I have predicted the demise of this Stock Market for a while. No one can get the timing 100% right, 100% of the time. Now, I think we are close - within three months of a very big correction driven by a new recession.
What to do?
If you want to make some money on the impending Stock Market and related Real Estate Price Crash, I suggest you look no farther than this -
Horizon ETFs - Betapro S&P/TSX Capped Financials 2X Daily Bear ETF. The symbol is HFD on the TSX. More information may be found here -
The price of this ETF rises 2% for every 1% that the prices of Canadian bank stocks fall. Of course, the inverse is true - if prices rise 1%, the value of this ETF falls 2%. It is crucial to catch the bottom before investing.
The price has trended between a high of $6.50 per unit and a low of about $5.80 per unit during 2017. It has held in this range all year. Its precipitous fall since it peaked at $230 a unit in early 2009 appears to be over.
Of course, the value of this ETF is obviously directly related to house prices in Canada, which many outside observers say is in a very serious bubble. There are reports that these prices have started to fall precipitously in Canada's largest housing market in Toronto. See here -
If this trend holds, I can't see the price of stocks for Canadian banks holding firm where they are. In fact, I think they will fall dramatically, just as they did during the 2008 - 09 recession.
Note as well that, based on concerns about this bubble and about massive personal debt held by Canadians, Moody's downgraded the debt of all six major Canadian banks in May of 2013, and again in May of this year. I think this has served to chill the market for these bank equities, and would note that since the May, 2017 downgrade, the value of these stocks have trended down or remained essentially flat. I think this strongly suggests they have found a plateau where there is very little chance these prices will appreciate further. In short, I think the next big price movement will be down, not up.
The last time that house prices fell in Canada, the price of a unit of HFD rose from about $80 a unit to $230 a unit - it rose about $185% while stock markets collapsed worldwide. You can make money in bad times.
As well, in the last recession, the average price of a house in Canada only fell 5%. There are predictions that these prices could collapse, at least in some markets such as Toronto and Vancouver, between 40% - 50% this time. In the early 1990's recession, prices fell 30% in Toronto over a period of six years, so this has actually happened within living memory. In such a situation, I think anyone invested in HFD would do very well indeed.
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