Canada's Banks "The Great White Short"

[errolanderson]

Warnings from Bay Street this morning on Canada's banks. Canada's banks have now been dubbed 'The Great White Short' by some U.S. analysts.

According to BNN, credit losses are expected to move sharply higher through 2019 . . . surprise, surprise. Canada's 'slow-mo' recessionary economy now blamed.

Cdn household debt is out-of-control and a record-breaker, but this credit story may have a deeper storyline than just middle class debt (IMO) . . . .

[helmsdale]

From

https://smallcaps.com.au/the-big-short-steve-eisman-gfc-canada-housing-market-australia-next/

"Steve Eisman, a hedge fund manager famous for predicting the US housing market crash of 2008, as portrayed in the film The Big Short, is now placing a new bet against the Canadian market.

As a portfolio manager at US asset manager Neuberger Berman, Mr Eisman has joined a group of investors short selling Canadian banks with expectations that the stocks will be hit if the housing market falters.

Mr Eisman was part of a small group of investors that discovered how unstable, flawed and corrupt the US housing market was and successfully bet against it prior to the Global Financial Crisis."

While Mr Eisman has sounded the alarm on the Canadian housing market, he is not expecting it to be as severe as the 2008 US market crash.

“This is not The Big Short: Canada – I’m not calling for a housing collapse,” he told reporters.

“I’m calling for a simple normalisation of credit that hasn’t happened in 20 years,” Mr Eisman said, adding that he believed Canadian lenders were not “mentally prepared”."

[sumdumguy]

I like that idea of shorting Canadian banks as insurance on deposits. Could be sound strategy for ordinary Joe too.

[Grahamp]

That is a terrible idea. If you are worried about deposit insurance put your money in a credit union where your complete balance is covered. If you are worried about a system wide meltdown you don’t want your money stuck in a brokerage account. It is highly unlikely in a charter bank collapse that any broker left in Canada would be solvent. Plus the costs are extremely high. You have your own capital cost of carry, plus 5% dividend cost you have to make up as a short, plus the general inflationary updraft in stocks if there is not a failure. You are easily 10-12% cost to carry that short annually and there is no way the risk of ruin of a Canadian bank is that high.

[Tucker]

Funny but not funny ha-ha how even with a Credit Union you can loose all your savings but somehow they will always find your mortgages.

[errolanderson]

Turkey credit woes appear worsening that may have tentacles most directly into Spain which has an impact on Europe’s banks which has an impact on the North American banking system.

It’s all connected . . . .

[furrowtickler]

That is a terrible idea. If you are worried about deposit insurance put your money in a credit union where your complete balance is covered. If you are worried about a system wide meltdown you don’t want your money stuck in a brokerage account. It is highly unlikely in a charter bank collapse that any broker left in Canada would be solvent. Plus the costs are extremely high. You have your own capital cost of carry, plus 5% dividend cost you have to make up as a short, plus the general inflationary updraft in stocks if there is not a failure. You are easily 10-12% cost to carry that short annually and there is no way the risk of ruin of a Canadian bank is that high.

The way things are shaping up ... out your money under the mattress... seriously!!

[Grahamp]

I used to be a doomsdayer, buy gold, currencies are going to collapse etc. I read book after book on the evils of central banking and attended Doug Casey, Peter Schiff conferences and was ready for the bank failures and hyper inflation that I was certain was imminent. I have mellowed as I approach my 40th birthday however, the problem is if you are right or probably more realistic when you are right (can’t print money forever.) you are still wrong. In that it will very difficult to profit from this. What are you realistically going to do. Save 1000’s of ounces of silver so you can grocery shopping for a few years until things reset. Unfortunately it ends with a bailout, revolution, or war.

I still think there is reason for optimism though. Despite an incredibly incompetent government if you can hitch your wagon behind man’s desire to make his life better and easier I think you will almost always outperform the pessimist.

[biglentil]

I used to be a doomsdayer, buy gold, currencies are going to collapse etc. I read book after book on the evils of central banking and attended Doug Casey, Peter Schiff conferences and was ready for the bank failures and hyper inflation that I was certain was imminent. I have mellowed as I approach my 40th birthday however, the problem is if you are right or probably more realistic when you are right (can’t print money forever.) you are still wrong. In that it will very difficult to profit from this. What are you realistically going to do. Save 1000’s of ounces of silver so you can grocery shopping for a few years until things reset. Unfortunately it ends with a bailout, revolution, or war.

I still think there is reason for optimism though. Despite an incredibly incompetent government if you can hitch your wagon behind man’s desire to make his life better and easier I think you will almost always outperform the pessimist.

Don't worry the government has your back. That paper dollar is backed by their competence.

[helmsdale]

Ive never really gotten behind the idea of precious metals. Like Grahamp says, are you going to hike silver and gold around to pay for groceries? Who is going to accept gold and silver as payment? Will they be paying their suppliers in gold and silver? What would it really be worth if shit was to melt down. Can it provide sustenance when you're hungry? Can it keep you protected from the elements when it's storming? Can it really do ANYTHING for you? So you have a literal tonne of gold stored in a vault. You want a chicken, and the poultry farmer says, it'll be worth an entire tonne of gold? When you're hungry enough, whats worth more, the tonne of gold or the chicken to you? And, if everything were to go to gold and silver, how on gods green earth do you expect to be able to protect it? The ONLY things that will be considered precious if things were to completely flush down the toilet are guns and ammunition! You have a tonne of gold or silver but no ammunition? The guy with a loaded 9mm handgun, now has your tonne of gold and silver.

[furrowtickler]

Ive never really gotten behind the idea of precious metals. Like Grahamp says, are you going to hike silver and gold around to pay for groceries? Who is going to accept gold and silver as payment? Will they be paying their suppliers in gold and silver? What would it really be worth if shit was to melt down. Can it provide sustenance when you're hungry? Can it keep you protected from the elements when it's storming? Can it really do ANYTHING for you? So you have a literal tonne of gold stored in a vault. You want a chicken, and the poultry farmer says, it'll be worth an entire tonne of gold? When you're hungry enough, whats worth more, the tonne of gold or the chicken to you? And, if everything were to go to gold and silver, how on gods green earth do you expect to be able to protect it? The ONLY things that will be considered precious if things were to completely flush down the toilet are guns and ammunition! You have a tonne of gold or silver but no ammunition? The guy with a loaded 9mm handgun, now has your tonne of gold and silver.

Buy dirt and defend it with lead ...

[15444]

Ive never really gotten behind the idea of precious metals. Like Grahamp says, are you going to hike silver and gold around to pay for groceries? Who is going to accept gold and silver as payment? Will they be paying their suppliers in gold and silver? What would it really be worth if shit was to melt down. Can it provide sustenance when you're hungry? Can it keep you protected from the elements when it's storming? Can it really do ANYTHING for you? So you have a literal tonne of gold stored in a vault. You want a chicken, and the poultry farmer says, it'll be worth an entire tonne of gold? When you're hungry enough, whats worth more, the tonne of gold or the chicken to you? And, if everything were to go to gold and silver, how on gods green earth do you expect to be able to protect it? The ONLY things that will be considered precious if things were to completely flush down the toilet are guns and ammunition! You have a tonne of gold or silver but no ammunition? The guy with a loaded 9mm handgun, now has your tonne of gold and silver.

Bingo. Lots of bachelor farmers out there which really wouldn't be affected by a meltdown. Now if you're a fella from the city and come along starving with a gorgeous 25 year old blonde daughter and 1 pound of gold to buy a cow, I can think of many lonely farmers that would gladly let you keep the gold.

And if you dont have anything to offer the farmer of value, you will quickly find the means to take it by force.

[sumdumguy]

I guess the Hutterites will be the only survivors with lots of chickens and the ability to sustain themselves and all their friends —— and they will have a lot of friends. 👍 i’ve heard the doomsday doctrine from my father since I was knee high to a grasshopper. It was just around the corner when he had too much time on his hands. Then spring would come, he’d get busy and forget about it for half a year.

[errolanderson]

Another shocker in European bond markets overnight . . . the Swiss 20-year turned to - 0.20%. In other words, the Swiss government holds your money for 20 years and then gives you back less.

Apparently, the odds of a U.S. Fed rate cut this year has now soared to more than 70%. Goldilocks has left the house . . . .

[biglentil]

Another shocker in European bond markets overnight . . . the Swiss 20-year turned to - 0.20%. In other words, the Swiss government holds your money for 20 years and then gives you back less.

Apparently, the odds of a U.S. Fed rate cut this year has now soared to more than 70%. Goldilocks has left the house . . . .

Market cannot bear any type of normalization of rates. Doesn't leave them much room to fend off the next recession unless they go negative with rates. Wheres helicopter Ben? We need him back to keep the massive everything bubble from imploding.


Canada is even in worse shape, good thing Trudeau legalized the bail in. What's a little 20% haircut off everyone's bank accounts.