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Canada bubble is popped

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Big news indeed, this isn't going to be pretty. Looks contagious, the regulatory body is out with warnings years too late. Runs on the bank involved, general sense the music has stopped.

Only a matter of time until the Carney-print dots between prime central London and the Canadian crash are finally put together.

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55 minutes ago, Grab_Some_Popcorn said:

'The C$2 billion ($1.5 billion) loan is coming from an institutional investor that Home Capital did not identify, and the lender’s agreement is non-binding. With a 10 percent interest rate plus other fees and charges, the company is effectively paying 22.5 percent on the first C$1 billion it borrows, which falls to 15 percent if it uses the full C$2 billion available to it, according to Jaeme Gloyn, an analyst at National Bank of Canada.

“They did what appears to be to us a very expensive deal,” said David Baskin, president and founder of Baskin Wealth Management in Toronto, a former investor in Home Capital stock. “Basically they blew up the income statement in order to save the balance sheet, which I guess if you’re facing an existential crisis is what you have to do.”'

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It's to be hoped there's no bailout but who would offer a kick the can loan of such a magnitude to a failing company unless it maybe had a secret guarantee from the central bank.

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27 minutes ago, Mapatasy said:

Great find. On one had: "speculative frenzy he hasn't seen since 1988-89"

On the other hand: "We don't really have any credit risk... funded by NHA MBS and CMB"

This kind of sounds familiar. They may be AAA, AA rated.  Will they still be when house prices halve?  Doubt it.

Edited by Bear Hug

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54 minutes ago, Mapatasy said:

http://bloombergtv.ca/2017-04-26/news/short-seller-discusses-role-in-home-capitals-woes/

Independent short seller Marc Cohodes joins Bloomberg TV Canada’s Lily Jamali to discuss his role in Home Capital Group’s troubles and hints at his next Canadian target.

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https://mishtalk.com/2017/04/26/subprime-credit-card-losses-bite-capital-one-income-down-20-charge-offs-up-30/#more-45525

'Capital One Financial Corp. reported a 20% drop in first-quarter net income from a year earlier as losses jumped for U.S. credit cards and the bank took a bigger provision charge for credit losses.

The firm, known for its big presence in the subprime credit-card market, reported net income of $810 million for the first quarter, or earnings per share of $1.54. Excluding an item pertaining to a U.K. insurance customer refund reserve, the bank reported net profit of $910 million and earnings per share of $1.75.

Even so, the result badly missed Wall Street forecasts. Analysts had expected $937.5 million in net income and earnings per share of $1.92. Revenue of $6.5 billion also fell short of expectations.

The bank, often looked at by analysts as a gauge of consumers’ ability to pay back their debts, reported that domestic credit-card net charge-offs reached 5.14% in the first quarter. The was up from 4.16% a year prior. The companywide provision for credit losses jumped 30% from a year earlier to $1.9 billion.'

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Justin Trudeau will post on Twitter, do a heart shape with his hands and blame it all on Islamophobia - and everything will be fine!

Edited by MARTINX9

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On a mind-slow, so went to GreaterFool (Canadian Housing & Finance Blog... entries by a sort of HPC mind in the Canada sphere)  for more info....

Quote

 

April 26th, 2017

In case you missed it, big news. Shares in Canada’s premier non-bank mortgage lender, Home Capital Group, just collapsed 64.5%. Stunning. Historic. That rolled back 14 years of corporate growth during which HCG loaned tens of billions in mortgages, an unknown number of which were liar loans, falsely documented, fraudulently taken and now the very poison killing the company.

.......Home Capital was found to be making liar loans almost two years ago, punted at least fifty brokers, had a boardroom bloodletting and has been targeted by the tough-nuts regulators at the OSC. Now hemorrhaging depositors and facing serious securities charges, the company took a rescue package from an unnamed source with terms so punitive they’ll likely destroy it. What was an investment-grade, deposit-taking institution a few days ago is now a tatty rabble on life support forced to pay 22.5% interest on a borrowed billion.

more... http://www.greaterfool.ca/2017/04/26/where-theres-smoke/

 

 

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This could be very big indeed.  This could be the first of many.  The first of many Canadian banks, the first of many countries.

By the way, greaterfool.ca is a great blog by a high-profile ex-Canadian MP (ex cabinet member if my memory serves). 

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Can someone explain the origination of the crisis?

Do they face default? Lack of CF by signing new loans? What was the trigger?

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42 minutes ago, Democorruptcy said:

Perhaps one of our members based in Canada, should start a petition to bring Mark Carney back home to "sort" it? 

Isn't he heading back on a year and a half to be Canadian PM anyway?

 

Might be buggering off a in June anyway, never know.

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Last year Steve Keen identified Canada as one of seven major economies about to experience an almighty debt recession and financial crisis.

For reference the other six Zombies-To-Be are Australia, China, Hong Kong, South Korea, Sweden and Norway.

Singapore, Belgium and France are also strong contenders. :)

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2 hours ago, Freki said:

Can someone explain the origination of the crisis?

Do they face default? Lack of CF by signing new loans? What was the trigger?

Allegedly their credit is good, but credit always looks good during bubbles.

 

Scenario seems to be: Aggressive expansion, allegations of liar loans, resulting in ongoing regulator investigation

Which has led to a drying up of customer deposits and savings and negative market sentiment.

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