Using Veritas to Construct the "Per…

29-04-2017 Hits:85773 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:80003 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:79864 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:84342 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:80884 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:83130 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:54140 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:82264 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:82117 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:81985 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:88010 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:85884 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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Here are some facts:

  • 1. If the Fed were to cut rates to help ARM debt service, what happens when the next resets come about in the next month, 3 months, 6 months or next year (depending on the mortgage contract)? Suppose significant defaults do occur; and they will because this is not a subprime issue, it is an issue of lax underwriting standards since banks were giving away money that was not theirs. Since they weren't underwriting off of their balance sheet capacity but instead underwrote with the anticipation of selling the risk off, bad loans and defaults weren't their problem after the first year risk retention period had expired, hence the popularity of 2/28 ARMS. I digress... Assume the Fed cut rates, those who are going to default aren't going to default because interest rates are high (they are actually damn close to historical lows). They are going to default because they were given a loan they couldn't afford due to lax, "it's not my money" underwriting, secured by collateral that was bought at the top of a raging bull market that is now declining in value. So if this does occur, does the FED drop rates every time a reset period occurs? What happens when we get to zero or negative real rates??? Japan redux??? What happens to the dollar? This all goes without saying that dropping rates in response to financial market foibles is what got us here in the first place.

 

 

  • 2. 3 month USD LIBOR has recently risen to 5.72% while the two year treasury is under 4%, primarily due to the fact that the banks (the actual financial insiders) do not trust each other enough to lend past over night without a significant premium while the treasury does not carry a risk premium. This alone should tell the smart money that there is real risk floating around, not just paranoia. Bulls, caveat emptor! USD LIBOR is what many ARMS are pegged to, plus a risk premium spread determined through underwriting (see point 1 for reference on underwriting with someone else's monies!). This LIBOR/Treasury spread is the highest in 6 years (since 9/11 attacks) and at least double the average spread over Fed Funds rate.
  • 3. The Fed Funds rate is at 5.25%, and the US stock and futures market has already priced in a 25 - 50 basis point rate cut, despite the fact that the Fed has made it clear that the credit issue has not significantly seeped into the wider economy according to beige book stats.
  • 4. The Case/Schiller home value index shows a -3.2% drop in single family home values nationwide, the biggest drop since it was calculated, back to 1987. If you read my previous analysis, this index excludes a LOT of the property that is relevant to the pricing declines and defaults that are occurring. So if it says we're down 3.2%, I'll put my money on being down at least 4%. This is just for the month, with a 2 month lag built in. Real time across all residential real estate classes, look towards being down closer to 5%. Remember, this is the collateral that secures these underpriced mortgages with "too slim" risk premiums that are set to increase in debt service to many marginal borrowers who stretched just to get the teaser rate covered. The reset rates are governing about $50 billion dollars of debt service per quarter. That is a decent amount of "extra interest".
  • 5. So, suppose the Fed cuts rates 25 or even 50 basis points... The banks still do not trust each other. They all know that they, as well as their peers, used the "Hey, it ain't my money so I'll push the loan through!" underwriting methodology, then repackaged the loans into the junk bond cum AAA securitized debt alchemy, and sold it off to whoever would buy it, worldwide, but got caught with some of it on their own books, funds and SIVs. This would still lead to a spread of LIBOR over Fed Funds rate. Then what does the Fed do? Listen; if there is arsenic in your spring water bottles in the supermarket, no matter how low you discount the price of that water, no one is going to want to buy it. The reason is the price wasn't the problem in the first place, it was the arsenic. Well, poorly underwritten loans on devaluing property is like arsenic, fellas (and gals).