Using Veritas to Construct the "Per…

29-04-2017 Hits:87101 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:81043 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:80879 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:85352 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:81859 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:84042 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:55091 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:83288 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:83035 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:82931 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:89169 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:86905 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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The lead story this morning of ZH is "The Only Thing Better Than A Zero Hedge? Wells Fargo's "Never Lose" Economic Hedge", explaining more accounting shenanigans (if you read the links below, you will see that I have caught Wells in a few rather aggressive interpretations) related to MSR's. One thing that was noted was the inputs for valuing MSRs using interest rates as was extolled by management. Well...

The biggest input for MSRs are foreclosures, not interest rates. The interest rate argument is academic (assuming a refinance, that may or may not happen when few can qualify) while the foreclosures are happening at a much more rapid and prevalent clip and are much more likely to happen. The foreclosures are also a guaranteed end to MSR income. You can't service a loan on an REO, now can you? So while interest rates are remaining steady and can be put into an MSR valuation formula for a positive GAAP dollar generating result, foreclosures are on the rise and will continue to be, which will (and rightfully so) drive down the values of MSRs. This is probably why (the more academic) interest rates are used for inputs in lieu of a straight pipe to the foreclosure rates. 

For those who haven't read my take on Well's Q4, you can read it here: http://boombustblog.com/Reggie-Middleton/1293-The-Wells-Fargo-4th-Quarter-Review-is-Available-and-Its-a-Doozy.html.

This is also a reason why assets need to be market to market, and not to model. Outside of the possibility of the models actually being faulty or just plain old wrong, they are subject to bias and fraud. If one were to simply force he banks to reveal cash flows and yields on the MSRs, as in raw revenues less all expenses divided by acquisition costs, I am sure you will find an inverse relationship with localized foreclosure rates, much tighter than that of interest rates. You will also find that, on a discounted basis, these MSRs are highly overvalued on bank's books. Unfortunately, banks don't do this so the easiest way to get to the values is to let the market set it. 

Anybody who is a member of my blog should download the forensic reports from 2009 to remind themselves of the amount of issues that reside within Wells. It is very, very overrated.    

 

 

 

In  the WSJ, there was a story about Fannie forcing loan buybacks that breached warranty. This concept needs to gain more traction because it will probably dropped profitability by a quarter or a third at those banks that bought loans from the "liar loan" institutions, ex. Wachovia, WaMu, National City, Lehman and Countrywide. 

 "It is payback time for Fannie Mae and Freddie Mac on some mortgages sold to the finance companies by lenders.

Stuck with about $300 billion in loans to borrowers at least 90 days behind on payments, Fannie and Freddie have unleashed armies of auditors and other employees to sift through mortgage files for proof of underwriting flaws. The two mortgage-finance companies are flexing their muscles to force banks to repurchase loans found to contain improper documentation about a borrower's income or outright lies.

The result: Freddie Mac required lenders to buy back $2.7 billion of loans in the first nine months of 2009, a 125% jump from $1.2 billion a year earlier. Fannie Mae won't disclose its figure, but trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.

"Because taxpayers are involved, we're being very vigilant," said Maria Brewster, who oversees Fannie's repurchase team. "No taxpayer should have to pay for a business decision that caused a bad loan to be sold to Fannie Mae."

[Pushback]

The get-tough stance comes amid pressure on Fannie and Freddie to make the most out of more than $100 billion in taxpayer funds they got to stay afloat. The U.S. government took them over in September 2008."


 I clearly pointed this out in my quarter discussion of JPM and Wells Fargo, see 

JPM 4Q09 review.Subscribers will be well suited to run through the forensic reports in the download section and subtract a likely buyback reserve from projected earnings which are already on a sharp downward slope from the refinance plateau and reversal coming off of the initial decline in mortage rates. As I have been saying all along, this ain't over yet, not by a long shot.