Using Veritas to Construct the "Per…

29-04-2017 Hits:94664 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:85555 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:85932 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:90034 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:88463 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:88204 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:59346 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:87803 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:87343 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:87690 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:94106 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:91389 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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In reviewing the last couple of quarter's results of Goldman Sachs operating results, I have come to the conclusion that Goldman is a Federally insured, publicly traded hedge fund!


Reggie Middleton on Goldman Sachs Preliminary 3Q09 results

Goldman Sachs generated net revenues of $12.4 bn in 3Q09 as compared to $6.0 bn in 3Q08 and $13.8 bn in 2Q09. The revenues grew primarily on back of strong performance in its trading and principal investment segment while traditional investment banking arm and asset management segment continued with its lacklustre performance.

The Company's core investment banking revenues declined to $899 mn in 3Q09 from $1,294 mn in 3Q08 and $1,072 mn in 2Q09 with both financial advisory and underwriting business delivering poor performances. Revenues from the financial advisory business declined 47% y-o-y and 12% q-o-q  to $325 mn in 3Q09 owing to slow down in industry-wide M&A activities, while underwriting revenues declined 15% y-o-y and 46% q-o-q to $574 mn primarily due to lower debt underwriting volumes.

Revenues from Trading and Principal Investments were $10,027 mn in 3Q09, down 7% compared with $10,784 mn in 2Q09 but were up significantly over the corresponding quarter last year. Trading and Principal Investment revenues were principally buoyed by strong trading performance in its Fixed Income Currency and Commodity (FICC) segment which surged to $5,991 mn compared with $1,595 mn in 3Q08 on back of wide bid-ask spreads. Although bid-ask spreads compressed marginally in 3Q09 (which caused 12% q-o-q decline in FICC trading revenue) they remain wide by historical standards. As industry wide competition intensifies and bid-ask spread get restored to historical levels, revenues from FICC segment could witness some pressure going forward. As a note to all of those groupie types that believes Goldman walks on water, the monopolistic dearth of competition will only last for so long with a clear lack of barriers to entry. This bodes ill for a company whose only valid value driver is predicated upon a lack of competitors leaving wide operating margins.

Besides FICC, revenues from equities and principal investment also contributed to higher trading revenues with their respective share of $2,775 mn and $1,261 mn, respectively in 3Q09 compared with $1,562 mn and $(453) mn in 3Q08, respectively. As of September 30, 2008 revenues from Trading and Principal Investments contributed to 71.1% of Goldman Sachs net revenues compared with 15.2% for JP Morgan, 8.1% for Citi, 34.3% for Morgan Stanley and 16.3% for BAC. Further, the GS' average daily VaR, a measure of the market risk on its investment portfolio, was still higher at $208 mn at the end of 3Q09 as compared to $181 mn in 3Q08 - and this was with the no competition Federal ZIRP (zero interest rate policy) subsidy.  Thus, as the free ride of historically cavernous bid/ask spreads continue to normalize, one should expect significantly more volatility of earnings in GS as compared to its competition.


The Asset Management segment reported a y-o-y 29.3% decline in revenues to $1.5 bn as total assets under management dropped to $848 bn versus $863 bn 3Q08 while yield on AUM declined to 0.11% in 3Q09 from 0.13% in 3Q08 due to decline in composition of high yielding assets (it appears as if there are some GS clients who are not eating the green shoots). GS' net interest income increased 48.9% y-o-y to $1.7 bn during 3Q09 as interest expense dropped 83% compared to 66% drop in interest income ~ most likely the result of extensive cost management and cutting, but not truly discernable until the SEC reporting documents are released.

In line with increase in net revenues, compensation expenses increased 84.5% to $5,351 m in 3Q09 compared with $2,901 mn in 3Q08. Resultantly, the ratio of compensation expenses-to-net revenues improved to 43.3% in 3Q09 from 48.0% in 3Q08. Non-compensation expenses increased 2% y-o-y to $2,227 mn from $2,182 mn in 3Q08 with ratio of non-compensation expenses to revenues improving substantially to 18.0% from 36.1% a year ago. 


In aggregate, GS' net income available to common shareholders' increased to $3,028 bn, or $5.25 per share in 3Q09 versus $810 mn, or $1.81 per share in 3Q08 and $2.7 bn, or $4.93 per share in 2Q09. The bank's tangible book value per share increased to $92.7 in 3Q09 from $83.1 in 3Q08 while book value per share improved to $101.2 in 3Q09 versus $94.8 in 3Q08. 

On July 22, 2009 GS repurchased 12.2 mn shares from US Treasury which was issued under US Treasury's TARP Capital Purchase Program for $1.1 bn which resulted in a reduction of shareholders' equity. Although GS' continues on its endeavour to de-lever its balance sheet the bank still has a long way to go before it could boast of a healthy one.   As of 3Q09 the bank's tangible equity capital ratio stood at 6.1%, implying a leverage of 16.4x while its toxic level 3 assets stood at $50.0 bn, or 94% of its tangible equity.

Although GS' had beaten street expectations (which everyone at should recognized as the game that it is), the company's share price has significantly run ahead off its fundamentals. Since December 2008, the company's tangible book value per share has increased by a modest 3.2% while its share price has increased by a whopping 92.1% with its Price-to-Tangible Book value per share ratio currently standing at 1.77x compared with 1.45x in 2Q09 and 0.45x in 4Q08.  Based on closing price as of October 18, 2009, GS' price-to-tangible book value per share is at 1.99x while average price-to-tangible book value per of its peers stood is 1.55x, implying a premium of 28% for the Goldman Sachs brand name. As I said, an expensic, federally insured, publicly traded hedge fund with a strong lobby arm and an even stronger brand management department.


Readers should take into consideration that this is the exact same argument that I posed a year and a half ago when I first shorted Goldman Sachs at $185! Where is it trading today? $186.43. This is after it had to be rescued by the government for fear of collapse!

Let's revisit history with an excerpt from Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street Saturday, 05 July 2008, it's deja vu all over again...


  I rode Goldman down to the $100 to $75 band, but it eventually bottomed somewhere around $50. Now it's right back where it started from, pre-bailout. Does it deserve to be there??? Inquiring minds want to know...

The Legacy Goldman Sachs direction neutral strategy empirical analysis is still available to Pro subscribers. Click Goldman Sachs Option Strategy Analysis Goldman Sachs Option Strategy Pro Analysis 2009-08-05 09:52:44 1.02 Mb to access or proceed to the downloads section. I will be providing a refresh of this analysis the third week in October.

Below is a complete listing of the fundamental research that we are using to compile the direction neutral strategy analysis for the tickers listed above. Some of it is free for non-subscribers. I would recommend that pro subscribers reread the documents to brush up on my take on the companies listed herein.



Goldman Sachs Stress Test Retail Goldman Sachs Stress Test Retail 2009-04-20 10:08:06 720.25 Kb - 17 pages

Goldman Sachs Stress Test Professional Goldman Sachs Stress Test Professional 2009-04-20 10:06:45 4.04 Mb - 131 pages

Free research and opinion

§  As Reality hits, the Masters of the Universe are starting to look like regular bank employees

Reggie Middleton's Goldman Sach's Stress Test: Breaking Ranks with the Crowd Once Again!

Who is the Newest Riskiest Bank on the Street? 

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