Cramer - Canada = investing hot spot

[Kassz007]

Quote from Mnphats:

A friend of my families own a small island north of Winnipeg. Its been in the family for generations. They don't own the entire island because the Queen owns one third and evidently she owns one third of all the islands in the area. It was an interesting story.

She never visits either.

And when she does visit, nobody cares. In fact, and it never fails, the debate is rehashed as to whether or not we should do away with the British monarchy.

 

[Kassz007]

Quote from kubchaser:

http://ca.news.yahoo.com/s/capress/100526/business/cities_quality_living

Mercer report pointed out that Vancouver, Montreal, Toronto and Ottawa are ranked among the world's top 25 most livable city.

I guess.. that somehow contrinbuted to housing cost? LOL

Bingo. The knee-jerk reaction to increasing asset prices is to call it a bubble. The fact of the matter is that nobody knows if a bubble is a bubble until it pops. Sometimes assets increase in value for a reason, not because of irrationality.

I'm not saying that Canadian real estate ISN'T a bubble, but it's impossible to claim that it is. Those who do are merely speculating.

 

[pitz]

Quote from Kassz007:

http://ca.news.finance.yahoo.com/s/...ofit-doubles-745-million-loss-provisions.html

Q2 profit more than doubles to $745 million

Credit loss provisions reduced to $249 million

Revenue up - $3 billion vs. $2.65 billion

EPS $1.26

Of course -- the Canadian banks are awesome, because nearly their entire at-risk loan books, are guaranteed against default by the government, while they still reap nice lending spreads.

 

[Kassz007]

Quote from pitz:

Of course -- the Canadian banks are awesome, because nearly their entire at-risk loan books, are guaranteed against default by the government, while they still reap nice lending spreads.

Gaurenteed against default or not, the fact of the matter is they did not need that gaurentee because they do not take excessive risk that threatens the entire financial system.

 

[pitz]

Quote from Kassz007:

Gaurenteed against default or not, the fact of the matter is they did not need that gaurentee because they do not take excessive risk that threatens the entire financial system.

I disagree here; the Canadian banks are just as leveraged, if not more leveraged than the US banks. The key difference is that the Canadian banks did not have runs on their long-term assets because, quite frankly, they do not hold much in terms of long-term assets, and they do not have a duration gap in their portfolios.

The gaurantees against default also mean that if depositors were to start a run against Canadian banks, that the Canadian banks have the ability to raise interest rates on loans dramatically, causing said loans to go into default, against which, they could collect on the guarantees, and defeat a bank run. A similar setup did not exist in the USA because:

a) A good chunk of loans on the banks' books were not guaranteed against default and;

b) Most loans in the USA are 30-year fixed rate, not the 100% adjustable rate mortgage books run by the Canadian banks;


Housing is likely to crash in Canada in the coming quarters/years, but it is very unlikely that this will cause the banks serious problems, for the above reasons. A housing crash in Canada will actually accelerate banks' profitability, since Canadian banks are effectively 'short' the housing market.