mortgage, you have to make 8 or 9% return on your investment just to break even. It is just not worth it.
So Canadians by and large tend to take out smaller mortgages compared to Americans, so mortgage meltdown wouldn’t affect Canadians as much.
You may be right; I don’t follow automobile stocks that much (though I do remember GM had sunk as low as one or two dollars a while back).
You might want to tell Well Fargo & Co. Canada that...
Wells Fargo ends subprime lending in Canada - The Globe and Mail
You really should do some minimal research before you speak. It just makes you look like...well...you...:lol:
We see the numbers - 83 banks fail in the US - 400 are on watch? - Big friggin deal - Look at how many banks they have - Add that they have 10 times the population and it is not a big deal in perspective!
Chart 4. The title is "Number of U.S. Banks by Size Category"
A bar chart. 4,893 banks or savings institutions have more than $100 million in assets; 3,517 have $100 to $500 million; 859 have $500 million to $5 billion; 150 have $5 to $50 billion; and 22 have more than $50 billion.
4883
3517
859
150
50
=====
9459 banks with $100 million or more.
Chart 4. The title is "Number of U.S. Banks by Size Category"
A bar chart. 4,893 banks or savings institutions have more than $100 million in assets; 3,517 have $100 to $500 million; 859 have $500 million to $5 billion; 150 have $5 to $50 billion; and 22 have more than $50 billion.
4883
3517
859
150
50
=====
9459 banks with $100 million or more.
We see the numbers - 83 banks fail in the US - 400 are on watch? - Big friggin deal
MIT, the numbers by themselves don’t mean much. How do these numbers compare with other years? My guess is that there probably were more bank failures in 2008 and 2009 compared to other years. And that can be attributed to the economic meltdown.
Also, how does that compare to Canada? We do have a few small banks here, but to my knowledge, we did not have a single failure.
MIT, the numbers by themselves don’t mean much. How do these numbers compare with other years? My guess is that there probably were more bank failures in 2008 and 2009 compared to other years. And that can be attributed to the economic meltdown.
Also, how does that compare to Canada? We do have a few small banks here, but to my knowledge, we did not have a single failure.
This is true, but many have tightened their belts, cut costs and ended risky lending altogether. Because they were hurt substantially by sub prime lending...
In complete contradiction to you asinine assertions.
I agree to apoint - But if you watch the business news and read the business papers they have moved to stock manipulation more than educating business people on how to make their business better. If you see an announcement of a plant closure or 2,000 people being laid off the stock price goes up. Considering that those 2,000 people were either making profits (negative effect on bottom line) or that management had too many people (Meaning the management is poor) the stock price should go down.
Gildan closed their Canadian and US manufacturing plants down to move to Honduras - Stock price goes up! - Seems the expected profits did not materialize and now that country is under sanctions - Not a smart managerial move.
Ford is doing quite well - The family put a ton of their own money back in - they leaned up the company - got smarter and because they were in the Big 3 their stock got beat up. They are making money - Honda is making money - These two companies are focused on their cost structure AND marketing - Toyota - the darling of the auto industry had favourable stock prices as they over expanded. Everyone was jumping on the Toyota Manufacturing Process - It is a bloated - mind numbingly slow improvement process that only works well when the volume going out the door is high enough to support it. They are moving to the lean and mean process that Ford and Honda follow. Honda is way more flexible than Toyota and much leaner. Honda has a flatter management structure and still sticks to many of the philosophies of Juran. Toyota - GM and Chrysler still have too many silo operations - One side doesn't see or talk to the other.
Tim Hortons being swallowed by Wendy's was not a good fit - again Timmy's has a flat management structure - Wendy's was imperical. Starbucks was a marketing focused company not a cost focused company - Over expanded on their name only not on the ability to make money -
It is easier to manipulate a stock - just need a good press release - than it is to make profits.
It is all percentages - 1% failure rate in the US likely means a $500 million loss in profits here - Our banks risk are spread across a nation - the USA's banks are more regional - Our banks have absorbed losses in some of their US purchases but if that US bank was left on it's own in an economically depressed region it likely would have failed.
You do not hear of banks failing in Canada but we do see an amalgamation of many small credit unions - These small credit unions have had a decline in members traditionally through plant closures. They reach a point where they do not make enough profit to pay staff and rather than close/fail they merge with a larger entity.
Saying our banks are better is a misnomer - trumpeted by Mr Harper - It is comparing apples to oranges.
There was a news article a couple of days ago stating that the housing market across Canada is on the rise again. BC is expected to have the most sales with pricing equivilant to 2008 prices so they say. Since our Premier is about to introduce the HST in the New Year, I have no idea how that will affect building and all other things. Banks do not seem to be backing off lending to anyone. In fact if you go in and talk about money, they call constantly to see when you would like to come in again. It's more like they are chasing business rather than rejecting it. However, regarding the housing market, it also states that the number of purchases that will happen in this latter part of 09 will have a downward effect in 2010 but I assume that would be obvious anyway. Only so many people buying houses.
We did have some banks doing sub-prime loans. On the last house we sold the person that bought it went to some bank I had never heard of and I was amazed that she managed to get the loan at all. She has since sold the house herself and moved to one of the smaller communities in the area.
We did have some banks doing sub-prime loans. On the last house we sold the person that bought it went to some bank I had never heard of and I was amazed that she managed to get the loan at all. She has since sold the house herself and moved to one of the smaller communities in the area.
VanIsle - There seems to be a resurgence in apartments again - Not sure why. Either it is homeowners cashing out and downsizing (Front End Boomers) or people losing their homes and needing a place to stay.
I think we are going to see more people moving in to housing they can afford.
I think we are going to see more people moving in to housing they can afford.
That is possible Toro, but unlikely. There is one big difference between USA and Canada. In USA, interest payments on mortgage loans are tax deductible, in Canada they are not. As a result, Americans tend to take out bigger mortgages than Canadians do. So mortgage losses would affect USA much more than they would affect Canada.
Indeed, when we lived in UK (where interest payments are tax deductible), we could afford to pay for our house outright. But still I took out 95% mortgage, since interest is tax deductible. I was able to invest my money and get a bigger return than the interest rate I was paying on the mortgage. With tax deductible mortgages, if your mortgage is 5% and you make 6% on your investments, you come out ahead.
Taxes may play a part but only a small part. The world experienced a global housing bubble. Some countries have tax deductibility, others don't.
It also belies what occurred in Canada a mere 20 years ago. The average price of a home in Toronto fell from 300,000 in 1991 to $200,000 several years later. Likewise, there was a steep drop in Vancouver. On the West Side, the average home was priced at $770,000 in 1996 at the peak of Hong Kong repatriation scare. 2-3 years later, it was $550,000.
Similarly, you could see it recently in very hot markets such as Calgary.
And this was only until 2006. It doesn't include the the next two years when home prices in Calgary went up even further. This is what all bubbles look like. It does not matter what the bubble is in - stocks, commodities, real estate, wine, baseball cards.
Out west, home prices doubled in 4-5 years, yet incomes never doubled. There was a disconnect between income growth and home price increases. And the banks, despite their conservative lending, fueled these moves.
This happens over and over and over again. People always try to rationalize why a bubble is different this time. I hear it all the time. It never is.
Indeed, when we lived in UK (where interest payments are tax deductible), we could afford to pay for our house outright. But still I took out 95% mortgage, since interest is tax deductible. I was able to invest my money and get a bigger return than the interest rate I was paying on the mortgage. With tax deductible mortgages, if your mortgage is 5% and you make 6% on your investments, you come out ahead.
Taxes may play a part but only a small part. The world experienced a global housing bubble. Some countries have tax deductibility, others don't.
It also belies what occurred in Canada a mere 20 years ago. The average price of a home in Toronto fell from 300,000 in 1991 to $200,000 several years later. Likewise, there was a steep drop in Vancouver. On the West Side, the average home was priced at $770,000 in 1996 at the peak of Hong Kong repatriation scare. 2-3 years later, it was $550,000.
Similarly, you could see it recently in very hot markets such as Calgary.
And this was only until 2006. It doesn't include the the next two years when home prices in Calgary went up even further. This is what all bubbles look like. It does not matter what the bubble is in - stocks, commodities, real estate, wine, baseball cards.
Out west, home prices doubled in 4-5 years, yet incomes never doubled. There was a disconnect between income growth and home price increases. And the banks, despite their conservative lending, fueled these moves.
This happens over and over and over again. People always try to rationalize why a bubble is different this time. I hear it all the time. It never is.
Sir Joe - Don't forget that in the USA capital gains tax applies when you sell your house - Here in Canada it is Free - Untaxed money!!
Governance of chartered banks has helped alleviate some risk. However, most of them are fiscally conservative, at least when it comes to managing risk. They don't follow bubbles (they run from them). The few who were in the US mortgage business got out in 2005/2006. Their lending portfolios are tightly managed. If they will only lend .03% of their book to pharmaceuticals they cap it religiously and don't care if they next guy in the door has the cure for cancer. They won't lend him the money to go over the cap. Some of the banks are heavily invested in technology, both at the retail customer level and the analysis level. The Canadian banks aren't equity lenders. They lend on debt servicing capability. Real estate investments (non primary residences) are subject to debt servicing tests that look at worst case scenarios. If a deal can survive higher interest rates and higher vacancy rates, and not be the primary source of one's income, then they put the deals together. Our legal system has something to do with it too because when people can prove the Canadian bank lended them into jeopardy the banks don't do well in court. On the other hand, our system allows for recourse and doesn't put all of the real estate risk on Canadian banks.
Also, CMHC underwites all mortgages with 20% or less equity. Their systems also analyze housing markets extensively. Accordingly, they will set policies based on regions. Anyone who has dealt with CMHC underwriting knows they are pretty cut and dry on what they will do and not do. They won't get sweet talked into making deals that their systems decline.