Monday, September 15, 2008 is a date that goes down in history as one of the largest acquisitions in the United States. Bank of America agreed to a $50 billion dollar merger with Merrill Lynch, the world’s largest and most widely recognized investment brokerage, thereby creating a bank offering a vast array of services; everything from fixed-income trading to credit card lending.
This buyout is expected to close in the first quarter of 2009 but is receiving mixed reviews. While some feel that this merger brings risks, others feel it brings opportunity.
Over a year ago the Bank of America appeared to have given up on investment banking and mortgage brokering due to the losses it suffered in an area of business it had no expertise in. This has left economists wondering how Bank of America intends on turning Merrill Lynch and its interest in the housing market around.
Optimists on the other hand, view the Merrill takeover as an opportunity for Mr. Lewis, chief executive of Bank of America Corporation, to transform the Bank of America into a market leader – one of the country’s largest players in wealth management and now, one of the nation’s biggest mortgage lenders. This deal expands Bank of America’s reach into equities and emerging markets and strategically, if the deal goes according to plan, Bank of America will be able to offer Merrill Lynch’s retail brokerage services to its already extensive customer base.
Bank of America, while once again expanding into the investment market, is keeping a tight rein on it loans and is enforcing strict lending guidelines in an effort to ensure what happened in the US housing market late last year, does not happen again.
The Bank of America and Merrill Lynch merger comes after a fall in US house prices of over 20% last year which resulted in an unprecedented number of default mortgages and loans. This steep fall is not expected to hit Canada near as hard or at the rapid pace it hit the US. In fact, Canadian economists are saying that the housing market in Canada is leveling off and in many cities house price appreciation is expected to stall, but not decline.
The major difference between the US and Canada housing markets is credit. Looser credit conditions south of the border fuelled easy lending which in turn created excessive demand – demand that the country could not sustain. In addition, the lack of lending guidelines led to the high number of mortgage defaults and ultimately contributed to the demise of Merrill. By having reinforced guidelines and by not creating risky loans, Canada has maintained its strong real estate market and is not expected to be greatly impacted by the merger.
This solidifies the certainty in Canadian Investments and the Canadian Housing Industry. Consumers will continue to turn to local Canadian markets for investment purposes as our economy remains steady and strong. It is expected that foreign investors will also take advantage of the stable Canadian Housing market and turn their investing from the popular US States, to the rapidly growing Canadian Provinces. As a result, many more Canadians will consider investing in the housing market and in alternate funds, such as Bond Funds where the money acquired by these funds is invested into the Real Estate Market to gain a greater rate of return, meanwhile maintaining its security.
The need for safer investments and more secure enterprises by the Canadian consumer has triggered the creation of these alternate funds; the MBN Bond Fund being a prime example.
The MBN Domestic Bond Fund 7-1 is an RRSP eligible fund and it provides consumers with a 7% annual rate of return on their investment, without deductions, compounding over a 4 year term, and provides annual internal and dividend returns paid to each Bond Fund Shareholder. MBN Finance Ltd., a division of MBN Ltd. administers all of the capital within the fund to finance Building and Land Development Projects. In addition, these funds are used to provide Bridge and Interim Financing through MBN Mortgage, and to contribute to viable real estate projects across North America, with its primary focus in the stable Alberta market.
Due to the US housing crisis and inevitable fallout from this crisis, Canadian consumers are seeking local investments opportunities in the Canadian Market and are turning to safer, secured investments, such as the MBN 7-1 Bond Fund, which is managed by the Professional Services of Collins Barrow, Canada’s largest association of Chartered Accountancy Firms, and Scott Hall LLP – a full service law firm established since 1986 and is required to report to its qualified Board of Directors. This accurate management is paramount in the success of a fund such as this provides the safety that Canadian Investors are currently lacking in their US and Foreign Investments.
The near bankruptcy and ultimate merger between the Bank of America and Merrill Lynch further solidifies the need for strong Canadian Investments and the importance of domestic securities and funds. Consumers are feeling the fallout of their foreign and US investments and in turn, are searching for local investment opportunities. These local and secure investments are what continue to support the Canadian economy, increase its growth and strengthen the local market.
To learn more about the MBN Bond Fund and how to invest in it, please call 1-866-955-9662.
MBN Mortgage
September 16, 2008
