Canadian Banks

So far three of the big five Canadian banks have released their earnings for this period and they are quite impressive given what has been going on all over ther world with bank bailouts.

TD Canada Trust - $712 million dollar profit - Q1
RBC - $1.05 billion dollar profit - Q1
CIBC - $147 million dollar profit - Q1

If this isn't a sign of the strength of the Canadian financial system I don't know what is. While CIBC's profit would be considered unimpressive a few years ago, this is quite significant compared to the $1.46 billion loss they took for Q1 last year.

Considering that the UK has been dumping billions into their banks and the US is easily in the trillions, Canadian banks have not taken one dime from the governement and are posting profits. Yes, that's right, profits.

I think this is prime opportunity for Canadian banks to start buying up some great financial opportunities in the US. This is exactly when the strong need to take over the weak. Maybe its just me, but its time to stop being so frightened and make a few bold moves to increase our position of strength in the world.

Great Cartoon

Rick Santelli - The Silent Majority

I watched this on CNBC yesterday morning and Rick hit the nail on the head with this. I know I'm Canadian but I've always admired the US capitalist system to reward hard work and smart decisions.

Three years ago I was ready to make the jump into home ownership, not because I wanted to make a buck on my home but to live in and invest in myself. I watched many friends jump into houses they couldn't afford simply because they wanted to get in on the wave. People then started using their homes as ATM's and are now getting burned, yet it's my tax dollars that they are asking for to help them out.

I ended up not buying a home because the prices were inflated and I couldn't afford it. So I kept renting. Now our government is wasting money on stimulus packages that won't do anything and I'll end up paying higher taxes, preventing me from likely owning my own home in the future.

If someone wants to put up money for a home there is an inherent risk factor that it will go down and not up. That's the risk you take and if you bet wrong, that's tough and hopefully you learned from your mistake.

Getting the people who didn't drink the coolaid to pay for those who did is perverse and wrong and as long as this continues we are doomed to wallow in recession for years to come. Enjoy the rant. I did!

The Bull In China

China looks to be the first major economy to beging to see the effects of its stimulus plan, and my guess is that this bull will affect commodity prices worldwide. Here are some interesting facts that were published in a Bloomberg article today.

-China has a balanced budget and has much more ammunition of cash due to its foreign exchange reserves. It's overall debt is only 18.5% of GDP. It can relentlessly ramp up spending to create jobs and increase growth.

-China's banks can lend more effectively to businesses because they aren't saddled with the toxic debt that the American banks are.

-Coca Cola's sales in China rose 29% in the 4th quarter. McDonald's is reporting strong growth and is expanding its restaurants.

-Steel and Iron Ore prices are starting to rise as demand for infrastructure commodities increase.

Watch this economy closely because if it starts to show more signs of recovery the demand for oil may turn around the price of oil. With all the cutbacks on oil expansion it has the possibility of spiking quite fast.

DXO - Double Leveraged ETF

Crude Oil is getting hammered this week due to continuing rising inventories despite OPEC's cut backs. The NYMEX storage facility in Cushing, OK is almost at full capacity with 35 million barrels.

While demand has fallen over the past 6 months, crude at this price is unsustainable and will lead to price spikes in the near future. My concern is that companies are cutting back on exploration projects and laying off workers needed to produce. As Oil prices fall further it becomes extremely uneconomical to produce so production shuts down even more and inventories will eventually start to diminish. The problem truly arises when demand starts to creep back up. Even a small increase in demand will send the price higher very quickly. It will take alot longer to get supplies back online than it did to shut it down.

In order to play this scenario I'm invested in DXO, an oil etf that plays on the front months of crude contracts. It's trading in the mid 2.50's right now, and I'm accumulating anywhere below 2.45. The ETF is designed to double the percentage moves of crude oil prices. When oil hit $147 it was trading in the 28.00 to 29.00 range.

If crude moves like I think it will, this ETF will move. When that will happen is anyones guess, but it will happen.