Canadian Banks - We Love 'Em and Hate 'Em...for the same reason

They make tons of cash!

As investors we love it that our banks are so profitable. Quarter after quarter they churn out mind boggling numbers. Oh sure now and then they disappoint a tad by missing expectations and we sell off the shares for a while. For the past few years they held off increasing dividends while reorganizing after the world wide banking crisis which affected them very little. With that behind us the smart money is betting that we'll see dividend increases in 2011. In fact, National Bank (NA) kicked it off with a dividend increase announced last November, the first Canadian bank to do so since 2007. RBC (RY) joined the party last week with an announcement of a 8% dividend hike.

As retail bank customers it's more of a love/hate relationship. While we appreciate the banks' for the services they provide we often get more than a bit PO'ed with their #$%*! charges. If you're like me, you've shopped around for a package with the lowest possible monthly service charges, transaction fees, ATM fees etc. I'm happy to report that I pay no service charges for my day-to-day banking services. I think they call it a "seniors' package"...don't like the term but what the heck, I'll take...whatever. For the record, I NEVER order from the seniors' menu at restaurants.

So, you ask, what's my beef with bank charges? I didn't have one until a couple of weeks ago. We took a short four night trip to Vegas in mid April. In keeping with our practice, we took cash out of our US funds account. No exchange, no problem. Right? I did have fair warning before we left that my better half intended to shop. The shopping in Vegas is just too much fun. Jimmy Choo anyone? It was no surprise that we burned through the cash and were soon into the plastic and therein lies my beef with bank charges.

For the entire period we were away the Canadian dollar was trading well above the US, in a range between 1.0225 and 1.0275 US. Guess how we made out with our credit card charges. The best we did was 1.00368 on a day when the C$ was over $1.025 US. A day or two later when the C$ dropped below $1.025 US the rate was .99558. Yup, while our Canadian dollar was worth well over the US$ we lost out on any possible savings by virtue of a 2.5% fee for all foreign currency transactions.

Yup, our banks make tons of money...trouble is, all too often these great returns are at our expense.  For my part, I'll keep shopping for the best deal and I'll stick with my BMO, RBC & TD shares.  After all, like I've mentioned before, the Canadian banks have outperformed the markets every years since 1967.

FEAR and GREED, my personal struggle

Regular readers know that I've been holding the Canadian Endeavour Fund for some time. It had been my largest single holding. Since the last big dip in March, 2009 this Canadian large cap fund has made significant gains and contributed greatly to my overall recovery.

One day last fall I realized that the unit price had risen to the highest level since I initially bought in. Whenever something reaches a new high (for me) there's always a temptation to take the money off the table for fear that it will soon drop and may take forever to come back. Such a decision can't be taken lightly with your largest single holding. Questions. Will I miss further upside if I cash out? Might I lock in the gains and avoid a huge loss if the bottom falls out?

The day it caught my attention the units were at a new high and I figured I'd be real happy to cash out at this level and put the money into a bond or money market fund to avoid further volatility. Remember, my exit strategy calls for me to be out of the markets in advance of my next retirement date as mentioned in Who Should(n't) Be In Funds?

Well, you know what happened to the Endeavour Fund units. They pretty much followed along with the TSX. Up, up and away! Each week the unit price reached a new high. After each new high the price would fall back a tick or two. Each week I'd tell myself that I should have bailed (FEAR). Each week I'd remind myself how much money I gained since that day last fall when I realized that this fund was smokin' (GREED).

As reported on May 5, I tried to cash in some chips...but when I finally made the decision I missed the boat as finance guy was away and didn't think to put an out-of-office notifier on his email account. I know full well that a mutual fund dealer is not like a stock broker in terms of always being able to make contact but I don't think it's too much to ask that finance guy make provision to let clients know when he's not available.

Over the next couple of days finance guy and I were in a bit of a p!$$!ng contest as I noted that I was out several thousand dollars because the fund switch was not completed on Monday, May 2 as requested. Little did I know that finance guy processed the switch on Wednesday, May 4 even though I think I'd made it clear that my window of opportunity had passed on Monday and I planned to wait until the Endeavour Fund units recovered to that same level. I only discovered this when I logged into my account with the fund company a few days later.

So, my fund switch was completed albeit a couple of days late and at great cost as the Endeavour Fund units had gone down and the Bond Fund units had gone up. So, even though it didn't go exactly as planned, I did indeed Sell in May and Go Away. I'll continue to monitor the markets as I'm keeping my trading account and watching for opportunities to make a few changes like getting out of Cisco (CSCO:NY) which is my worst dog at the moment.

We're settling into our new life in Carman, Manitoba and I'm enjoying Bloggin' By The Boyne.

Good Luck and Happy Investing!

TPCI turns two

Yup, the first post to TPCI was two years ago yesterday.

My Blogger profile says that I've been on Blogger since October, 2005. I don't recall blogging back then. Neither Blogger.com nor I have any memory of my activity prior to May 8, 2009. I have a vague memory of ranting on a certain subject way back when. Long before Facebook or Twitter I did consider starting a "Get Michael Kane Off ROBTV (now BNN)" group. That may have been the subject of my early blogging.

TPCI was triggered, I suppose, out of anger. Not the best emotion to harness when attempting to record rational thoughts on a given subject but it did get things going. Along the way, I've come to realize that I was as angry with myself as I was with finance guy. Hey, I'm an adult. I have to take responsibility for my decisions. Sure, it's okay to be PO'ed with the guy doling out the $#!tty advice but, at the end of the day we all went along without taking the trouble to learn what we were getting into.

By May of 2009, my stuff had hit an all time low on November 20, 2008 and nearly got there again on March 2, 2009. So, things were actually on the road to recovery when I first posted to TPCI. Since then it's been quite a ride as regular readers will know.

Last week, the Bin Laden effect gave us a bump up on Monday. The markets apparently responded to the suggestion that the world would be a safer place without Osama. By Tuesday, suggestions that Bin Laden's demise would result in retaliatory violence took the wind out of those sails. This, coupled with an across the board sale off of commodities, sent the markets into a tail spin. Even with a gain of 111 points on Friday, the TSX was off nearly 400 for the week.

For probably just as good a reason as commodities dropped off last week, they're recovering a tad today. Naturally, the TSX is responding in kind although not in a big way.

Have a great week and, as always, Happy Investing!

I tried to cash in some chips...but

As mentioned last Monday, I was giving serious consideration to taking some money off the table.  The markets were up on the Bin Laden effect and it was looking like a good day.  My plan was to pull out of my largest single holding, the Canadian Endeavour Fund.

Shortly after 1:00 PM 'Toba time I pulled the trigger and dashed off an email to finance guy in The 'Peg.  "Switch ALL of my Endeavour Fund # 1234 to the Bond Fund #2345" (fictional fund numbers).  I sent the email High Priority and requested a Read Receipt and confirmation by return email.  Naturally, I expected an email saying that he'd do it but would need a signed form for this size of transaction.  He'd never remember that he sent the required form at my request some months ago.  All that was left was me to sign it and date it.

I did not hear back.  Why?  Well, on Tuesday I learned that finance guy was out west, with his computer, but not checking email.  For his failure to put a simple out-of-office notifier on his email account, which would have caused me to contact someone up the ladder, my ship sailed without me aboard.

Monday was the perfect day to make the requested switch.  By Tuesday I was down thousands of dollars because of the market decline.  It was a double hit.  I lost on the units that I tried to get out of when they dropped and lost some more when the units I wanted to buy went up. Wednesday added insult to injury as the same thing happened again.  Ouch!  That hurts!

As for finance guy, he takes no blame and has offered to do not a thing.  I contacted what I thought was his head office in Toronto only to learn that finance guy is an independent broker licensed through them but not employed by them.  A similar call to the fund company in Toronto was to no avail...and no, had I contacted them directly on Monday, they would not have been able to make the switch.  They only act upon orders from licensed dealers.  So, there you have it.  If you're watching your portfolio and think that you may wish to make the occasional timely change, deal with an independent at your own risk.  Me, I'm seriously considering taking my business to the financial services department of one of the major banks.  From past experience I believe that banks tend to support their staff and make amends when someone drops the ball.