Monday, September 29, 2008


"I felt a great disturbance in the Force, as if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened." - Obi-wan Kenobi

Or, you know, maybe it was the US economy being destroyed. You know, six of one, half dozen of another. It's often hard to tell the differences between big noises to the south when you're this far north.

To think that I would live to see such times. It's going to make that meeting with my investment counsellor that much more interesting next week.

There are times when I think George Bush is Darth Vader's retarded little brother, I swear to God...

Last Five
1. Fingers in the factories - Editors*
2. The dreaming - Kate Bush
3. I'm ready - Tracy Chapman
4. Skinwalker - Robbie Robertson
5. Eventually - Brendan Benson


Mireille Sampson said...

Dath Vader's retarded little brother - there's a character that should be introduced to the franchise.

The Dow and TSX are down by 25%. the dot-com saw markets down by 50%, so it's been worse.

I really don't know what to think about the bailout plan. Feels like it was hatched in a panic - which of course it was - and can anything hatched in a panic be the best piece of paper to do the job? On top of it going on right before and election and then there was what sounded like rupublican in-fighting and someone using the issue to try and have a coup within the party? I'm thinking that it may not be such a bad idea for them to have to re-think it.

I'm not even sure what it can accomplish. They can't stop house prices from coming down - nor should they, those prices were artificially inflated beyond people's means by artificially low mortgages. House prices need to reflect what people can afford to pay for them. The house prices being the root of all of looks like a rescue bill can really only be the difference between a recession and a really fucking deep recession?

I really don't know, I have no idea how bad this can make things. Depression? Some people say that, but the US was pretty much still a developing country back then, there was no deposit insurance certainly so people wouldn't put their money in the banks. I would think that the US would have to be on it's way to becoming a failed state before we'd see another depression. Think about how unlikley that is.

My only question today is: if a bank fails, what happens to the mutual funds? CDIC doesn't insure them of course, but if the stock market isn't 0 (which it never will be) then what happens to those funds? Are then transferred to another bank that wants to buy the assets or is the mutual fund buyer just fucked? There's one to ask your advisor.

colette said...

From an interesting article in the Globe and Mail:

Investment dealers and sellers of mutual funds have their own protection plans similar to CDIC. Both the Canadian Investor Protection Fund and the Mutual Fund Dealers Association Investor Protection Corp. cover you against losses of up to $1-million if your firm goes under.

Let me get the URL

colette said...

Here's the URL:

A good explanation of the risk which Canada's banks are exposed to. Our banks are more heavily regulated and our mortgage market was always more restrictive than the US and this article gives a quick overview of the differences.

CIBC and BNS were invested in the American mortgage market (through investment in what's called asset-backed commercial paper, e.g. mortgages, most of them "junk" mortgages) and found themselves uncomfortably exposed to some seriously crappy investments but they've written off their losses there already and are moving on. They had enough good investment to offset the losses without compromising their overall stability. Individual investors lost out though.

The next truly interesting (in a trainwreck sense) concern is what's going on with the amount of consumer debt people are carrying. I don't know if or how the lending rules in Canada differ than those in the US when it comes to unsecured credit so it will be interesting to see how that plays out up here. That's probably Canada's bigger day-to-day issue than mortgages.

The other thing I'm watching are the banks' jitters about lending to one another. I'm wondering if the banks from the Middle East (particularly the Emirates) may come in to fill that gap. They're very well capitalized and secure. They aren't going to have their crisis for another 10-20 years.

Mireille Sampson said...

Thanks for that Colette!

The Canadian banks are in a much better position, but there's always the unforseen. And those write-downs, I can't remember if their write-downs were described as "aggresive" or not. There's a lot of leeway in how write-downs are valued and reported, "agressive" usually means honest, that the investments have been written down to fair market value. But there have been many american banks that have not written down to that level, they figure they'll hold onto the investment long enough that it will go back up. It's one of the catches with Paulson's plan - if they try to sell their bad bets to the gov't, they're going to have to be honest and that revellation may cause problems in and of itself as others can see the results too.

Canadians have a stupid amount of consumer debt. This is where the french seem to have kicked everyone else's ass, France isn't much affected by this because the french can't spend money they don't have. Maybe Canadian mortgages are better off, but I think the rules for other types of debt are pretty loose. I have an idiot sister who has either 2 or 3 credit cards. She's in uni, has been since she left high school and lives on student loans and a part-time job. Does that sound like someone who should be given a credit card, much less multiple credit cards? But they gave them to her. She treats money much the way you might expect by that description too. If that's any measure, the household debt of canadians is quite likely going to be a problem. We have reverse-mortgages and home-equity loans too, just not much of the s.p. And no one's going to tell me canada hasn't gone through a housing bubble, things are already on the way down in the west.

SBB said...

Darth Vader's retarded little brother.... that is, well...perfect.