Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by SkaSka »

This is just more of a general observation: after watching from the sidelines what happened with VRX and now with HCG, if management is not trustworthy, stay the hell away from the company as there are most likely more cockroaches underneath the sink than what is being led on.

Nothing new as an investing axiom, just a vivid way in real time to reinforce the axiom.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by SQRT »

ig17 wrote: 26 Apr 2017 08:54 They agreed to pay 15% on a secured line of credit to replace HISA deposits that were paying what, 1.75%?

What happens when GIC holders stop renewing? And what is left of the business model?

Echoes of 2007/2008.
Agree. Surprising how fragile some of these businesses are. Once they lose the confidence of investors/depositors the business can fall apart very quickly.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Taggart »

What surprises me is there's still people buying on the way down.

It was only a few days ago Home Capital Group released their pre-announcement for the quarterly report. After what's happened today it was all just a pack of lies.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by NorthernRaven »

Taggart wrote: 26 Apr 2017 11:29 What surprises me is there's still people buying on the way down.

It was only a few days ago Home Capital Group released their pre-announcement for the quarterly report. After what's happened today it was all just a pack of lies.
The question, though, is whether they have an actual problem, or a funding/poisoned brand problem. If, given funding, Home were to run their operations and lose big piles of money, then they have bad fundamentals and aren't really a going concern. But there's no real evidence of that I've seen - are they really that different from Equitable, their closest comparison? Those questionably-vetted mortgages should be mostly matured out, even if they had been more vulnerable. Is there anything to indicate that Home is materially more reliant now on wonky originations than Equitable is?

Of course, even if not justified on the fundamentals, a run is still deadly and Home may not be able to pull out, but that's a somewhat different issue.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by flywaysuzy »

If people aren't comfortable plunking down their savings to buy a gic from this company, then they have no money to loan out at a profit. Thus no business going forward. I am sure it is a comfort knowing you might have cdic coverage for deposits under 100k but does anybody know the timeline for such a payout in case of a loss?
I would hope 'somebody' will put out this grass fire before it gets to the edge of the forest...
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Pickles »

NorthernRaven wrote: 26 Apr 2017 11:45
Taggart wrote: 26 Apr 2017 11:29 What surprises me is there's still people buying on the way down.

It was only a few days ago Home Capital Group released their pre-announcement for the quarterly report. After what's happened today it was all just a pack of lies.
The question, though, is whether they have an actual problem, or a funding/poisoned brand problem. If, given funding, Home were to run their operations and lose big piles of money, then they have bad fundamentals and aren't really a going concern. But there's no real evidence of that I've seen - are they really that different from Equitable, their closest comparison? Those questionably-vetted mortgages should be mostly matured out, even if they had been more vulnerable. Is there anything to indicate that Home is materially more reliant now on wonky originations than Equitable is?

Of course, even if not justified on the fundamentals, a run is still deadly and Home may not be able to pull out, but that's a somewhat different issue.
Exactly. I have close to CDIC limits in both registered and unregistered GICs. I wasn't convinced by the pre-announcement of an unconfirmed loan agreement, otherwise I might have placed a bet for a bit of HCG. My HISA balance is $39.40 and I will let it ride for the nonce. Not losing any sleep --- for now.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Pickles »

flywaysuzy wrote: 26 Apr 2017 11:58 If people aren't comfortable plunking down their savings to buy a gic from this company, then they have no money to loan out at a profit. Thus no business going forward. I am sure it is a comfort knowing you might have cdic coverage for deposits under 100k but does anybody know the timeline for such a payout in case of a loss?
I would hope 'somebody' will put out this grass fire before it gets to the edge of the forest...
That question is addressed in the HISA thread in the "Under the Mattress" forum which also deals with CDIC limits and their application.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by deaddog »

Taggart wrote: 26 Apr 2017 11:29 What surprises me is there's still people buying on the way down.
Could be Short seller covering and of course Knife grabbers.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Taggart »

From a few weeks ago, short seller Marc Cohodes said he's not just focused on Home Cap but also Equitable (not a shareholder).

A few days ago I watched this video and at least had a good laugh with it.

Perhaps in future I should take a closer look at what the short sellers are doing.

It would of worked for Sino-Forest (not a shareholder).
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by FinEcon »

I do not and have not ever owned HCG, despite many looks at it over the years. It never met the test of quality business model but valuations have bounced around enough that it kept coming back for 'cigar butt valuation' review from time to time.

I think the biggest thing to keep in mind is that share price volatility is not risk. Unless you are confident this is a solvency issue and not a only liquidity situation, there is no reason to panic. If you felt this is a quality business 3 months ago, I don't know why anyone would think that, but you should have some real reasons to believe the business model is flawed and I don't think the current news tells you anything with respect to that.

Much like US banks were forced to accept funding on onerous terms in the GFC, it is possible the regulator forced them to shore up funding. The problem with such funding is that it is highly onerous and often sucks up quarters or years of profits for solvent firms facing liquidity problems. All financial institutions are subject to liquidity events from time to time, solvency is another matter entirely.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by 8Toretirement »

The selling is overdone. People are reacting as though there is no value in the company. The mortgage portfolio has value in excess of the current share price. Only some of the mortgages were affected by corrupt brokers. This was not a Home Capital issue to start, but a broker issue, some of the banks had the same problem.

Home Trust is not bankrupt, the issue is their high interest savings account redemptions, they had enough funds to cover but they need to ensure they stay within guidelines. The OFSI was irresponsible in the way they handled this by causing doubt on the solvency of the corporation.

This is a rarely seen bank run in Canada on Home Trust where fear gets ahead of everyone. I think the shares will go back over $14.00 by the end of the week once analysts get ahead of the curve.

Banks will start to support the share price if there is value as this could happen to any one of these institutions.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by DavidR »

8Toretirement wrote: 26 Apr 2017 13:50 ... Only some of the mortgages were affected by corrupt brokers. This was not a Home Capital issue to start, but a broker issue, some of the banks had the same problem.
Well mgmt says it was "all the brokers fault". Can we trust mgmt on this? Perhaps they were quite happy to look the other way until....something happened? Maybe the bank inspectors found the problem?
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Taggart »

It's not just Home Capital getting hit in the market today, Equitable is down 36%.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by adrian2 »

8Toretirement wrote: 26 Apr 2017 13:50 Home Trust is not bankrupt, the issue is their high interest savings account redemptions, they had enough funds to cover but they need to ensure they stay within guidelines.
Really? Isn't the definition of a savings account that it's the depositor who can, at will, withdraw the money any time she wants?

If HCG borrows short and lends long, it's exactly their problem. It's called term mismatch.
The OFSI was irresponsible in the way they handled this by causing doubt on the solvency of the corporation.
They did precisely what they had to do, kudos to them!
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by 8Toretirement »

adrian2 wrote: 26 Apr 2017 15:02
8Toretirement wrote: 26 Apr 2017 13:50 Home Trust is not bankrupt, the issue is their high interest savings account redemptions, they had enough funds to cover but they need to ensure they stay within guidelines.
Really? Isn't the definition of a savings account that it's the depositor who can, at will, withdraw the money any time she wants?

If HCG borrows short and lends long, it's exactly their problem. It's called term mismatch.
The OFSI was irresponsible in the way they handled this by causing doubt on the solvency of the corporation.
They did precisely what they had to do, kudos to them!
Adrian, they don't sell mortgages through their HISA. They had about 1.4B in cash as of 24 April. The line of credit is surplus and raises their cash position to about 3.5 B.

OFSI created a bank run with the way they handled this. Their job is behind the scenes not in front in the news. They could have applied pressure to the Corp to restate any disputed reports.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by deaddog »

8Toretirement wrote: 26 Apr 2017 13:50 This is a rarely seen bank run in Canada on Home Trust where fear gets ahead of everyone. I think the shares will go back over $14.00 by the end of the week once analysts get ahead of the curve.
You backing up the truck? :D
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Shakespeare »

You backing up the truck? :D
Well, I put some money in at 6.54. We shall see....
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by adrian2 »

8Toretirement wrote: 26 Apr 2017 15:12 Adrian, they don't sell mortgages through their HISA. They had about 1.4B in cash as of 24 April. The line of credit is surplus and raises their cash position to about 3.5 B.
Then what do they do with the HISA money and why were they relying on HISA money to stay within "guidelines"?
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by adrian2 »

Shakespeare wrote: 26 Apr 2017 15:27
You backing up the truck? :D
Well, I put some money in at 6.54. We shall see....
I did buy Nortel on the way down:
100 shares at $70
100 shares at $50
100 shares at $30
... after I've shorted 300 shares at $102.

Should I have let it ride? Hindsight is 20/20.

I was seriously thinking of shorting HCG today, something I haven't done since the Nortel days, but I did not pull the trigger.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Taggart »

I didn't sell HCG because it was going down, I sold because I didn't like this mornings announcement from the company. Obviously many other investors didn't appreciate it either. I usually get rid of a company after a dividend cut, so it will be interesting to see if HCG can retain their present dividend with the quarterly report, due out early May.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by randomwalker »

"History doesn't repeat itself, but it does rhyme."

"Those who forget the past are doomed to repeat it."

All you have to do is go back and read the thread "Xceed Mortgage (Symbol-XMC), is it the next HCG?"

More or less the same business model. More or less the same result.

http://www.financialwisdomforum.org/for ... &hilit=xmc

When the big five banks are looking to package and unload their uninsured mortgages one has to wonder about the real value of subprime uninsured mortgages out there.

http://ca.reuters.com/article/businessN ... J1TN-OCABS
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by CROCKD »

http://www.theglobeandmail.com/report-o ... e34816524/
Mike Rizvanovic, analyst with Veritas Investment Research says the big fear is a possible run on the firm’s GICs which accounted for roughly 79 per cent of the firm’s deposits in 2016.
How do you have a 'run' on GICs which have a fixed term?
I have a non registered GIC ladder with Oaken with 4 rungs. I opted not to rollover the 5th rung in December 2016 because I didn't like their rates. The amount is within CDIC limits.
The company said guaranteed investment certificate deposits “remained essentially unchanged” over the same period, and that its total, including Oaken and broker GICs, was $13.01-billion on April 24 – versus $13.06-billion March 28.
I also have a small Home Capital GIC in my BMOIL LIF which I believe is subject to separate CDIC coverage.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by StuBee »

I too am baffled by the notion of a "run on GIC's". When they mature they mature and they are no longer GIC. Perhaps what they mean is that individuals will no longer rollover their GIC's with a HCG related company when (or if...) they mature. I know that I will avoid them when my own Home trust or Home bank GIC's mature.

Who would calmly purchase a GIC from them at this time? The parent company has suddenly lost 2/3's of its market value. Whether or not this event is rational is beside the point. GIC's are all about safety, trust and confidence. HCG, at this time, does not inspire trust or confidence. I am confortable with CDIC but in this part of my portfolio I am not inclined to run after risk.
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by DavidR »

CROCKD wrote: 26 Apr 2017 17:58 http://www.theglobeandmail.com/report-o ... e34816524/
Mike Rizvanovic, analyst with Veritas Investment Research says the big fear is a possible run on the firm’s GICs which accounted for roughly 79 per cent of the firm’s deposits in 2016.
How do you have a 'run' on GICs which have a fixed term?
Run on a bank means depositors show up wanting their money back today.... Run on GICs means they won't be rolled over.
So sure, they won't have to pay all the creditors (depositors and GIC holders) on the same day, but it's still a big problem. Can they collect 79% of the mortgages receivable to match the demand to repay all the fleeing savings acct and GIC holders?
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Re: Home Capital Group (Symbol-HCG) [Delisted 31-Aug-2023]

Post by Hammerer »

The facility, combined with Home Trust’s current available liquidity, would provide Home Trust access to more than $3.5 billion in total funding, more than twice the amount of outstanding High Interest Savings Account (HISA) balances.
Is that like saying I weigh more than twice as much as a kitten?
Total GICs, including both Oaken and broker GICs, stood at $13.01 billion as at April 24, compared to $13.06 billion as at March 28.
A .38% reduction, but GIC deposits down by $50m in under a month.

From their quarterly reports on Dec 31st 2016 (http://www.homecapital.com/quarterly_re ... Report.pdf table 43 on pg. 57):

Code: Select all

Deposits payable on demand: $2.4b
Deposits payable at a fixed rate:
0-3 months: $1.63b 
3-6 months: $2.03b 
6-12 months: $3.27b 
1-5 years: $6.42b
Total: $13.35b
Last edited by Hammerer on 26 Apr 2017 20:34, edited 1 time in total.
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