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shorting Canadian Banks

  • Last Updated:
  • Nov 22nd, 2017 12:26 pm
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Deal Addict
Dec 3, 2014
1025 posts
183 upvotes
Ontario
treva84 wrote:
Aug 31st, 2017 9:56 am
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.
I am tempted to get back into TD, but the other outcome is clarity in a negative sense, in which case the downside risk may be more significant than the potential upside. I am tempted to maintain my financials exposure in the US market where housing is at a much more moderate level and the population generally is better at living within their means
Deal Addict
Nov 9, 2013
1908 posts
666 upvotes
Edmonton, AB
llpresident wrote:
Aug 31st, 2017 10:39 am
I am tempted to get back into TD, but the other outcome is clarity in a negative sense, in which case the downside risk may be more significant than the potential upside.
Earnings are up 17%, as of me writing this the stock is only up 3% - is it at all possible that negative scenarios are already priced in?
I am tempted to maintain my financials exposure in the US market where housing is at a much more moderate level and the population generally is better at living within their means
I agree that Canadians are too indebted both in consumer and mortgage debt. We are closer to the end (rather than the beginning) of a credit expansion. When the credit contraction inevitably occurs, there will be pain for indebted individuals, corporations, and the economy as a whole. Nonetheless, Canadian banks are intrinsically stronger than their American counterparts due to i) consolidation and ii) regulation. Canadian bank ROE is a testament to this - Canadian banks enjoy higher ROEs than their American counterparts.

Now, I am not saying you shouldn't own American banks; my point is that despite uncertainty and despite fears of a credit crunch I believe many of the Canadian banks are still priced with asymmetrical long term upside vs downside.
Deal Addict
Jan 20, 2016
1376 posts
516 upvotes
Houston, TX
Cerenity wrote:
Aug 29th, 2017 11:16 am
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.
TD 67.00
+3.24%

oopsy, your crystal ball needs an upgrade
Make the Trudeau drama teacher again!
Sr. Member
Oct 21, 2014
650 posts
438 upvotes
Burlington, ON
asa1973 wrote:
Aug 31st, 2017 12:24 pm
TD 67.00
+3.24%

oopsy, your crystal ball needs an upgrade
TD didn't raise it's dividend today. It had a monster quarter, but no raise of dividend.
Deal Addict
Jan 20, 2016
1376 posts
516 upvotes
Houston, TX
Gungnir wrote:
Aug 31st, 2017 1:19 pm
TD didn't raise it's dividend today. It had a monster quarter, but no raise of dividend.
OK, maybe mixed it with worries about price hike :/

But being said, they changed their div raise schedule so imo nobody expected them to hike today...
Personally I'm fine with my 4.0% (to bought price) and regular increase on TD. Still a good part of DI portfolio.
Make the Trudeau drama teacher again!
Deal Addict
Dec 3, 2014
1025 posts
183 upvotes
Ontario
While I'm not compelled to go long, I think the vast majority of us can agree that shorting the banks continues to be a losing proposition.
Deal Addict
Jun 3, 2009
3741 posts
452 upvotes
Montreal
Gungnir wrote:
Aug 31st, 2017 1:19 pm
TD didn't raise it's dividend today. It had a monster quarter, but no raise of dividend.
Reducing the share float works even better for me.
Member
Jul 27, 2017
489 posts
138 upvotes
GTA
llpresident wrote:
Aug 31st, 2017 1:45 pm
While I'm not compelled to go long, I think the vast majority of us can agree that shorting the banks continues to be a losing proposition.
a) what about selling covered calls (short or LEAP), either 'at the money', 'in the money' or 'out of the money'?

b) should TD continue to be the upside bank, then what about either naked PUT or a PUT credit spread?
Deal Addict
Dec 3, 2014
1025 posts
183 upvotes
Ontario
porticoman wrote:
Aug 31st, 2017 1:53 pm
a) what about selling covered calls (short or LEAP), either 'at the money', 'in the money' or 'out of the money'?

b) should TD continue to be the upside bank, then what about either naked PUT or a PUT credit spread?
Both are beyond my skill level
[OP]
Member
Dec 13, 2014
360 posts
106 upvotes
Hampstead, QC
RY continues its downtrend below the 200 SMA. Canadian debt levels simply unsustainable and the short train to 80 is on....below that is a foregone conclusion IMO.
Deal Addict
Jun 27, 2007
3189 posts
512 upvotes
leflower wrote:
Sep 5th, 2017 11:56 am
RY continues its downtrend below the 200 SMA. Canadian debt levels simply unsustainable and the short train to 80 is on....below that is a foregone conclusion IMO.
May low of 90.73 is clearly target. I think RY will dip below to trip stops, then bounce to 20 MA.
80 is a little bit a stretch, at least short term. The only way RY can get there within 4 weeks time frame would be a flash crash. Given NK situation, everything is possible.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!
Deal Addict
Jan 20, 2016
1376 posts
516 upvotes
Houston, TX
leflower wrote:
Sep 5th, 2017 11:56 am
RY continues its downtrend below the 200 SMA. Canadian debt levels simply unsustainable and the short train to 80 is on....below that is a foregone conclusion IMO.
well, it depends... On NYSE it's still above SMA200 ;)

https://finance.yahoo.com/chart/RY#eyJt ... IjF5In0%3D

other banks are better even on TSX , but cherry picking it's all you can do for now :)
Make the Trudeau drama teacher again!
Sr. Member
Oct 21, 2014
650 posts
438 upvotes
Burlington, ON
leflower wrote:
Sep 5th, 2017 11:56 am
RY continues its downtrend below the 200 SMA. Canadian debt levels simply unsustainable and the short train to 80 is on....below that is a foregone conclusion IMO.
Maybe this will work out for you, NK has vastly overstated it's weapons capabilities just like you've vastly overstated your position. It's a match made in heaven.
[OP]
Member
Dec 13, 2014
360 posts
106 upvotes
Hampstead, QC
Gung, make jokes all you like...but Canadians are over leveraged and the banks have lent out too much money. The perfect storm is approaching.
Deal Addict
Nov 24, 2013
4174 posts
1172 upvotes
Kingston, ON
leflower wrote:
Sep 5th, 2017 12:43 pm
Gung, make jokes all you like...but Canadians are over leveraged and the banks have lent out too much money. The perfect storm is approaching.
IOW, the banks have lent out enough to make $$$ on the lending. With delinquency rates remaining low, debt load is actually good for bank profits. They're the ones encouraging it.

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