RE:RE:Provisioning and reserves at almost magically low levels ...This latest attack by the shorts is a JOKE
What they want investors to believe is that some very stupid third party is buying bad mortgages from Home at the original face value, and then taking the loss themselves to avoid showing a loss on Home's books. . Defies logic. Why would anyone take on a known loss and pay face value so Home will not show a loss? Please send me the names of these people. I have a few stocks that I paid 20 bucks for that now trade at 15 and I don't want to take the loss.. So, under the shorts logic, these guys will buy my stock at 20 and take the loss themselves?????? Also, the number of mortgages sold to third parties is zilch, less than .01 %.
The reason the reserves are so low is simple. Housing prices in the GTA are up more than 40% over the last few years. That means equity behind the mortgages given a 20% downpayment, is over 60%. What homeowner walks away from 60% equity in their home if they become unemployed and cant pay their mortgage payments.????. Answer- ZERO- 100% of them sell the house, pay off the mortgage in full, and bank the proceeds. Result, no loss by Home and thus no need to increase the loss provisions. That is why the provisions are so low.
Last, the short sellers have no understanding of when a transaction is a related party transaction. If a party becomes related in November , then all transactions with that party from that exact date are related. Somehow their view is transactions for the entire year prior to November are related. I ask them to simply phone a partner in one of the big four accounting firms and in ten seconds they can tell you how dead wrong their view is. Their complaints about disclosure issues are simply dead wrong.
With significant buy backs, each day fewer shares are outstanding ,and earnings per share go up. At some point there will be a significant short squeeze as there will be no shares to short. Expect earnings of over a buck a share for this quarter ,and 4,50 a share for 2017. At 11 times earnings that gives a share price of 50 bucks a share. If stock price stays at this level much longer, there is no question one of the Canadian banks is going to make a low ball offer for 100 percent at 40 bucks a share, and steal this company. I would not be surprised if one of the Banks is sniffing around right now. Where else can they get at book of a significant number of mortgages in the GTA with equity behind them of around 60%. Compare that to new mortgages issued by the Banks this month, with 10% equity behind them.