82 billion dollars

[JBen]

Hunter.
Why then are the banks deferring mtg payments, willing to "negotiate" other forms of credit. Why are the feds buying up billions in unsecured mtgs.

Will they? highly unlikely but it can happen. Im sure the US thought the same.

But even if they don't, the losses can be substantial. And that in itself will trigger ripple effects, mass sell offs of the equity markets....

*****
A basic asset swap, something virtually every bank does. Used to do far, far more prior to 08.

I would sell Bank A, 500 million worth of stocks. Stock I didn't own. often to them ( off market or as block trades on the exchange)
I would borrow 500 million of all those stocks from bank B ( sometimes even bank A).
I would be long 500 million cash from the sale of stock. I would use that cash to buy BA, BDN ( banker acceptance, Bank deposit notes). Gords GICs.
I would use the BAs as collateral at which ever bank I borrowed 500 million worth of stock from.
Bank A would pay me, as terms of the swap interest on 500 million. Usually CDOR -spread.

We would then off load everything in germany.

Our depositors ( the Gords) would deposit their cash in our bank in Germany. In order to make everything good. Our German bank would sell 500 million worth of US T-Bills they didn't own to a 3rd party here in Canada. I would buy the 500mm of US TBills from the 3rd party, and use as collateral in Germany or more often they would borrow it from me.

So when we have trouble refinancing ( rolling) the "BMO BDNs" that mature April 17th.........guess what.

I don't know to word it succinctly. google the global swap markets. All the banks in Canada do not have the cash....

Back in the early 90s, I worked for Bankers Trust. Doing the same kind of stuff. Google them and Gibsons greeting cards, proctor and gamble. One of our bigger counter parties then was OMERS....Google CIBC and Enron. Which at the time if I recall I had about 1 billion worth of crap on the books with CIBC capital markets.Wee were gnats...

When sub prime in the US got in trouble in 06. I had about 1 billion of asset backed securities on my books ( bought from our banks) and used as collateral at our banks. You could also google and read "When genius fails". A time back in the 90s the US almost went caput. Didn't get much play back then.

Will it?
Doubt it, but never say never

[mosquito]

The gov't is putting banks on the hook for loans etc. that at this point are unlikely to be repaid, that will hurt them. However their financial health is on the scale of Godzilla, they look like a buying opportunity or maybe since I have time now, in and outs using HFU and HFD stocks. In 2 years they are likely to be back to their January numbers... where else is there the potential for almost doubling your money (+ dividends, IF you buy the stock not the market stocks like HFU)

When you look at the banks that have failed, and they are interesting, it is usually because of aggressive plans that failed. The Canadian banks fit the old Japanese Godzilla analogy fairly well, slow, crushing oppositions and short of nuclear attack almost undamageable.

[huntervinni]

Jben you can't compare the banks in the US with Canadian banks. I never said this pandemic and the possible crash in real estate won't hurt our banks.......I said they won't go under as a result of this. Sure they will be creative and defer mtg payments which not many people i believe have taken advantage of, because in all honesty there is no advantage in doing that unless of course you have no choice.

[JBen]

No you can't, our system is stronger. But we also just have the 5 big ones ( for all intents and purposes). Liquidity matters.

And the Govt isn't putting the banks on hook . They are taking the risk buying up some unsecured mortgages, buying different kinds of bonds. And the banks are covering their backsides, if you think they care about you, have a heart and want to be nice by letting you defer mortgage payments.......when too many of you start defaulting on credit cards, on credit lines, on mortgages because you can't make payments, and or the price of your house isn't worth the mortgage......which they would then own...

[JBen]

I linked fincad and derivatives for a reason.
Heres a paper from the Bank of Canada for Interest rate swaps.
The Federal Government's Use of Interest Rate Swaps and ...www.bankofcanada.ca › uploads › 2010/06 › kiffe

Heres a link that touches on the use of Interest rate swaps here in canada. Companies, governments, all financial institutions use them to farm off, mitigate Interest rate risk.

In 2010 the notional value ( book value) was 434 trillion.
The interest rate derivative market has grown in volume over
the years. The notional amount of interest rate derivatives
outstanding was $434.1 trillion at mid-year in 2010 compared to
$201.4 trillion at mid-year in 2005 according to the ISDA Market
Interest-rate Swaps: Hedge or Bet? A Case of Canadian ...caia.org › aiar › access › article-917
Survey.1 The use of interest rate swaps in the corproate sector has
been studied extensively. A study of 500 big firms surmises

Liquidity is like blood. Choke off the aorta and....
choking off liquidity happens when....

[fishfood]

The gov't is putting banks on the hook for loans etc. that at this point are unlikely to be repaid, that will hurt them. However their financial health is on the scale of Godzilla, they look like a buying opportunity or maybe since I have time now, in and outs using HFU and HFD stocks. In 2 years they are likely to be back to their January numbers... where else is there the potential for almost doubling your money (+ dividends, IF you buy the stock not the market stocks like HFU)

When you look at the banks that have failed, and they are interesting, it is usually because of aggressive plans that failed. The Canadian banks fit the old Japanese Godzilla analogy fairly well, slow, crushing oppositions and short of nuclear attack almost undamageable.

Yeah it's the best time to buy when alot of shares are 50 to 60 percent down.
I'm investigating in a short term 1 year should almost double my investment "hopefully". Yeah it would be great for a long term investment but I am not worried about the long financial investment. Easy money money to be made now, its horrible but everyone needs to make money and now is the perfect time to get a nice boost on the money we do have.

I turned down a job last week my regular job might not even happen this year .I talked it over with the wife that I would need to find a new line of work,she wants me to take the year off lol. If I'm lucky I will make enough to retire next year. Become part of the trading group most people dont know they can retire on such little amounts. That is if they are smart enough to make money on the the money you have.

I even know a trader that uses the banks money to make his own income, something I would not recommend lol.

Sent from my SM-G960W using Tapatalk

[JBen]

Another indication I thought I'd mention.

I know a small business owner. He does over 7 figures in revenue a year. But it's a capital intensive business ( equipment, supplies, vehicles). His credit lines are big. Even with the governments 75% wage subsidy, he decided to lay everyone off. He recently applied for the small business loan banks are doing. its interest free. Are the banks doing that because they believe in from the heart out? Or is it worth it to them, give him tens of thousands interest free, and he doesn't have to pay back the full amount either. If it means he doesn't default on his credit lines( X hundred thousand) ???? He's just one small business owner.

i've mentioned the swap markets may times. No-one needs to know all the different types, what and why they are used. What the mechanics for them are. The "notional value" and they are like huge balls of twine with dozens of loose ends. Or the worlds biggest bait caster, the size of Ontario, with the worlds gnarliest birds nest. All that stuff is behind the scenes, stuff few know about. And it won't take a heck of a lot, for big problems.

Are we better than the US. Yep, we have stricter regulations, banks have more stringent stress test and capital requirements, etc etc.
But just because all the movies are the Wolf of Wallstreet, the big short, and many more...Dont think we are immune, nor that the rest of the world likewise isn't tied up in that massive birds nest. 434 trillion in Interest rate swaps in 2014 ( which primarily are used so that users can farm out their risk to rates, or even swap rates...say wanting 1 month interest rate exposure, instead of 6 or 12)

Someone mentioned life insurance a lit bit ago.
Lol, derivatives for life insurance were becoming popular around 2014.
https://www.investopedia.com/terms/i...derivative.asp

[mosquito]

Yes, the 40,000 loan, as long as it is paid back before 2022 you only have to pay back 30,000. Any small business owner that isn't waist deep in cash and gold will apply for that. End of the year alot will pay it back, alot will have folded by then too.

The banks look at the longer term and failures are a short term issue so someone extending their mortgage or loan is a benefit in the interest and the fact there isn't a bankruptcy.

No financial institution is immune but Canada's bank... well Godzilla doesn't fit, Hyrda is a better fit, mortgages, loans, credit cards, bonds, foreign banks, investments... they hold enough of any one of them to be huge in that area alone, they paste the Hydra together and we have a Canadian bank. Damage one head the others will keep it alive and it will grow back bigger.

2 years ago, not sure what it would be now on a quick look but I think they are good, they've been getting $1B in profits so they may go hunting bargains too.

https://business.financialpost.com/n...-and-takeovers
The Big Six are estimated to have $14 billion of excess capital, leaving them with enough resources to pursue acquisitions, buy back shares or build from within

[JBen]

Pretty much Mosquito.

Back in the 80s, we had banks, insurance cos, brokers. The banks gobbled up the brokers when deregulation hit ( another problem in the us). They now have insurance and more ( though underwriters are still the big ones). Every 10-12 years one of the big ones will want to merge with another. There’s always big fights and teeth gnashing with the feds.

“Liquidity”
Prior to 2008 we had massive lines with them all. Which meant I had 5 lenders I could go to. Borrow hundreds of millions here, raise collateral from another. Tomorrow ( maturities, refinancing is often daily/weekly). Juggle things around, blah blah.

If that drops to three, credit lines get reduced, the ability to juggle, blah blah. It’s both a big strength, but a weakness as well.

Anywho, people can only guess how it might go. As far as real estate goes, the measure the feds have taken, to take some of the risk, and the measures the banks are taking are preemptive. For good reasons.

[MarkB]

Careful, there's going to be 3 crashes ... the first pretty much happened. The second .... Q4 2020 or Q1 2021. Third well into 2021.
First was based on fear/panic in anticipation of COVID impacts. Second will be based on real business impacts ... insufficient orders, lots of bankruptcies ... Third is when massive layoffs are done, and savings are chewed through ... then we get into massive delinquent debt, and personal bankruptcies ... that's when property is going to tank.

I hope I'm wrong ... but I'm going to wait and see what happens. If property crashes ... might be time to invest. Got to be patient though...