"Canada's three largest banks posted healthy profits last fiscal quarter while many of their U.S. counterparts struggled to survive. The key has been their limited exposure to toxic assets and conservative mortgage lending. The banks could yet weather the recession with a chance of staying profitable." -WSJ,
O Canada: Banks Look Healthier
Brush up on your Canadian banks, because when the bottom finally is in they will come roaring south with a vengeance to fill the void left by the eventual death of Citigroup (C) and so many (
17 so far for 2009) other US banks... and they will make FISTFULS of money.
TD Bank (TD), arguably the most adventurous of the Canadian banks has already commenced acquiring SOLID us banks and financial firms.
This is not an immediate endorsement of Canadian banks. To be sure they will feel pain. However, unlike their US and European counterparts, they will not only survive but prosper.
"Canada’s banks are a different beast. While the U.S. banking system is made up of thousands of banks serving certain communities, states, or regions, Canada’s banking system is made up five large chartered banks with branches in every province. In decreasing order of size by market capitalization, these are the Royal Bank (RY), TD Bank (TD), Bank of Nova Scotia (BNS), CIBC (CM), and Bank of Montreal." -Seeking Alpha,
Why Canada's Big 5 Bakns Won't Go Bankrupt
The Canadian banks trade both on the
TSX and the
NYSE. The easiest vehicle to trade of course is the
iShares CDN Financial Sector Index Fund (XFN). The index includes the five chartered banks and of course a large number of insurance and 'near bank' financial firms.
There are a total of 26 holdings in the index.
The question then is when do you get long for the LONG TERM?
1) Wait for a clear break of the down trend before building a position for the long term. Patience. This bottoming process will take YEARS.
2) There will be many trend breaks on the backs of vicious short covering rallies. WAIT for the pullpack. WAIT for a higher lower. Only then can you trust that the trend has turned and BEGIN to ease into a position.
3) The consolidation along the bottom will be a long one. It will consist of a large, volatile trading range and it will last YEARS.
4) The bottom will be accompanied by several major catalysts. While it is difficult to define exactly what these will look like, you will know them when they occur. Of that, you can be certain. For example, the eventual nationalization of Citigroup (C) would be just one such catalyst. The complete destruction and dismantling of AIG would be another.
So watch and wait. Patience.
