Great White North Prognostications

To start with the Royal Bank is now worth, roughly, more than Citi. How can this be? Well I can understand a few issues that might make Citi weak but my key question is: How have Canadian banks been so smart as to not either buy a bunch of CDOs or sell a bunch of CDSs? Are our bankers so much smarter than the rest of the world?

There is an interesting story from Chernobyl. The first sign that the reactor blew up was from Sweden when their nuclear reactors thought they were having a leak as the radiation wafted their way. For the next many weeks the wind blew this radiation back and fourth across Europe, but it spared France. Daily maps showed the radioactive wind in European newspapers. After a while though it turned out that France’s nuclear system, then considered to be the best in the world, had been lying about all problems for years. Thus by reflex they lied about the radiation levels from a disaster that wasn’t even theirs. Due to this lack of openness, and thus public oversight, it turned out that France actually had the worst nuclear safety record in the western world.

I think that this now applies to Canadian banks. I believe that the world does not yet have a clear picture of the health of Canadian banks. So the result is the same, the financial fallout is wafting all over the world but somehow avoiding Canadian banks. Their stocks have been falling but not to the degree that they should if they had jumped onto the toxic waste bandwagon.

So my second last question is: When the party was ending in places like Lehman Brothers, did the Lehman people realize that their Canadian cousins had bags of cash and could buy their toxic waste for one last quarter, and do you think a bunch of podunk Toronto bankers could resist personallized seminars at the four seasons that would then be given to them about the huge returns available to their investment divisions if they were to jump into these vats of toxic waste?

So my last quesion is: Would the cozy government regulators jump all over the banks and expose their weaknesses or would they agree to let them play their cards close to their chests and try to bluff their way through this economic disaster?

Now from an investment point of view if and when will this shoe drop? People talk so never is not a possible option. The sure sign that they are strong is if they start buying things. But if they start talking merger again then they are weak.

2 Days ago I heard a rumour about UBS solvency but I didn’t really believe it. What I do believe is that rumours like that trigger bank runs. Thus when I hear rumours like that floating around I probably should have sold all banking stuff. The big Canadian banks have a zero percent chance of a run but if say Citi or someone has a run then I would lose well over 5-10% on my Canadian banks not to mention the Citi freefall. Plus even after recent banking losses the money could then be reploughed back into Canadian banks for a nice ride back up.