Using Veritas to Construct the "Per…

29-04-2017 Hits:88389 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:82112 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:81992 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:86492 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:82935 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:85066 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:56163 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:84390 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:84105 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:83972 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:90434 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:88006 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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Note: A formatting error cut this article short yesterday. Please take the time to read it in its entirety.

Maybe, it just may be the total collapse in credibility and trust in the US Federal Reserve and Treasury. I mean, come on. Have you hear the bullsh1t that they spouted this morning? Quick Bloomberg scan:

Yellen Says Unclear If Use of Rates Can Stem Leverage (Update1) ...

... Fed Chairman Ben S. Bernanke said yesterday it’s “not obvious” there’sa bubble in the US and Yellen said today the US stock market is not overvalued. ...
- 2009-11-17

Kohn Says US Asset Prices Don’t Seem ‘Out of Line’ (Update1) ...

... low interest rates don’t appear to be fueling another asset-price bubble in US ... Kohn’s remarks echoed comments made by Fed Chairman Ben S. Bernanke in an ...
- 2009-11-17
Bernanke Says ‘Not Obvious’ Asset Prices Misaligned (Update2) ...

 

... regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset-price bubble bursts in the future,” Bernanke said.

 I would love to see Bernanke's personal investment accounts, just to note how many long bonds and equities he is piling into over the last few months. Yeah, price misalignent is "not obvious", equity market is not over priced, there is no bubble. They are right, the market is not over priced, it is priced for idiots, fools and the follow me crowd. I remember when Bank of America (the company that just bought the two largest, and the two sickest financial entities around at than time - Countrywide and Merrill Lynch, with no government subsidy on Countrywide) announced the price of a follow on equity offering at about $12 and its share price shot up to around $14 or so (going from memory, so don't hold me to the penny). You know things are bad when the company's own CEO says he doesn't know why the hell his stock is shooting up. For those who are not financial types, all anybody who wanted to buy $14 BAC stock had to do was to purchase it $12 directly from the underwriter. Whoever it was that was buying the stock was "literally" throwing the money away!

People may blame Greenspan for his low rate policy, but at least he had the balls to come out and declare how irrational market behavior was when it was irrational. Reference the Irrational Exburance speech during the dot.com days, which apparently was not nearly as bad as the Asset Securitization bubble days we see before us.

Greenspan's comment was made on December 5, 1996 (emphasis added in excerpt):

[...] Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? [There goes that Japanese thing again - Bad CRE, Rotten Home Loans, and the End of US Banking Prominence?...]

You do know how the dot.com bubble ended, don't you? These guys/gals at the Fed are a step and a half away from condoning it. 

And on this note of credibility, Geithner at the NY Fed said that he was not in the position to force counterparties to take less than the contractual 100% payout of CDS despite AIG's highly distressed situation. We will ignore the fact that highly distressed entities negotiate discounted payouts EVERY SINGLE day (we will not even broach what happens in bankruptcy), and that this is normal business in a capitalistic society, of which I am increasingly doubting this country as a card carrying member. Let's focus on the fact that at least one foreign counterparty actually OFFERED to take a reduced payment, and Geithner said NO! He literally opted to have Reggie Middleton pay AIG's full liability because Reggie (at least to him) obviously needs to carry a higher tax liability and suffer a lower standard of living. You see, Mr. Geithner doesn't believe that Reggie's 18 and 19 hour workdays are LONG enough!

From Bloomberg: Fed AIG Rescue Faulted by Inspector for Limited Effort on Bank Concessions 

Timothy Geithner, now Treasury Department secretary, led the New York Fed when it negotiated with the banks in November 2008. The Fed contacted eight of AIG’s biggest counterparties to ask for discounts, Barofsky said. Only Zurich-based UBS AG was willing to take a haircut, a 2 percent discount, and that was under the condition other banks agreed to similar terms, Barofsky said. The Fed decided that all counterparties would receive full payment.

The French bank regulator, overseer for Societe Generale and Credit Agricole SA’s Calyon, “forcefully asserted” that the banks couldn’t accept less than full value on swaps unless AIG went bankrupt, Barofsky said. Because the Fed had already committed to preventing an AIG collapse, regulators had reduced leverage in negotiations, he said. Other counterparties included Merrill Lynch & Co., Barclays Plc and Bank of America Corp.

Why commit to save AIG? The Fed should commit to save the US taxpayer, not AIG. The world would not have came to an end if said counterparties didn't get paid in full. Simply don't pay them in full! AIG didn't have the cash, it would not have been hard. The Fed should have supervised the states taking control of the truly state regulated insurance entities (which probably were shielded) and contolled the systematic dismantling of AIG - which is essentially what is happening anyway, just after the taxpayer has been raped, as opposed as before.

Before the Fed stepped in, AIG tried to persuade banks to accept haircuts of as much as 40 cents on the dollar, according to people familiar with the matter. The Fed’s decision to pay the banks in full may have cost taxpayers $13 billion, or 40 percent of the $32.5 billion AIG paid to retire the swaps. AIG paid the market price of $29.6 billion for the mortgage-backed assets that were protected by the derivatives. 

...

AIG’s rescue includes a $60 billion Fed credit line, a Treasury investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by the company.

Barofsky faulted the Fed for its initial refusal to name AIG’s counterparties or how much they received. The Fed said in March that releasing details could harm AIG and later released the data under pressure from Congress.

“Notwithstanding the Federal Reserve’s warnings, the sky did not fall,” Barofsky said. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

 The guys at Austrian Filter have simply put my thoughts in a timeline. I don't usually reproduce posts from other blogs, but this one is precious [annotation in red are my comments]: 

Zero Credibility from the Austrian Filter

Straight from the horses' mouths, a quick time line of Paulson's & Bernanke's economic assessments:

February 28, 2007 - Dow Jones @ 12,268

March 13th, 2007 - Henry Paulson: "the fallout in subprime mortgages is "going to be painful to some lenders, but it is largely contained." A total lack of understanding of what caused this problem. It was never subprime, it was a dearth of underwritng prudence, which means that the losses will appear everywhere a loan was underwritten (or not underwritten). That is any loan, anywhere. A lot of loans in a lot of places. I think we are figuring this out by now, but my blog readers knew this back in 2007, and profited from it. See the Asset Sercuritization Crisis links at the bottom of the post.

March 28th, 2007 - Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," Same problem as above
 
March 30, 2007 - Dow Jones @ 12,354

April 20th, 2007 - Paulson: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom," Same problem as above

April 30, 2007 - Dow Jones @ 13,063

May 17th, 2007 - Bernanke: "While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S." Same problem as above

May 31, 2007 - Dow Jones @ 13,627

June 20th, 2007 - Bernanke: (the subprime fallout) ``will not affect the economy overall.'' Same problem as above

July 12th, 2007 - Paulson: "This is far and away the strongest global economy I've seen in my business lifetime." This goes to show you the quality of Paulson's business lifetime!

August 1st, 2007 - Paulson: "I see the underlying economy as being very healthy," He was probably just lying!

October 15th, 2007 - Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions." He is right. To be honest, he was probably hamstrung between a rock and a hard place, but it really looks bad to have this thrown in your face in public, doesn't it???

December 31, 2007 - Dow Jones @ 13,265

January 31, 2008 - Dow Jones @ 12,650

February 14th, 2008 - Paulson: (the economy) "is fundamentally strong, diverse and resilient." Well, if you look at it from a conceptual perspective...

February 28th, 2008 - Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street." Right, everything is going according to plan...

February 29th, 2008 - Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system." Ignorance right here. He really should have been reading my blog. I told him Bear Stearns was going to fail and Lehman had issues the month before - Is this the Breaking of the Bear? Sunday, 27 January 2008

March 16th, 2008 - Paulson: "We've got strong financial institutions . . . Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."

March 18th, 2008 - Bear Stearns Bailout Announced - I told you so, right on schedule...

May 7, 2008 - Paulson: 'The worst is likely to be behind us," Need I comment???

May 16th, 2008 - Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning," he said. That's what anybody who relies on his judgement espoused in public deserves. I know a few people who are enamored with Fed and Treasury pronouncements... What a shame.
 
May 30, 2008 - Dow Jones @ 12,638

June 9th, 2008 - Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned, Okay, if you say so...

July 16th, 2008 - Bernanke: (Freddie and Fannie) "...will make it through the storm", "... in no danger of failing.","...adequately capitalized" The ultimate contrarian indicator...

July 20th, 2008 - Paulson: "it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation." And to think, some people dismiss me because I had bad quarter....

July 31, 2008 - Dow Jones @ 11,378

August 10th, 2008 - Paulson: ``We have no plans to insert money into either of those two institutions." (Fannie Mae and Freddie Mac) That reminds me of the joke where the bill collector calls and asks when he can expect payment. The guy on the other end of the phone says, "You can EXPECT payment whenever you damn well please!"

September 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation's balance sheet. Whoa!

September 16th, 2008 - $85 Billion AIG Bailout "Loan" Whoa! again.

September 19th, 2008 - $700 Billion Bailout Plan Announced Whoa! cubed...

September 19th, 2008 - Paulson: "We're talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem," he said. "This is the way we stabilize the system." The mathematically challenged Treasury Secretary and ex-Goldman CEO, or does he think we are mathematially challenged?

September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon." There it goes. Should we expect a similar reversal on the Green Shoots Theorem as well?

September 21st, 2008 - Paulson: "The credit markets are still very fragile right now and frozen", "We need to deal with this and deal with it quickly.", "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing." I really shouldn't comment any further...

September 23rd, 2008 - Paulson: "We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses, both small and large, and the very health of our economy," Whoa! to the fourth degree

September 23rd, 2008 - Bernanke: "My interest is solely for the strength and recovery of the U.S. economy," Why doesn't the Fed and the Treasury spend some of that TARP money to spring for a subscription to my blog?

October 31, 2008 - Dow Jones @ 9,337

March 31, 2009 - Dow Jones @ 7,609

The authors of this very interesting blog post conclude: If Bernanke and Paulson were doctors, and our economy was the patient, they would be in jail for malpractice. If they were graded for their performance in public, they would have failed, if they had a private sector job, they would have been fired. If they were attached to a lie detector with 500 volt biofeedback, they would have been electrocuted!

I've commented on the accuracy of these guys' statements many time in the past:

  • Is Paulson to be trusted, or is this Bush Administration Shock and Awe, 2.0? 
  • Reggie Middleton asks, "Do you guys know who you're messin' with?" 
  • If I wasn't such an optimist, I just might start fearing for my country! 
  • FASB endorsed FUD - Fear, Uncertainty and Doubt
  • Is the worst behind us yet, Mr. Paulson?   
  • The Asset Securitization Crisis Analysis road-map to date:

    1.          Intro: The great housing bull run - creation of asset bubble, Declining lending standards, lax underwriting activities increased the bubble - A comparison with the same during the S&L crisis

    2.          Securitization - dissimilarity between the S&L and the Subprime Mortgage crises, The bursting of housing bubble - declining home prices and rising foreclosure

    3.          Counterparty risk analyses - counter-party failure will open up another Pandora's box (must read for anyone who is not a CDS specialist)

    4.          The consumer finance sector risk is woefully unrecognized, and the US Federal reserve to the rescue 

    5.          Municipal bond market and the securitization crisis - part I

    6.          Municipal bond market and the securitization crisis - part 2 (should be read by whoever is not a muni expert - this newsbyte may be worth reading as well)

    7.          An overview of my personal Regional Bank short prospects Part I: PNC Bank - risky loans skating on razor thin capital, PNC addendum Posts One and Two

    8.          Reggie Middleton says don't believe Paulson: S&L crisis 2.0, bank failure redux

    9.          More on the banking backdrop, we've never had so many loans!

    10.       As I see it, these 32 banks and thrifts are in deep doo-doo!

    11.       A little more on HELOCs, 2nd lien loans and rose colored glasses

    12.       Will Countywide cause the next shoe to drop?

    13.       Capital, Leverage and Loss in the Banking System

    14.       Doo-Doo bank drill down, part 1 - Wells Fargo

    15.       Doo-Doo Bank 32 drill down: Part 2 - Popular

    16.       Doo-Doo Bank 32 drill down: Part 3 - SunTrust Bank

    17.       The Anatomy of a Sick Bank!

    18.       Doo Doo Bank 32 Drill Down 1.5: Wells Fargo Bank

    19.       GE: The Uber Bank???

    20.       Sun Trust Forensic Analysis

    21.       Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street

    22.       Goldman Sachs Forensic Analysis

    23.       American Express: When the best of the best start with the shenanigans, what does that mean for the rest..

    24.       Part one of three of my opinion of HSBC and the macro factors affecting it

    25.       The Big Bank Bust

    26.       Continued Deterioration in Global Lending, Government Intervention in Free Markets

    27.       The Butterfly is released!