RE:Credit Suisse on the Ropes
Hahaha the woke go broke, I'm going to borrow that.
Though I'm no expert I assume it will affect the banking sector negatively internationally like in 2008. To what extent who knows? Negative sentiment is rampant right now. Will it be a temporary blip here in Canada? That's my guess. Will it be the start of a broader trend as loan loss provisions start to build as higher interest rates, devaluing currency, shrinking asset valuations and skyrocketing energy costs do their thing in Europe? Again who knows, a crystal ball would be nice... But I think so.
For what it's worth I exited my Canadian banking positions near peak in March when rates first started to climb. I also sold my physical real estate investments. The Canadian banking sector and the Canadian housing sector are tied at the hip. I'm bearish on Canadian real estate (for the first time in a decade) as I believe higher interest rates will put many households and investor's who bought property at INSANE prices with record low rates in 2020-2022 into default.
Particularly because in 2021 more Canadians took out variable mortgages vs fixed rate so they can pass the "stress test," the squeeze has begun. Add in the 2017-2020 fixed crowd who have an average rate less than 2.5% over the next 3 years and you'll see what I'm getting at. The 5 year fixed at TD is 5.34% (and climbing) at time of posting. Therefore I see foreclosure's being on the shopping list again, landlords cutting losses who can't raise rent enough to over the mortgage increase etc... All of which is bad news bears for the Canadian Banking sector IMO.
All of that to say due your own due diligence and draw your own conclusions. I'm bearish for the reasons listed above. The Credit Suisse crisis is just adding more negative sentiment at a bad time. I hope to be opportunistic in 3+ years and re-enter both the Canadian banking sector and hopefully purchase another batch of income properties. I'm still long energy with CVE as my largest holding. If energy prices rise again (OPEC cut, SPR releases end, Russian sanctions taking affect and unrest in Yemen again) I see the rate increase continuing into 2023 inflicting even more pain on the real estate sector chewing away at the margins of the big bank's.