Using Veritas to Construct the "Per…

29-04-2017 Hits:85783 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:80011 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:79871 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:84350 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:80890 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:83137 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:54148 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:82273 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:82123 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:81992 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:88017 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:85892 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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New MBIA Chief Brown Says He Has Different CDO Strategy Now

By Lavonne Kuykendall
Of DOW JONES NEWSWIRES
 
The return of Jay Brown to the helm of MBIA Inc. (MBI), the company he led from 1999 to 2004, suggests the company has decided that the best person to lead it out of its trouble-plagued venture into complex structured finance deals is the guy who got them into it in the first place. Of course it would. Now I'm really confident in management's ability. Brown, whose ties with MBIA go back to 1986, took over as chairman and chief executive of the company in early 1999 as MBIA struggled with the aftermath of the bankruptcy of health-care operator Allegheny Health and Education Research Foundation, which defaulted on bonds that were insured by MBIA.
One of Brown's fixes for the company was to expand the company's portfolio of derivatives, or credit default protection it offered on collateralized debt obligations. These CDOs packaged pools of loans, including subprime mortgages, into complex securities.
Back in 2003, Brown told investors, "If you don't like CDOs...you don't like MBIA," according to a Financial Times article covering MBIA's 2003 investor's day presentations. 'Nuff Said! At that meeting, Brown said he expected "extraordinary" rates of return on the company's CDO portfolio, and expected the securities to make up between 13% and 15% of the company's book of business. More like extradordinary rates of shareholder wealth destruction, but why mince words...
He doesn't feel that way anymore.
"It has been clear as I have watched this industry from the outside over the last six months that this business model is not well-built to handle the volatility of those markets, and we will not do this business going forward," Brown said in an interview Tuesday, hours after replacing Gary Dunton as chairman and CEO of the beleaguered bond insurer. "No more derivative CDOs. That's for sure."
Volatility!!! I guest a lack of loss history, lack of legal precedent upon default, liquidation or dispute, or lack of even a simple understanding of  what the hell they were never crossed his mind!
 
 
 
CDO Business Grew Under Brown's Watch
 
Brown noted in the interview that MBIA wrote coverage for structured finance securities long before he came on board, though the business did grow while he was in charge.
Brown gave up the CEO spot at the world's largest bond insurer in 2004, and resigned as chairman in May of 2007. It was during that time that MBIA increased its CDO portfolio well beyond his original 15% upper target. By the end of last year, MBIA's CDO portfolio reached $130.6 billion, or 19.2% of its total insured net coverage.
Now that's what I call aggressive expansion in the name of shareholder value.
MBIA is now among the handful of so-called financial guarantors that are reeling from their exposure to CDOs backed by subprime mortgages, amid an ongoing deterioration in the U.S. housing market. MBIA faces the possibility it could lose its coveted triple-A credit rating, which would hinder its ability to write new business and also wreak further havoc on banks that have to write down the value of securities insured by MBIA.
Why would anyone consider stripping this company of its AAA rating when it has such astute management? I pity the uninformed who dare buy this company's securities. MBIA posted a fourth-quarter loss of $2.3 billion as write-downs in its credit derivatives portfolio swelled to $3.5 billion. Scrambling to maintain sufficient capital to justify its top-tier rating, MBIA in recent weeks has raised more than $3 billion though debt and equity offerings and by slashing its dividend. Totally diluting the hell out of its current security holders.
 
Sean Egan, principal of ratings agency Egan-Jones, called it ironic that MBIA would turn to Brown to help the company recover. "It is hard to reconcile that he was pushing for the company increasing its exposure to structured finance, and now the company is reeling because of that very exposure," Egan said Tuesday. Almost as hard to reconcile that AAA rating that your competitors gave the company and its products...
An analyst at Fitch Ratings said in an interview that it was inaccurate to put blame on Brown for being part of an industry-wide movement towards privately issued securities at a time when municipal finance was becoming less profitable.
"If you want to relate it to anything, it was that the structured finance markets have been growing at a significant rate since the mid- to late-1990s," said Fitch analyst Tom Abruzzo. MBIA "clearly grew along with the market." Oh, yeah! We can put our faith in Fitch's opinions, as accurate as they are. Didn't they make their models based on perpetual housing price appreciation???
 
The first nine months of 1999 marked the first time that bond insurers as a group wrote more coverage for asset- and mortgage-backed securities and CDOs than they did in the municipal market, according to a Fitch report at the time. And that makes it a good move? Should management get excused, and rehired?
 
Weighing Options
 
Brown said he is at work with insurance regulators and others to craft a fix for the problem that could see MBIA operating its municipal, private bond, and investment businesses "separately," though he drew the line at a split of the company. Someone needs to explain this to me. How do you separate without splitting?
 

Ambac Financial Group (ABK), the second-largest bond insurer, is reportedly considering a plan to separate its municipal-bond business from the riskier structured finance operations. Another rival, Financial Guaranty Insurance Co., or FGIC, announced Friday it had applied to split its businesses, after having its credit rating slashed by Moody's Investors Service.
MBIA's relatively strong capital position gives it more options than those companies, Brown said, noting that "significant change" is required in the securities MBIA insures in the future and the amount it decides to guarantee. Naahh, get out of town!
 
In recent days, the company has been examining its current structure, which already consists of "many legal entities" that operate separate parts of the business, Brown said in the interview.
"There is a lot going on behind the scenes," Brown said in the interview. "We are looking at all of those. Is there something in there for us to help our customers? And we are evaluating those options as we speak.
"I know where I will be in five years," he said. Is the answer to that question, "Still in business"? The question is, "How long will it take us to get there?" My guess will be, uhmm, ahhh, welllll,,,,,, 5 years maybe!
 
Shares of MBIA shed 54 cents, or 4.4%, at $11.70. The return of this guy would scare the hell out of me if I was brave/foolish enough to be long this stock.