'Historically, people have lost money': David Dodge warns against shorting Canadian banks
A former Bank of Canada governor has a warning for anyone who dares to bet against Canada's banks: you're going to lose.
"Those who short Canadian banks historically have lost money," David Dodge told BNN in an interview Monday afternoon. "And I think they will lose money going forward on that as well."
His advice to investors came on the heels of Atlanta-based PAA Research's short call on RBC and CIBC.
The independent research shop, whose name stands for Please Act Accordingly, told clients Monday a mix of factors – including a housing downturn, high consumer leverage, and tighter credit conditions – could drive down Canadian bank stocks at least 50 per cent.
PAA put a $70 price target on RBC and a $76 target on CIBC.
Dodge acknowledged the banks aren't perfect, and are having to ramp up spending in technology – but said he's not buying into PAA’s doom and gloom.
"I think the banks have a long way to go in terms of modernizing their technology; that is going to be expensive," he said.
"On the other hand, they're now moving after a long period of not having moved very fast. So I would be very hesitant to ever short the Canadian banks."