Canadian bank shorts

[frith2012]

Anyone done much work around the Canadian and/or Australian bank shorts?

[obtuse_investor]

I do think that shorting Canadian banks over the next 2-3 years would be a profitable trade, I am just not wired right to do it. But I realize, others are.

 

Here is a short thesis presentation from ValueXVail 2013

 

http://www.scribd.com/doc/153610244/ValueXVail-2013-Brian-Bosse

[Liberty]

I don't short, but those looking at Canadian RE should probably have a look at this:

 

http://www.cansofunds.com/wp-content/uploads/2013/07/Canso-Px-The-Canadian-Housing-Market-July-2013-Revised-2.pdf

[obtuse_investor]

There are no obvious listed stocks in Canada-- like homebuilders. There will be mayhem in the general Canadian equity market if and when the housing bubble does pop.

 

I suppose, as someone living in Canada, I have shorted the housing market-- by renting the house my family lives in.

[Liberty]

I suppose, as someone living in Canada, I have shorted the housing market-- by renting the house my family lives in.

 

That's my approach too. I'm renting, and will stay here until the market is a lot lower than it is now or the fundamentals change in some major way that make the valuations make sense (but I really don't see how that's possible other than with a big RE correction -- it's not like wages will suddenly start going up double digits to catch up and people's debts melt away without killing housing).

[cwericb]

This might be a little off topic, but here is some food for thought.

 

Certainly housing in some of our major cities seems over priced and a correction may be overdue, but in the longer term consider this.

 

When I was a child the world population was about 2 billion. Today its about 7.2 billion.

 

The UN projects that by 2050 the population will reach 9.6 billion. That’s a 33% increase in just 37 years!

 

These people have to go somewhere.

 

Canada is one of, if not the least densely populated industrialized countries in the world. People are becoming ever more transient and if you think we have a lot of immigrants here today, you won’t recognize the make up of this country in 20 years. This is simply a fact of life.

 

Think about these numbers...

The population density of India is 380 people per square kilometre, Japan - 339, South Korea - 487 and Bangladesh - 1035. 

The population density of Ontario is 12 people per square kilometre , Quebec - 6, British Columbia - 5, Saskatchewan - 2. Yes, some of that may be presently considered uninhabitable (at least by today’s standards) but Nova Scotia has a density of 17/ sq. km. and New Brunswick with 10.

 

I also believe we are seeing another shift that I have been predicting for some time. There is going to be some levelling out of the population within this country along with property values as geographical location becomes less important than it once was.

 

I am seeing more and more people moving to desirable locations outside of the major centres and commuting to the city perhaps once a month while they work from home through cell phones and computers. Example: I met a guy last week. He lives in the Maritimes, but he is in charge of equipment and personnel for a mid sized airline based 2,000 miles from here. He does everything from his house on the beach and commutes to work once a month. His wife also works for another company in a different city and both are able to spend most of their time here. This is not an isolated example by any means and I see it more and more frequently.

 

While this may have some downward pressure on some of the high priced real estate in major centres it will have the effect of increasing prices in other areas. You just can’t have a forty year old bungalow selling for $1,000,000 in Vancouver and the same house selling for less than $200 k in a nice, low crime neighbourhood elsewhere. Maybe in times past, but not today. That demographic is changing.

 

[Hoodlum]

I don't short, but those looking at Canadian RE should probably have a look at this:

 

http://www.cansofunds.com/wp-content/uploads/2013/07/Canso-Px-The-Canadian-Housing-Market-July-2013-Revised-2.pdf

 

It will be interesting to see if the government sues the banks to get back losses if the market does tank.  I don't think the banks will get off scott free, especially with the bundling of mortgages they sold at high profits.

[constructive]

Simple tangible leverage ratios

 

NA.TO    28.2

CM          26.6

LB.TO    25.4

RY          24.2

TD          23.7

BNS        23.2

BMO        22.9

CWB.TO  11.9

 

FN.TO      53.0

ETC.TO    22.2

HCG.TO  19.3

MKP.TO    16.5

 

Generally higher than the US. One name jumps out. Is anyone familiar with First National Financial?

[constructive]

http://www.firstnational.ca/

 

http://www.firstnational.ca/docs/aboutus/IR%20Fact%20Sheet%202012.pdf

 

They appear very sensitive to the normal functioning of the Canadian mortgage securitization market.