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shorting Canadian Banks

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  • Nov 22nd, 2017 12:26 pm
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Deal Addict
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May 11, 2014
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Iqaluit, NT
ukrainiandude wrote:
Aug 24th, 2017 8:43 pm
USA 18% of exports goes to Canada; Canada exports 76% to the USA.
It won't hurt them a lot.
But might cause a recession here.
That is net exports between Canada and the US. Similar to how we were talking about Debt to GDP ratio, it doesn't paint the entire picture. The problem is a lot of manufacturing relies on parts imported from Canada and Mexico relying on those manufacturing bases to produce many finished products. Even cars that Ford and GM manufacture rely on parts and mechanics manufactured in both Canada and Mexico to manufacture and then are placed in the vehicle in the US and then exported. So no, it will hurt manufacturing and prevent the export of many products as the cost of manufacturing will increase in the US knocking down beyond the lateral trade you are referring to.

Also, you can't just look at the percentage of exports to figure out what helps and hurts. Just because it doesn't hurt as much, doesn't mean it won't. Specific industries get hurt tremendously because of rash decision making. Home builders are already seeing a relatively large drop in starts because of the tariffs on soft lumber. And the tariffs haven't really helped US producers. We have already seen German exports of softwood lumber to the US jump 1000%. Russia as well. The US didn't capture the lost domestic sales, it just went from Canada to other countries. So what help did this really do? The US exports large amounts of corn and soybeans to both Canada and Mexico. Canadian and Mexican cattle use this for feed, food industries etc. Sure, beef is then resold into the US, but Canadian beef also is exported to other countries such as Japan, S.Korea and China. Without the support of those purchases, the costs increase and North America as a unit will lose sales to Australia, NZ etc. The fact of the matter is a lot of the sales of these products are synergistic in capturing income from places outside of North America.

With NAFTA gone, these specific exports are in danger. When an entire industry is knocked, that ripples spending in other industries giving an overall domino effect. That is the tremendous danger. Angering the voters who actually rely on paycheques in these businesses are what Trump is in danger of losing. The fan club is not that big. But angering the farming and manufacturing voters (which allowed him to win key states over Clinton) is a major problem. Trump I believe is smarter than that.

You are correct in that Canada and Mexico will be disproportionate in getting hurt from the exit of NAFTA. But make no mistake, it will hurt many key industries in the US in which Trump needs to win over to hold onto his presidency.
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Deal Addict
Sep 2, 2004
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Like xgbsSS said, it is a disproportionate amount of course but almost 20% of the exports of an economy the size of the US is a massive amount. The talk about a NAFTA withdrawal doesn't worry me too much at this point.
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Feb 19, 2010
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ukrainiandude wrote:
Aug 24th, 2017 7:07 pm
Would he even have the power to scrap it on his own? Turns out presidents do have that power and don't need Congress. NAFTA's Article 2205, which Trump cited in his speech last week in Pittsburgh, is only 34 words and simply says that a party may withdraw from the agreement six months after it provides written notice.
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http://money.cnn.com/2016/07/06/news/ec ... index.html
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There seems to be differing opinions on how this would have to be achieved but the bottom line is that Trump isn't nearly as powerful as he thinks he is particularly when he thinks he can unilaterally effect change.

As others have alluded to, there is a huge constituency of state governments, businesses, and American workers that would be very adversely affected by NAFTA getting toasted. Trump doesn't seem to be listening or is just oblivious in his usual bloviating style.
Sr. Member
Oct 21, 2014
650 posts
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Burlington, ON
jerryhung wrote:
Aug 29th, 2017 10:03 am
BMO -3%
BNS -1%

This ER is just horrible for Cdn. banks
Seems every time the market gets scared by world events this thread gets bumped. Didn't read BMO's quarterly but BNS was solid.

Excerpt:
Scotiabank reported third quarter net income of $2,103 million compared to $1,959 million in the same period last year. Diluted earnings per share were $1.66, compared to $1.54 in the same period a year ago. Return on equity was 14.8%, in line with last year. A quarterly dividend increase of 3 cents to 79 cents was announced.

I think today's drop has more to do with the flood and NK's posturing more than anything else.
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Jul 22, 2015
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Anyone has any idea why BMO is the only big 5 bank that didn't raise their dividend?
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Mar 10, 2009
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Toronto
MoneyHypeMike wrote:
Aug 29th, 2017 10:31 am
Anyone has any idea why BMO is the only big 5 bank that didn't raise their dividend?
Their ER was pretty damn good I'm not too sure why they didn't increase their dividend.

With that said, TD has yet to report.. they might not raise their dividend either..we'll have to wait and see.

Here's part of the article I was reading:
..Bank of Nova Scotia (TSX:BNS) had $2.1-billion of net income for the three months ended July 31, up seven per cent from the same quarter last year, and announced its quarterly dividend will go up about four per cent.

Bank of Montreal (TSX:BMO) had nearly $1.4 billion of net income over the same period, an increase of 11 per cent from the same time last year, but said its dividend will remain steady.

Analyst John Aiken of Barclays Capital says in separate notes to clients that both banks performed better than expected.
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May 11, 2014
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jerryhung wrote:
Aug 29th, 2017 10:03 am
BMO -3%
BNS -1%

This ER is just horrible for Cdn. banks
MoneyHypeMike wrote:
Aug 29th, 2017 10:31 am
Anyone has any idea why BMO is the only big 5 bank that didn't raise their dividend?
Considering they only just raised it last quarter, they probably are just waiting out a few quarters first. Most banks I've seen keep the dividend the same for at least 2 quarters.
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Dec 11, 2007
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TD is unlikely to hike as they moved to annual dividend increases a few years ago that are announced in Q1.

The other majors increase the dividend semi-annually but at a lower rate each time vs TD's annual increase.
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Jun 3, 2009
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MoneyHypeMike wrote:
Aug 29th, 2017 10:31 am
Anyone has any idea why BMO is the only big 5 bank that didn't raise their dividend?
It has been raising dividends at a slower pace than the other banks as witnessed by its lower payout ratio.
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Nov 9, 2013
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Edmonton, AB
Looks like CWB smashed their Q3 out of the park - estimates were for 0.62, actual was 0.69. I wonder if it'll follow NA and LB's suit and surge this morning.
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Feb 26, 2017
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treva84 wrote:
Aug 31st, 2017 8:49 am
Looks like CWB smashed their Q3 out of the park - estimates were for 0.62, actual was 0.69. I wonder if it'll follow NA and LB's suit and surge this morning.
I would think it would be up this morning (it also helps that the TSX looks like it will open up). TD should also have a bit of a bounce with the 0.15 earnings beat and the new buy back as well.
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Dec 3, 2014
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I think banks will continue to be flat. Earnings no longer driving stock movement. There's is enough fear over possible future issues, mostly housing and Canadian debt levels, to suppress the stock prices. Since those issues have yet to come to fruition in any bubble bursting way, but nor have those risks been alleviated, I predict more sideways movement. There are better stocks to own until we wait for some clarity on these issues.
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Nov 9, 2013
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llpresident wrote:
Aug 31st, 2017 9:46 am
I think banks will continue to be flat. Earnings no longer driving stock movement. There's is enough fear over possible future issues, mostly housing and Canadian debt levels, to suppress the stock prices. Since those issues have yet to come to fruition in any bubble bursting way, but nor have those risks been alleviated, I predict more sideways movement. There are better stocks to own until we wait for some clarity on these issues.
I somewhat agree - I think to some extent the fear is priced in which is why the banks are moving more or less sideways. However I think today is a great buying opportunity - if you await for "clarity" as the clarity emerges you'll be priced out.

Think of it this way - TD just posted an earnings that are up 17% year over year. You can buy a well managed, wide moat company, that is a dividend stalwart and grower, trading at a current P/E of 13.25, with 17% earnings growth. I think that's a pretty good buy at present.

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