Canadian Banks:Cramer's Top Pick

CNBC's Jim Cramer has announced his favorite Canadian bank.It is Toronto Dominion Bank,the nation's 2nd largest.TD recently raised its dividend and beat its earnings estimate.
TD is a conservative,deposit-rich bank,Cramer pointed out.With most of its exposure in Ontario,it attracts a great deal of natural resource clients.
The bank has 25% of its business in the U.S.,and is buying Chrysler Financial for 3.6 billion dollars.This will improve its loan/deposit ratio.TD has no headline risk,in Cramer's opinion.
Despite Cramer's call,the typical Cramer bounce in a stock he selects didn't seem to materialize when he announced it.This leads to a certain train of thought:Don't they like Canada?Don't they trust Canada?Are they bored by Canada?
Toronto Dominion Bank(TD)

Citigroup Gauges 2011 Market Risks

Some observers are totally bullish on the new year,but Tobias Levkovich,Chief U.S. Equity Strategist at Citigroup,recalls that we still have geopolitical risk to consider.In addition,we haven't really talked a lot about gasoline prices,which have been climbing markedly lately.
Political heat will occur in the latter part of 2011,as primary election issues come into focus.At that juncture,a separation of the parties will take place.People want something done in Washington,but at some point the paths totally diverge.
Health care will be going on for a couple of years in the courts.The funding of it will be an interesting battle to see,but commodity prices will be much more interesting to the markets.
Profit margins are not being paid attention to.Around mid-year,that could be an issue.Wage creep that pressures the margins could be a big issue.We're looking at the S&P 500 reaching a level of 1400 in 2011.We think the beginning of the year will be relatively strong;then there will be a pullback on some of these margin issues.
We review our targets in December.What drove the markets in December were the tax cut extension and payroll tax deduction,Mr.Levkovich said.A Canadian citizen who frequently appears on business television,he writes a report card on his own performance every year.
Citigroup(C)

Why Canada Did Better

On the jobs front,Canada has clearly outperformed,says Andrew Pyle of full service financial firm Scotia McLeod.Canada's growth of over 2% is reflecting domestic demand.Commodities are a much bigger share of Canada's exports,but there's been a slight shift to domestic spending from commodities,which has been helpful in the past six months.He thinks Canada will get an interest rate hike before the end of the quarter.
The financial landscape in Canada was a lot firmer before the recession,Mr.Pyle indicates.Consumers there weren't hit by housing,so their wealth wasn't so impacted.Nonetheless,the direction of Canada's economy and the Canadian dollar,the Loonie, are tied to the U.S.,Canada's largest trading partner.If the U.S. takes a double dip,it won't be good for the Canadian economy,the financial planner noted.
Scotia McLeod is a division of Scotiabank.Founded in 1921,it serves clients through a number of branches,including the National Branch in Toronto.
Bank of Nova Scotia(BNS)

Canada Approves Nortel Deal

The Canadian Ministry of Industry has signed off on Ciena Corporation's acquisition of Nortel's Metro Ethernet Networks business.Nortel is undergoing a major restructuring.The Toronto telecom firm has been shedding a number of businesses,selling assets to Hitachi,Avaya and GENBAND.Nortel's business spans more than 150 countries,bringing in 2008 revenue of more than 10 billion dollars U.S.It is currently in bankruptcy proceedings.Nortel shares are traded on the OTC pink sheets.
Ciena had already obtained U.S. approval of the deal.Ciena CEO Gary Smith said they have always believed that the transaction provided a substantial benefit to Canada and the Canadian marketplace.The deal could roughly double Ciena's revenue and workforce over time.The company,headquartered in Linthicum,Maryland,employs around 2100 workers and posted revenue of 176.3 million dollars in its last fiscal quarter.It specializes in fiber optic technologies,communications networking equipment,software,services,processing systems and products.Ciena is listed on the NASDAQ exchange.

Automakers Critical To Canada

The Canadian government,on both the national and provincial level,has been watching the U.S. automakers with great concern.The automotive industry is Canada's largest manufacturing segment,directly employing more than 150,000.The industry contributes more than 14% of Canada's manufacturing output,sustaining 12 Ontario communities.In consequence,the Canadian authorities are providing 3.29 billion dollars U.S. in loans to Canadian subsidiaries of General Motors and Chrysler.The federal government will give 2.09 billion,while Ontario will provide another 1.2 billion,said Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty.President Bush is authorizing 17.4 billion in aid to the struggling automakers.Ford Motor Company is not included in the loan packages,as it only needs a back-up line of credit at this time.

Central Banks Seek Growth

Central banks are cutting interest rates in hopes of sparking flagging economic growth.The Bank of Canada was first last week,cutting its overnight rate a quarter of a point,from 4.5 to 4.25.As late as July,the BOC was worried about inflation.Now it is concerned about deflation and the prospect of a failing economy.The Bank of England followed suit.It cut its key rate to 5.5 from 5.75.Growth has begun to slow,though the upward risks to inflation still remain.Credit tightening poses a risk to the Gross National Product.Slowing demand growth will ease pressure on capacity.The European Central Bank left rates unchanged.That may amount to a concession,since the ECB has been a hawk on inflation,and might prefer to raise rates.Today at 2:15 PM Eastern,the Federal Reserve will issue its decision on interest rates.It is expected to cut as well.Bill Gross of PIMCO would like to see the Fed cut all the way down to 3%.To restart the near-recessionary economy,we will need that.The Fed needs to reduce steadily and significantly.There has been a breakdown of the modern banking system.The tangled web of subprime loans has created a shadow banking system.The banking system must be shored up.Home prices may fall another 10% over several years.The banking system exhibits a freezing up of liquidity and a reluctance to make loans to the vital part of the economy.The Fed must use all means to provide liquidity.Troubled Swiss bank UBS has written down another 10 billion of subprime securities,following an initial write-down of 3 billion.To cover this,it has sold a stake in itself to the government of Singapore and a secret Middle Eastern investor.Shares of UBS rose on the news.Longterm investors are building positions in such financial stocks,which are trading at a big discount,although they could well drop further before recovery.Similar holdings are HSBC(HBC) and Citigroup(C).