Money laundering as the key to success

When all the news is bad, maybe it's time to buy

In the investment game, what’s obvious often turns out to be terribly wrong.

Of all of the Canadian banks, TD had an especially rough 2024. In October of that year, the bank plead guilty to conspiracy to commit money laundering and paid a $3 billion fine to the US Department of Justice.

It was bad news all around. US assets would be capped. The bank would have to spend at least another billion dollars on shoring up internal compliance measures, which would of course hit profit margins. As the stock plunged, many of the bank’s best employees looked for an exit as their stock options cratered in value. Nobody had anything nice to say about the company.

At that time I fielded a call from more than one client who insisted on liquidating all of their TD shares. And could you blame them?

Clearing out some files, I just came across a Globe and Mail opinion piece from December of ‘24 titled “Can TD Bank ever recover from its US money-laundering saga?”

The conclusion?

For TD, 2025 will be “a transition year” according to its leadership team. Indeed, it will be nothing like any year in the bank’s long and, until now, unblemished history.

The article was just a long list of everything wrong with TD. Who would be lining up to invest at the beginning of a “transition year” when there were several other similar companies one could invest in without the stink of corruption all over them.

So of course, one would assume that it would have been the most challenging Canadian bank to own over the past year.

Right?

Dude. Of course not. That’s why I’m writing this article.

TD shareholders earned a 75% return in 2025, including dividends. In a boring old bank stock. If you’re keeping score at home, that’s about double the return on AI darling Nvidia.

How did they do this? They were forced to sell off lower-ROI assets. They committed to share repurchases. They focused on cost savings. And they rode a bull market in bank stocks around the world.

If you were convinced to sell because you listened to the talking heads, or spent too much time absorbing the financial media, you missed out. Big time.

Obviously, I’m not suggesting that TD stock went up because of the money laundering allegations. Rather, the negative news flow created the opportunity for investors to acquire the shares at a bargain price (or to sell your shares far too cheap).

The people who paid too much attention to the mainstream narrative lost out, selling their discounted shares to those with the foresight to look through to how management would react, and to the ultimate resolution.

As I wrote in Low Risk Rules,

If all of the news coverage you are reading is negative, chances are that this will already be reflected in investor outlooks, and so prices will be low. Any news that is “less bad” than most people expect will therefore actually result in higher prices. This means that, counterintuitively, the worse the news is, the better a time it is to invest. In that sense, saying “I’m optimistic, because how much worse can things be” is not just dark comedy but a viable investment strategy.

In retrospect, the story of 2025 was one of the “experts” being consistently wrong. Making investment decisions based on what you were reading in the media was a losing strategy. Tariffs didn’t create a second Great Depression. World War 3 didn’t erupt. The US market dominance everyone expected flipped on its head, with global markets outperforming (including some of those specifically targeted by Trump’s tariffs).

The lesson to take, then, is to root your investment decisions in your own observations and analysis… and not to let the hysterical financial media impact your decisions. It’s terribly difficult to do, because you need to keep yourself well-informed, but do so in a way that allows you to remain impartial and form your own opinions. Stick to the facts as much as you can, but for the sake of your portfolio, ignore the opinion pages.

What are the consensus views you’re reading today that might turn out to be wrong a year from now?