Fed again was going to go deep into the ‘war-chest’

Interesting article today on the FOMC from TD Economics, the Fed again reaffirmed it’s decision to keep rates at unprecedented low levels to keep the economy in motion. President Lacker also hinted that the Fed again was going to go deep into the ‘war-chest’ and try to remove toxic mortgage stocks from the slumping US bank balance sheets.

 

 

Here is the main TD Economics Article

 

 

 U.S.: FOMC CLOSE BUT NO CIGAR FOR TREASURY BUYING

 

• The FOMC kept the fed funds rate steady and

reaffirmed its commitment to keeping rate exceptionally

low.

• President Lacker dissented, preferring the Fed

to start purchasing Treasuries immediately.

• Fed hints at its willingness to expand balance

sheet further.

• Concerns were expressed about the downside

risks to inflation and growth.

 

Not surprisingly, the FOMC kept the fed funds rates steady and reaffirmed its commitment to keeping rate exceptionally low for some time. The Committee seemed to have advanced the discussions on the purchasing of Treasuries, and although it didn’t quite commit to this today,

it appears that it is only a matter of time before it does so. To this decision, Richmond Fed President Lacker dissented, favoring instead that the Fed immediately embark on expanding the monetary base by buying Treasuries. The economic assessment of the Committee remained grim, with the Fed noting that “industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending”. However, the Fed stated that it anticipates “a gradual recovery in economic activity will begin later this year”, though it considered the risks to the economic outlook to be to the downside.

 

On the inflation front, the Fed noted that it expects inflation to remain subdued on account of the growing economic slack. And the statement goes on to express the Committee’s concerns about the risks that inflation could remain below the levels deemed to be appropriate to foster economic growth, which suggests that the Fed will stand on guard against any deflationary spiral.

 As expected, the Committee did give a nod to the improvements in financial market conditions since the last meeting. However, it did note that “credit conditions for households and firms remain extremely tight.”

 

In the final analysis, with the fed funds rate effectively at zero and its efficacy in stimulating the U.S. economy impaired by the dislocations in the U.S. financial sector, it is now clear that the Fed is willing to pursue more unconventional approaches to monetary policy implementation. In contrast to the prior statement in which the Fed noted its willing to sustain the size of the balance sheet at a high level, the Fed has now expressed its willingness to outright expand it. And in addition to its commitment to expand credit facilities and purchase large quantities of agency

and MBS debts, the Fed is now willing to embark on purchasing longer-dated Treasuries if certain conditions are met – which we believe will occur in due course

5 Tips to find hidden money

  5 steps to help you plan ahead. It’s hard enough these days to be thinking about how you are going to cover necessary items let alone save for the future, but as they say we don’t plan to fail- we fail to plan! This week Aaron Theilade from Investors group shares 5 simple principles to find that hidden money and start saving today for a better future.

Investing regularly is important. If you’re going to achieve your retirement and other financial goals, you should consistently contribute to your RRSPs and non-registered investments. “Paying yourself first” through monthly contributions is an excellent strategy to build an investment portfolio. If you’re like most Canadians, however, you are not sure where to look to find the extra money needed to invest. There is a way – in fact, there are four good ways to perhaps uncover “hidden” money you already have, which you can use to start an investment plan on a regular basis. All it takes is a bit of smart money management using the strategies set out below.

 

Review your household budget Carefully reviewing “how” your family spends its money and making changes can free up cash flow. Start by determining if expenses are essential, including your mortgage and utility payments, or if they are non-essential such as buying lunch at a restaurant every work day. Then ask yourself, what can I do differently? Small and simple changes like ensuring you turn off lights when you leave a room can make a major difference in how much money you have left to save each month. * The GVRD has created a great money-saving guide to reusing, repairing and renting goods in the lower mainland, to recive a copy, send me an email I would love to pass it along!

 

Debt consolidation can increase your ability to invest “Debt consolidation simply means paying off a number of higher interest rate loans or other high-cost debt by taking out a single loan at a lower interest rate for a consolidated overall lower monthly payment,” says Jane Olshewski, Senior Specialist – Financial Planning Programs at Investors Group. “You can choose to consolidate debts such as car loans, education loans, credit cards or lines of credit and benefit through a single, more affordable monthly payment which is lower than the sum of the many monthly payments you were making previously.” It can be an effective way to regain control of your finances, manage your monthly cash flows, free up money for other purposes and reduce stress. Additionally, any repayment plan that can allow you to move from simply servicing your debt balances to actually eliminating them is positive as well. If you own a home, you can also consider consolidating your debt using a home equity loan. Your loan is secured by your home at usually a much lower interest rate than you currently pay on most credit cards, which can often range from 19 percent to over 28 percent. By paying less interest monthly, you’ve created additional cash flow that can be used towards your retirement, other financial goals or paying down your principal. * A TD Canada Trust HELOC or Home Equity Line Of Credit is a simple interest account that can be an extremely efficient way to manage cash flow and save thousands on interest costs, send me an email at david.hudson@td.com 

 Restructure your mortgage Sometimes, changing the structure of your mortgage can help you find the money you need to make regular investment contributions. Many individuals set their mortgage repayment at the highest amount they can afford in order to minimize interest payments and pay off their mortgage as quickly as possible. Although these are two important goals, other goals like building an investment portfolio to prepare for retirement and protecting against uncertainty through insurance products also need to be taken into consideration. Does it make sense to pay off your mortgage over a different term to provide you with the cash flow you need to start an investment portfolio or to fund the monthly premiums on a life and/or disability insurance policy? If you have built up extra equity in your home, does it make sense to use the equity to cover your RRSP contribution or to start an RESP? With the help of a personalized comprehensive financial plan including a cash flow analysis prepared by a Investors Group Consultant you can decide how quickly you want to pay off your mortgage while working towards your financial goals.

 Get tax back now, not later Getting a tax refund cheque from the government each year might seem like a “windfall” profit – but it’s not. By having too much tax withheld from your pay each month, you are actually giving the government your money to use throughout the year – and they aren’t paying interest to you for your kind gesture. Instead, if you are an employee and your employer makes tax deductions on your behalf, you can reduce the amount withheld from your pay cheques each month by filing a T-1213 form with the Canada Revenue Agency (the CRA). The CRA will then issue a “letter of authority” to your employer, authorizing your employer to reduce withholding taxes. You can then invest part of your usual year-end tax refund immediately each pay period.

 

Thanks to Aaron for sharing these great tips!

TD Mortgage Rate Lowers! 4.35%!!

Great news TD Mortgage Rate Lowers!!

 

TD Mortgage rates are lowering! Today it was announced that effective November 19^th 2008 that a limited time offer of 4.35% 1 Year Closed Fixed Rate Mortgage will be offered on applications up to December 31^st 2008. All transactions must be funded by no later than April 30^th, 2009. As with all Mortgage products the offer can be changed or withdrawn at any time – time is of the essence! Is your mortgage working for you, or are you working for your mortgage? Today is the perfect time to start saving money. Today!

Lynchism Gem: Ignore the headlines

Famed Money Manager Peter Lynch is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.

It’s not that easy thing to do, every water cooler and dinner table has endless chatter on recession, housing, subprime woes, the credit crunch, Overpaid CEO’s and soaring energy costs.

Makes you want to sit on your thumbs and wait it all out before making any big moves. But what exactly are you waiting for???

Rarely has there been a moment in time that you couldn’t scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, “in spite of all the great and minor calamities that have occurred…all the thousands of reasons that the world might be coming to and end-owning stocks has continued to be twice as rewarding as owing bonds” The top reason not to buy stocks, in Lynch’s view, is if you don’t already own a home-in which case, that should be your first investment. An owner occupied home is nearly always profitable.

Warren Buffet the Oracle of Omaha has recently been quoted to be actively perusing US Stock and companies with his personal account. “Be Fearful when others are Greedy, and be greedy when others are fearful.”

The Fundamentals of the economy especially in British Columbia are very strong. If you are needing to retire and have lived your whole like in Winnipeg and have enough to live well in BC would you not leave the winter behind, if you want to use your RRSP’s and the Canadian Medicare then your California of Canada is right here in the Lower Mainland!

 

Here is a great article in the Vancouver Sun echoing these ideals

#####

B.C. in better position than most to weather financial storm

Derrick Penner

Vancouver Sun

Monday, October 20, 2008

 

VANCOUVER — On the bright side, British Columbia is heading into a period of economic uncertainty with a provincial budget that is in good shape and an economy that is performing well, according to the  Institute of Chartered Accountants in B.C. (ICABC).

However, the B.C. economy is not doing so well when it comes to the competitiveness and productivity of its workforce, the ICABC said in its annual Check Up B.C. report, an assessment of provincial economic performance. B.C.’s labour-force productivity increased by 1.3 per cent between 2002 and 2007, the report said, which lagged the national average of 4.5 per cent.

“At this time of uncertainty, it is imperative that government continues to be conservative in their economic forecasts and considers all policy tools at its disposal to stimulate investment, boost productivity and maintain sound fiscal management,” Richard Rees, CEO of the ICABC.

Rees added that the no one knows what the impact of the current financial crisis will be, and while “many British Columbians stand to lose a great deal,” the province’s economy is “in a better position than many of our competitors to weather some of the challenges.”

The Check Up report measures factors in three general areas: quality of life, work and investment, mostly how these factors performed over 2007.

On the work side, the ICABC noted that B.C. reported a record low unemployment rate of 4.2 per cent in 2007, a year that saw 70,800 new jobs created.

However, in 2008 the job market has softened, the ICABC added, with only 500 net new jobs created in August and an unemployment rate that has risen to 4.6 per cent.

“Already many resource-dependent communities are feeling the effects of reduced consumer demand and lagging commodities markets, and our forest industry continues to stagnate,” Rees said.

“But we are fortunate in B.C. that the provincial government has done a good job creating a sound economic environment.”

© Vancouver Sun 2008

TD Canada Trust raises home equity loan rates

*Update April 23, 2009 Current pricing structure on the HELOC is at Prime + 1.5% = 3.75% on the float portion of the account*

“TORONTO — One of Canada’s biggest mortgage lenders, TD Canada Trust, is increasing the interest rate charged for its home equity line of credit and variable-interest mortgages.

The bank has been charging its prime rate for its Home Equity Lines of Credit — which uses the value of the customer’s home as collateral — but will start charging one percentage point above prime.

TD Canada Trust also is increasing the rates for its open and closed variable-rate mortgages to one percentage point above prime, effective Tuesday.

The prime rate at TD and most major Canadian banks has been 4.75 per cent since April, the last time the Bank of Canada changed its target for its overnight lending rate.

With the change, TD customers who have borrowed under those lines of credits or variable mortgages will be paying an annual rate of 5.75 per cent unless the prime rate changes again.”

Banks around the world, including in Canada, are finding it more expensive to borrow money on wholesale markets, due to the turmoil in the U.S. financial sector.

TD Canada trust has raised the “base” rates for the Varible Rate Mortgage products and the Home Equity Line of Credit. This prime plus pricing is a sharp contrast to what we were offering just a few short months ago. Shortly after the notice we have seen the majority of the other Canadian Banks follow suit.

It is difficult to gauge how long this pricing structure will last, what started out as a mortgage meltdown has blown into a global credit crisis.

David Hudson

Canadian banks ranked soundest in the world

Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as a financial crisis and bank failures shake world markets.

Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after its government pledged the equivalent of $97 billion Cdn this week to bolster bank balance sheets.

The United States, where some of Wall Street’s biggest financial names have collapsed in recent weeks, rated only 40th, just behind Germany, at 39th, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

On Thursday, the U.S. was considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum’s Global Competitiveness Report based its findings on opinions of executives and assigned banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received a score of 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

U.K. banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness while Switzerland’s banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the U.S., China, Canada, Sweden and Switzerland slashed interest rates in a bid to end panic selling on markets and restore trust in the shaken banking system.

It is certanly reasuring to be a proud part of a sound economic banking system. Canada’s banking system has been underrated for years, TD Canada Trust is infact the 5th largest Bank in America, yes you read that correctly in America! It has very strong US base with TD BankNorth group, and is infact the namesake of the Celtic’s home in Boston MA !!!

TDdave

Bank of Canada’s half-point cut becomes a quarter-point cut for borrowers

Canada’s central bank moved Wednesday to cut short-term interest rates by half a percentage point, but Canadian banks are cutting rates only half that much.

Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and TD Canada Trust said they will trim their prime lending rates by 25 basis points — meaning a quarter of a percentage point — effective Thursday.

The prime lending rate is what banks charge credit-worthy business customers on short-term loans. Other interest rates, including certain mortgage rates, may be linked to the prime rate but set several points higher.

Tim Hockey, CEO of TD Canada Trust, issued a statement saying his bank is doing its best to help the central bank.

“Continuing market turmoil has steadily driven up the cost of borrowing for financial institutions. This makes it challenging to match the Bank of Canada rate cut at this time,” he said.

“We recognize the efforts the Bank of Canada is making and, despite the fact that our cost of funds remains high, we have decided to reduce our rate by 25 basis points. We see this as a balanced move in managing our funds and passing along the intended benefits to our customers.”

The other banks issued one-sentence notes saying they will cut their prime rates to 4.5 per cent from 4.75 per cent, the same cut announced by TD.

The Bank of Canada, in a move co-ordinated with the U.S. Federal Reserve and other central banks, cut its target for the overnight rate half of a percentage point to 2.5 per cent. The central bank describes that rate as its key policy interest rate, signalling its intentions to credit markets.

http://www.cbc.ca/money/story/2008/10/08/prime-rate.html?ref=rss&loomia_si=t

TD Canada Trust is leading the way for lending practices in Canada, with the ripple effects from Global Economic concerns tricling down it is interesting to note why the banks are only following with half of the centeral banks discount.

Liquidity on the international market has lead to higher expectations for for gin investors, simply put for gin investors want a higher return on lending funds to Banks- this premium demand has forced the Canadain banks to pay higher returns in exchange for forgin cash infusions. This has the bank changing it’s pricing policys in these unprecedented times. It will be interesting to watch what other actions will be taken in the near future with regards to Mortgage rates and HELOC produts from all of the Canadian lending institutions.