Wednesday, May 12, 2010

Finally! Mish tackles Canadian consumer debt. Australia right there, too.

Oh man!  How geeked am I right now?  No matter how good the idea, it takes time, or perhaps, notoriety to get a momentum break.  I have tried with mixed results to short Canada through one of its largest banks, the Bank of Nova Scotia.  Always looking for opportunity, I keep BNS on my screen, but have pretty much abandoned shorting the country via the bank based principally on its momentum and institutional investor base.

The tide may be turning.  Being a dude, first, and philosopher-investor second, and trader third, I appreciate that it takes realization before my resources can be committed to a macro move without limiting performance advantageous to smaller, nimble participants.  Now that Mike Shedlock (Mish to those who know his work) has blogged on Canada, it's time to pay closer attention than ever to the consumers in Canada, and Australia.

Read Mish's blog post, "Canada's Household Debt Reaches Record $42,000 a Person; Fast and Furious Real Estate Decline Coming" here.  The title says it all, most of it anyway.

Canada had been a fiscally conservative bastion over the last decade or two.  That has changed.  In short, Canadians have switched to middle class consumerism in the form of an American lifestyle, a lifestyle whose fallout we now read books about.  Though their mortgage lending practices have been different than ours, the signals coming from the North are not to be overlooked.  As recently as February, rumors started to come out of Canada that the government ran a deficit, contrary to their balanced budget history, as a backdoor bailout to Canada Mortgage and Housing Corporation of approximately $50 billion was enacted.

Not surprisingly, CMHC was originally structured to sell insurance to lenders, but along the way became a loan backer in the glorious stylings of FNM/FRE.

There are plenty of tidbits out there suggesting Canada is due for a big decline based on the above and more.  I like BNS because what was once a strength, its focus on Canada, would now be a weakness.  Additionally to that, Scotia Bank expanded into Central America and the Caribbean, neither of which could be considered strong enough to bridge a major downturn.

Heads on swivels my dear Compats, and Long Live Libertarianism.