Royal Bank (NYSE:RY) is about to release earnings. Ponder this Bear Case Scenario:
American analysts remain fixated about a Canadian Housing Bubble. This will discourage investors from increasing positions in the stock. Many mortgages are underwritten a very low rates. When the markets revert to the mean many will be underwater.
Canadian consumer is close to maxing out debt capacity. Therefore product growth will start to stall with negative implications for earnings.
Loan loss reserves have been curtailed in the past few years and earnings have been subsequently manufactured. This cannot go on forever and reality will burst onto the scene shortly.
George Gutowski writes from a caveat emptor perspective.