Being a Canadian I obviously keep a close eye on the financial scene here in Canada.  The RRSP deadline is fast approaching tomorrow March 1, 2010.  This deadline means you must have your registered investments purchased by end of day if you want to claim them against the 2009 tax year.  This is quite a hectic day for mutal fund advisiors and pretty much any financial planner that offers some type of registered investment.

Many Canadians will just speak with their personal financial planner or go to a bank and purchase whatever mutal fund they are currently promoting.  Many of these funds have very little upside wich is offset by high fees.   they may not tell you about these fees unless you ask.  Since the fees are taken from your balance after you purchase the finds you generally do not notice them missing.  So yes,  you can be starting your investment down 1-3% regardless of market conditions.  Each year these fees will be deducted from your account once again.  These fees can eat you alive while they destroy any possible gains and can significantly decrease your retirement potential when calculating the year over year expense.

Combined with a heavy taxation rate when withdrawing this money during your retirement may cause many people to rethink their savings strategy.  Some of the reason I mentioned are why the folks at the Divident Growth site refuse to be sold mutal funds.

Dump Your Funds

dividendgrowth.ca

Check out these links and ensure you are educated.  Everyones situation is different so make sure you make choices that are right for you.

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Wikipedia’s definition of a Bank Run

A bank run (also known as a run on the bank) occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent. As a bank run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy (or positive feedback): as more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.

Bank Holiday

March 5, 1933

Roosevelt declares bank holiday
When Franklin Roosevelt started his first term in the White House in 1933, he inherited a nation in the depths of the Depression. A record 13 million Americans were unemployed and businesses were drowning in red ink. Perhaps even more pressing was the head-spinning string of bank failures which had triggered a frantic run on the nationÝs savings vaults. The wave of withdrawals by panic-stricken depositors further dried up banks’ already-depleted supply of liquid assets and pushed the nation’s banking system to the brink of disaster. On March 5–the day after being sworn into office–Roosevelt stepped into the breach and declared a “bank holiday,” which, for four days forced the closure of the nation’s banks and halted all financial transactions. The “holiday” not only helped stem the frantic run on banks, but gave Roosevelt time to push the Emergency Banking Act through the legislative chain. Passed by Congress on March 9, the act handed the president a far-reaching grip over bank dealings and “foreign transactions.” The legislation also paved the path for solvent banks to resume business as early as March 10. Three short days later nearly 1,000 banks were up and running again.

Some would say these two countries need each other to survive while other think China could begin selling its products to its own people. Other news items shows China putting massive amounts of money into gold and silver.

Here is a video from Chinese news station pitching silver bars.

China Dumps US debt

Major Foreign Holders of US Treasuries

Japan’s US Treasury Holdings

Why is China Buying Gold?

The chart below lists the write down the major global banks took in 2009. The top four all all Canadian banks. A couple more like Royal Bank of Canada and CIBC are also listed a but further down.

Many people may think the Canadian banks are too conservative and take small risks. Those people would be correct. Profits for the big 5 Canadian Banks (TD, RBC, CIBC, BMO and Scotiabank) are smaller than what you would expect from most majors banks mostly because their exposure to risk is much less. This great ability to manage risk is done in a country that does not have a required reserve ratio on deposits. Kinda strange since the US banks have a 10% reserve ratio and nearly collapsed a year ago.

If not for the stock price and security alone you may want to look at the Big 5 dividend history.

Here are some excerpts from a few of the sites regarding their dividend history.

Scotiabank

Scotiabank’s practice has been to relate dividends to the trend earnings, while ensuring that capital levels are sufficient for both growth and depositor protection. This practice, coupled with the Bank’s strong earnings growth, has led to dividend increases in 37 of the last 39 years – one of the most consistent records for dividend growth among major Canadian corporations.

BMO

Dividends are generally increased in line with long-term trends in earnings per share growth, while sufficient profits are retained to support anticipated business growth, fund strategic investments and provide continued support for depositors. BMO’s policy is to maintain a dividend payout ratio of 45% to 55%, over time.

CIBC

CIBC has not missed a regular dividend since its first dividend payment in 1868.

Remaining two banks. RBC TD

To honor this post I present the great Canadian Silver Maple Leaf 1 oz coin.

I plan to write a more detailed article in the future regarding how these two investment vehicles have done in the past few years.

Despite what anyone in the media says, Canada is a major exporter of oil to the US.  Currently The US imports almost twice as much oil from Canada then the next country on the list.  See for yourself.

US Crude Oil and Total Petroleum Imports Top 15 Countries

Enbridge’s Alberta Clipper pipeline set to come into service ahead of schedule – Winnipeg Free Press

People all over the country are choosing to move their money out of bigger banks and into smaller, community-oriented financial institutions that generally avoided the reckless investments and schemes that helped cause the financial crisis. Fueled by the personal initiatives of thousands, it’s a grassroots effort that has the potential to shift power in the financial system away from Wall Street and to Main Street. Check out the video, read up on what inspired the idea, connect with others through Facebook and Twitter and then use thetools and links provided to find a community bank or credit union in your area.Move Your Money

http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table

Provided the Fed actually reveals their true accounting practices it will be interesting to see where this money came from when bill HR 1207 is passed this year.

Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009. Now, however, the Fed tells us that they’re “fed up,” or that they think the economy is strong enough for them to gracefully “exit,” or that they’re confident that private investors are capable of absorbing the balance. Not likely.

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References:

No Agenda News: The Epic Disaster of Fannie& Freddie