Last week an economist at the Bank of Canada officially acknowledged that Canada was entering a recessionary period, and the share price of some of Canada's major financial institutions fell.
The Globe has now reported that 3 of the 5 'big banks' have issued common shares in recent weeks.. effectively selling off a portion of the companies at current (and arguably questionable) market valuation -- this has allowed those banks to essentially cash out of the company in hopes of a turning a profit by selling to investors like you and me.
What's going on, here?
Normally, companies sell shares to accumulate cash for expansion and long term projects. This doesn't seem to be the case per Mark Carney, Governor of the BoC, who is not particularly pleased with the industry's (albeit if only in appearance) movement to raise their capital cushion (i.e. ratio of: Tier 1 Capital - to - Investments and Debt) to between 500-600 basis points above global requirements of 4%.
All this info got me thinking about an article I read browsing Reutor's last week where the writer effectively delivers points which suggest bank bankruptcy and economic failure in the US financial markets:
So, what do YOU think?
Should the banks loosen up on lending terms to credit worthy applicants, or should they hoard cash in investments, and effectively magnify the impact of Canada's recession?
This is a big decision and will influence the direction of our markets in the short-term, and possibly determine the length and severity of this financial downturn!
Oh and yes, Obama's my homeboy.
;)
Until next time!
xx
The Globe has now reported that 3 of the 5 'big banks' have issued common shares in recent weeks.. effectively selling off a portion of the companies at current (and arguably questionable) market valuation -- this has allowed those banks to essentially cash out of the company in hopes of a turning a profit by selling to investors like you and me.
What's going on, here?
Normally, companies sell shares to accumulate cash for expansion and long term projects. This doesn't seem to be the case per Mark Carney, Governor of the BoC, who is not particularly pleased with the industry's (albeit if only in appearance) movement to raise their capital cushion (i.e. ratio of: Tier 1 Capital - to - Investments and Debt) to between 500-600 basis points above global requirements of 4%.
All this info got me thinking about an article I read browsing Reutor's last week where the writer effectively delivers points which suggest bank bankruptcy and economic failure in the US financial markets:
Dreadful. This market is making our banks lose their shizz, apparently. On the flipside, I wonder if our banks are truly liquid? If our banks are in fact "cash poor", we are in for a bumpy ride.. I really hope this is not the reason behind the Bay St posse's lack of cooperation.NEW YORK (Reuters) - Jim Rogers, one of the world’s most prominent international investors, on Thursday called most of the largest U.S. banks “totally bankrupt,” and said government efforts to fix the sector are wrongheaded.
Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government’s $700 billion rescue package for the sector doesn’t address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.
So, what do YOU think?
Should the banks loosen up on lending terms to credit worthy applicants, or should they hoard cash in investments, and effectively magnify the impact of Canada's recession?
This is a big decision and will influence the direction of our markets in the short-term, and possibly determine the length and severity of this financial downturn!
Oh and yes, Obama's my homeboy.
;)
Until next time!
xx
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