Editor's Note: Our Financials analyst Josh Steiner will send subscribers a full report outlining our high-conviction thesis. In the meantime, below is a brief summary written by Hedgeye CEO Keith McCullough earlier today.
Fortunately, I haven't been short the bank stocks this week. That makes for a fantastic short-selling opportunity, especially in bank stocks most levered to Oil & Housing - i.e. Canadian Banks!
Our analysts, Josh Steiner and Christian Drake, have been all over this fallout in Vancouver real estate and have cited in recent Institutional Research as a key factor in the deflation of the Canadian housing bubble...
So, we'll reiterate our short stance on RY, TD, CM, NA, BMO, BNS, CWB, and HGC today.
If we imagine the Canadian banks as floating down a class VI rapid on a raft supported by the Toronto and Vancouver housing bubbles, one of its floats just blew.
Looking at the banks’ exposure to risk mortgages in BC, CWB is the most exposed to the Vancouver meltdown; Canadian Western Bank’s uninsured BC mortgages amount to 459% of tangible common equity. Turning to the larger-cap banks, CM is next in the punishment line with BC risk mortgages at 166% of tangible common equity.
KM
