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Contrarian, macro, hedge fund manager, Emerging Markets
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Summary

  • Canadian real estate bubble overshadowing US housing bubble from 2003-2007.
  • Catalysts of Canadian bubble already present and will weigh down CIBC.
  • CIBC has most exposure amongst major Canadian banks in local mortgage market.

In this video, we discuss the extent of the Canadian housing bubble that has been continuous since 1999. The average home price has risen from $150,000 to over $400,000 during this period, which far exceeds local income growth. New legislation and the prospect of inflation or higher interest rates are the catalysts for this bubble to pop.

The best way for US based investors to trade this trend is by shorting either the Canadian Dollar (NYSEARCA:FXC) or the Canadian Imperial Bank of Commerce (NYSE:CM). Even though financials are strong and the dividend yield is high, the reason for choosing CIBC to short is that they have the highest exposure to the local mortgage market amongst Canadian banks.

Source: Canadian Imperial Bank Of Commerce: Bullish Or Bearish?