Monday, February 15, 2010

Short Those Canucks!

With the focus on the Winter Olympics in Vancouver at the moment, it's a good time to address Canada's economy - that is with every other economy in the world imploding.

But it turns out, that Canada's housing market is supposedly back to its peak!

From the WSJ:

Last Wednesday, a housing-price index for Canada's six biggest cities posted its seventh straight monthly gain, showing home prices in November are now back to their prerecession peak. Another broader measure shows the average home price in 2009 hitting a record.

From Bloomberg:
The average five-year mortgage rate was 5.39 percent on Feb. 10. In May it was 5.25 percent, the lowest since 1951, according to Bank of Canada figures.

Bank of Canada Adviser David Wolf said in a January speech that it’s "premature" to conclude there’s a bubble in the housing market, and a rate increase to slow it would "be dousing the entire Canadian economy with cold water, just as it emerges from recession."

Say what?

Prices are at an all-time high, BUT they are *just emerging* from a recesion???

So why the [bleep] are house prices skyrocketing, when *shelter* over the rest of the world is deflating?

Look no further than the *bubble blowers* of Big Government:
The Department of Finance in 2008 said Canada Mortgage and Housing Corp. would limit amortizations to 35 years and offer loan insurance on only 95 percent of the loan value. The government’s housing agency had offered mortgage insurance on loans worth as much as 100 percent of the home value and amortization periods of as many as 40 years since 2006.


40 year mortgages, with no money-down, backed by the government!

No doubt when it inevitably collapses, the *free market* will be blamed...

Short candidates appear to be - BMO, CM, TD, RY, BNS:

Obviously, I'd rather short a *basket* of these financials. There appears to be a Canadian Financial ETF, but alas it doesn't trade here (I think).


Anonymous said...

Before you short Canadian banks, consider the following:
All Canadian mortgages contain personal covenants-no walkaways;
All mortgages over 80% LTV require government guaranty-bank not responsible for first 20% loss;
in Canada, appraisals are accurate,FICO scores are honest-no lying,cheating,stealing,as in your country.

Anonymous said...

Also,Canadian banks use mark to market accounting-not mark to make believe ,as in your country.Also,conservative and generous provisions for losses,in order to keep embarrassingly high earnings down.

CaptiousNut said...

Believe me, if this was *MY* country, things would be a whole lot different!

Thanks for your input. The banks are still a short from a trading perspective.

Anonymous said...

1. there is a housing bubble in Canada; the data are clear on that point. Par example, housing prices rose almost 20% in 2009. In VChina they went up 9.8%, and the Chinese government was all over that.

2. The Bank of Canada is fueling the bubble by printing money over the last 14 months at an annualized rate of about 13%. This is twice the rate of the previous 12 months. Guess Mark Carney decided to go with his Goldman buddies in the US and make love to QE. And no, that's not Queen Elizabeth.

Anonymous said...

Skip the banks, sell the loonie. Then you get the benefit of the looming commodity crash as well as their other problems.