The Globe and Mail reports in its Monday edition that American investors are shorting Canadian bank stocks, but if there is a problem with domestic banks, it certainly is not valuation levels. The Globe's Scott Barlow writes that he suspects the Canadian bank short interest is part of a two-sided trade that has made the investment strategy extremely profitable once currency fluctuations are taken into account. Compare the value of $10,000 Canadian dollars invested in each of the KBW index of United States bank stocks and the S&P/TSX bank index. Over the past 12 months, the U.S. bank index has generated a 31-per-cent return that far outdistanced the 5.8-per-cent profit from Canadian banks. There are risks for Canadian banks stocks -- the frothy housing market is the most prominent example. Mr. Barlow, however, does not believe Canadians should panic about U.S. pessimism regarding our Big Six banks. He notes the most effective valuation tool for banks stocks signals stronger future performance. Mr. Barlow says the Americans are likely playing a currency and relative value game -- Canadian versus U.S. banks -- rather than predicting disaster ahead for domestic bank stocks.