Using Veritas to Construct the "Per…

29-04-2017 Hits:84612 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:79083 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:78930 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:83416 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:79980 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:82287 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:53261 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:81292 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:81293 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:81102 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:86953 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:84970 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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I went through your blog and the new post on Moody's rating affirmation and Ambac's reinsurance was fairly comprehensive. I especially liked the part where you talked about blood transfusion between two sick people and calling it a cure. I can't think of a better analogy that fits so well in this case.

Regarding my opinion on your post, From what I could gather, Ambac, struggling to avoid the losses of its AAA credit rating, took out insurance on $29 billion in securities it guarantees. The world's 2nd largest bond insurer agreed to transfer the risk that the securities will default to Assured Guaranty Ltd.

Robert Genader, Ambac's CEO had the following comment:
"Reinsurance is a valuable, capital-efficient and shareholder-friendly tool or managing risk and capital."

Reinsurance on $29 billion out of $556 billion portfolio – don’t know how much “risk” the company is likely to manage by reinsuring 5% of its portfolio. And, this reinsurance is certainly is not shareholder friendly as the management would like us to believe. It basically dilutes future earnings attributable to the shareholders. More importantly, the management has not commented upon the amount of capital they freed through this deal. Another point that needs attention is Assured Guaranty will not insure any CDOs (read: toxic waste). Taking a closer look at this deal in the overall context of Ambac’s portfolio, Ambac insures $8.8 billion of securities backed by subprime mortgages and $29.2 billion of collateralized debt obligations that repackage pools of subprime mortgage debt and slice them into new pieces with varying degrees of risk. My view is that all Ambac could manage through this deal was to sell the “potentially good” assets for an undisclosed amount while retaining the “potentially bad” ones. (Although I presume the reinsurance deal was favorable to Assured Guaranty).

Another caveat here is the credibility of the reinsurer. Fitch recently
affirmed Assured Guaranty's AAA insurance and reinsurance ratings after the company announced a plan to raise $345 million through share sales and give
the proceeds to Assured Guaranty Re Ltd. so it can reinsure more deals. However, MBIA (which apparently is in a negative rating watch list) holds 17% stake in the reinsurer!!!

And, according to Moody’s, Ambac's AAA rating was affirmed because the insurer has “enough” capital. That was even before the company had announced that it was buying reinsurance from Assured Guaranty.

Again, should these companies be having AAA ratings?

Security Capital Assurance Ltd. (SCA) insures $154.2 billion of securities, of which 46% is structured finance securities, including $16.1 billion of CDOs backed by subprime mortgages and $1.9 billion of subprime mortgage
backed bonds. According to Fitch, SCA is now more than $2 billion short of
the capital it needs to maintain the AAA rating. SCA is only the fifth largest bond insurer — if it needs to raise $2 billion, how much more will the largest players, MBIA and Ambac, have to raise? We have mentioned this
in Ambac as well as MBIA valuation spreadsheets that they’ll need to raise
at least $3-4 billion each in the base case scenario. Can they raise such huge amounts in this environment? MBIA’s market cap is $3.8 billion and that of Ambac is $2.5 billion.

I’m not too sure if this is the parameter (or one of the parameters) for assigning AAA rating, but it should be!!!

And then MBIA announced last Thursday that they’re canceling Friday's conference call, due to pending rating agency “reviews”. Wonder if they have something to hide!!! Do they have clauses in the deal with Warburg which says that the additional funding of $500 million would be subjected to MBIA maintaining its AAA rating? I don’t know as yet. Perhaps I would be in a position to comment on that once they disclose the deal’s details in the filings.

Meanwhile, I came across something really interesting on Fitch’s rating
model
. In a conference call regarding securitization and the sub-prime mortgage market crisis, Fitch responded to First Pacific Advisors like this:

Q: What are the key drivers of your rating model?
Fitch: FICO scores and home price appreciation (HPA) of low single digit
(LSD) or mid single digit (MSD), as HPA has been for the past 50 years.

Q: What if HPA was flat for an extended period of time?
Fitch: They responded that their model would start to break down.

Q: What if HPA were to decline 1% to 2% for an extended period of time?
Fitch: They responded that their models would break down completely.


Q: With 2% depreciation, how far up the rating’s scale would it harm?
Fitch: They responded that it might go as high as the AA or AAA tranches.

So now, when these rating agencies talk about rating in “base” and “stressed” conditions, I’m not sure of what they really mean.