March 19, 2013 Comments

Our stock picks did okay today. Canadian Tire was up 1.1%. I did not sell any of my Shaw at least not yet and it rose 1.3%.

The whole business with Cyprus is not something that would cause me to sell any stocks but it was a very stupid situation.

Cyprus, for whatever reasons, had a huge banking industry with substantial foreign deposits. Those banks lost a lot of money when Greece defaulted. Banking regulators in their “wisdom” encourage banks to hold government bonds and usually consider them to be risk free. Left on their own these banks even if they were short capital would almost certainly have recovered. Now the IMF and European Union or whomever have basically waved a huge red flag that tells everyone to pull their money out of the Cyprus banks. If the banks and Cyprus got into trouble die to the banks losing money on Greek bonds then destroying the reputation and business of these banks is hardly going to help matters. What must be done in the event of weak banks is for government officials to to either nationalize the banks or profess great confidence and financial support for the banks. What was done here (or attempted to be done) just seems idiotic.

 

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