Some quick notes on Home Capital

I don’t think that Home Capital is a great short at the moment due to the expensive borrow (>60%).  The expensive borrow and rising share price suggests a short squeeze.

However, I do think that there are serious issues with the company such as systemically poor underwriting.

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Why I’m not shorting Canadian real estate

  • Comparing Canadian real estate to the US, Canadian underwriting is tighter.  Compared to the peak of the US subprime bubble, Canadian underwriting is far more conservative.
  • Comparing real estate to oil&gas and mining, there is far less fraud in real estate.
  • Based on price per square foot… the most overpriced market is China, then Australia, then Canada, and then the US.

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