Betting on a housing market collapse

Some people express a lack of faith in current house prices by delaying buying or moving to better economic climates.

Others might make a friendly wager with a co-worker that house prices will be lower in 2014 than they are in 2013.

But how confident are you that a market correction will occur not just in Vancouver, but all across Canada?

And even if the national market corrected sharply do you think that would have much impact on our banks or would CMHC insurance protect them from any dramatic losses?

Do you really think a housing market crash would have as much effect on our economy as it did in the USA?

Would you be willing to bet 95% of your assets on the likelyhood of such an occurrence?

Vijai Mohan has made an all-in bet against Canada.

The founder of a small San Francisco-based hedge fund called Hyphen Partners LP has staked 95 per cent of his investors’ assets on a wager that the country’s housing market and banking sector are about to come apart at the seams. Mr. Mohan has amassed large short positions on Canadian bank shares and the loonie, betting their values will fall sharply.

“Canada faces two risks,” said Mr. Mohan in an interview. “Very few people are looking at those risks simultaneously. That collectively presents a lot of opportunity” – for someone looking to profit from Canada’s misfortunes.

Read the full article over at the Globe and Mail.

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Vote Down The Facts
Guest
Vote Down The Facts

Interesting contrast to what Garth said tonight: “Canada has almost no financial instruments available to profit from a housing correction, and those who claim otherwise are blowing smoke.”

Short'em High
Guest
Short'em High

@VDTF#1. Yield seeking financial advisors either do not know or would rather not have to explain to clients the placement of money to profit from asymmetric risk. This is because it is anathema to most so called investors that, in return for a good chance at taking all of an adversary’s assets in one blow, they must forgo a steady return or even pay small losses into an adversary’s account to herd that adversary along the path to certain destruction.

Anonymous
Guest
Anonymous

Garth will say exactly the opposite if/when he is wrong (again) which almost inevitably happens.

Any HPI predictions for April out there?

jesse
Member

He should go long companies who use Canadian exports as inputs. No wait he’s running a hedge fund.

patriotz
Member
frank
Guest
frank

“Most analysts argue that Canadian banks are largely shielded from the effects of a housing downturn because government-owned Canada Mortgage and Housing Corp. insures 64 per cent of Canadian mortgages, ” Well that’s reassuring! the banks and their over-paid execs are safe, while the rest of us shoulder the risk.

Anonymous
Guest
Anonymous

VDTF: “Interesting contrast to what Garth said tonight: “Canada has almost no financial instruments available to profit from a housing correction, and those who claim otherwise are blowing smoke.”

It is true there is no easy way to do it other than wait to buy a house when blood is in the streets. Remember Garth has his clients money heavily invested in banks which make up a large portion of the TSX. He has a vested interest to not talk about bank stocks going down. In any event shorting the banks is very risky due to their dividends so personally not something I will do, although I expect their share values to be cut in half when all is said and done.

An Observer
Guest

Banks won’t get a free ride when this goes down. They have offloaded over half a trillion dollars of risk to CMHC and once CMHC begins the process of covering those bad loans you can bet they will be diligent and audit the loans that are failing.

“So, you gave a million dollar mortgage to a 64 year old who makes $50K/year with no non real estate based assets because he told you he makes $150K/year? You can keep that one… Next”

So they will be hit with that plus a crashing economy hits bank stocks in so many other ways. I agree that they might be resilient at first but if this is the extended drop that I suspect then confidence will collapse and their stock will plummet

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

are we crashing yet?

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

vreaa is taking a ‘break’, vancouver price drop has stopped posting drops, it looks like bears are in hibernation. i wonder why? hiding from the fact that 2012 was supposed to be year of the crash?

another bear prediction turning into another year of disappointment. so sad 😉

Anonymous
Guest
Anonymous

It’s Official!

Hot Indian Money has arrived in North Surrey. Still spectical? Plot the price of a detached Surrey home vs ones in Abby, Richmond, Vancouver. Percentage wise.

Surrey going up, up, up, in relative terms. $600,000 for an old teardown in North Delta compared to $800000 in South van.

rp1
Guest
rp1

#10 – we’re all unemployed from spending too much time on blogs.

Anonymous
Guest
Anonymous

Garth says there has been already a 30% correction in Richmond. So a $1 million house now costs $700,000.??

What a liar!

Some Guy
Guest
Some Guy

The article raises the possibility of OSFI increasing the capital requirement for uninsured mortgages.

Sounds esoteric but the banks generally price using a rate of return-on-capital model so if this happens it would translate fairly directly into price (rate) increases for uninsured mortgages.

I guess the unintended (?) consequence might be to drive even more of the market into the government insured segment.

Anonymous
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Anonymous

You don’t put 95% of your personal assets in a hedge fund. It’s meant as a counter trade to your other investments. A ‘hedge’ if you will.

No Noise
Guest
No Noise

http://www.cbc.ca/news/business/story/2013/04/26/f-rfa-macdonald-power-shift-savers.html

Watch Neil Macdonald’s full documentary The Monarchs of Money tonight on The National at 10 p.m.

Londonernow
Member
Londonernow

Why isn’t Vancouver on the Prime Global Cities Index compiled by Knight Frank:
http://my.knightfrank.com/research-reports/prime-global-cities-index.aspx

This is an outrage! Maybe the Vancouver mayor should get involved and set Knight Frank straight on the worldwide desirability of Vancouver real estate.

Short'em High
Guest
Short'em High
@#7 Says: “no easy way to do it other than wait to buy a house when blood is in the streets” That is easy to say but it may not be so easy to buy the actual bottom because nobody else will be buying the fad everyone suddenly realizes was stupid or foolish. It is easier to be far too early or late. Given a choice, one should always try to be late. @jesse’s remark about knowing the difference between a hedge fund and financial advisor is also a good one. I can only add that where one finds a stable return one must always trade receiving that stable return for being part of somebody else’s plan for your own financial destruction. Most will never learn this fact and a few will learn the hard way. There is a good… Read more »
No Noise
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No Noise

@#10 BBB

Its capitulation. Everything’s been said and all the bubble bursting prophecies have come true – it’s just a boring wait now. Although, every day there’s a fresh tidbit of some sort (eg. sold for 10/20% below assessed). But its just come to be expected – not as interesting at this point. With more job losses/bankrupcies/HPI reductions through 2013/14/15 RE blogs will pick up as folks actually get excited about realistic home values again.

Yellow Helicopter
Guest
Yellow Helicopter
So was on the ferry yesterday and picked up one of the free ‘Homes and Land’ magazines that you see everywhere (on the ferries or in the glass newstands on street corners,) and picked up both the ones for Vancouver to Whistler and Vancouver Island… This a magazine that is in the business of sellign real estate ads. Nothing else. Yet both the table of contents page AND an article on page 16 detailing the ‘West Vancouver Market report’ states as its first line, “Conversations with several West Vancouver real estate professionals have a few key points in common. The first is that the market presents clear challenges.” They then try to soften the blow with the next line: “The second common thread to the discussions, though, is that there are some encouraging signs on the horizon.” They explain the… Read more »
Yellow Helicopter
Guest
Yellow Helicopter
In the markets I’m tracking, SFH sales above $1 million are absolutely dead. Yet anything below $800k is still selling quite quickly… it’s the last bastion, as townhouses are similarly priced and people would obviously rather stretch to a house… Went to see V1003090 at the open house this weekend- house in central / upper Lonsdale listed three days ago for $699k, and is going to go in a bidding war tonight (so much interest they are only accepting offers this evening.) It was an absolute stampede, and that was just one of two open houses set up this weekend… and I must say, it’s a great house for those that like character houses; the pictures on MLS don’t do it justice. So still lots of interest for anything that is reasonably priced under $800k. It’s going to be interesting… Read more »
ANONYMOUS1
Guest
ANONYMOUS1

The Temporary Foreign Worker Program and The Intra-Company Transfer visa program are significantly contributing to the Housing ponzi scheme here. Too much undocumented population growth!!!

Before you vote me down ( as the majority here do because of self-serving interests), consider that the upvotes are 1800 to 20 on the cbc.ca website.

End this program now…Call you MP

http://www.cbc.ca/hamilton/news/story/2013/04/24/bc-inside-outsourcing.html

jesse
Member

” might be to drive even more of the market into the government insured segment”

We’ll have to see how willing the government is to increase the insurance quota.

blah-blah-blah
Guest
blah-blah-blah

“The S&P 500 has now outperformed its hedge-fund rival for ten straight years, with the exception of 2008 when both fell sharply. A simple-minded investment portfolio—60% of it in shares and the rest in sovereign bonds—has delivered returns of more than 90% over the past decade, compared with a meagre 17% after fees for hedge funds (see chart). As a group, the supposed sorcerers of the financial world have returned less than inflation.”:

http://www.oftwominds.com/blogapr13/wall-street-rentiers4-13.html

jesse
Member

“undocumented population growth”

It is documented, unless you think these people are slipping through the border without going through passport control. You can find the data through statscan and CIC, that track short stay, visitor, permanent, and TFWs/students.

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