Using Veritas to Construct the "Per…

29-04-2017 Hits:93347 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:84579 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:84489 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:89049 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:87533 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:87340 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:58504 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:86876 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:86493 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:86837 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:93144 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:90471 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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That the professional (fundamental) investor always looks for the numbers to back up the assertion while the reporter may often run with the assertion. I have caught a lot of executives lying over the last two years, and many of those lies have ended up in insolvency, bankruptcy, emergency mergers and collapse (speaking of bankruptcy, I should have preliminary previews of 2 or 3 very likely bankruptcy candidates coming on tap within a week or so for subscribers).

Case in point (in terms of lying, that is) is the recent article in the Wall Street Journal regarding PNC Bank - Jun. 29 PNC Waits to Repay TARP Funds:

 Some banks have repaid their TARP funds. There are many more that still can't. And then there's PNC Financial Services Group Inc. Who is one of those banks that "still can't"!

Unlike competitors such as J.P. Morgan Chase & Co. and U.S. Bancorp, the Pittsburgh-based regional bank has chosen not to repay the Treasury Department's investment in the firm, even though PNC likely could do so immediately. Yeah, right!

While bank officials declined to comment for this article, PNC Chairman and Chief Executive James Rohr was asked by an analyst in May about the company's plans for paying back $7.6 billion in preferred shares the government purchased from PNC last year through the U.S. government's Troubled Asset Relief Program.

"We see significant advantages in redeeming TARP" sooner rather than later, and could do so "as soon as possible," he said. I don't see where he said he can do so now, though!

Mr. Rohr added, though, that "we're going to do it in a shareholder-friendly manner."

Mr. Rohr's comments suggest that PNC shareholders are unlikely to face the heavy dilution that other bank investors have faced recently. But they are going to face the heavy losses from the poorly thought out acquisition of National City using thos very same TARP funds that they now wish they didn't take, and would love to be able to pay back but can't since they need it to cushion against the train wreck that they just purchased. Many firms re-paying TARP have raised the necessary cash in part by issuing new shares, which dilutes current investors. The National City purchase is a prime example of how the loose money bandied about by the Bush administration with no strings attached was abused by the banks that recieved TARP. The government gives PNC billions of dollars of TARP money to strengthen the banking system and PNC goes off and buys a subprime and Alt-A slush fund called National City, instantly becoming a bank at risk, funded by the US taxpayer. Hey, other reporters noticed it...

PNC Will Post Loss on Provision Tied to National City

PNC to cut 5,800 jobs; shares sink after weaker Q4

PNC Bank considered less stable after buying National City Corp.

PNC, Wells Fargo Slump Into 2009 After Buying Lenders

In contrast, PNC intends to re-pay Uncle Sam by setting aside future profits, rather than minting new shares, Mr. Rohr said. Really? I would have thought you were in little bind when Congress decided to put a little teeth in the TARP, but after you had already went on your rather irresponsible shopping spree at the taxpayers expense...

The stance also signals a willingness to limit the compensation of PNC's managers according to the government stipulations that come with TARP. Those curbs have made executives at financial firms with large trading and investment-banking operations eager to escape TARP. Willingness, or inability to do anything about it due to their current situation?

"It's very different if you have a bunch of managers that are about to jump ship," says Anton Schutz, manager of the Burnham Financial Services Fund. "If you run an investment bank, that's where you really run into compensation issues." That's because investment bankers are overpaid and everyone knows it, except for investment bankers, of course. They think they deserve every thick dime...

Another reason why PNC isn't racing to abandon TARP, according to analysts: PNC acquired National City Corp. last year after the Cleveland-based rival started teetering from losses on subprime loans.

Although most analysts think PNC will eventually turn hefty profits from the deal, a further downturn could force PNC to dip into its capital reserves to support National City loans. Whew! It's about time you came around to this line of thinking. Let's delve into this a little farther, shall we?

In addition, the firm holds far more construction and industrial loans than some consumer-focused competitors. Those loans have been slower to show losses than mortgages and credit cards, and could yet hammer PNC and other regional firms.

Somebody should write to the reporter, Marshall Eckblad at This email address is being protected from spambots. You need JavaScript enabled to view it. and inform him of the work done over at BoomBustBlog.

 PNC and the government's estimation of what PNC needs to be considered a "healthy" bank

The recent Fed's estimation of total capital requirement of $06 bn under the adverse case scenario in the SCAP bank stress tests would lead to a dilution impact of about 3.2% for existing shareholders' based on current market price of $42.2 per share. However PNC's capital requirement of $0.60 bn seems overly conservative considering the banks deteriorating capital position. PNC's tangible equity capital to risk weighted assets has declined to 2.32% as at December 31, 2008 from 7.89% as at December 31, 2006 largely due to acquisition of National City Bank. Based on the expected tangible equity capital of $4.9 bn and risk weighted assets of $237 bn as of December 31, 2010 PNC's actual capital requirement is estimated at $4.7 bn to maintain a minimum ratio of 4% for Tangible Equity Capital to Risk Weighted Assets. The above capital requirements of $4.7 bn could result in dilution impact of 25% for its existing shareholders' based on PNC's current share price. 

  Fed 2 yr cumulative loss rate range Fed 2 yr cumulative average loss rate for US banks 2 yr cumulative loss rate for PNC 2 yr cumulative loss rate for STI
  Base Case Adverse Case Base Case Adverse Case Fed's loss rate assumptions Realistic loss rate assumptions Realistic loan loss estimate
First Lien Mortgages 5 – 6 7 – 8.5 5.5% 7.8% 8.1% 9.9%                 2.6
Prime 1.5 – 2.5 3 – 4 2.0% 3.5%      
Alt‐A 7.5 – 9.5 9.5 – 13 8.5% 11.3%      
Subprime 15 – 20 21 – 28 17.5% 24.5% 12.7%    
Second/Junior Lien Mortgages 9 – 12 12 – 16 10.5% 14.0%      
Closed‐end Junior Liens 18 – 20 22 – 25 19.0% 23.5%   3.2%                 0.3
HELOCs 6 – 8 8 – 11 7.0% 9.5%   3.7%                 0.9
C&I Loans 3 – 4 5 – 8 3.5% 6.5% 6.0% 6.1%                 3.2
CRE 5 – 7.5 9 – 12 6.3% 10.5% 11.2% 11.6%                 4.3
Construction 8 – 12 15 – 18 10.0% 16.5%   21.5%                 2.6
Multifamily 3.5 – 6.5 10 – 11 5.0% 10.5%   7.3%                 0.2
Nonfarm, Non‐residential 4 – 5 7 – 9 4.5% 8.0%   6.9%                 1.6
Credit Cards 12 – 17 18 – 20 14.5% 19.0% 22.3% 21.4%                 0.3
Other Consumer 4 – 6 8 – 12 5.0% 10.0%                     0.3
Securities (AFS and HTM)                             1.9
Others* 2 – 4 4 – 10 3.0% 7.0%   2.5% 0.3
Total loan losses           7.3% 12.9
*including misc commitments and obligations          

The Fed estimates the 2 year cumulative losses in first lien mortgages and junior lien mortgages at 8.1%. However, most of the regions in which PNC operates have witnessed significant housing price decline with an average housing price decline of 8.9% since 2008 while some of the regions including Florida, New Jersey, Maryland and Michigan we have witnessed double digit price decline.  In order to arrive at more realistic assumptions about the charge-offs for loans secured by residential properties, we analyzed the delinquencies and foreclosure trends as well house price movement in these states and have adjusted the general loss rates observed in these regions for the credit quality of PNC's portfolio.  Based on our expectations PNC's 2 year cumulative net charge-offs for First Lien Mortgages (incl Alt A) is expected to reach 9.9%. 


Primary geographies of PNC and National City 1Q-08 2Q-08 3Q-08 4Q-08 % change since 20008 Alt-A loss rate Sub prime loss rate
Pennsylvania 2.4% 1.2% -0.4% -0.8% 2.4% 14.3% 33.5%
New Jersey -1.5% -3.2% -4.8% -5.4% -14.1% 23.5% 43.4%
Washington 3.0% 0.5% -2.0% -3.8% -2.4% 11.1% 27.1%
Maryland -1.4% -4.2% -6.3% -7.7% -18.3% 18.8% 38.6%
Virginia -0.3% -2.6% -3.8% -4.6% -10.9% 21.2% 37.3%
Ohio 0.6% -0.3% -2.3% -1.9% -3.9% 15.6% 35.4%
Kentucky 2.8% 3.1% 1.7% 1.0% 8.8% 14.2% 34.7%
Delaware 1.0% -1.2% -2.0% -4.2% -6.3% 16.2% 39.1%
Florida -8.6% -13.0% -16.4% -19.5% -46.5% 37.1% 52.3%
Illinois 0.5% -0.6% -2.6% -3.0% -5.6% 22.9% 41.3%
Indiana 2.3% 1.6% -0.1% -0.5% 3.3% 16.1% 35.2%
Michigan -3.5% -5.2% -7.0% -6.9% -20.8% 22.5% 45.7%
Missouri 1.5% 0.6% -0.3% -0.6% 1.3% 13.4% 36.1%
Wisconsin 1.7% 0.8% -0.9% -0.9% 0.6% 17.8% 41.7%
Average (assuming equal weights) 0.0% -1.6% -3.4% -4.2% -8.9% 18.9% 38.7%
Overall U.S -0.2% -1.9% -3.9% -4.5% -10.1%    
Price change relative to National Average 0.2% 0.3% 0.5% 0.3% 1.3%    
Source: Federal Housing Finance Agency               

So long story short, or short story long - depending on how you look at it, I think the government, the WSJ, and those wishful PNC shareholders have a rude awakening coming...