u/Old_Man_Heats

MELI’s margin expansion is heavily driven by its growing loan book in Latin America, a region with historically volatile currencies and macro environments. If a severe recession hits, defaults rise regardless of algorithmic credit scoring, forcing MELI to increase provisions and cut lending, which would compress margins and collapse the current growth‑justified multiple. Short MELI as a bet that credit risks are underpriced and that the market will re‑rate the stock lower when loan growth stalls or NPLs rise. Stronger‑than‑expected consumer credit performance; continued FX stability; MELI’s non‑financial segments (e‑commerce, logistics) offset credit losses.

NU’s profitability and margin expansion come from scaling its consumer lending in Brazil, a volatile EM with high interest rates and past default cycles. Similar to MELI, a macroeconomic shock would spike delinquencies, forcing NU to raise provisions and slow loan origination, puncturing the growth narrative and its premium valuation. Short NU on the thesis that the current cheap‑looking multiple is a trap built on unsustainable credit growth in a fragile economy. NU’s low cost structure and digital‑only model could maintain superior underwriting; rapid user growth buffers losses; Brazilian rates stay high (good for net interest margin).