What are you buying today?

[50centdollars]

In 2008 Canadians were not levered like they are today. Anyway, I'm not saying to short HCG or any of the Canadian banks. The only way to play it I think is to sell your house and go rent for a while. I find it interesting that the CEO's of 5 of the 6 big banks all retired at the end of 2014. I wonder why???

[Schwab711]

Canadian housing bubble collapse didn't occur because a big part of the financial crisis was the liquidity crisis. US banks also were much more heavily invested in derivatives that enhanced the liquidity squeezes many financial institutions experienced. The Canada Sands in the west were the Bakkan of today and fertilizer prices were significantly higher. Exports of resources in general kept Canada a float. US banks in general, at the time, were much more leveraged than Canadian banks. Canadian banks have oligopoly protection which kept credit ratings artificially high. Consumer debt has increased consistently throughout the crisis, buoying the economy.

The issue in Canada is that average appraisal values of homes have risen at an unsustainable pace for a number of years. Low LTV cannot protect from the drop required based on how over priced the housing market is. Will it ever correct? If so, when and by how much? Canada looks terrible on paper right now. I worked as a financial analyst for a major Canadian bank (mostly on the US side) but I have not worked there in a few years. I sold all my stock in the bank as soon as I was able. I think the diversification into the US for most will ultimately lessen the blow but the market has to drop by 40%+ (whether in a year or over a period of years).

http://www.businessinsider.com/canada-housing-market-slides-2015-1
http://business.financialpost.com/2014/11/26/the-imf-cant-stop-worrying-about-canadas-potential-housing-bubble/
http://business.financialpost.com/2014/10/01/housing-bubble-will-force-bank-of-canada-to-renew-rate-hike-warnings-soon-pimco-says/
http://www.bankofcanada.ca/wp-content/uploads/2011/06/sp150611.pdf

[50centdollars]

Canadian housing bubble collapse didn't occur because a big part of the financial crisis was the liquidity crisis. US banks also were much more heavily invested in derivatives that enhanced the liquidity squeezes many financial institutions experienced. The Canada Sands in the west were the Bakkan of today and fertilizer prices were significantly higher. Exports of resources in general kept Canada a float. US banks in general, at the time, were much more leveraged than Canadian banks. Canadian banks have oligopoly protection which kept credit ratings artificially high. Consumer debt has increased consistently throughout the crisis, buoying the economy.

The issue in Canada is that average appraisal values of homes have risen at an unsustainable pace for a number of years. Low LTV cannot protect from the drop required based on how over priced the housing market is. Will it ever correct? If so, when and by how much? Canada looks terrible on paper right now. I worked as a financial analyst for a major Canadian bank (mostly on the US side) but I have not worked there in a few years. I sold all my stock in the bank as soon as I was able. I think the diversification into the US for most will ultimately lessen the blow but the market has to drop by 40%+ (whether in a year or over a period of years).

http://www.businessinsider.com/canada-housing-market-slides-2015-1
http://business.financialpost.com/2014/11/26/the-imf-cant-stop-worrying-about-canadas-potential-housing-bubble/
http://business.financialpost.com/2014/10/01/housing-bubble-will-force-bank-of-canada-to-renew-rate-hike-warnings-soon-pimco-says/
http://www.bankofcanada.ca/wp-content/uploads/2011/06/sp150611.pdf

Ya Canada does look terrible right now. The consumer is tapped out and you have falling commodity prices.

[KCLarkin]

Ya Canada does look terrible right now. The consumer is tapped out and you have falling commodity prices.

"Invest at the point of maximum pessimism." - Sir John Templeton

[Range]

Ya Canada does look terrible right now. The consumer is tapped out and you have falling commodity prices.

"Invest at the point of maximum pessimism." - Sir John Templeton

While that is a good quote, I hardly think it applies here.

Shares of HCG were up almost 20% in 2014.

[KCLarkin]

Ya Canada does look terrible right now. The consumer is tapped out and you have falling commodity prices.

"Invest at the point of maximum pessimism." - Sir John Templeton

While that is a good quote, I hardly think it applies here.

Shares of HCG were up almost 20% in 2014.

The quote was in reference to the negative sentiment on Canada not HCG. I don't think we're at the point of maximum pessimism on Canada yet but the other half of the quote "sell at the point of maximum optimism" may apply to the U.S. market.

If HCG falls another 20%, then I will open a thread for more debate. At current prices, I am aware of the risks and the position is sized appropriately.

[no_free_lunch]

I think the diversification into the US for most will ultimately lessen the blow but the market has to drop by 40%+ (whether in a year or over a period of years).

Schwab, which market will drop by 40%?  Housing, energy stocks, tsx?

[50centdollars]

With house prices at all time highs, I highly doubt Templeton would think we are at the point of maximum pessimism.

[Ross812]

PCLN and GOOG

[Schwab711]

I think the diversification into the US for most will ultimately lessen the blow but the market has to drop by 40%+ (whether in a year or over a period of years).

Schwab, which market will drop by 40%?  Housing, energy stocks, tsx?

Housing prices have to correct by 40% over time in real terms. If there's a 10% drop over 5 years with 4% growth then we are 30% of the way there. Just about every metric for Canada points to housing being 100% overpriced and the average of the metrics implies 40% drop is necessary. Unless money leaves these housing prices can persist but lending is dropping for a reason (which makes the problem worse faster). EDIT: To go with this, the US housing market is still overvalued because numerous interferences stopped the market from dropping. We will likely see flat housing prices with fast GDP growth to finish the correction while Canada may not have the luxury of positive GDP to save them.

Also, the point of maximum pessimism is not even close for the Canadian housing market. If anything, this is maximum exuberance.