Canada Bear

Published on
24 July, 2018
Topic
China, Macro, Trading
Duration
10 minutes
Asset class
Currencies

Canada Bear

Featuring Larry McDonald

Larry McDonald, creator of The Bear Traps Report, discusses his bearish trade on the Canadian dollar. He highlights why excessive leverage and exposure to China are key factors that could spark a downturn in Canada’s economy, in this interview with Justine Underhill. Filmed on July 19, 2018.

Published on
24 July, 2018
Topic
China, Macro, Trading
Duration
10 minutes
Asset class
Currencies
Rating
13
Sharing

Comments

  • PB

    Pieter B.

    26 7 2018 04:36

    1       0

    Thanks a lot Larry & Justine!

  • TN

    Thomas N.

    26 7 2018 02:09

    1       2

    As a Canadian, I feel I need to toss my two cents (or two loonies) in here. Firstly in regards to the trade idea itself, long USD/CAD right now makes some sense. I can agree with that on a momentum basis, I can agree based on NAFTA risk or global growth (Chinese growth) slowdown. I cannot agree for the reasons given in the trade idea and I feel his statements were painting Canada with a very broad brush in terms of two major metropolitan centres (Vancouver & Toronto). Trust me, there's lots of great deals for real estate in Canada. Also, the legislation put in place to disincentivize foreign buyers also included measures for stricter mortgage qualifications, therefore creating a more stable, higher quality loan environment that will have a very subdued "housing crisis" outside of a potential price correction in those two centres. Trust me, this isn't 2008 sub-prime on repeat.
    Secondly, I need to reply to some of the comments which I find to be alarmist and hyperbolic, especially in regards to David R's comments. I'm sorry David, but I find your comments to be misleading. The BIS report (March 2018 quarterly, which can be found here https://www.bis.org/publ/qtrpdf/r_qt1803.htm is not claiming that our system is on fire. Of course we have elevated debt levels right now, but our indicators according to the report are just barely triggering "early warning indicators" that are designed to signal 3 years ahead, and we also still have household debt service ratios that are very much under control. This report also does not say anywhere that the "Canadian financial system as the second-weakest & riskiest in the world in 2018, with "high probability" of failure & collapse of its banking system. One of the worst countries in the world today, economically speaking." It does not rate a probability at all! Don't lie, David, it just makes you look bad. Tell me the page number this is on.
    If you dislike our "basket-case" of an economy so much, please just leave it alone. I'm sorry we offend you. But I'm not sorry that I'm Canadian.
    Hope you have a wonderful day

  • JM

    John M.

    25 7 2018 22:02

    1       0

    Maybe by year end the Federal Reserve will abort it's rate hike cycle in which case the BoC can also stop raising rates without causing the CAD USD exchange rate to deteriorate, right?

  • DV

    Dimitri V.

    25 7 2018 05:46

    1       0

    China just announced fiscal stimulus no? http://english.gov.cn/premier/news/2018/07/23/content_281476234114940.htm

  • AE

    Alex E.

    25 7 2018 02:52

    0       2

    Just curious, what would compel all those Chinese housing buyers to sell their Canadian holdings and return them to a confiscatory regime like the Chinese Government? Granted, the Canadian Home Owner is leveraged but with interest rates going higher, most mortgage owners are holding their own given that NO borrower of mortgage money is able to have a mortgage which would cost more than 40% of their incomes. As well, ALL Canadian Banks are insured for their mortgages meaning that the CMHC (Insurance Company) takes the brunt of any housing whoopsie...But, maybe Mr. McDonald has a crystal ball that I don't have??? Maybe he sees something that I'm not seeing...

  • BG

    Brandon G.

    25 7 2018 02:11

    1       1

    Would an unwinding of NAFTA or imposing of tariffs by the US have a material affect on the Canadian dollar compared to the forces of Chinese investment volatility and oil prices discussed in the video? I was surprised neither were addressed.

  • DR

    David R.

    24 7 2018 21:15

    4       1

    Canada is indeed an economic basket case, circling the drain about to be flushed. The BIS (the central banks for central banks) just identified the Canadian financial system as the second-weakest & riskiest in the world in 2018, with "high probability" of failure & collapse of its banking system. One of the worst countries in the world today, economically speaking.

  • SM

    Sergio M.

    24 7 2018 12:45

    0       0

    USD?CAD has a hit if 1.46 so that would be a resistance level? I wonder if that's what he meant by his Profit Target?

  • IC

    Ibrahim C.

    24 7 2018 09:49

    4       0

    Very reasonable one, however the target could be higher if the housing bubble busts. One more point is the Canadian Central Bank’s interest rate policy to keep the rates increasing, which has not been helping either!