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Kyle Bass: Canada is coming to a halt

13428 Views 26 Replies 12 Participants Last post by  james4beach
I think Kyle Bass does some very nice analyses, and in this recent talk he references Canada, in particular real estate. He thinks Canadian real estate is unsustainable, and a slowdown in China is going to hit us hard in the next 12 months. Skip to 35:30

Transcript below. Emphasis is mine

China is slowing down much faster than people think it is ... One of the potential butterfly effects of China is Canada. Everyone thinks Canada is a nation that is extremely prudent in their lending practices, and that it's very natural resource rich and doesn't carry many debts. Canadian household debt to income is now 100%. It's higher than the US. Canadian home prices are now, on a median, 9 times median income. Does anybody know where US housing prices got (median home price to median income) at the height of the subprime bubble? It hit 7.

Where Canadian housing sits today is completely unsustainable. The question is, if China slows down, what happens to the resource areas of Canada? One is mining, one is energy. You look at the forward curve for energy. The crude curve is so backwardated ...

All the prescriptions for a problem in Canadian housing are out there. We're starting to see inventories build very rapidly. When you look at these equations the brokers put out, they give months of inventory. Two variables, one is inventory, two is the velocity. So you can't look just at the months, you have to look at the aggregate inventory and how long it's taking you to sell them.

It sure looks to me like all of a sudden, Canada is coming to a halt. Volumes are drying up. 9 times median income. I don't know when Canadian housing breaks, but if we're right about China, in the next 12 months it's going to be a real problem. There are similar scenarios to the US housing problem that exist in Canada. They're not all the same, but there are some similarities that are worth paying attention to. If you're looking at Canada, I advise you to be extremely cautious.
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Is this the Canadian real estate crash the American experts have been predicting for the last 7 years, or is it a new one?

Is he still betting on a collapse of the Japanese economy? 5 years ago he predicted it could not last 2 more years.
I fearlessly predict that there will be war in the Middle East, a tsunami in the Pacific, and an earthquake in South America. Also a volcano will erupt someplace.

And a famous person will die. Not necessarily connected to the above events.

There, now let's see how good a prophet I am. If any of these predictions happen in the next 10 years I will claim a win.
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