I recently completed an analysis on Canadian banks which was published on Seeking Alpha
My analysis shows Canadian banks will not be able to absorb rising default rates over the next five years (peaking at 7% in 2019). The assumptions are laid on in the article below. Since it is a PRO article you will only have access for the next week or so
http://seekingalpha.com/article/2938716-big-short-ii-can-canadas-larges…
Additionally, you can view my slide deck on the below link. The assumptions were tweaked slightly to assume 0% default (or 100% recovery) on insured mortgages and business/government loans. Again, it shows that a 7% default rate in 2019 will threaten bank solvency
http://www.slideshare.net/ndsouza22/the-big-short-ii-canadian-banks
Finally, the precursor to the above research peice got me featured in an article on Globe and Mail (national Canadian newspaper). The article was stripped of all nuance but cool nonetheless. See below link
http://www.theglobeandmail.com/globe-investor/investment-ideas/investor…
Cheers
lol the comments on the globe and mail are pretty funny.
That's an expensive short my friend so good luck to you. A 7% overall default rate in Canada seems high but I'm no expert on the space.
lol ya the comments were pretty funny. I'm likely going to print them out as a memento.
My favorites include:
"Sigh, another day, another whiz kid with an HP10b calculator and some ideas about what the future might hold"
"I look for insight on financial readings not an update on unproven non-CFA graduate to make a blanket statement of shorting the banks?"
"Why does the Globe feel the need give a CFA in-training with no track record a voice in a National paper?"
P.S.
The 7% default rate is only in respect to the uninsured mortgages, personal loans and credit card loans portfolio (for the slidedeck analysis). I don't have my model on me at the time of this comment but I believe that equals a sub 5% default rate on the entire loan portfolio.
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