Thursday, October 09, 2008

Things I've Read

Great synopsis from Calculated Risk - The Adjustment Process
Canadian Banks ranked safest in world - Globe and Mail
The Stock Market is presenting buying opportunities now - Canoe Money

Are you reading anything interesting out there?


Unknown said...

"Canadian Banks ranked safest in world". I read similar statement from Paulson before Fannie and Freddie collapsed.

The Canadian Banks are stuffed with mortgages and construction loans on their balance sheets. Canada's financial system is still in the denial phase...

mohican said...

I understand that there is a lot of mistrust about these sort of statements now because they have been proven patently false in many other jurisdictions but the Canadian banking system is fundamentally different than most other countries.

The major difference rests in the way the mortgage market is structured with the CMHC / Federal Government gaurantee on high ratio mortgages via the National Housing Act. The banks do not hold substantial home loan default risk in their portfolios for that reason.

There is also the fact that there was never a national housing bubble in Canada thus spreading the risk for national banks among bubble and non-bubble markets. Additionally, there was never rampant usage of no documentation, 100%+ financing, negative amortization, and other funny products that were exceptionally common in the US. Banks that have focused on underwriting quality should not run into significant problems. These comments exclude the possibility of a run on the banks because as we all know there isn't enough money to pay out depositor's claims because that money is lent out times 10.

However, I reserve judgement on regionally concentrated financial institutions in the housing bubble markets of Vancouver, Victoria, Calgary and Edmonton.

Jade East said...

One interesting thing I've read is from John Grey.

"The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over"

Jade East said...

Correction authors name is John Gray.

kaybertoss said...

Yeah but,
A negative savings rate.
A all time, record high Canadian household debt load.
Many Canadian households not living within their means month to month.
Burying years of over consumption with lines of credit only to later refinance it into their Mortgage AKA the housing ATM.

If housing prices fall significantly across Canada what effect will it have on the above and thus directly affecting those said banks?

mohican said...

I'm clearly not saying that rosy economic times are just around the corner. Things just may not be quite as bad as people seem to thing these days.

Maybe I'm wrong and we should all bury a bus, buy ammo, and hoard canned food.

jesse said...

A real return chart from the S&P (pdf)