Using Veritas to Construct the "Per…

29-04-2017 Hits:87211 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:81129 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:80971 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:85445 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:81943 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:84131 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:55194 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:83389 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:83130 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:83019 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:89278 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:86993 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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This is from MBIA's recently published 8k. If you have not done so already, it is strongly recommended that you read the November blog post: Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On January 16, 2008, MBIA Insurance Corporation (“MBIA”), a wholly-owned subsidiary of MBIA Inc. (the “Company”), issued $1.0 billion principal amount of Surplus Notes due January 15, 2033 (the “Notes”) with an initial interest rate of 14 percent until January 15, 2013 and thereafter at an interest rate of three-month LIBOR plus 11.26 percent. As a point of reference:

London interbank offered rate, or Libor



52-WEEK

Latest Wk ago High Low
One month 3.98938 4.37063 5.82375 3.98938
Three month 3.95125 4.44250 5.72500 3.95125
Six month 3.79375 4.26250 5.59500 3.79375
One year 3.42375 3.86438 5.50656 3.42375

 

 

The Notes were issued pursuant to the Fiscal Agency Agreement, dated January 16, 2008 (the “Fiscal Agency Agreement’), entered into between MBIA and The Bank of New York (“BONY”), as fiscal agent (the “Fiscal Agent”), in an offering exempt from the registration requirements of the Securities Act of 1933, as amended.

The Notes are subordinate in right of payment to all existing and future debt issued, incurred or guaranteed by MBIA, all existing and future claims of policyholders and beneficiaries and all other creditor claims which have priority over claims with respect to the Notes under New York insurance law, other than any future surplus notes or similar obligations. Each payment of interest on or principal of the Notes (including upon redemption) may be made only with the prior approval of the New York Superintendent of Insurance and only out of surplus funds available for such payments under the New York Insurance Law.

MBIA has the option to redeem the Notes in whole or in part on January 15, 2013 and the interest payment date occurring in January of each fifth succeeding year thereafter at a redemption price equal to the principal amount of the Notes to be redeemed together with any accrued and unpaid interest to the redemption date, and on any other date at a “make-whole” redemption price set forth in the Notes.

The Notes do not include any restrictive covenants.

In the event of MBIA’s rehabilitation, liquidation, conservation or dissolution, the Notes will immediately mature in full without any action on the part of the fiscal agent or any holder of the Notes, with payment thereon being subject to the satisfaction of the conditions to payment described herein.

In no event shall the Fiscal Agent or any holder of the Notes be entitled to declare the Notes immediately mature or otherwise immediately payable.

The Bank of New York has from time to time engaged in, and will continue to engage in, banking and other commercial dealings in the ordinary course of business with MBIA and its affiliates. The Bank of New York has received, and will continue to receive, customary remunerations with respect to these transactions.

 

From my second blog post on MBIA (the Scary Halloween Story) and the monolines dated Tuesday, 13 November 2007...

Being so sensitive and exposed to CDOs, one would be curious as to what happens if the CDO spreads widen. Well…

Effect of Change in spread in CDO

   

Figures in Million of dollars

   

As of 31/12/2006

 


 


CDO Exposure

 

130,900

Statutory Capital Base

 

6800

 


 

 


Assumed Duration of the CDO bonds

5

 


Change in Spread that can eliminate capital

 


In bps

104

 


Capital Eroded

 

6807

 


 

 


Remaining Equity


-6.8


So, an increase of 104 basis points in CDO spreads wipes out the equity of MBIA, TOTALLY wipes it out.

To put this into perspective, let me show you the entire sensitivity grid. Hey, no matter which way you look at, these guys are at risk. They have $6,800 in capital. Just move your finger over any combination of CDO duration and spread in basis points, and if you come close to that 6,800 figure, bingo! The current duration average is approximately 5 years. So the question is, "Will spreads reach 104, or more?" Well, look at the charts above that I posted from Pershing. Better yet, look at the subprime underlyings performance, which can be mimicked by the ABX from markit.com. Horrendous, indeed.

 

Sensitivity Analysis

       
   

Spread in BPS

Duration

 

100

102

104

106

108

3

3,927

4,006

4,084

4,163

4,241

4

5,236

5,341

5,445

5,550

5,655

5

6,545

6,676

6,807

6,938

7,069

6

7,854

8,011

8,168

8,325

8,482

7

9,163

9,346

9,530

9,713

9,896

______________

So, knowing what you know now... Would you buy these notes, even at 14%???