Peregrine

Funny how shorts always have a higher burden of proof and draw more suspicion with regard to their motives than longs... Be wary of that premise. There is no reason to suggest that shorts in general do more work than longs, although in general they seem to broadcast themselves more audibly. In my view, people are people. I've seen a lot of shorting based on driving fear in the markets and taking advantage of gullible investors by spreading misinformation. Often times, it can be a profitable strategy as fear tends to drive action fairly immediately. I know Cohodes's history - he has a history of doing this.

Liberty, it's probably not a good idea to get your information from twitter short-sellers - they're not exactly a very fair source. It's also probably not a great idea to base your view on a company by how its stock is doing on any single day. First National is the largest monoline lender in Canada by far and handle substantial underwriting and origination for the Big Banks - in fact, they are so good at underwriting, originating and servicing that their arrears rates are even lower than that of the Big Banks and that the Big Banks even outsource those functions to First National. Home and Equitable are the two largest federally-regulated lenders after the Big Banks and occupy dominant positions in a niche-type market. Check out their NPLs and loss rate history if you're worried about their underwriting. It's no wonder that short-sellers love these stocks - the float's small, they're not liquid and they're all pretty easy to manipulate given the narrative and fear over anything related to Canadian real estate. I'm sure it's because of the shorts that fraud and lax lending standards were uncovered, the second CEO in a short period was fired, insiders have been selling rapidly, and the company can't even earn decently in a huge real estate bubble in Canada. Based on what I know about the company, I don't trust their financials, so looking at them to be reassured isn't an option. But if you think they're so wrong, I expect you can make a lot of money with your variant perception by buying it hand over fist. Time will tell who's right. Meanwhile, the stock is at almost 5-year lows and falling fast... Personally, I have no position as I don't short. It seems to me that your perception and knowledge of the company has been framed by short-sellers, and I am not surprised that that has been the case. I don't care for changing your opinion but I do think that it'd be helpful to look at the actual facts than to repeat the distorted claims of others.

This is just my opinion: housing prices crashing alone will have little if any effect on the global financial system. Off the top of my head: 1) The majority of mortgages in Canada are insured fully by the full faith of the Canadian government. There are three mortgage insurers in Canada: CMHC, Genworth and Canada Guaranty. CMHC is by far the largest and is a Crown Corporation, or a government owned company. Genworth and Canada Guaranty are privately owned, but in event of a default by either, the government will reimburse 90% of mortgage losses to lenders. Both Genworth and Canada Guaranty underwrite at combined ratios of ~40-50% and have capital well in excess of regulatory minimums. Contrary to what many think, these mortgage insurers perennially operate at combined ratios unheard of in the insurance industry - they are tremendously profitable. A smaller portion of insured loans are securitized in the two government programs NHA MBS and CMBs. Private securitization is non-existent in Canada, unlike the US circa 2003-2006. There are also no derivative products such as CDOs and CDOs-squared that further leverage bets on mortgages in Canada. The Big Banks here do not carry massive derivative books and there is none of the webs of counterparties and systemic risk that exist between banks here, much less with other banks worldwide. 2) The other portion of mortgages in Canada are uninsured balance sheet loans - that is, banks, specifically the Big 6 Banks, bear the risk. Now, that risk is mitigated by: - Very low arrears rates, an attribute largely due to sound federal regulation of uninsured loans by OSFI and the concentrated nature of Canada's mortgage market - Substantial LTV cushions, typically around 50-60%. And at origination, maximum 80% (or minimum 20% down) - Full recourse in most provinces - you can't discharge a mortgage in bankruptcy - Substantial equity capital (CET1, total capital, etc)

I think NPLs and loss rate history during a period of consistently rising home prices have limited value in predicting what might happen if home prices dip significantly. Pre-crisis in the US, Golden West Financial had incredibly low charge-offs for fifteen years or more. For eight consecutive years from 1998 to 2005, they had 0% charge-offs! Wachovia acquired Golden West in 2006. Fast forward two years and Wachovia, which was one of the biggest banks in the US at the time, was destroyed by the losses in Golden West's option arm portfolio. I am not saying the Canadian lenders are like Golden West. But historical loss rates might be very bad predictors of future losses. You're right. Loss rates are not the best indicator of quality underwriting in a generally rising home price environment. But arrears rates and NPLs definitely are. If these banks are underwriting so liberally to the degree that their borrowers can't pay, then early arrears rates and ultimately non performing loans will show that in due time.

Liberty, it's probably not a good idea to get your information from twitter short-sellers - they're not exactly a very fair source. It's also probably not a great idea to base your view on a company by how its stock is doing on any single day. First National is the largest monoline lender in Canada by far and handle substantial underwriting and origination for the Big Banks - in fact, they are so good at underwriting, originating and servicing that their arrears rates are even lower than that of the Big Banks and that the Big Banks even outsource those functions to First National. Home and Equitable are the two largest federally-regulated lenders after the Big Banks and occupy dominant positions in a niche-type market. Check out their NPLs and loss rate history if you're worried about their underwriting. It's no wonder that short-sellers love these stocks - the float's small, they're not liquid and they're all pretty easy to manipulate given the narrative and fear over anything related to Canadian real estate.

This is an underrated point that doesn't get much play. So-called "global" cities everywhere are dealing with real estate price inflation with the local media decrying about housing bubbles. This is the case in New York, San Fran, Hong Kong, Singapore, Shanghai, London, Sydney, etc. On measures of absolute values, Toronto is considered cheap compared to others from the point of view of this foreign/global buyer. People want to move to these cities but in doing so, the demand is driving up cost of living substantially. It's an interesting dynamic.

I remember that there are similar problems with property taxes in lower-tier retail properties in Middle America. The taxes are assessed on property values that were based on values from years ago and were no longer current. I think that many of the property owners were also trying to renegotiate their property taxes.

Yes, I'm aware of remedial programs that Genworth (and CMHC for that matter) uses for mortgages in delinquency or default. These programs are there to help avoid foreclosure, which is a costly situation for both the homeowner and the lender.

There is no way a bank takes them out. Why would they do it when they have a risk free model with the government? I was thinking more along the lines of EQB taking them out or doing some sort of merger since EQB is in the same situation as HCG. For the record, HCG and EQB are leaders in the alt-A regulated market. There's not many players, and it's a highly niche-type market. Take a look at their non-performing numbers over time - it doesn't jive with the fraud thesis. I used to think this. However it doesn't really pass the reality test to me anymore. I think their numbers are too good to be true. Genworth Canada is a good example. Their delinquencies are really low. Part of the reason is that they restructure a lot of these loans and then don't disclose it. They amend payments, delay payments etc and I think this gets them out of having to show these actual troubled loans more clearly in their accounting (ie. the semantics become different and thus not needed to report). In Genworth's case the number of cases where they are 'proactive' is buried in one report they put out annually (I forget which one atm). Here is a video that explains their process https://www.youtube.com/watch?v=ECHZ0a_-Ojw. I suspect the other suspects EQB, HCG do something similar. Read those SA articles on how HCG was selling off some of their Brampton originated loans. Too much smoke here, anecdotal evidence for me to believe their deliquentcy numbers or more importantly that they will stay this low. Seems impossible to me that you can lend in lower quality borrowers and face less risk. Normal US banks has loan loss provisions in the 1 to 2% - and EQB and HCG are 0.10% - doesn't make intuitive sense to me. Genworth Canada as a mortgage insurer doesn't hold mortgages, they guarantee them. They can't amend payments or delay them. If a mortgage that they insure goes into default, they reimburse the lender for any losses. Typically, losses get minimized because of the substantial LTV cushion. But if you're worried about their underwriting, look at their combined ratios. It doesn't make sense to you, so you're trying to distort the facts so that it does make sense to you. Have you considered the possibility that your initial premise is wrong?

One thing I should add about the Fujian people with respect to the Chinese take-out business: the Fujian people are especially known for being hard-working and entrepreneurial, even among the Chinese. They are very hard people to compete with in businesses characterized by efficiency and power of will.

50, you need to provide some context otherwise your statement makes no sense. how much is the house worth ? if it's worth $2M. a 700k loan is no big deal at all. even if they default or if market corrects 30%, the bank is still ahead by repossessing. Agreed with this. One more thing to add: as a federally regulated lender, Home Capital needs to abide by debt servicing ratios to qualify mortgages on affordability. 50, you're probably not privy to all the details.

Thanks to all the people contributing to this thread. It's been a fantastic and illuminating read :).

There is no way a bank takes them out. Why would they do it when they have a risk free model with the government? I was thinking more along the lines of EQB taking them out or doing some sort of merger since EQB is in the same situation as HCG. For the record, HCG and EQB are leaders in the alt-A regulated market. There's not many players, and it's a highly niche-type market. Take a look at their non-performing numbers over time - it doesn't jive with the fraud thesis.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/azp-pr-b-atlantic-power-corp-preferreds/ http://bit.ly/2mVOHfu http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/vsn-veresen-inc/ http://bit.ly/2np33CE And some other stuff that's gotten bought out. Let us know when you come up with your first idea post, Frank. Same goes to you, Mr. Gibbons. I'm seeing you're a member since 2009, but you have no idea posts over the whole time. http://www.cornerofberkshireandfairfax.ca/forum/profile/?area=showposts;sa=topics;u=107 Lol - my fault. My post was partly tongue-in-cheek and partly a reaction to seeing his name reappear whenever a Trump thread starts getting hot again. But thanks for correcting the record.

Am I the only one who thinks this is an idiotic analysis? It is playing on fears instead of credible analysis. In 2000 certain industries were absurdly high (internet, telecom, and some other mega caps) so the indexes were overvalued but that had nothing to do with the median stock valuation. There were hundreds of dirt cheap "old economy" stocks in 2000. 2007 was different but the crash was not about over valuation but a largely unforeseen housing crash that damaged everything else. No, you're not wrong. Using means may diffuse some of the extremes better, but it doesn't do it entirely either.

NEWSFLASH: After January 20, 2017, it's no longer racist to make jokes about the President's intellect. Lol. You may well disagree with Obama's positions, but it is a false equivalence to suggest that Obama did as much as Trump already has done to legitimately call into question his level of intellect.

LOL! Nothing could've encapsulated the essence of that article as well as this post.

Actually 200x to 250x is the norm now if it's in reputable school zones. The chart doesn't show price to rent ratios. It shows a range of price to rent ratios relative to the price to rent ratio in 1980.

Lol - this thread is quickly devolving into past shitstorms. Quick question: does Cardboard contribute anything to this board other than threads like these? Those 1,000+ posts can't be all logical fallacies, false equivalencies and reality distortion.

You asked why detached homes were selling below their June 2016 prices. And I proposed that perhaps it was due to: 1) strong sales activity in the run up prior to the foreign buyers tax being enacted; and 2) a different mix of sales making a comparision of average sales prices of detached homes difficult. Yes, I'm aware that the 14% I cited is from a broad index.

There was a rush of sales activity prior to the foreign tax being enacted. Plus changes in mix of sales in any given month so the average figure may not be as comparable. Anyway, y/y February sales prices were up 14% from what I've read. Sales activity is slowing for sure though.

Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious. The countless articles that have been written about all this stuff that's going on and how it's done is not enough? What exactly are you looking for? Being a member of CoBF doesn't give you subpoena power. Frank, are you a realtor? Lol, I have no professional connection with the real estate industry. This being a discussion forum, I am open to learning new things. I prefer views to be backed by hard facts and data and not conjecture and anecdotal evidence. Don't mistake me asking for facts as me being biased in favor of Canadian real estate. PS: I don't even own any real estate as I do believe that prices right now make it a poor long-term investment currently.

Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious.

Again, to correct another misconception: all insured mortgages now have to qualify at the 4.6% posted rate, which is over 2% higher than contracted rates. Uninsured mortgages also have to qualify at the high posted rate - except for 5 year and longer terms. But yes, interest rates act like gravity on all kinds of assets - including real estate. This rule is recent, most didn't have to go through it, and qualifying at a time when they lend to everyone isn't the same as being disciplined enough with your finances to actually have the spare cash flow when the time comes... Many wouldn't qualify without the bank of mom and dad providing a down payment that they couldn't save organically. Everyone wants to focus on debt service, but in the end, the absolute size of the debt always ends up mattering... Again, not exactly true. All variable rate mortgages and fixed rate mortgages under 5-year terms had to qualify at the higher posted rate prior to the new mortgage insurance rules last fall. The new rules made it so that ALL insured mortgages have to qualify at the higher posted rate now. Obviously debt service matters. The situation makes it particularly hard on the new home buyer who is challenged more than ever due to high prices and tightened rules. They aren't the ones driving the sales activity though.