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Is The Next Domino To Fall.... Canada?

Tyler Durden's picture





 

While two short months ago, "nobody" had any idea that Italy's banks were on the verge of insolvency, despite that the information was staring them in the face (or was being explicitly cautioned at by Zero Hedge days before Italian CDS blew out and Intesa became the whipping boy of the evil shorts), by now this is common knowledge and is the direct reason for why the FTSE MIB has two choices on a daily basis: break... or halt constituent stocks indefinitely. That this weakness is now spreading to France and other European countries is also all too clear. After all, if one were to be told that a bank has a Tangible Common Equity ratio of under 2%, the logical response would be that said bank is a goner. Yet both Credit Agricole and Deutsche Bank are precisely there (1.41% and 1.92% respectively), and both happen to have total "assets" which amount to roughly the size of their host country GDPs, ergo why Europe can not allow its insolvent banks to face reality or the world would end (at least in the immortal stuttered words of one Hank Paulson). So yes, we know that both French and soon German CDS will be far, far wider as the idiotic market finally grasps what we have been saying for two years: that you can't have your cake and eat it, or said otherwise, that when you onboard corporate risk to the sovereign, someone has to pay the piper. Yet there is one place where that has not happened so far; there is one place that has been very much insulated from the whipping of the market, and one place where banks are potentially in just as bad a shape as anywhere else in Europe. That place is.... Canada.

As the chart below shows, which is a ranking of global banks by tangible common equity, lowest first, of the banks with a TCE ratio of under ~4% a whopping 30% are those situated in Canada, the same place where nobody thinks anything can go wrong, and which has been completely spared from the retribution of the bond vigilantes. Something tells us Canadian sovereign CDS, not to mention Canadian bank CDS, are both about to go quite a bit wider...

h/t Geoffrey Batt

 


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Thu, 08/18/2011 - 15:41 | Link to Comment TruthInSunshine
TruthInSunshine's picture

You left off France, the U.K. and the Amerikranski Republic.

Some claim that Brazil is going to get a real hangover soon, too.

Who knows.

I do know that purchasers and purchasing power is scarce (you should see what debt is being discounted at in workouts).

Thu, 08/18/2011 - 16:04 | Link to Comment itchy166
itchy166's picture

+1 lol

Thu, 08/18/2011 - 15:36 | Link to Comment Bam_Man
Bam_Man's picture

Canada will be OK until commodities roll over (which looks like they may be starting to do). Then their housing bubble pops and the dominos start to tumble. Same goes for Australia, although their housing bubble is so gigantic it looks like it has already begun to pop.

Thu, 08/18/2011 - 15:37 | Link to Comment caerus
Thu, 08/18/2011 - 15:37 | Link to Comment fyrebird
fyrebird's picture

Okay I got it.  Whatever happens next we can blame Canada.

Finally.

Thu, 08/18/2011 - 15:42 | Link to Comment WonderDawg
WonderDawg's picture

Good stuff.

Thu, 08/18/2011 - 18:02 | Link to Comment Arkadaba
Arkadaba's picture

Cultural reference just in case some haven't seen the movie lol:

http://www.youtube.com/watch?v=vxPRHXgYVlk

Thu, 08/18/2011 - 15:37 | Link to Comment MrBinkeyWhat
MrBinkeyWhat's picture

BLAME CANADA!

Thu, 08/18/2011 - 15:37 | Link to Comment Caviar Emptor
Caviar Emptor's picture

What's bad for the gander is bad for the goose

Thu, 08/18/2011 - 18:26 | Link to Comment oddjob
oddjob's picture

Actually Gander was bad for the 101st Airborne.

http://www.rense.com/general69/gander.htm

Thu, 08/18/2011 - 21:10 | Link to Comment knukles
knukles's picture

MB Luna

Thu, 08/18/2011 - 15:39 | Link to Comment Threeggg
Threeggg's picture

Gold margin increase in 5, 4, 3, 2....................

Can almost "Bookit" with expiry tomorrow

Thu, 08/18/2011 - 15:57 | Link to Comment unununium
unununium's picture

If you're wallowing in the stuff, you lightened up just a little today like me. Discipline folks.

Thu, 08/18/2011 - 16:20 | Link to Comment RockyRacoon
RockyRacoon's picture

That would be very suspicious with volatility at this (low) level.   But doing suspicious stuff is just what they do.  No?

Thu, 08/18/2011 - 15:39 | Link to Comment breezer1
breezer1's picture

not all of us spitzer but you are right , most are unfortunately.

housing bubble here is worse than when it popped in the land of the free.

heres ben's take fresh off the press...

http://www.theeconomicanalyst.com/content/cmhc-worse-shape-fannie-mae-was-yielding-floor-insightful-commenter

Thu, 08/18/2011 - 15:43 | Link to Comment falak pema
falak pema's picture

Anything the Hfs can lay their hands on ...is good to be taken like a trojan woman.

The CDS racket is the sesamy for insider trading, peer to peer, and triangular plays amongst the PDS AND THEIR  Oligarchical owners. Keep the ball rolling fellas. Where ever the domino stack takes us...

Thu, 08/18/2011 - 18:02 | Link to Comment SovietCong
SovietCong's picture

OK, can someone please answer this. To my knowledge, securities, derivatives included, are not federally regulated in Canada, so CDSs are regulated on a province by province basis. There's no market, even an OTC, for Canadian sovereign CDS. Hell, there's no such thing as Canadian CDS, except maybe for private ISDA-style arrangements, pretty much like the CDS's on those subprime RMBS-backed CDO's in, say, 2006. But you can't trade those, unless you're a top-tier client of one of the big banks or one of those banks itself.

Am I missing something there? Can you synthetize a Canadian sov CDS?

Fri, 08/19/2011 - 04:19 | Link to Comment ZeroPower
ZeroPower's picture

ISDA oversees everything, theyre International.  You can create a bespoke trade however you want dealing with Canada's bonds (essentially CDS, added layer of risk) at any structured credit desk. The problem comes in trading, really hard to unwind said trade, so we either deal with a HF who has a super conviction one way or another (in which case we'd charge a nice spread to cushion any potential adverse moves) or simply choose another bank or even retail client to offload the exposure to (i.e. client wants FTD (first to default) CDS basket, so even though we get short by selling them long risk, we then go out to another bank and do the inverse so that we are essentially flat and just made on the spread).

But bespoke products arent the bread and butter of credit trading, if someone wants long sov CAD risk, short bonds (choosing a liquid issue) are the simple equivalent.

Thu, 08/18/2011 - 15:39 | Link to Comment TooBearish
TooBearish's picture

Sorry Ty not buying it CAD banks lend to no one outside the country

Thu, 08/18/2011 - 17:42 | Link to Comment sleepingbeauty
sleepingbeauty's picture

Except CIBC, the most American of the Canadian banks.

Connie

Thu, 08/18/2011 - 15:41 | Link to Comment speconomist
speconomist's picture

What about Canadian dollar?

 

Is it going to plummet even more?

Thu, 08/18/2011 - 15:53 | Link to Comment Arkadaba
Arkadaba's picture

This doesn't look like plummeting to me:

http://www.exchange-rates.org/history/CAD/USD/G/30

Thu, 08/18/2011 - 16:11 | Link to Comment speconomist
speconomist's picture

http://www.exchange-rates.org/history/CAD/GBP/G/30 7% against GBP in this chart, somehting less in the chart you linked, 10% against CHF (Pulled back after 20% drop last week), etc.

Thu, 08/18/2011 - 16:45 | Link to Comment tmosley
tmosley's picture

Compare the CAD to gold.  It's plummeting.

Thu, 08/18/2011 - 18:06 | Link to Comment Arkadaba
Arkadaba's picture

But aren't all currencies? 

Thu, 08/18/2011 - 15:40 | Link to Comment adr
adr's picture

At least Canada has fairly low mortgage rates. I could easily afford a $250k home outside Montreal whereas a $250k home in the US would be pretty hard even at 4.5%.

In other news:

CHINESE AND AMERICAN BASKETBALL PLAYERS BRAWL DURING BIDEN'S VISIT

http://nbcsports.msnbc.com/id/44191433/ns/sports-college_basketball/

pretty frickin hilarious. I wonder if they scheduled a flash mob on Facebook before the game.

Thu, 08/18/2011 - 17:01 | Link to Comment Scisco
Scisco's picture

Low rates will not persist. Look at the areas where the bulk of the population live. The mortgage to incomes are at unaffordable levels and many are VRMs. Privately, Canadians are in debt to their eye balls and are living from paycheck to paycheck. Sound failure? For the icing on the cake, look into the CMHC and normalized government debt levels.

Thu, 08/18/2011 - 15:41 | Link to Comment Prescient_Point
Prescient_Point's picture

As per wikipedia "

TCE is an uncommonly used measure of a company’s financial strength. It indicates how much ownership equity owners of common stock would receive in the event of a company’s liquidation. During the financial and economic crisis of 2008-2009, it gained public popularity as a measure of the viability of large commercial banks.

TCE, when used in a ratio with tangible common assets, is a measure of a bank's ability to absorb losses (e.g., homeowners defaulting on mortgages) before becoming insolvent. It is one of the factors considered by the Office of the Comptroller of the Currency to determine if a bank has become insolvent."

 

Does this mean that higher the bank's TCE, the more stable it is?

 

Thu, 08/18/2011 - 15:41 | Link to Comment Prescient_Point
Prescient_Point's picture

As per wikipedia "

TCE is an uncommonly used measure of a company’s financial strength. It indicates how much ownership equity owners of common stock would receive in the event of a company’s liquidation. During the financial and economic crisis of 2008-2009, it gained public popularity as a measure of the viability of large commercial banks.

TCE, when used in a ratio with tangible common assets, is a measure of a bank's ability to absorb losses (e.g., homeowners defaulting on mortgages) before becoming insolvent. It is one of the factors considered by the Office of the Comptroller of the Currency to determine if a bank has become insolvent."

 

Does this mean that higher the bank's TCE, the more stable it is?

 

Thu, 08/18/2011 - 15:41 | Link to Comment eduard khil
eduard khil's picture

maple syrup, bitchez

Thu, 08/18/2011 - 15:41 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Obama might go on TV and say 'now is a good time to buy gold' 

Thu, 08/18/2011 - 15:44 | Link to Comment WonderDawg
WonderDawg's picture

Shortly after which, will be a good time to sell.

Thu, 08/18/2011 - 15:49 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Like stocks in March, 2009 you mean? 

Thu, 08/18/2011 - 17:35 | Link to Comment WonderDawg
WonderDawg's picture

Touche'. I'm glad I was listening to Prechter at that time, and got in the first week of March. Unfortunately, I was also listening to Prechter last year and sold too early. However, the indexes are almost back to the level at which I sold, so I don't feel so bad. I'm not smart enough to time this shit myself, so I err on the side of safety, which is now paying off. Also should have bought more physical Au at the same time. But, I did okay for a country boy.

Thu, 08/18/2011 - 18:02 | Link to Comment IQ 145
IQ 145's picture

Selling "too early" is alright! Do not belabour yourself over this. All great traders sell too early. Just keep doing it and don't participate in the downfalls and you will be very comfortable. Congratulations.

Thu, 08/18/2011 - 15:41 | Link to Comment Arkadaba
Arkadaba's picture

I guess that is why Goldman is moving in for the pickings: 

http://business.financialpost.com/2011/08/18/goldman-sachs-launches-new-stock-exchange-in-canada/

However, I wouldn't short the Canadian dollar just yet ....

Thu, 08/18/2011 - 16:14 | Link to Comment speconomist
speconomist's picture

Please ellaborate.

Discussing it also here: http://www.zerohedge.com/news/next-domino-fall-canada#comment-1574395

Thu, 08/18/2011 - 17:53 | Link to Comment SovietCong
SovietCong's picture

I guess we all remember what happened when the GS' Sigma X started to trade intensely in shares of Italian banks some weeks ago...

Thu, 08/18/2011 - 15:42 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Not a bid to be found for stocks

Thu, 08/18/2011 - 15:42 | Link to Comment Tinfoil Hat
Tinfoil Hat's picture

When my Calgary condo costs as much as some of the big McMansions south of the border it's no suprise that harsh times may be on the way.  Hopefully many Canadians thank their lucky stars for the incredible abundance of resources we posess and how that can help see us through whatever bad times are coming, but I doubt it.  The big question for the "road warrior" future, who will get here first with big weapons?  America? China? Russia?  My guess is ole' harper will pump everything we have into the US and down we'll go with them.  Fitting I suppose though, America has been a big shield and bigger check book for a long time, yanks are welcome in my Rocky mountain forest bug-out territory anytime.  Just bring a good attitude and plenty of your sweet guns.  A parka probably is a good investment too..

Thu, 08/18/2011 - 16:07 | Link to Comment somaplease
somaplease's picture

See you in Johnsons Canyon when SHTF. Seriously tho, im in Kensington and I rent. The valuation of this place is insane all because of the location??

Thu, 08/18/2011 - 16:32 | Link to Comment NotApplicable
NotApplicable's picture

The real weapons are the little pieces of paper that will collateralize all of those abundant resources (they will seek real value). Otherwise, why would any sovereign loan to an insolvent institution in a foreign country?

Thu, 08/18/2011 - 15:43 | Link to Comment russki standart
russki standart's picture

Canada is the next domino to fall?? Like who gives a shit what happens in Canada anyways....

Thu, 08/18/2011 - 15:47 | Link to Comment MrBinkeyWhat
MrBinkeyWhat's picture

Canadians might...Just saying, Eh?

Thu, 08/18/2011 - 16:20 | Link to Comment Grimbert
Grimbert's picture

Don't ignore Canada - by population they're nearly as big as Poland!

Thu, 08/18/2011 - 18:27 | Link to Comment Arkadaba
Arkadaba's picture

And where do most US oil imports come from by country ... hmmm ....:

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_m.htm

 

Thu, 08/18/2011 - 15:43 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

Don't the Canadian banks already have a built-in bailout via the CMHC?  Seems to me Canadian banks hold very little housing credit risk.

The only entities that do hold it are the government and GNW to a small degree (they compete with the CMHC).

I would be more worried about the Aussie banks, who do hold housing credit risk (though again, they share some of it with GNW who is also present down there).

Thu, 08/18/2011 - 16:01 | Link to Comment lizzy36
lizzy36's picture

You are correct.Virtually all mortgages where the loan-to-value ratio is greater than 80 percent are guaranteed indirectly or directly by the CMHC.

As well counterparty risk is very limited.

There are pockets of housing bubble risk, but lending standards tend to still be high.

Further while leverage maybe somewhat higher there is no issue with suprime, CDO's and CDS.

Finally, the OSFI (cdn bank regulator) considers Basel III 7% TCE not good enough. The OSFI wants an additional buffer and total TCE for each bank to be 10.5%.

Finally TBTF orginated here. The government will never let one of the big 5 die. NEVER.

Thu, 08/18/2011 - 16:18 | Link to Comment chet
chet's picture

We'll see.  There was a lot of rationalization during the US housing bubble as well. 

I follow the Vancouver housing market as best I can, and there are extremely over-leveraged buyers stretching to pay those prices.  Median home prices are at 8 or 9 times median income.  And plenty of evidence of subprime loans as well.  Plenty of evidence of speculative activity.

Perhaps most of the risk was passed to the CMHC (exactly what we said about US risk being passed on to Fannie and Freddie, and "managed" through securitization), but with such low capital cushions the idea that Canadian banks can skate through a crisis seems optimistic.

Thu, 08/18/2011 - 17:27 | Link to Comment IMA5U
IMA5U's picture

au canada

au canada!

 

 

2x !!!!

Thu, 08/18/2011 - 15:44 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

Take off, to the Great White North.

http://www.youtube.com/watch?v=ot70G4wSQi0

 


Thu, 08/18/2011 - 15:45 | Link to Comment FubarNation
FubarNation's picture

I've been keeping some $ in Canada and was wondering how the fuck the real estate market (Hongcouver) can keep rolling along.

 

Prices are insane.

 

I though my $Cando was bullet proof.

 

Perhaps not.

Fuck.

Thu, 08/18/2011 - 15:49 | Link to Comment tmosley
tmosley's picture

No paper is safe.  Period.

Still time to buy a seat in the PM lifeboats.

Thu, 08/18/2011 - 16:00 | Link to Comment FubarNation
FubarNation's picture

I've been buying those seats since '99 when everyone and their dog was laughing at me.

Thu, 08/18/2011 - 16:48 | Link to Comment tmosley
tmosley's picture

Nice.  The first I ever dipped my toes into the PM world was 2002.  Made a pretty penny in paper gold.  I took my fiatscos and ran.  Wish I had stayed in, and converted to physical when I bought my first house.  Gold was so cheap back then, I'd probably be worth twice as much as I am now if I had done that.

Thu, 08/18/2011 - 15:45 | Link to Comment Jaddi
Jaddi's picture

Eric Sprott actually wrote about the leveraging in the Canadian banks in Nov. 2009. Worth the read.

http://www.sprott.com/Docs/MarketsataGlance/11_09%20Dont%20Bank%20on%20t...

Thu, 08/18/2011 - 16:54 | Link to Comment GregGH
GregGH's picture

Thanks Jaddi for sharing that - very timely

Thu, 08/18/2011 - 15:45 | Link to Comment Mark_BC
Mark_BC's picture

Hah, my accounts are in CIBC, the worst of the bunch. But they have hardly anything left in them, and I've almost convinced my mom to totally empty her account. Bring it on boys, we need our asses kicked too.

Thu, 08/18/2011 - 16:13 | Link to Comment Flakmeister
Flakmeister's picture

CIBC has historically been the "worst" bank, they also seem to take the biggest bite of whatever is the shit sandwich du jour... It's like they keep trying to emulate the Big Boys to the south...

Thu, 08/18/2011 - 15:45 | Link to Comment DormRoom
DormRoom's picture

errr.. the article forgets to mention the probability of Canadian banks liquidating?   More importantly what are Canadian banks exposure to Europe & US?  Not as bad as a tranche of other global banks, eh.

Fri, 08/19/2011 - 04:24 | Link to Comment ZeroPower
ZeroPower's picture

Eurozone, virtually nil (CIBC and RBC have some counterparty risk with the UK and French capital markets players) and theres of course some exposure to the US being neighbours as well as basically all 5 having some sort of branching operation in the States.

Point is, there are many many other places to look for trouble to before even mentioning the CAD5

Thu, 08/18/2011 - 15:45 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Canada? Somebody tell Rosie!

Thu, 08/18/2011 - 15:46 | Link to Comment Henry Hub
Henry Hub's picture

Canadians have been brainwashed into thinking the Canadian big five banks are sacrosanct. This was reinforced in part by the fact that they stood up so well in 2008. But this is a wake up call. Canadians like Americans have to stock up on gold, can goods, and beef jerky. Ammo not so much. They have very restrictive gun laws. Only the criminals have guns.

Thu, 08/18/2011 - 16:11 | Link to Comment itchy166
itchy166's picture

Only the criminals have hand-guns maybe.  But here in Alberta, we ALL have long guns.

Thu, 08/18/2011 - 16:38 | Link to Comment Dapper Dan
Dapper Dan's picture

My hand gun is only to give me time to get to my long gun.

Disclosure:  Long Bushmaster  "the poor mans Rock River"

 

Thu, 08/18/2011 - 18:13 | Link to Comment itchy166
itchy166's picture

+.303

Thu, 08/18/2011 - 19:25 | Link to Comment B-rock
B-rock's picture

It's not that restrictive here... There's a 5 round semi-auto centrefire rifle limit and I have to keep stuff locked up... Get a license and keep a handgun (10 round limit) no prob (no hollowpoints). No 922r gives us cooler guns too! Can't just go shooting people like down south though...

Thu, 08/18/2011 - 15:46 | Link to Comment ark_1980
ark_1980's picture

more importantly...the idea of contingent capital for canadian banks just got more clearly defined...

 

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/cibc-sets-template-for-contingent-capital/article2133639/

Thu, 08/18/2011 - 15:47 | Link to Comment TyCarrerra
TyCarrerra's picture

Common, now, Tyler! Where are we supposed to run to now?

Thu, 08/18/2011 - 15:51 | Link to Comment DaveyJones
DaveyJones's picture

in a circle or more precisely, like that little whirlpool in a toilet

Thu, 08/18/2011 - 19:27 | Link to Comment B-rock
B-rock's picture

Spread the word: Canada is no place to run! Spread the word!

Thu, 08/18/2011 - 15:47 | Link to Comment azengrcat
azengrcat's picture

But their RE bubble, I mean banks are so stong!  It is different this time right?

Thu, 08/18/2011 - 15:48 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

where are all those fellas that tell us gold and silver are getting monkey hammered, pole-axed etc whenever they drop by .000000001% compared to the spoos?

to all gold shorts gentleman jim sinclair sends warm regards.

Thu, 08/18/2011 - 15:50 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Yes I join you in toasting them. Literally, 'toasting' them. 

Thu, 08/18/2011 - 15:52 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

i usually like mine medium rare but on special occasions like this i prefer well done over a very hot flame.

Thu, 08/18/2011 - 15:49 | Link to Comment MrBinkeyWhat
MrBinkeyWhat's picture

I have Aborigonal status in Canada, as my ancestors are Acadian, and thus Pre-Canadian.  Suck on that bitchez!

Thu, 08/18/2011 - 16:04 | Link to Comment Stumpy
Stumpy's picture

Acadian aboriginal? Let me guess? Cote-Nord in Quebec?

Thu, 08/18/2011 - 16:19 | Link to Comment tom a taxpayer
tom a taxpayer's picture

I have Aboriginal status in the Bronx.

Thu, 08/18/2011 - 16:22 | Link to Comment itchy166
itchy166's picture

I am afraid that you have been misinformed.  THe British kicked out the Acadians "pre-Canada" as you say, but you have no aboriginal rights here.  

Thu, 08/18/2011 - 15:51 | Link to Comment MrBinkeyWhat
MrBinkeyWhat's picture

...and since I was born in New Orleans, I can move to France! WOOT

Thu, 08/18/2011 - 15:52 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

Haha. TD Bank is right in the middle of the shit.

Thu, 08/18/2011 - 15:53 | Link to Comment treemagnet
treemagnet's picture

Maybe Bernanke will pull a John Candy for distraction and declare war on Cananda!  Canadian Bacon was it?

Thu, 08/18/2011 - 15:54 | Link to Comment gwar5
gwar5's picture

 

Now Canada?  No safe havens.

 

Thu, 08/18/2011 - 15:54 | Link to Comment RogueFit
RogueFit's picture

The CMHC is taking all the subprime risk. the Canadian banks have little subprime risk.

Thu, 08/18/2011 - 15:58 | Link to Comment razzgold
razzgold's picture

I don’t think Americans and Europeans can understand the CMHC.  It’s regulated… they won’t be able to grasp the concept. 

But they grasp the concept of CDS' and derivatives.

Thu, 08/18/2011 - 16:08 | Link to Comment Double down
Double down's picture

By whom is the CMHC regulated?  Certainly not OSFI!

Thu, 08/18/2011 - 16:12 | Link to Comment razzgold
razzgold's picture

by the government! you need at least 25% down to buy a house anything less you are paying the CMHC insurance prem.

and by less you need at least 20% down

 

Thu, 08/18/2011 - 15:55 | Link to Comment MrBinkeyWhat
MrBinkeyWhat's picture

They let me stay here on the Gulf Coast of Alabama. I suspect that is because of property ownership and productive capacity.

Thu, 08/18/2011 - 16:42 | Link to Comment Blano
Blano's picture

Lucky bastard you.  That's where I want to end up.

Thu, 08/18/2011 - 15:55 | Link to Comment razzgold
razzgold's picture

Canadian are not degenerate debt holders like in the US and Europe.  Canadian banks are closely regulated by the government and make billions of $ every quarter.

Canada is resource rich and actually sells their resources.   

Thu, 08/18/2011 - 15:59 | Link to Comment JohnFrodo
JohnFrodo's picture

The Canadian housing market is maybe 30% overvalued, we depend on the US like the Tea Party depends on ignorance, and consumer debt makes the US look frugal. It could all easily unwind.

Thu, 08/18/2011 - 16:10 | Link to Comment kridkrid
kridkrid's picture

The Tea Party is no more ignorant than any other group that doesn't understand that money is debt.  We are all going to crash in the same unsustainable monetary system, it matters not what you political ideology is.

Thu, 08/18/2011 - 16:00 | Link to Comment SDRII
SDRII's picture

Q the chart of household leverage...

Thu, 08/18/2011 - 16:11 | Link to Comment Savvy
Savvy's picture

That made me laugh. Canadians have been pulling equity out of their homes as fast as any American ever did. Toys, trucks, trips and a credit card in every pot hee hee ho ho. The housing bubble is huge. A single detached bungalow in Vancouver is $1 million. CMHC only guarantees a mtge if you borrowed through them, mostly first time buyers with little down payment. People would look at me cross eyed when I'd say 'get out of debt, buy silver'. Oh no Razzgold, if the US goes down, 70% of our markets are gone and we're in deep do do.

Thu, 08/18/2011 - 16:15 | Link to Comment razzgold
razzgold's picture

I own gold and silver and a house with a mortgage.  

With our banks being regulated and not handing out mortgages to every joe shmo we fair much better.  we are subject to slow downs, resession blah blah but when things turn around our housing wont double dip

 

Thu, 08/18/2011 - 16:22 | Link to Comment somaplease
somaplease's picture

In all fairness, we were also handing out the 40 year, 0 down mortgages some time ago.  Carney even said, if interest rates increase, many Canadians are screwed.

Thu, 08/18/2011 - 16:26 | Link to Comment RockyRacoon
RockyRacoon's picture

Right.

Fri, 08/19/2011 - 03:22 | Link to Comment Seer
Seer's picture

"when things turn around our housing wont double dip"

Sorry to be the bearer of bad news, but there won't be any "turn around," this is slinky-down-the-staircase from here on out... Our (western civilization's) entire meme is collapsing.

Thu, 08/18/2011 - 15:55 | Link to Comment Nothing To See Here
Nothing To See Here's picture

40% of the Canadian economy relies on Terrance and Phillip (see pie chart : http://home.comcast.net/~injoke/spPie.jpg).

Now, when it comes to their banks, they are integrated with Europe and will thus suffer alongside the fascist/socialist old continent. This being said, Canada's sovereign debt is among the lowest in the industrialized world. They intend to cut state spending at the federal level. They did not have FM&FM to run a subprime scheme all over the country. And they have gold mines/commodities all over the place. I don't know.

Thu, 08/18/2011 - 15:59 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

if it keeps rising gold holders are gonna need a biggeer safe.

hat tip steven spielberg.

Thu, 08/18/2011 - 15:59 | Link to Comment cocoablini
cocoablini's picture

in the scheme of things, Canada has resources and assets and export economy of natural resources. They have a country that is inherently more valuable than the stripped nations of Europe and maybe the US.
On the other hand, Canadian banks are...banks. And all banks, even if they played the game well in 2007-2008, are going to fold like a cheap suit because the ponzi mechanism is collapsing. So, Canada played the game well, but the game is over and changing.

Fri, 08/19/2011 - 03:28 | Link to Comment Seer
Seer's picture

Look up Canada's main exports and you'll be surprised at what they are (they're NOT oil related).

The US still ranks near the top in most inventories of natural resources (higher than Canada): and I'm not counting one of the greates assets- farm land.  The issue is (internal) consumption...

Thu, 08/18/2011 - 16:00 | Link to Comment Oquities
Oquities's picture

dja hear about the Newfie who wanted to be buried at sea?  his son drowned diggin' the grave.

Thu, 08/18/2011 - 16:15 | Link to Comment Flakmeister
Flakmeister's picture

First newfie joke on the Hedge... congrats...

Reminds me of the Newfie that lost his girlfriend when he forgot where he laid her...

Thu, 08/18/2011 - 16:01 | Link to Comment myth_drannon
myth_drannon's picture

And in reponse to ZeroHedge  GlobeAndMail publishes a piece on  how Canadian banks are the safest :

 

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/the-worlds-safest-banks/article2133878/

Thu, 08/18/2011 - 16:13 | Link to Comment wang (not verified)
Thu, 08/18/2011 - 16:03 | Link to Comment adr
adr's picture

Check out the market at the close. Looks like we can get a +500 day tomorrow. Massive buy ramp in the last 15 minutes. In 8 minutes the Dow jumped 119 points!!!

Someone must have caught the Algos and switched them off right before the close because the last 4 minutes saw 34 points drop off and the poor market couldn't hold 11k.

What a con game. Unbelievable.

Thu, 08/18/2011 - 16:03 | Link to Comment deez nutz
deez nutz's picture

and the bad thing for Canada is:  money printing? to devalue their currency and that leads to more exports??? from a nation that counts on the U.S. to purchase 85% of it's exports?  A strong Canadian dollar leads to bad things.  They have become addicted to their weak currency.  Wages are too high, productivity too low for them to survive at any length with a dollar at parity with the U.S. or worse ...STRONGER!

Tyler don't you think with Canada artificially suppressing interest rates, which is causing a housing bubble as well as forcing millions of Canadian to max out their credit cards, this isn't being engineered?  Don't forget about GM FORD and CHRYSLER workers pay.  Not only are paid a 20% higher wage they get more perks.  With the Canadian dollar at parity this costs the car companies more money.  Canada has good reason to find "bad news", it is a parasitic economy and must experience what the host experiences.

Thu, 08/18/2011 - 16:19 | Link to Comment wang (not verified)
Thu, 08/18/2011 - 16:23 | Link to Comment deez nutz
deez nutz's picture

WRONG!

Ever see the semi's lined up at the border?  NAFTA has been a one-way valve since the USD  went almost 50% over the CAD in 1999.  Can u say "dependancy" bytchez?

Thu, 08/18/2011 - 16:05 | Link to Comment Mayer Amshel
Thu, 08/18/2011 - 16:13 | Link to Comment somaplease
somaplease's picture

Its funny how you fuckers still utilize the retarded stereotypes of the 80s eh? Fuck youzzz!!!

Thu, 08/18/2011 - 16:17 | Link to Comment Flakmeister
Flakmeister's picture

Whats the matter? Lumpy gravy in your poutine?

Thu, 08/18/2011 - 16:23 | Link to Comment somaplease
somaplease's picture

Mmmmmm.....lumps

Thu, 08/18/2011 - 16:17 | Link to Comment hunglow
hunglow's picture

Have we finished that super highway yet.   Have we even started it yet?

Thu, 08/18/2011 - 16:17 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

Most of the ridiculous mortgages are insured through CMHC, pre-backstopped by the taxpayer Sux for taxpayers, bully good for the banks if things go bad. No need to grovel for bailouts in the event of a crash. Canadian interest rates will probably rise, people will have negative equity, and our growth will be limited by the stale US economy. As far as an apocalypse, well I'll guess we'll see if that happens.

Thu, 08/18/2011 - 16:38 | Link to Comment LaughingMan
LaughingMan's picture

Banks in Canada are actually pretty good at preventing people from taking mortgages. They usually wont let you get a mortgage if your monthly mortgage payment exceeds approx 35% of your wages. It is also very hard to get a mortgage unless you have a considerable downpayment and if you dont you have to buy insurance to cover the risk. Are houses overpriced in Canada? The answer would be yes and that is mainly because there is ultra high demand in the populated areas. Once you leave the greater Toronto area or Vancouver house prices are really not that bad. For example, I am about to purchase an old smaller home with 140  acres in St Charles for $129,000.

Thu, 08/18/2011 - 17:08 | Link to Comment robertocarlos
robertocarlos's picture

And the bank buildings will be burnt to the ground.

Thu, 08/18/2011 - 16:17 | Link to Comment anony
anony's picture

Point o' Odor!

Flipster as developed a new method for determining whether or not a city, state, country, village, town or household will fail:

Count the number of cranes----- or whatever you call those watchmacallits, those real tall ones that rise right beside the building, as it rises.

The more there are, the shorter you should be re: that country's prospects.

Canada, indeed.  I counted 40 of 'em in downtown Toronto alone.  Can't imagine what those hot cities like Edmonton have in cranes. 

Couldn't agree more that our Northern neighbors are on a precipice, in a bubble, and all I don't know is the best to move to play it.  Yet.

Pittsburgh PA, has maybe, one and it's not even 10 stories. This is not of any use in predicting the Superbowl champion in February, however, so don't put all your kid's electronics money in it.

And this for all you Bamster fans:  take special note: PSW

http://www.sodahead.com/living/nero-in-the-white-house/question-2063295/Nero

Thu, 08/18/2011 - 16:19 | Link to Comment PulauHantu29
PulauHantu29's picture

Canada is a HUGE BUBBLE.

I looked at some condos there in 2002 selling for $210,000 each. They flipped several times and last sold for over $850,000!

Yuo wanna talk Bubble....it's a Global problem...Hong Kong is enormously overpriced...same with Australia (read The Daily Reckoning). I would not touch ANY RE until The Great Correction has subsided....years to go.....sad stuff.

Thu, 08/18/2011 - 16:34 | Link to Comment Threeggg
Threeggg's picture

Dreams built of paper........picture perfect.

Thu, 08/18/2011 - 16:44 | Link to Comment Sudden Debt
Sudden Debt's picture

You should check out Europe :)

 

Thu, 08/18/2011 - 18:14 | Link to Comment IQ 145
IQ 145's picture

In all the above cases. This is the aftermath of the inflationary party. The most important export of the USA for two decades was inflation. The wealthy became wealthier. They have to do something with all the  monoply paper; they compete for housing in desirable areas. Continue stockpiling silver until the desirable real estate crashes; at this time the silver will be very high; t hen you can buy something; it that's what you want. Just don't become attracted to it now.

Thu, 08/18/2011 - 22:06 | Link to Comment wang (not verified)
Thu, 08/18/2011 - 16:26 | Link to Comment FranSix
FranSix's picture

TD.TO  Monthly Chart

stockcharts.com

Average house price chart, Toronto

http://www.gettingtechnical.com/01_home/market_commentary/can_en.html

Thu, 08/18/2011 - 16:48 | Link to Comment wang (not verified)
Thu, 08/18/2011 - 16:34 | Link to Comment Slow-choke-off
Slow-choke-off's picture

Here is the list of worst to best of the CDN 5 in mho:

start with BMO piece of shyt bank, should have died years ago, French Colonialists

next is CIBC, old world imperialists

then scotia bank, all they do is PM's,

then TD bank, kinda like a dogs hind leg

last is Royal Bank, owned by the soon to be new King Willie

that's all folks.

Thu, 08/18/2011 - 16:54 | Link to Comment Growyourownfood
Growyourownfood's picture

1. Bloomberg aggregates uncomparable data regularly and with no attention given to nuance, in order to present it in a matrix, especially when it comes to equities accross countries.

2. Canadian banks have next to zero subprime exposure, and yes, any loan under a 80 LTV pays 1-2% of principal annually into the mortgage insurance co (CMCH) which guarantees the loan.

3. Canada has 30% debt:GDP.

4. Asian money has an impact in Vancouver, nowhere else (I live there). Vancouver/Whistler accounts for 20% of Canada's RE market at most. Average canadian RE prices are 5-6x median income avg across country. Van is the outlier.

Thu, 08/18/2011 - 22:04 | Link to Comment wang (not verified)
Thu, 08/18/2011 - 16:56 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

I blame Ricky, Bubbles, and Julian! They stole all the change from the banks, that has to be it.... I think Tier 1 capital is a Rickism......

http://www.youtube.com/watch?v=TR3QHoqfhX8

 

Thu, 08/18/2011 - 16:58 | Link to Comment robertocarlos
robertocarlos's picture

Things are different here. 

Thu, 08/18/2011 - 17:06 | Link to Comment Demandrel
Demandrel's picture

I think the point that is missed here is that Canadian banks do not take mortgage risk.  As a result, for them to fail there would have to be a massive decline in the quality of commercial loans across Canada, and even then the fact that there are a lot of mortgages on the books where the bank did not take any risk will protect them.  The socialization of mortgage risk in Canada through CMHC insurance makes comparisons to other lenders elsewhere very difficult.  CMHC is explicitly guaranteed by the government, unlike Fannie and Freddie.  

Thu, 08/18/2011 - 17:32 | Link to Comment pitz
pitz's picture

Exactly.  The GoC is obligated to print as much money as necessary to support CMHC and its guarantees.  Canadian banks run duration-matched portfolios, assets are matched to liabilities, so they do not take on interest rate risk nor do they take default risk on the loans.  The Canadian banks are in a far better position to prosper than even the Government of Canada itself since they are beneficiaries, not payees, on the CMHC insurance policies that were so foolishly written.

Thu, 08/18/2011 - 17:09 | Link to Comment bill1102inf
bill1102inf's picture

"Our housing market is not a bubble", "That crack house is def worth 500,000", "Its different, this time", "It cant happen here"

 

.............

 

cant wait

Thu, 08/18/2011 - 17:18 | Link to Comment Growyourownfood
Growyourownfood's picture

Not "It can't happen here". More like "It didn't happen here in 2008" and "It isn't happening here currently".

Thu, 08/18/2011 - 17:16 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

who knows what the Cdn Big 5 bank's exposure is ...... am sure someone in Canada and NY Fed hasbeen looking at this for at least 3+ weeks or longer.   And this could be representative of the chain reaction that has started ....

And if the Cdn Loonie is the short of a lifetime .... then what about half the other currencies on this planet?  Ever hear of overfocused on an issue?

Where does the Swiss Franc, the Yuan/Reniombi, the Aussie & NZ currencies, etc....... start their backtrack?

Everything is out of whack  presently ...

And this site acts like the news media acts about Ron Paul ..... ignores ....another short of the century (Marc Faber's words not mine ... and I think Jim Rogers is along on that ride as well) .... medium/long-term Tresuries which tapped their lowest yield rate ever today.

There are so many imbalance candidates right now  ....  I'd say the loonie has a lot of jostling to do to get on that 'best trade' idea bus ......

 

 

 

Thu, 08/18/2011 - 17:30 | Link to Comment pitz
pitz's picture

Canadian banks are guaranteed a bailout through the CMHC with nearly the entirety of the Canadian mortgage market guaranteed by the government, and ultimately, the printing presses.  This, in turn, allows the banks to carry essentially infinite leverage on their books, since there is no risk whatsoever of non-performance of the mortgages (short of the Government of Canada reneging on their legal obligations!). 

So to call Canada 'domino' is completely and utterly ignorant. 

Thu, 08/18/2011 - 17:41 | Link to Comment grant
grant's picture

There are 18 banks on that list with a TCE ratio < 4%, and 4 of those are canadian.  4/18 = 22%

Since ZH think 22% = 30%, canadians shouldn't worry too much about the rest of their analysis.

Thu, 08/18/2011 - 18:19 | Link to Comment IQ 145
IQ 145's picture

It's a bullshit article. The Canadian Banking system is no. 1 in t he world. The idea that higher realestate prices necessarily imply some kind of financial problem is of infantile simplicity. Every aspect of the Canadian situation is distinct and different from the US.

Thu, 08/18/2011 - 17:50 | Link to Comment falak pema
falak pema's picture

canada can withstand the HF tsunami. Its run by the best and the brightest of the new world. Their banks as so solid they are made of granite from Krypton. Superman was canadian and Batman was a french canuk who learnt to say bonjour before he said goodbye and thank ya all.

Thu, 08/18/2011 - 18:03 | Link to Comment Flakmeister
Flakmeister's picture

It's eh, not A

all the same, thanks for the flare posting

Thu, 08/18/2011 - 18:11 | Link to Comment rfbear
rfbear's picture

Tyler, in all due respect... and I do respect and am thankful for you and your ZH machine (you), Canadian Banks are the least of investor problems worldwide.  By the time our banks are in real trouble, I will be living in Peru at the side of a mountain near Cusco.

Thu, 08/18/2011 - 18:22 | Link to Comment Itsalie
Itsalie's picture

If that chart is anythinbg to go by, Switzerland (UBS and CS) and UK (Barclays Lloyds and RBS) are in in the same boat as France Germany and far worst than Italy. The PE of Socgen is far lower than Credit Agricole even though the TCE ratio is reversed for these 2 banks. This analyses is only a small part of tnhe story, must work harder from here people or you lose money betting on hyperventilation all the time!

Thu, 08/18/2011 - 18:22 | Link to Comment MiningJunkie
MiningJunkie's picture

Tyler! could not agree with you more! I am a Canuck and I will tell you that Canadian real estate values are out of this planet's atmosphere and with our largest trading partner (U.S. of friggin A.) going into cardiac arrest, the banks could have a rude awakening in 2012. However, my Canuck mining companies are going to morph into the new "banks" without the debt. Their collateral will be gold and silver reserves...

Sell the C$ and buy gold and silver shares...

Thu, 08/18/2011 - 19:00 | Link to Comment LongOfTooth
LongOfTooth's picture

I believe I hear Martha and the Vandellas warming up in the background.

 

http://www.youtube.com/watch?v=fhcflDSUMvc

 

Thu, 08/18/2011 - 19:12 | Link to Comment OutLookingIn
OutLookingIn's picture

Canadian's cannot "jingle mail" house keys as their Amurican cousins can and still do.

Mortgage debt in Canada will follow you. Canada's bankruptcy laws are tough.

Most Canadian mortgage holders have not treated their home as an ATM, as did their southern cousins.

Canada's population is still quite morally strong and believe in abiding by the law and that wrondoers get punished, including those that corrupt and accept such corruption. Perfect? By no means! But miles lower then the level of coruption suffered by our cousins from the south.

Housing bubble? Hell yes! Along with most every where in the world! This is not news. Will the banks crumble? Who knows for sure? One thing is for sure though, and that is it'll be only one tenth as bad, since Canda is only one tenth the economic size of the good ole US of A, eh? 

Thu, 08/18/2011 - 19:56 | Link to Comment Flakmeister
Flakmeister's picture

Pretty balanced assessment of the situation...

Thu, 08/18/2011 - 21:57 | Link to Comment wang (not verified)
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