This chart of the Canadian bank sector (XFN) is one of the many that we are tracking carefully at present for signs of what comes next in the credit crisis fiasco phase 3.
As we look at the first peak in the banks marked in early 2007, one can’t help but note that global GDP was about 5% back then. It is likely to be about half that in 2012. Consumers had less debt, and governments were much less indebted. Yet shares of Canadian banks are back hovering around credit bubble highs today. I am worried about the regular folks who have been pushed into the banks for “safe yield” the last couple of years. When the levered traders pile out again, mom and pop are likely to be hurt just as badly this time as they were in 2002 and 2008. No doubt oblivious advisors will be surprised yet again by the losses.
Source: Cory Venable, CMT, Cory Venable Investment Counsel Inc.