Using Veritas to Construct the "Per…

29-04-2017 Hits:84640 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:79104 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:78949 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:83437 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:80001 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:82308 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:53284 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:81315 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:81315 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:81125 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:86979 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:84994 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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Implied volatility for the big banks is down across the board, just about where it was before the system went into convulsions. This implies the coast is clear, as do the share prices of many banks.

Hard core forensic and fundamental analysis implies otherwise. So does the Fed's actions, which still incorporates ZIRP policy, as well as the waffling at FASB. We will either have smooth sailing from this point on out or there is a nasty surprise waiting (on and off balance sheet) for bank investors in the near future. I invite readers to weigh in with their opinions.

image001.png

As you can see, we are just about where we were in 2007 in terms of average volatility. 

image003.png

The decrease in volatility has been extreme. On that note, it would be a good time to revisit the FASB argument: About the Politically Malleable FASB, Paid for Politicians, and Mark to Myth Accounting Rules

fasb_mark_to_market_chart.png

 It would also be a good time to revisit the derivative exposure and concentration argument as well...

 

image001.png

 Cute graphic above, eh? There is 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 exposure is even worse than Bear Stearns and Lehman‘s derivative portfolio just prior to their fall. Total net derivative exposure rated below BBB and below for JP Morgan currently stands at 35.4% while the same stood at 17.0% for Bear Stearns (February 2008) and 9.2% for Lehman (May 2008). We all know what happened to Bear Stearns and Lehman Brothers, don't we??? I warned all about Bear Stearns (Is this the Breaking of the Bear?: On Sunday, 27 January 2008) and Lehman ("Is Lehman really a lemming in disguise?": On February 20th, 2008) months before their collapse by taking a close, unbiased look at their balance sheet. Both of these companies were rated investment grade at the time, just like "you know  who". Now, I am not saying JPM is about to collapse, since it is one of the anointed ones chosen by the government and guaranteed not to fail - unlike Bear Stearns and Lehman Brothers, and it is (after all) investment grade rated. Who would you put your faith in, the big ratings agencies or your favorite blogger? Then again, if it acts like a duck, walks like a duck, and quacks like a duck, is it a chicken??? I'll leave the rest up for my readers to decide. 

As excerpted from As the markets climb on top of one big, incestuous pool of concentrated risk...

As a result, we have looked into derivative exposure of top commercial banks to determine if they are hedging with each other to an extent that engenders systemic risk. We have sourced the data from OCC report (attached for your reference, see pdf occ_q1_2009_derivatives 10/09/2009,01:37 190.49 Kb). Overall derivative products in U.S have grown at a staggering pace rising from $41 trillion by 2000 year end to $202 trillion, or nearly 14.0x of U.S GDP as of March 31, 2009. Of the $202.0 trillion notional value of derivatives in United States, top 5 banks alone account for 96% of the total industry notional amount The high concentration of derivatives among the top five players strongly suggest (this actually being politically correct, realistically it practically assures us) that they may be subject to extreme levels of counterparty risk towards each other. JPM is the largest player in derivative markets accounting for approximately 40% of total notional value of derivatives in U.S. JPM's notional value of derivatives as of March 31, 2009 stood at 39.0 times its total assets and 959 times its tangible equity.

Company

Notional Value of derivatives

% of Total Notional Value

Implied market value using JPM's actual as template

Implied hedged amount using JPM's actual as template

Total Assets

Notional Value of derivatives / Total Assets

Tangible Equity

Notional Value of derivatives / Tangible Equity

Implied Counterparty Exposure of Derivatives as Multiple of Tangible Equity

JPMORGAN CHASE & CO.

                 81,161

40.2%

             1,798

            1,700.05

2,079

39.0x

         84.65

958.8x

20.1x

BANK OF AMERICA CORPORATION

                 38,864

19.2%

                861

               814.06

2,323

16.7x

         65.66

591.9x

12.4x

GOLDMAN SACHS GROUP, INC., THE

                 39,928

19.8%

                884

               836.34

926

43.1x

         41.91

952.7x

20.0x

CITIGROUP INC.

                 29,619

14.7%

                656

               620.41

1,823

16.3x

         29.67

998.4x

20.9x

WELLS FARGO & COMPANY

                   1,870

0.9%

                  41

                 39.17

1,286

1.5x

         30.33

61.6x

1.3x

HSBC NORTH AMERICA HOLDINGS INC.

                   3,454

1.7%

                  76

                 72.35

402

8.6x

         66.23

52.1x

1.1x

Total

               201,964

100.0%

       4,316.48

            4,082.37

 

 

 

 

 

*all data as of 1Q09.

** JPM had additional collateral at the initiation of transactions of

18,500

Notice how all of the banks on this list probably have at least 100% of their tangible equity exposed through counterparty exposure to, at the most, 5 other highly concentrated, highly correlated and highly incestuous counterparties. Most of the banks have between 12 and 20 times their tangible equity concentrated into this close knit pool. That, my friends, is excessive risk waiting to implode. I am sure there are some of you saying "Well, you don't know that they are actually using each other as counterparties". Yeah, right! Who the hell else would they be using? Tell me what group of companies will be able to absorb $4.1 trillion dollars (That's TRILLION with a "T" of MARKET VALUE carried on the balance sheet, NOT  notional value) of counterparty risk??? These are the top derivative holding banks here in this list. 

Maybe it is also a good time to review the risks of the Pan-European debt crisis roiling the fixed income markets. After all, if we have massive defaults (virtually guaranteed), some banks will be caught out there, particularly the ones who hold a lot of the debt, and those who were used to hedge the risk of that debt. As illustrated above, the pool of banks large enough to hedge is really not that large in the US, where the largest banks reside. Hey, everything is kosher. After all, everybody is hedged, right?

1.     The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

2.     What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect

3.     The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.

4.     The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

5.     The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

6.     The Beginning of the Endgame is Coming???

7.     I Think It's Confirmed, Greece Will Be the First Domino to Fall 

8.     Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

9.     Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?

10.   "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire! 

11.   Germany Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort of...

12.   The Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino

13.   As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis

14.   Once You Catch a Few EU Countries "Stretching the Truth", Why Should You Trust the Rest?

15.   Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

16.   Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe

17.   Moody's Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks

The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!

More banking opinion and analysis:
  1. The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
  2. Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
  3. As the markets climb on top of one big, incestuous pool of concentrated risk...
  4. Any objective review shows that the big banks are simply too big for the safety of this country
  5. Why hasn't anybody questioned those rosy stress test results now that the facts have played out?
  6. Banks Swallow Another $30 billion or So in More Losses as Their Share Prices Surge (Again)

You can download the public preview here. If you find it to be of interest or insightful, feel free to distribute it (intact) as you wish.

JPM Public Excerpt of Forensic Analysis Subscription JPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb