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Wednesday, December 29, 2010 3:06 PM

Stoneleigh and Max Keiser on Canadian Housing Bubble: "Expect Enormous Comeuppance, Tremendous Sense of Denial, Ireland-Like Dynamics, 90% Price Drops

Inquiring minds are watching a superb interview with Max Keiser and Nicole "Stoneleigh" Foss regarding the Canadian Housing Bubble. The interview starts at 13:42.

Interview Snips

  • Canadian banks are not as "bulletproof" as everyone thinks.
  • When the housing bubble bursts there will be tremendous consequences to Canadian banking system.
  • We are in a massive bubble and there will be an enormous comeuppance.
  • Canada housing bubble currently peaking.
  • When you are in a bubble, the psychology is such that you cannot see it for what it is. Talking to Canadians about the housing bubble is like talking to Americans in 2006. There is a tremendous sense of denial.
  • People pay 50-70% of their income for mortgage costs in places like Vancouver, but it's not just Vancouver. Such things are absolutely characteristic of a bubble.
  • Canada will play catch-up to the downside in the fairly near future.
  • Ireland-like dynamics absolutely coming to Canada.
  • There is also a tremendous commercial real estate problem that will affect Canadian banks.
  • Canadian banks have also acted as reinsurers in the derivatives market for a number of extremely risky things. So in a number of cases "the bucks stops with the Canadian banks".
  • Real estate prices will fall about 90% on average. Deflationary credit collapse coming.

"Stoneleigh" lives in Canada and is author of the popular Automatic Earth Blog. Also see Stoneleigh and Max Keiser Flatten the Canadian Economy

I agree with everything "Stoneleigh" said in the above bullet point list except I do not see a price collapse of 90% on average. I think 50-60% in some areas is more like it. Even 40% would be devastating and that would be my best case scenario.

Mike "Mish" Shedlock
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