New No-Fee Chequing Account: ING Direct THRiVE Chequing a Great Choice.

ING Bank of Holland is expanding its presence in Canadian retail banking. Taking a leaf from CIBC and Loblaws' PC Financial, ING has begun offering no-fee chequing accounts in addition to its line of savings, investment, and mortgage products. 

Known as ING Direct in Canada, the brand has become a well-known name in many Canadian households through its "save your money" slogan and orange colour scheme. The chequing accounts are a direct attempt to take market share away from Canada's major banks and occupy a larger share of the average Canadians' wallets. 

ING will undoubtedly meet with much initial success as they already have over 1.8 million customers in Canada, of which many have accounts at other banks. In the first year, ING hopes to attract about 100,000 customers, but they are probably low-balling that number in anticipation of a pleasant year-end announcement that they shattered their expectations. 

Some of the features of the new accounts include an initial batch of free cheques, free debit, free ATM transactions at Credit Unions and HSBC Bank, and, my personal favourite, FREE overdraft protection as long as you pay back the amount within 30 days! No more NSF charges if you forget about a certain bill that is coming due or a cheque that you wrote awhile back. 

To be sure, ING is making deeper and deeper inroads into the Canadian market. Their StreetWise series of mutual funds are simple and reasonable, their savings rates are respectable, and now their chequing account is quite superior to anything offered by Canada's five traditional banking enterprises. Of course, PC Financial offers largely the same thing, but it is nice to see even more choice for Canadians in the banking sector. 

All in all, an excellent choice for the intelligent investor. Why pay fees when you don't have to. Take the money you save on your banking fees and buy shares in your old bank with it.

For information on ING's new product, go to:

http://www.ingdirect.ca/en/chequing/index.html

Happy Investing : )

Canadian Banks Generating Huge Profits: CIBC and National Bank Lead the Way.

Earnings season for the Canadian banks were off to a great start on Thursday when CIBC (TSE:CM) reported a $799 million profit. This was more than what industry experts were expecting and could bode very well for investors in Canada's other major banks as well.

Last year, the bank reported earnings of $652 million during the same three month period. This growth is an indication of an improved lending environment in Canada, as well as an improved environment for investment fund managers, of which CIBC Mutual Funds is a large player. When stock markets increase in value, the amount of money that CIBC charges its clients to manage money (usually around 2-2.5%) goes up as well. 

CIBC said it would maintain an 87 cent per share dividend, but investors were hoping that they would boost it, giving the other banks motivation to do the same. Currently CIBC is only paying out about 45 percent of its earnings to shareholders, which is a very reasonable number and a number that could be increased in the future. For the intelligent investor, the ability for CIBC to raise its dividend in the future is a sign of financial health and a good catalyst for a rise in the share price in the future. 

In addition, the company has more than enough capital on hand to make acquisitions or initiate share buybacks. Share buybacks are great for shareholders as they increase earnings per share by reducing the number of shares, which increases your share of the business pie.  

National Bank (TSE: NA) also reported a record profit of $312 million. Last year, quarterly profits came in at $215 million. This massive increase will surely bode well for shareholders when the company reviews its dividends and perhaps decides to increase the amount of money that they want to pay out to shareholders. 

Both National Bank and CIBC have provided an excellent window into the health of the Canadian financial landscape. As a Canadian investor, it is important to ensure that one of Canada's financial conglomerates, whether it be CIBC, National Bank, Royal Bank (TSE:RY), Scotiabank (TSE:BNS), TD (TSE:TD), or the Bank of Montreal (TSE:BMO), make up a portion of your investment portfolio. The balance sheets are healthy, business is booming, and dividend increases are sure to start coming down the road. Just be careful not to get too greedy and overpay for them on a day when other investors have bid up the share prices. Wait for a down day and gradually buy your way in.

Happy Investing : )

For more information on this topic check out:

http://www.vancouversun.com/news/CIBC+earnings+ahead+expectations+share/4344970/story.html

http://www.winnipegfreepress.com/business/cibc-q1-exceeds-expectations-116904108.html

Provide Insurance to Other Investors: Generate Income Selling Put Options.

In a stock market environment with inflated prices, the intelligent investor must look for more innovative ways to generate income and increase their wealth.

One method often overlooked is the selling of what are called "put-options." Quite simply, a put option gives the buyer the right to sell a stock at a fixed price and at a fixed date in the future. For example, if John Smith owns shares of CIBC and the current price of his shares are $50, he can buy an option to sell those shares to someone else at $48 six months from now. Why would John do this? Perhaps John owns too much CIBC and wants to just have a little insurance in case the price declines too much. If the shares decline to $30 in six months, John will be very happy that he bought the insurance as he can now sell them to someone at $48. If, however, six months go by and CIBC is still selling at more than $48, John will simply keep his shares and not want to "exercise" his right to sell the shares at $48. His insurance will simply expire.

Of course, John must buy his insurance from someone, and this insurance costs money. Personally, I like to provide this type of insurance on stocks that I would like to own anyway. You could think of it like buying stocks on Priceline.com and getting paid to do it. For instance. If I want to buy CIBC at $48, but it is currently selling at $50, I have two options. I could simply wait until it falls to $48 and then buy it... or I could agree to buy them from John in six months at $48 should he choose to want to sell them, and for this agreement I collect a fee, called an "options premium." The size of this fee changes. The more the owner and myself are worried that the price of the stock might fall in the future, the larger this premium would be.

Now, if agreements like this had to be made on an individualized basis, it would be quite difficult. Thankfully, our modern market economy has what is called an "options market." In Canada, the market is in Montreal at the Montreal Options Exchange. http://www.m-x.ca/accueil_en.php. In the United States it is in Chicago at the Chicago Board Options Exchange. http://www.cboe.com/. The more well known global names will be listed in Chicago, with the domestic Canadian names listed in Montreal.

Now, the "caveat" to this is that you must actually have enough money in your investment account to buy the shares on the date agreed to should the buyer of the put option choose to "exercise," or sell them to you, at the agreed upon price. This seems obvious, but it is important to remember that you cannot simply take your insurance premium that you collected and forget about the contract. You must then provide the insurance that was paid for if it is needed.

This may sound complicated, but the strategy is really fairly simple once you get more comfortable with puts and "options" in general. In the future, I will discuss how money can be made utilizing "call" options. Or the right to buy something at a future date and at a fixed price.

As always, just e-mail me with any questions or concerns : )