RE:WHY ALL THE BANKS GOT HIT HARD TODAYpressure today mostly coming from US financials, Canada throwing out baby with bathwater
- US Fed dropped rate
- now Bank Cda followed suit and dropped rate 100 points as well
- US banks hold lot of US BBB debt, which is investment grade, but if the underlying companies get downgraded, then some of them will end up in junk territory, which is a different market that some banks won't or can't touch; then the banks would end up holding the bag and end up being under-capitalized;
- US Fed freed up the monetary policy, which should help the banks' liquidity, but unless the Fed is willing to buy the downgraded debt, then the banks are still on the hook;
- couple that with DOW hitting new low, now some 38.4% off the recent high, and you have a perfect storm, like today;
- market waiting for US to approve the fiscal measures, which is all they have left, after spending their monetary ammunition; this has now had two delays, so may be few more days still, before money finds its way to companies and US consumers, so this adds to market down pressure
if it's any consolation, so far at least, Dow futures are up, as are asian markets, so with a bit of luck, we may have a small reversal tomorrow;
long term, this will probably prove to be a buing opportunity of the decade, but until above is all stabilized, the markets will remain volatile and so will the financials, obviously; I've seen four bottoms since 86, never did catch one perfectly; came close in 08 but not close enough ;) ... no way to pick an entry point, so, for what it's worth, my strategy is to A) find a solid company B) buy the dips, sell some on the pops, and if it goes lower, buy back what I sold and then some; sort of an average-down, if you will; but mostly, look at the 10 and 20 year charts for comfort; TSX hit this level in 2000, so from that perspective, 20 years of profit went poof, so that makes this a pretty decent entry point, historically; plus of course, now the banks, including TD, are much much stronger, better capitalized, more profitable, despite declining interest rates, more diversified, better yields .... so much better overall; I recall when RBC first hit 1 billion dollar quarterly profit, some years back and that seemed like an insane number; now these banks are hitting 2-3 plus billion/quarter profits, and it's become a norm; NSF charges $50, economy bank account $15/mo, small business accounts $100-300/mo, very few tellers in branches ... these are not banks, they're cash printing machines, which now have government support, by backstopping the CHMC and now even the under/un-insured mortgages .... bankers' wet dream ..
sorry for the rant, just MHO, for what it's worth