Canadian Personal Finance Blog

As usual on the day that the Bank of Canada is about to announce an interest rate change, I typically wait until that is announced, but today, I’ll simply “flash” that information when it is available at 9:00 AM ET. 

The prognosticators are saying this is most likely another 1/2 point drop, however, whether the large banks follow suit or reflect the entire 1/2 point drop, is another story completely, as we have seen, some banks are attempting to help their margins by expanding the working area for their borrowed moneys (Toronto Dominion for one).

Bank Rate Since 2000?

Here is an interesting graph, using the data from the Bank of Canada’s web site. It shows the key overnight rates over the past 8 years, interesting to see how low rates have been and yet still there is problems with high interest rates causing folks to have problems with their debt loads?

The graph is missing the last 1/2 point drop that happened earlier this month (apologies for the inaccuracy, I am just figuring out how to do this stuff on the web).

Bank of Canada Overnight Rates since 2000

Deflation?

Now that Gasoline prices have dropped by about 30% in Ottawa, here is an interesting question, are we now in a deflationary period? Will all the surtaxes and rate increases levied because of high gasoline prices be lowered now? Will I ever answer these rhetorical questions? Anyone care to comment?

The Bank of Canada announced a 1/2 point drop yesterday of one of their key rates to 2 1/2%, and made the statement:

Bank of Canada lowers overnight rate target by 1/2 percentage point to 2 1/2 per cent

The Bank of Canada today announced that it is lowering its target for the overnight rate by 1/2 percentage point to 2 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 3/4 per cent.

Normally I would be dancing in the streets and celebrating (the way I was yesterday for the Canadian Personal Finance 1000th Post), however, sometimes things are not as they seem to be at first blush, at least from one bank.

Toronto Dominion: When is Prime Not Prime?

That is actually an excellent question for Michael James, as he is a Pure Mathematician who revels in all things to do with Prime Numbers, however, in this instance Prime means, Prime Lending Rate.

As of two days ago TD (my current bank of choice) had their Prime lending rate (for only their best clients and least risky loans) pegged at 4.75% and their Variable Rate mortgages (at least some) were available at that very rate. Yesterday an odd announcement and change was made that these loans are actually now at Prime + 1%, or 5.75%, thus bumping up the rate for all of these mortgages almost an entire point (and adding much more to monthly payments).

I on the other hand use a secured line of credit which allegedly is at the TD Prime Lending rate of 4.75% as of two days ago. Today, I have seen no change in that rate either up or down, which worries me.

1. The rate should drop 1/2% in reaction to the Bank of Canada rate drop, but it might not
2. The rate might go up 1% as has happened with the Mortgages to reflect the banks concern about liquidity and credit.
3. The rate might only go up 1/2% as a combination of (1) and (2)
4. None of the Above and the rate simply does not change, thus the bank pockets 1/2% increase.

It’s The Economy Stupid

Thanks for the 1000th Posting

Germany Bails Their Banks Out

Greece, Ireland and now Germany have now guaranteed all privately held bank accounts in their country. This means those accounts are safe, but also that these governments were worried that the banks that held these accounts might actually fail, and they are concerned enough that they feel they must assure their population that their funds are safe.

What does this mean? As usual, I have no idea at all, but it does add more spice to the bubbling cauldron that is the world’s financial markets. Does this mean Canada is heading in this direction? I don’t think so, or maybe I simply, hope not.

Is Jobs Apple?

So a rumor on a CNN web site claiming that Steve Jobs had a heart attack caused Apple shares to plummet, which seems to imply that people view Apple and Steve Jobs as being 1 thing (i.e. Jobs goes, and Apple goes).  I think that is an interesting theory, but I don’t buy it, Steve Jobs is smart, but he has smart people working for him too.

More Jobs in Canada

No not another Steve Jobs story, evidently 12,500 more jobs in Canada for September. This now worries me more, given I don’t have one, but it is encouraging to hear there are still jobs in Canada. All I need now is to get one of those jobs, and hope that the credit tightening does not stop a lot of growth that might cause more jobs to be created.

Election: 1.5 Weeks to go

Should be an interesting home stretch in the Canadian Elections, given the Tories seem to be taking a page out of the Liberal tactics book and are looking for ways to snatch defeat from the jaws of Victory as well. Tory support is slipping, but where are these folks going? I see an NDP/Liberal split of the left but who knows, what may happen, should be fun to watch, maybe Mr. Harper will pull a rabbit out of his sweater vest?

Carnivals

• Girls Just Wanna Have Funds is hosting the 173rd Carnival of Personal Finance where they link to my Stupidest Monthly Bill Ever post

We most definitely live in very interesting times, and they are getting more and more interesting every day. With the U.S. government’s bail out plans going on hold and the markets not appreciating that (if you view a 700 point drop as “negative feedback”), I think we are most assuredly living in very interesting times.

Eerily Similar Commentaries

Now, I am not saying that this is time to panic, but I remember in 2000 when folks started wondering at Nortel whether the company could actually “collapse” from it’s $120 per share stock price I heard statements like:

• The government wouldn’t let it happen, it would kill the TSX and the Canadian Economy.
• If Nortel goes down, a lot of people are going to be hurting
• Nortel’s fundamentals are sound

Have you heard those same statements about the U.S. financial system? No, I am not saying this is in any way similar, I am merely pointing out that no one knows where this is going to go, and what the final fall out might be.

OMG I Almost PMP’ed

OK, that’s for my younger readers, for my reaction when I heard the Congress didn’t pass the “bail out” bill.  Speaking as someone with no income now, I am curious to see what happens, because if this causes an American recession or worse depression (anything is possible, I am not saying this is going to happen, simply I hope it doesn’t), finding a job in Canada is going to get a lot more interesting.

Is it time to buy in to equities? Don’t ask me! You should buy when you think the bottom has been hit, but I have no idea what “bottom” is any more.

By the Way Oil is Below $100 a Barrel

Remember two weeks ago when we were worried about Oil prices? Oil is below $100 a barrel, but I guess it’s kind of hard to notice that the hurricane is over if your house is on fire.

Now is the time to Panic?

No, but watching the financial pundits is more interesting than listening to the Election pundits, that is for sure.  In Canada Jack Layton is portraying the NDP as the official opposition to the Tories, if that happened, I would truly agree that we are living in interesting times, and the Devil is going to put in central heating, because it really is getting cold in hell.