Shorting the Canadian Housing Asset Bubble



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Shorting Canada's Banks

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If you're like us and you think housing in Canada, especially major cities is overpriced, then you've come to the right place.

Canada's housing market is in a bubble. We are not here to discuss why this is so or what factors are contributing to this and keeping it in a bubble, we are here to discuss some shorting stock ideas that we have put together to play this bubble.

The ideas contained on this page are preliminary and, as always, you should not construe them as investment advice and be sure to read our disclaimer.

Some Preliminary Short Ideas for the Bubble

Residential REITs

TICKER SHORTABLE* NAME INDUSTRY

CAP

MIC YES Genworth REIT
BEI NO BoardWalk REIT REIT 2.21 b
NPR YES Northern Property 640 m
CWT.UN YES Calloway Real Estate Investment Trust ( REIT 2.3 b

The REITs hold some residential real estate in their portfolios. Often they are apartment buildings and they may have purchased them some time ago. Due dilligence is required to determine if their holdings are sub prime.

Thrift Mortgage Lenders:

TICKER SHORTABLE* NAME INDUSTRY CAP
HCG yes Home Capital Group Inc. thrift 1539 M
ETC NO Equitable Group Inc. thrift 319 M
HEQ YES HOMEQ Corporation thrift 39 m
MKP NO MCAN Mortgage Corporation thrift 188 M 
FN.UN NO First National Financial Income Fund thrift 231 M 

These mortgage lenders lend to Canada's supposedly non-existant sub prime market. Often many of their mortgages are insured by the CMHC. Some are not. Either way, the general thesis is they will lose money even if their mortgages are insured due to lost revenue on a default.

Construction Companies:

TICKER SHORTABLE* NAME INDUSTRY

CAP

CUQ YES Melcor Developments CONST

*shortable indicates that this stock was not shortable on the few online discount brokers I checked. This may not be the case with your brokerage, so be sure to check.

The main problem with any of these is that the TSX isnt as diverse as the American Exchanges. There are few companies to choose from to short and many of them may not have shares available with your broker. Canada, for instance, does not have any publically traded homebuilders to the best of my knowledge. In the USA, there are at least 8 to choose from. Most of these lost massive ammounts of money when the bubble collapsed and their share price followed suit.