Westpac Banking Corp (ADR) (NYSE:WBK)

My basic macroeconomic thesis is that currency distortions emanating both from East Asia and the Eurozone are responsible for a lot of nuttiness in the market over the past decade. There have been housing bubbles in the US and Spain. There was a major financial crisis in Ireland. Germany has become an exporting machine. China continues to grow at an absurd pace, in spite of a seemingly infinite amount of overcapacity in the manufacturing sector and in urban real estate. All these economic distortions can be traced, in part, to currency distortions.

The bubble in China has benefited some nations, while harming others. Primary beneficiaries are nations heavily reliant upon on commodities and mining. Coal, copper, silver, gold, platinum, and palladium have all taken off. Australia, as one of the world's largest resource exporters has benefited immensely. These benefits flow downwards and create more wealth, which then drives real estate prices up in Australia.

I don't pretend to be an expert on the Australian economy and admittedly don't know enough about their real estate sector to make any bold proclamations, but I've read a lot about a housing bubble being present there and it makes a lot of sense to me.

That said, WBK's forward earnings are around $10 per share, which would indicate the stock is currently undervalued if that holds up. Given this, red thumbing WBK is sort of a risky bet. Maybe it's even a stupid bet. But I'll go ahead and make this "stupid bet" on CAPS. I'm too risk averse to do it IRL; at least, unless the stock prices comes up another 20% or so.

So take this pick for what it is ... my inclination to agree with Australian housing market bears and see whether that ends up manifesting itself in WBK's price. A collapse in China might be the impetus that sends commodities prices downwards, which then harms Australian GDP growth; thereby, creating a housing crash.