Using Veritas to Construct the "Per…

29-04-2017 Hits:94619 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:85530 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:85906 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:90004 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:88440 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:88181 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:59318 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:87774 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:87313 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:87661 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:94070 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:91354 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 warned about the Muni market last year. I warned that the monoline model couldn't stand the test of time (36 years is not time, that is barely 1 generation). I warned that munis will weaken already emaciated monolines and cause significant stress on banks. In the beginning of the 6th month of this year, we already have 300% more defaults than all of last year - and things are getting much worse, not better. Before we go on to the article though, a quick recap for those that don't follow me:

·         Muni Primer: beginner - Municipal bond market and the securitization crisis - part I

·         Muni Primer: Intermediate - Municipal bond market and the securitization crisis - part 2

From part 2 of the muni report: "Muni failures will provide a backdrop for the increase in stress and pressure on the monoline industry, which I believe has a strong chance of creating a CDS domino effect throughout the investment banks and other insurers. For more info on the risks and threats of the CDS market see Counterparty risk analyses - counterparty failure will open up another Pandora's box. See "I know who's holding the $119 billion dollar bag" for a listing of the most likely candidates to suffer, as well as Banks, Brokers, & Bullsh1+ part and Banks, Brokers, & Bullsh1+ part 2 for my take on the general risks in the investment banking industry today. Reggie Middleton on the Street's Riskiest Bank - Update drills down on one of my short positions to reveal why I am bearish on Morgan Stanley - way before the sell side started yelling sell may I add, very similar to the contrarian position taken in Bear Stearns late last year.

The following municipal bond portion of the asset securitization crisis is also a tie-in to the prospects of the monoline insurance industry. The latest of my monoline analyses is the Assured Guaranty Report. You can also peruse the work I did on MBIA and Ambac starting from the inception of my short position in these companies last year, which turned to be nearly as profitable as the Bear Stearns short (see Is this the Breaking of the Bear?) instituted late last year as well, and based on the same investment thesis. A quick background of my older musings on the monoline industry: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton

  1. Tie-in to the Halloween Story
  2. Welcome to the World of Dr. FrankenFinance!
  3. Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
  4. Follow up to the Ambac Analysis
  5. Monolines swoon, CDOs go boom & I really wonder why the ratings agencies are given any credibility
  6. More tidbits on the monolines
  7. What does Brittany Spears, Snow White and MBIA have in Common?
  8. Moody's Affirms Ratings of Ambac and MBIA & Loses any Credibility They May Have Had Left
  9. My Analyst's Comments on MBIA/Ambac/Moody's Post
  10. As was warned in this blog, the S&P downgrade of a monoline insurer reverberated losses throughout Wall Street and Main Street"


From Bloomberg: Muni's, New Subprime Woe

The amount of municipal bonds that have defaulted this year is already more than triple of what it was for all of 2007.

And who could doubt there's more bad news on the way?

So far this year, $736 million in municipal bonds have defaulted. That doesn't necessarily mean they didn't pay investors; they may have just drawn down reserves. That's what happens just before they stop making payments to bondholders.

During all of 2007, only $226 million in municipal bonds defaulted, according to the May edition of the Distressed Debt Securities newsletter, published in Miami Lakes, Florida.

That $736 million is nowhere near the record for municipal bond defaults, to be sure. The record year, if you're counting, was 1991, when almost $5 billion went bust. That's still small potatoes compared with what happens over in the corporate bond market, where $36.6 billion blew up in 2006 and almost $24 billion in 2007.

But wait a minute: Municipal bonds never default, do they? Or at least this is how they are perceived by individual investors, right?

We're probably going to see a lot more munis default this year and in the years to come, because of the subprime crisis and, maybe, just maybe, because of the high price of a barrel of oil.

The hangover from the collapse in real estate prices is going to be a boom in so-called dirt-bond defaults.

These are bonds sold by municipalities to build the infrastructure for housing developments, and are backed by the taxes paid by all the new residents who are going to move in. If no residents move in, or too few do, the bonds aren't repaid.

Of the 30 bond issues that have defaulted so far this year, more than half are from issuers in two of the states that have figured prominently in all tales of the housing bust: 10 in Florida and seven in California.

Consider the $50 million in special assessment bonds sold by the Monterra Community Development District in Broward County, Florida, for example. On May 7, the district disclosed that it had tapped its $1,279,200 reserve fund for $1,211,727.11.

You can just stop right there and know that this story is bound to be a sad one.

These particular bonds were sold by the district in 2006 in a limited offering. The bonds were unrated, and sold in minimum denominations of $100,000. The bonds carried a 5.125 per cent coupon due in 2014, and were priced to yield 5.198 per cent.

Remember Colorado
The Monterra development is located in Cooper City, which is about 20 miles north of Miami and has a population of almost 30,000. Of the 10 Florida bonds that defaulted this year, all were sold by community development districts, and all within the last four years.

The big jump we are going to see in the number of such municipal bond defaults this year won't be limited to Florida and California, but will include all those places where the high tide of real estate mania has now receded.

This isn't an uncommon phenomenon after housing busts. In the past, the damage was usually confined to certain states where the boom was craziest, such as Colorado in the 1980s.

More bondholders are going to be affected this time around because the housing collapse is more national rather than regional or isolated, and because of the relatively recent development of so many "exurbs,'' as chronicled, for example, by New York Times columnist David Brooks in his 2004 book, ‘On Paradise Drive'.

Three-hour commutes
These are the suburbs beyond the suburbs, where Americans have moved to enjoy the good life, commute (usually) be damned. Not too long ago, the newspapers seemed to be filled with stories about people who gladly commuted two and even three hours each way for affordable real estate. Most people knew actual examples of such hearty souls. I wonder how much gasoline at $4-plus a gallon will dent the growth, and tax base, of such communities.

It's not just the price of gasoline that is going to make the nation's many far-flung communities less attractive. On May 28, Bloomberg carried a story detailing how the increase in the price of jet fuel was causing airlines to curtail service throughout the country.

Maybe we'll have to reconsider this whole flight-from-the-coasts idea that got such attention a few years ago.