Short sellers target Canadian banks, but one says, “This is not ‘The Big Short: Canada'”

Steve Eisman, a fund manager who profited from the U.S. financial crisis a decade ago, says Canada's housing market won't collapse

TRD NATIONAL /
Mar.March 24, 2019 03:55 PM

Cast of “The Big Short” film: Steve Carell, Ryan Gosling, Brad Grey and Brad Pitt; and the book’s author Michael Lewis (Credit: Getty)

A fund manager who profited during the U.S. financial crisis a decade ago is one of a growing number of short sellers betting that the share prices of the largest banks in Canada will fall.

Among the short sellers is Steve Eisman, a portfolio manager at Neuberger Berman who gained fame from The Big Short, a book about him and other short sellers who collected massive profits from the collapse of the U.S. sub-prime mortgage market.

Eisman took short-sale positions last year in the stocks of multiple Canadian banks that he declined to identify. Other investors see the same trading opportunity. New York-based S3 Partners reports that short-sale positions against Canadian banks are now worth US$12.3 billion, up 19 percent since the start of the year.

Short sellers have targeted TD Bank of Toronto more than any other major Canadian bank. Short positions against TD Bank shares total $3 billion, up 17 percent so far this year. Short positions against the shares of Toronto-based CIBC have increased 26 percent this year to $2.3 billion while bets against Bank of Montreal have jumped 37 percent to $1.3 billion, according to S3 Partners.

But Eisman said he doesn’t expect Canada to experience a financial crisis like the one that enveloped the U.S. a decade ago.

“This is not ‘The Big Short: Canada’ – I’m not calling for a housing collapse,” he told the Financial Times.

Weakness in the Canadian property market is a major cause of the increased short selling, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

New-home prices in Canada fell year-over-year in January for the first time since 2009, pushed lower by more stringent regulations on mortgage lending, new taxes on foreign buyers of Canadian homes and a faltering national economy.

In the last several years, Canadian property prices have risen at a faster pace than Canadian income, due to a lack of discipline in loan underwriting and low interest rates, among other factors.

The Canadian central bank has downsized its prediction of the national economic growth rate for 2019 to 1.7 percent from 2.1 percent. The Bank of Canada also has joined other central banks around the world in adopting an easy monetary policy by holding interest rates unchanged after five increase since July 2017. [Financial Times]Mike Seemuth


Related Articles

arrow_forward_ios
Matt Rieger and a rendering of Paradise Lake Apartments

Developer scores financing for West Kendall affordable housing project

Wynwood 25 and Wynwood Annex with Jon Paul Perez and Jonathon Yormak (Credit: East End Capital/Related Group)

Related, East End score $136M refi of Wynwood projects

These real estate power players are involved in 2019’s juiciest lawsuits (Credit: Getty Images)

Here are South Florida’s juiciest lawsuits of 2019

Best of TRD 2019 promo

Coming soon: The Real Deal’s Best of 2019

Madison Realty Capital'a Josh Zegen and Fort Partners' Nadim Ashi  

Four Seasons in Fort Lauderdale scores $210M loan

Daily Digest Miami

South Florida home sales struggle in October, Cipriani and Terra plan luxury condo

Rendering of Sailboat Bend II

Affordable housing project in downtown Fort Lauderdale lands $27M loan

Daily Digest Miami

Heir to Merck pharma fortune sells Palm Beach estate, Brookdale buys back Sawgrass Park portfolio for $80M: Daily digest

arrow_forward_ios
Loading...