Proof the Largest Canadian Banks are Taking Over

Proof the Largest Canadian Big Banks are Taking Over, Gold Market Outlook, Gold Stocks from a Technical Perspective, and Proof the stock market is rigged

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Proof the Largest Canadian Banks are Taking Over, Gold Market Outlook, Gold Stocks from a Technical Perspective, and More Manipulation

Dear Readers, 

Last week, I talked about why the TSX Venture is failing.

If you are an investor or a public company in Canada, you should be forwarding that article to as many media outlets and friends as you can; otherwise, you will eventually have to leave the junior investment market in Canada for greener pastures.

That means fewer jobs, less innovation, and less opportunities in Canada.

The more Canadians are educated about what is going on, the higher the chances of someone actually doing something about it.

“You can continue the discussion on why the TSX Venture is failing by CLICKING Here”

The rules and regulations that took place last October added a lot more fuel to a fire that was already burning in the commodities sector, and thus the TSX Venture.

Those rules are forcing the little guys, both public companies on the TSX Venture and smaller financial institutions, out of the market. It’s important to note that while the little guys are shrinking, the big banks are getting bigger.

Last week, I gave you a glimpse of how it is being accomplished:

“With the removal of the uptick rule, firms are now shorting at will and destroying companies for small profits. Institutions (big banks) have many advantages that we don’t. They can short stock and have a fairly lengthy period before they have to replace that stock, should their shorts need to be covered. Even if their shorts need to be covered in a short time frame, they can extend that time frame by borrowing stock owned by their clients.

I have witnessed trades for many stocks where you can clearly see the manipulative efforts of small block sell orders coming through, that appear to be intentionally forcing share price down…Much of this activity runs through the houses of Canada’s biggest banks, and it almost always forces the price of stocks down to a point where liquidity and buy orders have completely dried up and there is no more stock floating around in the system to short.

Too big too fail is sadly a very real scenario. As smaller institutions dry up, investors will transfer over to the bigger guys who will then control more money.”

The big banks don’t want you to trade with your own money. They want you to let them “wealth-manage” it for you so they can collect fees from you, as well as underwriting and advisory fees from companies.

Their strategy is working.


RBC, the best performer of the big Canadian banks, announced Q2 earnings up 26% as takeovers lifted their earnings.

Via Bloomberg:

“…Wealth-management profit increased 6.1% to $225 million. RBC Capital Markets, the firm’s investment-banking unit, reported profit of $386 million, up 4% from a year earlier, lifted by higher underwriting and advisory fees.”

But check out the punch line:

“…Trading revenue across the bank fell 26% to $566 million from a year earlier…”

While the smaller institutions are drying up along with the TSX Venture, it seems the big Canadian banks are doing just fine; replacing loss in trading revenue with wealth-management profits and investment banking.

RBC wasn’t alone. CIBC reported a profit of $876-million, up 8%, and ahead of analyst estimates.

The big banks in Canada are doing so well that Canadian bankers now rank among highest-paid – and overpaid – CEOs in North America, according to a new list compiled by Bloomberg Markets magazine.

Via the Canadian Press:

“In all, six Canadian bank CEOs were in the Top 20, led by the Royal Bank of Canada’s Gordon Nixon, who came in at No. 4.

Bank of Nova Scotia’s Richard Waugh…seventh place, with US$11.1 million, followed by TD Bank’s Ed Clark, who was No. 8 on the list with US$10.8 million.

Gerald McCaughey, CEO of the Canadian Imperial Bank of Commerce, took home US$9.3 million…good for 11th place…

The Bank of Montreal’s William Downe – No. 12 – took in US$9.2 million…

National Bank of Canada chief Louis Vachon…on the list at No. 17 with US$7.2 million.

…The Bloomberg Markets magazine rankings also put Nixon, Waugh and Clark among some of the most overpaid CEOs when comparing compensation to a bank’s average asset, stock performance and return on equity.”

How do you feel about these over-paid CEO’s?

The days of the little guys being given the opportunity for 10-baggers are slowly fading away…

But is the TSX Venture exchange completely done?

Mergers and Acquisitions

Fundamentals will slowly find its way back into the market and shine some light on some of the great companies listed on the TSX Venture exchange. We are going through a massive cleanse, which is why I only bet on companies with lots of money in the bank right now.

The index seems to be stabilizing but volume remains lackluster at best.

However, I stress that great companies will be scooped up through lots of M&A activity in the coming months. For example, New Gold just offered a 42 per cent premium over market prices to acquire Rainy River Resources Ltd. This type of activity will likely continue moving forward and spark the interest of some of the better gold juniors.

I’ve always said that the best time to buy stocks is when nobody wants them, but fundamentals remain astoundingly strong.

So let’s talk about that.

Resource Sentiment

Last week, I met some friends over at the World Resource Investment Conference in Vancouver, Canada. Generally, this conference attracts a decent audience of investors and other interested groups.

But this time it was drastically different.

Take a look at these pictures, taken at 2pm PST:

World Resource Investment Conference 2013
World Resource Investment Conference 2013

A picture is worth a thousand words.

The place was dead. I have never in my life seen this trade show so dead.

It really does seem like nobody wants anything to do with the junior resource and precious metals sector.

Best time to buy stocks is when nobody else wants them…check.

Since precious metals stocks make up a large portion of the Canadian junior stock market. Let’s talk about gold fundamentals.

Gold Fundamentals

The fundamentals for the precious metals sectors could not be stronger. The physical metals are witnessing a ridiculous amount of buy-side interest that hasn’t been seen for decades.

It is the gold rush of the modern era.

In the last few weeks, headlines that support gold’s strong fundamentals were everywhere.

Russia, Greece, Turkey, Kazakhstan, Belarus and Azerbaijan expanded their gold reserves for a seventh straight month in April

According to the World Gold Council (WGC), India gold demand is expected to touch a record level of 300-400 tonnes between April and June, a 200 per cent year-on-year increase and almost half of total imports last year.

China’s reserves rose 721% from 2004 through 2012, while the combined total among Brazil, Russia and India rose about 400% to $1.1 trillion.

The Belgian Central Bank just told us last week that about 25 tons of the European nation’s gold reserves have been lent to bullion banks. That’s nearly 10% of the National Bank of Belgium’s remaining 227.5 tons of gold reserves, which may spark repatriation by the Bank, as other nations such as Germany and Venezuela are already doing.

In Dubai, there has been a massive surge in the demand for gold since the price collapse of last month, with demand far outstripping supply. According to Emirates 247, various estimates suggest that demand in the past few weeks has been nothing short of astronomical, surging by 10 times the normal demand.

In Singapore, Reuters reports that “supply constraints” have sent premiums to “all time highs” at $7 to spot London prices.

In the U.S., the U.S. mint continues to experience a a shortage of supply. However, they recently brought back the one-tenth ounce gold proof coins for sale after a supply shortage, only to offer it at 35% over spot price. The American Silver Eagles are currently being sold at over 117% over spot silver price. Take a look yourself:

“Want Gold or Silver from the U.S.? Pay a Massive Premium.”

Meanwhile, the volume for the Shanghai Gold Exchange’s benchmark cash contract has been surging. Earlier in the week, in just two days, the volumes have nearly doubled and surged from 10,094 kilograms to 19,599 or 94%.

The Shanghai exchange is also pushing forward with previously announced plans to open existing products to overseas investors, starting with nonferrous metals and natural rubber, and then to gold and silver.

This is an important factor in the prices of precious metals as we can clearly see the manipulative efforts on this side of the world. During Thursday night in overseas trading, gold touched a high of $1421/oz, before getting smacked down below $1400 once trading began here in N. America.

Someone on this side of the world doesn’t want to see gold above $1400.


Lastly, I am still expecting that the People’s Bank of China will make a massive announcement later this year regarding its gold purchases. We already know that they are continuing and have openly said they’re buying gold during every dip. I expect a massive increase in their reserves that will shock the world.

Fundamentals astoundingly strong…check.

A Technical Look at Gold Stocks

Gold stocks finally saw some love this week.

Despite the sell-off Friday, the Market Vectors Gold Miners ETF (NYSE ARCA: GDX) is still up over 5 percent, with an increase of 4.4 percent on Thursday alone.

While big fund managers are selling gold ETF’s, they’re out there taking positions in the miners.

George Soros recently increased his holdings in the GDX, the Market Vectors Gold Miners ETF by 69%, from $59 million, to $100 million. He also added $32 million to specific gold stocks and added $25 million of call options in the juniors.

From a technical perspective, things are also beginning to look bullish. It seems we are close to a bottom, but until we can see support in the coming weeks, caution is warranted:

Point & Figure Chart for S&P TSX Global Gold Index
Point & Figure Chart for S&P TSX Global Gold Index

If we can break through pass 220 on the above chart, prices could break out in the short term.

Using the Bullish Percentage Indicator (BPI), we see a very clear signal that the market may be forming a bottom and that the breadth of the stock is improving from an oversold condition in the Gold Miners Index (NYSE ARCA: GDM):

bullish percentage indicator gold stocks
bullish percentage indicator gold stocks

If we see gold price rise next week, this will likely send strong signals to the buy side of the gold miners and we may be able to see a good short term trade. However, I would keep my eyes closely on these technical patterns in relation to gold prices.

Is Everything Truly Better?

The market continues to climb with euphoria fueling its growth. But is the stock market really telling us the truth?

Leverage in both our economy and the stock market is higher than ever, fueled by liquidity created by the Fed.

Stock Market Manipulation

Over the past years, I have told you how the stock market has been manipulated higher. We know the Fed and the U.S. government is printing reckless amounts of money, but they need people to spend and borrow for it to have any affect on the real economy; yet, people and businesses are reluctant to do either.

So does it surprise me that the companies who are borrowing and spending beyond their means are the ones that have been given a major boost in the stock market?

In a recent video by Bloomberg, they found that the companies with the lowest working capital, smallest earnings overall, but the highest debt ratios are actually the biggest winners this year; climbing about 27% percent on the year, while companies with strong balance sheets have climbed less than 15%.

Take a look:


Is the Fed rewarding those who are borrowing and spending with a boost in their shares? You tell me.

Leave a comment

Until next time,
Ivan Lo
The Equedia Letter
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Comments 39
  1. The fact that the banking CEO’s in Canada get paid so much is ludicrous. Bank fees have only gotten higher and banks that are supposed to simply be a facilitator for our money is turning into the too big too fail banks of the US.

    Just stupid. Disaster waiting to happen

    1. That’s why banks shouldn’t be public. When you go public, investors want only one thing: profits. How else is RBC or CIBC supposed to grow?

      1. I’ll tell you how they can grow without leverage: raise fees. Do you really want to pay fees just for someoone to hold your money for you?

  2. I had the scotia bank lose a cheque of over 120k and they put the blame on me .they literally lost it .I have a buddy who works in a bank and he says that’s banking 101 simple . every level that I dealt with had a different excuse .. and the rich get richer . where else do you go? its not like the government is going to do anything about it .

    1. How does a bank lose a 120k check? Typical idiots.

      But could you not just ask the one who issued the check to reissue it? did you leave in the in the ATM or deposit it?

      doesnt smell right

  3. It must get to the point where evryone who has been taken by the banks and finds out they are terminal, takes out one banker at the top that they feel has taken way more than his share of the pie. Fear is the only thing that keeps things in check and the bankers fear nothing, least of all the law.

  4. To equate a CEO’s compensation with what he earns for shareholders is the only measuring stick. Much of the earnings have to do with market conditions. Looking at things this way, the compensation package is more related to the CEO’s leadership not perpetrating mistakes. Seems to me we have the compensation wrong.

    1. This is where you are wrong, Takeit2thebank. A CEO’s compensation with what he earns for shareholders is no different and cant just equate to market conditions.

      A public company needs to grow and the only way is with earnings. So they take risks to obtain earnings by lending more and betting more. Its that simple.

      Banks should not be public. I agree with Dietric.

  5. We can have different view. But the situation is real. How about using the Credit Union system. It is fare, it is just,and it is for their members. The system work because you have different boards that operate all over Canada. It is not one CEO deciding with one board. It is a group of credit union Ceo with their boards that take decision. So join the credit union system. Invest with them see the difference.

  6. Anyone ever notice these bank CEO’s either come from high government positions or go to a high government position after they are finished with the bank. I guess raping shareholders is the same as raping taxpayers.

  7. same thing happening in usa.. my relatively small bank now charges 25 bucks a month if u have less than 200,000 under management…includes checking savings,iras,cds,money market etc..just was just instituted…WTF?

    1. Thats exactly what happened…they cause a financial crisis and then swallow up all of the other banks…….then hide their book and pretend it never happened.

      what ever happened to all of the bad debt balance sheets????

    1. Welcome to the world of humanity Norman. There is never enough money for anyone, that’s why they invented the printing press.

  8. those CEO payouts are disgraceful. My wife, a 30 year RBC employee is supposed to exist on a pension of $700 per month while Nixon makes millions for being a member of “the old boys club”. In order for Nixon’s millions to keep coming, RBC cancelled all Christmas celebration for the lowly employees. Disgusted enough? There’s more.

    1. I’ve got many friends who work for RBC and you’re absolutely right. Here RBC is laying off so many people, even employees of 25+ years, and not giving them a proper severance. Or its find another job, of a lower position, even if you you’ve been with us for 25 years.

      Gre, would love to hear more of your horror stories from the inside.

  9. Blame the government – make life easy for the banks and screw the retired – can not survive the stupid low interest rate policy.

  10. Surely you have figured it out by now that GREED HAS NO BOUNDARY…the rich will get richer and hell with the middle class

  11. Mr Lo. Since your commenters were so furious about compensation issues, they seemed to not notice / appreciate the full significance of your first point about shorting and it’s deleterious effect. I hope a future article will lay bare the full duplicity of this strategy, and will ask readers to forward it to the appropriate authority, whoever that might be. The problem, imo, is that well meaning folks are brainwashed (by the $$ beneficiaries) to think that the old shorting rule was swell without realizing the full implications of the whole mechanism – it’s duplicative nature, non-transparency, supply/demand self fulfilment, etc. I created a website to try to explain this but I fear that many more voices will be needed before this nonsense can be abolished.

    Tied to this is the business of steering clients into margin account so their shares can be ‘borrowed’ (without notice to owner). Please everyone, change your account to ‘cash’.

    1. Thanks for the input, I feel people are griping about the compensation packages because they can directly see the effects of the shrinking middle class, good bye American dream. Also most don’t have any idea of how to get the short regs back on track, we tend to leave complicated issues to the “more informed”. What’s your website address?

      1. Hi Greg, just click on my name for the website i set up. Another you might try is (click on ‘hyperlink’). He is more up to date, I tried to focus on the long term philosophical/ moral issues since most folks think regular shorting (on downtick) is OK without understanding that any non-transparent ‘duplication’ of extra supply = lower price = self reinforcing destructive spiral. All it needs is for the herd effect to yield enough quantity for the strategy to succeed, guaranteed.

        1. Thank you Robert for the posts. They are great and well thought out. I think that your point on shorting is well thought out and I also hope Ivan writes that up in the near term.

          Greg: I don’t think there is a possibility of getting it back on track. Once you allow shorts to be made, how do you clear it up?

          Perhaps if they wiped out shorting, it would really open the eyes of the public on just how many shares are really out there that have been borrowed. For every company that has 100 million shares outstanding, I am sure there’s another 25 million thats being sold that doesnt exist – at least. No different than the derivatives market.

  12. The following is my opinion about the recent gold price.
    99percent is paper trading,with moves down are up they make on leverage,an areful lot of money,they pul the strings,so there is no magic voodoo even basic knowledge to it.
    Just think that they also can boost prices and know how they operate.
    Time is our friend

    1. This has already been proven by Andrew Macquire. Nothing anywone can do about it except wait for the Chinese exchanges to start allowing foreign trades after hours. That should spook the shorters here

  13. The best explanation of the problem created by the regulators and embraced by the TMX that I have read.

  14. RBC is OWNED by the Rothchilds! It isn’t that hard to see what is REALLY GOING ON with the “Banking” INDUSTRY and WHO really owns them!! There IS a Global Agenda that people need to be aware of, but MOST are NOT, unfortunately!

  15. All high management of big corporations get big bonus on the expenses of employees and small investors. People at lower level work like dogs and management reap the profit through big bonus and profit sharing.
    What’s left for small investors….

  16. Hey guys, I’m retired now after selling my biz, and I had no problems paying myself as much as possible, but what we are seeing today is the continual lowering of the middle class that came about because of Henry Ford ($5.00 per day). Just recently announced…. Barrick Gold is cutting 100 jobs at the toronto head office, with one hand , and one of the head guys is cutting himself a cheque for over 11 million with the other hand. Where’s the responsibility?

  17. I try not to take it personally when I see a brokerage hit the bid and sell 500 or 1,000 shares and down tick the stock price, especially at the end of the day. I know it is either the unintended consequences of decisions made in some ivory bank tower or just a dog scratching fleas. The real consequences are far more serious for us entrepreneurs who manage public companies. We know we cannot win this game. The “wealth management” people know that to get their returns they have to starve us of capital. Down tick the stock. The average investor only sees the price drop and believes it is the company’s fault. They call us to do more and it is “our” fault the price has dropped. They do not have a clue that significant market players, aided and abetted, knowingly or not by regulators and politicians, who do not understand the unintended consequences, or understand very well, are raping and pillaging the markets in order to concentrate their wealth at our expense. I have seen this going on for a number of years and only now are people finally starting to pay attention. The juniors are probably not going to be viable entities for long. I believe what is going on is a deliberate intent to destroy a valuable sector of the economy. War by another name is still war and we are nothing more than collateral damage. More’ s the pity. It is summer. More damage will be done. Exploration is strangled by regulation. Cash is unavailable at any price. Banks and large brokerages will decide who gets funded and who will die. Free enterprise is on its death bed

  18. I just could not leave your website prior to suggesting that
    I extremely enjoyed the standard information a person provide in your guests?
    Is gonna be again incessantly to investigate cross-check new posts

  19. I USED to trade the markets but i stopped trading because i believe almost ALL markets are now manipulated. I watched company after company being shorted to death, literally, with absolutely NO REASON for their demise other than shorting and a LOT of that was NAKED SHORTING! How very sad to see our “once free” markets now being abused to such a degree!!! For many years now I have watched the gold and silver (THE most manipulated market in history) being slammed down by the Fed(private banks) and associates as the global demand for physical metal surged upward! Can we say MANIPULATED??? It is as plain as the nose on your face!!! Like ALL FIAT(fractional Reserve Currencies) or should we say “printed out of thin air?? monies, this will end very badly, especially as a result of the DERIVATIVES mkts!!

  20. Howdy just wanted to give you a quick heads up.
    The words in your post seem to be running off the screen in Chrome.
    I’m not sure if this is a format issue or something to do with internet browser compatibility but I thought I’d
    post to let you know. The design look great though!
    Hope you get the issue fixed soon. Kudos

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