Using Veritas to Construct the "Per…

29-04-2017 Hits:88436 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:82152 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:82033 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:86536 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:82975 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:85102 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:56197 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:84421 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:84136 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:84002 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:90470 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:88051 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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Frank Quattrone, tech company investment banking extraordinaire, shares his views on Wall Street research - and I feel compelled to comment... See NYT article for the full spread (forgvie me NYT, for excerpting such a large chunk of the interview, but I must harp on this - my comments, as usual, are the red annotations):

Mr. Quattrone, dressed in his West Coast uniform — a blue blazer over a polo shirt and a pair of khakis — was almost finished with his presentation when, in response to a question from the audience, he shared his views about the state of Wall Street research, a topic that was once all the rage but now often goes overlooked.

“I do think the industry should petition to remove the Spitzer initiatives because ultimately they hurt the competitiveness of our country by denying small companies the access to research analysts,” he said, throwing a proverbial grenade into the auditorium.

Mr. Quattrone was referring, of course, to the former New York attorney general Eliot Spitzer’s landmark settlement in 2002, which forced the separation of investment banking from research. The settlement followed an investigation into whether some Wall Street analysts were providing misleading ratings of the companies they covered to bolster their firms’ investment banking business. Henry Blodget of Merrill Lynch and Jack Grubman of Citigroup were barred from the securities industry and others took their licks. (As an aside, Mr. Spitzer was not behind Mr. Quattrone’s prosecution.)

As a result, banks are no longer allowed to pay their analysts from any revenue derived from investment banking, only from trading operations. Beyond that, an investment banker can’t even call a research analyst at the same firm without a lawyer chaperoning the conversation. So what??? The confict of interest was real and damaging to the retail and instiutional investor alike. Hate Spitzer all you want, he was on point with this call.

At the time, the new rules had a certain undeniable appeal. Because research analysts so depended on investment banking work for their own bonuses — working on initial public offerings and mergers — they faced unquestionable conflicts.

... If Mr. Quattrone had his way, he would turn the clock back entirely. “I am not denying that there is the potential for conflict — always has been, always will be. I’m just questioning the best means of managing the conflict,” he told me after his presentation. “If the principles of what constitutes ethical and unethical behavior are spelled out clearly, such as disclosing the firms’ investment banking relationships and ownership interests in the covered security, as well as not publishing favorable reports on companies in which you do not believe — and violators are punished — the conflicts will be managed.” How do we determine what analysts do not truly beleive without full blown legal discovery, and then some??? It can't possibly be based on performance. Perforance was bad before Spitzer, and it was bad after Spitzer.

It’s widely known on Wall Street that because research can no longer count on investment banking revenue, research is expected to pay its own way. Many of the big banks have responded, to put it bluntly, by running their research departments more cheaply, or not running them at all. Prudential Financial, which had a pretty good research arm, decided to shut it down entirely last summer.  This is because the Wall Street business model is not predidcated upon truth telling. I have had a deluge of RETAIL users (that's individual invetors with small budgets, not just the institutional guys) of my blog email me and some even comment publicly (see the comments in this post) that they would pay $5,000 per year to access my blog research and consider it a bargain. I don't thinks there is a regular reader on this blog that doesn't believe Reggie's research is top notch and best in class. Think long and hard about this, investment industry folk. That $5k number is probably more than twice the commissions generated by the average retail investor at Merrill Lynch. All you need to do is refine the product, fellas. If you really have a problem with it, contact me and I will private label my stuff over to you. I have 14 slots available, one for every big brokerage, plus a few for the smaller ones (we can even schedule a BoomBustBlog event around it Cool).

Many of the most talented analysts — and therefore the most expensive — have left the business. And the smart up-and-coming ones who saw the handwriting on the wall ran to the “buy side,” jumping into hedge funds, venture capital firms and private equity. Some ambitious analysts have tried to go the independent route, but nearly all of them will tell you it has been tough going. No argument here, but the reason is because high quality research has been devalued on the Street and the contemporary thinking is that in order to have quality research you have to generate it yourself. That is why I built my own team. Nobody really wants to go through all that trouble (or at least many people don't want to). All we really need is a competitive product. This is a prospetive client talking - me!

 

That has created a two-part dilemma. The first is that the quality of research on Wall Street these days, notwithstanding some great recent calls from the likes of Meredith Whitney of Oppenheimer and Richard Bove, an independent analyst, has deteriorated even further and is coming under greater pressure as more banks begin to outsource research functions. I don't know I think I have had some pretty great calls, as well. I'll post a quick pictorial at the end of the post. 

It may be true that analysts now put a lot more sell ratings on stocks than they used to, clearly a result of Mr. Spitzer’s settlement. But sell ratings are only a small part of the story. Analysts were never supposed to be just stock pickers. Ask any big institutional investor about what makes good research analysts and the answer is rarely the buy, sell or hold ratings. And herein lies the problem. Buy, sell and hold calls may not make a good analyst but they can damn sure identify the bad ones - and the street is rife with them. Not necessarily bad in terms of ability (since I know many of these guys are quite bright) but bad in terms of actual performance. The conflicts and coporate politics bullsh1t is still there, trust me. How else can a lowly blogger such as myself outperform every analyst and brokerage house on the street??? It is the information they can provide, the details they model and understanding the nuance of the executives. Those aspects of research don’t always end up in reports, but that’s what separates the good analysts from the not-so-good.

The second problem — which is an even bigger one — is that it is hard to find good research on small companies. All the focus has moved to large companies where the big money is sloshing around. And that makes being a small public company a very difficult task, since nobody’s paying any attention to them. The reason no one is paying attention to them is because the investment banking money is not sloshing around them. It has abosutely, and I mean absilutely, nothing to do with their investment potential. Listen, all investors follow analysts for one reason and one reason only - greedy self interest. They want to make more money, or at least prevent the loss of the money they already have. This sounds worse than it is, since we are all in this to make money. There is absolutely nothing inherent in a small company that will prevent a potential investor from making money that is not inherent in a big company. Hey, now that I think of it, the first few guys in the door of a small company will actually make more money since there will most likely be a scarcity of shares and once the good news gets out thanks to one of those SUPERB anlalysts - BANG! Up shoots the stock. Remind me again, why is there a problem with analysts covering small companies... Oh Yeah! Small companies just don't have the capital requirements to garner the interests of transaction orientated investment banks. Operating and investment performance be damned!!!

“The only way that sell-side analysts now can make money inside of a big firm like that is to become an ‘Institutional Investor All-American’ research analyst,” Mr. Quattrone told me, “which means they have to cover the Microsofts and Googles. Why would they spend any of their time working with these small companies?” Mr. Quattrone posits that the lack of research has been one reason the initial public offering market for technology companies has had a tough time. How about if that analysit had a 8 year track record of 60% plus returns. Clients will follow him like the children did the Pied Piper. Why is it that pure performance takes the back seat to everything these days???

Mr. Quattrone compared Wall Street research with journalism. “Publications have journalists and editorial staff — kind of like research analysts — whom the public expects to be unbiased reporters of fact and opinion who report the truth and provide their honest opinion on important matters,” he said. “They also have a circulation department and an advertising department — kind of like institutional salespeople and bankers — who generate revenue. There is an inherent omnipresent potential conflict of interest between the journalists and the revenue generating departments because the latter produce the revenue that pay the former.” Or, in the case of journalists, editors, and writers that produce unique, rare and valuable product, people are glad to pay for it - which mollifies the issue.

 Unfortunately, I cannot include charts for Bears Stearns, Countrywide, etc. since they are no longer in existance, but the chart patterns are similar to the one's above. These are all companies that I were bearsish on way before the "Street" said sell.
 

 

For those who haven't been by BoomBustBlog user Shaunsnoll's site, he has a spreadsheet that tracks this blog's research. Give it a try. I would suggest that Excel web queries be used to automatically update the stock prices, since it the data is dated.