Using Veritas to Construct the "Per…

29-04-2017 Hits:87246 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:81160 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:81006 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:85476 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:81976 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:84158 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:55222 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:83424 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:83162 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:83053 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:89312 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:87025 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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 My reveiw and opinion of JP Morgan's Q4 2009 is ready for download JPM 4Q09 review JPM 4Q09 review 2010-01-19 01:48:27 1.16 Mb. I have made it available to all readers, but I sugguest that paying subscribers follow the appropriate links to see how appropo the assumptions regarding revenue and loss trends were in the forensic analysis. I have excerpted some of the review below:

Right off the bat, let's get something straight. The tax rate for JPM in 4Q09 was impacted by one-time items and some tax deductions. The tax rate was 15.4% against the normalized tax rate of 35%. Thus, JPM saved nearly $758 million (25.7% of the net income available to common stockholders) or $0.19 per common share in 4Q09 owing to lower tax rate. So when you see headlines in the media touting, "JPMorgan Earnings Blow Past Expectations, Revenue Looks Light ...", "JPMorgan Earnings May Have Tripled on Investment-Banking Fees‎", and "J.P. Morgan Earnings: A Beat! - MarketBeat - WSJ", view them with a jaundiced eye.

When the markets rejoiced the strong revenues of investment banks in 3Q09 on the back of extraordinary trading revenues, Boombustblog anticipated well in advance the highly fluctuating nature of this source of income and raised concerns about its sustainability (subscribers, see "The JP Morgan Full Forensic Report is ready for download! ", non-subscribers should reference Reggie Middleton on JP Morgan's Q309 results). If anything, I was "TOO" optimistic in my assumptions and forecasts regarding revenue drivers and loss rates. JPM's 4Q09 results have reinforced Boombustblog's apprehensions that the trading revenues which soared high in 3Q09 on the back of increased volumes and record high spreads would normalize and suffer sharp compression in the coming quarters. The revenues from principal transactions which largely comprise trading income as well as gains and losses on fair valuation of investments fell to just $0.8 billion in 4Q09 from $3.8 billion in 3Q09. The obvious reason was the drop in volumes and tightening of spreads, which I clearly warned my subscribers about last year. Revenues from principal transactions accounted for just 3.6% of the total net revenues against 14.5%, the previous quarter.

jpm_ficc1.png

 

Credit conditions continue to remain tough as the delinquency rates continue to climb and NPAs remain at elevated levels. The 30 day+ delinquency rates for the consumer lending rose to 5.93% in 4Q09 from 5.85% in 3Q09 and 4.21% in 4Q08. The 30 days+ delinquency rates for credit card touched 6.28% in 4Q09 against 5.99% in 3Q09 and 4.97% in 4Q08.

cons_credit_losses.png

Non performing loans increased to 2.77% of total loans at the end of 4Q09 from 2.72% of total loans at the end of 2Q09.

 loan_losses.png

 Loan portfolio continues to shrink and net interest margin continues to contract.

 image012_-_mbs.png

image001_mbs_sales1.png

 

As clearly foretold last year, JP Morgan is significantly understating the potential for losses on its WaMu portfolio acquisition

We looked into acquired portfolio of Wamu and as analyzed in the forensic report, owing to continuous deterioration in the credit quality, the acquisition is proving to be a bad deal for JPM. Exactly one year ago, I accused JP Morgan of taking unrealistic marks on the WaMu portfolio, see Is JP Morgan Taking Realistic Marks on its WaMu Portfolio Purchase? Doubtful!. It appears as if I was right on the mark, despite management proclaiming that the loss trend on those loans are going as expected. If that was the case, why is the discount and loss buffer already eaten through to provide material net losses - just one year after the purchase??? The Alt-A/Option ARM/HELOC pain has yet to really hit, and JPM is already in the red by about 5% on this deal and they bought it at a 25% discount! I suggest all readers reference the loss trends in the Alt-A market as of December (A Fundamantal Investor's Peek into the Alt-A Market) and paying subscribers should download the worksheet behind the data to get a granular view of what is going on. We are already at a charge-off rate of near 30%, which will not be reflected in JPM's numbers until next quarter, and I have reason to believe that the WaMu loans will perform worse than average.

As per the last forensic report at the end of 2Q09, the implied discount rate for purchased credit impaired loans stood at 22.9% while delinquency rate was 23.4%, thus a negative buffer of 0.5%. In 3Q09, this negative buffer has further worsened to 2.6%, due to an increase in delinquency rate to 25.6% reflecting continuous deterioration in the acquired portfolio. Moreover, for 4Q09 the delinquency rate has increased further to 27.8% and though the company has not reported the outstanding balance and carrying value numbers we believe that the buffer for 4Q09 will decline further.

image002-wamu_loans.png

image001-wamu_disc.png

In light of expected loan losses from the acquired portfolio, JPM is adding to the allowance for loan losses. In 4Q09, JPM added nearly $491 million to allowance for loan losses to cover the estimated deterioration in the Washington Mutual purchased credit-impaired portfolio; this is compared with no addition in the same quarter last year and nearly $1.1 billion addition in 3Q09.

 

Warranties of representation, and forced repurchase of loans

JP Morgan has increased its reserves with regards to repurchase of sold securities but the information surround these actions are very limited as the company does not separately report the repurchase reserves created to meet contingencies. However, the Company's income from mortgage servicing was severely impacted by increase in repurchase reserves. Mortgage production revenue was negative $192 million against negative $70 million in 3Q09 and positive $62 million in 4Q08.

Counterparties who are accruing losses from bad loans, (ex. monoline insurers such as Ambac and MBIA, see A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton circa November 2007,) are stepping up their aggression in pushing loans that appear to breach certain warranties or smack of fraud. I expect this activity to pick up significantly, and those banks that made significant use of brokers and third parties to place mortgages will be at material risk - much more so than the primarily direct writers. I'll give you two guesses at which two banks are suspect. If you need a hint, take a look at who is increasing reserves for repurchases! JP Morgan and their not so profitable acquisition, WaMu! 

http://boombustblog.com/images/stories/regional_banks/32bustedbanks/thumbnails/thumb_image020.png

As I said, losses should be ramping up on the mortgage sector. Notice the trend of housing prices after the onset of government bubble blowing: If Anybody Bothered to Take a Close Look at the Latest Housing Numbers...

PNC Bank and Wells Fargo are in very similar situations regarding acquiring stinky loan portfolios. I suggest subscribers review the latest forensic reports on each company to refresh as the companies report Q4 2009 earnings. Unlike JPM, these banks do not have the investment banking and trading fees of significance (albeit decreasing significance) to fall back on as a cushion to consumer and mortgage credit losses.

 

Related reading from the Blog:

A Fundamantal Investor's Peek into the Alt-A Market
(Reggie Middleton's Boom Bust Blog/MyBlog)

... Other banks to look at with suspect portfolios: JP Morgan Chase (Free Preview)  JPM Public Excerpt of Forensic Analysis Subscription 2009-09-22 14:33:53 1.51 Mb  JPM ...

Thursday, 14 January 2010

 

1. Reggie Middleton on JP Morgan's Q309 results
(Reggie Middleton's Boom Bust Blog/MyBlog)

...an. msnbc.com - The market's expectations for bank earnings increased after JPMorgan set a high bar Wednesday with a surprisingly strong profit that helped propel the Dow .....

Friday, 16 October 2009



2. Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
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JPM derivative and off balance sheet lending commitments and guarantees exposure Warning!!! This is the type of investigative, unbiased and independent analysis that you will never find in the mai

Thursday, 03 September 2009



3. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
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...and scroll down to the second half. JP Morgan securitization activities and QSPE exposure JPMorgan securitizes and sells a variety of loans, including residential mortgage, credit card, a...

Tuesday, 13 October 2009



4. The JP Morgan Full Forensic Report is ready for download!
(Reggie Middleton's Boom Bust Blog/MyBlog)

... Must Read: An Independent Look into JP Morgan. This contains the "public preview" document (JPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb), which is fre...

Thursday, 24 September 2009

 

An Independent Look into JP Morgan
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...plenty of this in the public preview. When considering the staggering level of derivatives employed by JPM, it is frightening to even consider the fact that the quality of JPM's derivative exposur...

Friday, 18 September 2009

 

Re: JP Morgan, when I say insolvent, I really mean insolvent
(Reggie Middleton's Boom Bust Blog/MyBlog)

...nbsp;  I have said it before, and I'll say it again - JP Morgan is insolvent! Anybody from JPM who wants to correct can simply email me via the contact form at the top of my site to show m...

Thursday, 22 January 2009



3. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
(Reggie Middleton's Boom Bust Blog/MyBlog)

...and scroll down to the second half. JP Morgan securitization activities and QSPE exposure JPMorgan securitizes and sells a variety of loans, including residential mortgage, credit card, a...

Tuesday, 13 October 2009



4. Is JP Morgan Taking Realistic Marks on its WaMu Portfolio Purchase? Doubtful!
(Reggie Middleton's Boom Bust Blog/MyBlog)

...ead of "Investment Advice in the MainStream Media: Hedge against Success???" For those don't know, the JPM discussion started due to this insolvency post: Re: JP Morgan, when I say insolvent, I really...

Friday, 06 February 2009



5. Yeah, Countrywide is pretty bad, but it ain't the only one at the subprime party... Comparing Countryw
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Saturday, 08 September 2007



6. Anecdotal observations from the JP Morgan Q2-09 conference call
(Reggie Middleton's Boom Bust Blog/MyBlog)

...ve trading arms to hide their negative earnings under??? Now, on to the review of credit issues in the JPM conference call...    Leveraged loans marked 42 cents on the dollar "Fir...

Friday, 17 July 2009