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Your mortgage is fixed for 30 years in the U.S. generally. The bank isn't going to come in and sell your house from underneath you if the price falls but you can still pay your mortgage payment. Cheers!

Thanks for starting this discussion Luca! I have used leverage successfully during covid (the highest I reached was 1.28 margin) and during the slump of late 2022 (mostly through LEAPS this time, maybe 1.15 or so). I find it easy to identify moments when markets are already down quite a bit and people are in fear mode and I'm good at staying calm and adding during those moments without trying to time the bottom or overthinking the crisis du jour. For those who do use leverage, how have the new interest rates changed that? I believe USD at Interactive Brokers went from around 2.5% to around 6%. Given the long term returns of stocks around 7%, I find the 6% hurdle too high and I'm currently at zero margin (but fully invested). Maybe it's just anchoring from the past. looking back we've been spoiled, what an opportunity for leverage the past 15 years have been!

There is a committee (4 people from S&P & 3 from TMX) that decides. Generally the TSX 60 (XIU) tries to mimic the sector weights of the TSX Composite (XIC) while also trying to beat it. Historically, they have replaced components when they go under 20bp but I don’t think it’s a rule. Financials are already overweight in XIU vs XIC so that might make the hurdle higher for FFH to get in. IFC took a long time to go in for that very reason. When IFC was announced in to XIU in March 2022, its weight at the end of Feb was 104bp and it was the 25th biggest company in the XIC. It was almost inevitable that IFC was going to get into XIU given its above average growth. Now its weight is ~124bp and it’s the 20th biggest weight in the XIU. They would have been better off putting it in sooner. I would argue FFH is a good analog for what happened with IFC. Given the high certainty of near term earnings, FFH’s weight in XIC is only going to increase. Today, I estimate, it jumped from 29th to 27th biggest passing GIB and TRI. Its weight is probably close to 101bp. At the end of 2022, FFH was #41 and 65bp. It’s like a freight train and if the committee can see that, they may want to get it in soon so they don’t lose ground to XIC. I estimate, AQN is only ~21bp in XIU after today’s trading so it’s flirting with the historical replacement precedent of 20bp. Please correct me if I’m wrong but I believe they will use Feb 29 as the measurement date. Presumably, it will be a live every quarter going forward or if a member of XIU is acquired. Recently ABX was rumoured to be interested in FM. If that transaction was consummated, it would open up a spot for FFH as well. Of course, they could always skip FFH and go to TFII but it’s less than half the weight. The biggest impact of Scotia and now NBF socializing the idea of FFH going in XIU is that shareholders who really want to take profits for risk management or because they are afraid of a drawdown might hold on instead. This is important, because most buying is institutional and it’s usually done on a % of volume. It’s a constraint placed by investors on asset managers to protect against them manipulating share prices. The side effect of that is, sellers set the price. Knowing there is likely a significant amount of buying coming sometime in the next year at a time when the company is growing incredibly fast might decide to at least lift their offers. Some shareholders might even hold on and see if they can get a better price when there is an indiscriminate time constrained buyer and reported BV is likely somewhat higher. The float in FFH is relatively tight and underowned by Canadian institutions who are benchmarked to XIC. If shareholders start believing what NBF is telling them, the multiple expansion could be significant. P/B could get out of hand. It’s happened before from 95-98, a period when FFH put up 20%+ ROE for 4 years in a row. Maybe 2023 was year 1. P/B went over 3 back then before coming back to earth. It seems more likely to happen in this kind of market (meme stocks etc..) but it might take analysts starting to believe FFH can grow earnings consistently as some quants also set prices. Morningstar coming around would be a huge signal. I don’t expect that to happen but it’s possible.

Undecided. Probably just leave it in cash for a while earning interest, as collateral for short puts that may be assigned. For example a while ago when I needed cash (to buy more FFH!) I switched STLC.TO stock to short ITM puts, which may be assigned at some point.