Using Veritas to Construct the "Per…

29-04-2017 Hits:88379 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:82106 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:81986 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:86485 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:82929 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:85060 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:56156 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:84382 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:84098 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:83966 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:90428 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:88000 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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From the FT.com :

 Fannie and Freddie’s combined $36bn of preferred stock is widely held by US regional banks. These banks will be forced to take significant write-downs of their holdings.

Few banks have provided detailed disclosures on the extent of their holdings in Fannie Mae and Freddie Mac, but among those that could be most affected are Gateway Financial Holdings and Midwest Banc Holdings. According to recent research by analysts at Keefe, Bruyette & Woods, both banks have exposure that amounts to more than 30 per cent of their tangible capital.

Now, I understand and agree with the argument that the bailout was necessary to prevent a run on US government backed debt, but this is far from a reason to rally or celebrate. Let's take a look at what Paulson has done to the Doo-Doo 32.

We looked at the filings of most of the 32 banks of the doo doo list. It is to be noted that GSE exposure includes the banks’ holdings in senior debt or mortgage-backed securities, which could virtually be certain to be protected under any bailout scenario of Fredic Mac and Fannie Mae. Banks’ holdings in common, preferred or subordinated debt face higher risk of being wiped out (although it appears that the sub debt may be protected as well, eventhough it may be considered a form of additional moral hazard).

Only a very few banks have disclosed how much of their exposure to GSE is in preferred stock, common shares or subordinated debt on a granular basis.

Key observations:

  1. Wells Fargo, M&T Bank and Sovereign Bancorp have exposure of 5.2%, 5.4% and 8.7%, respectively, of their total equity into preferred shares of GSEs.
  2. Banks have very nominal exposure to common equity shares (currently near worthless) of GSEs as % of banks’ total equity.
  3. Banks’ total exposure to GSEs securities (including senior debt) is 129.1% (as % of total equity) for Popular, 62.3% for Sovereign Bancorp and 53.4% for Glacier Bancorp

M&T does not have capital to spare. There ratios are thin enough as it is, and the preferred investments should be just about wiped clean. As for Wells Fargo...

 

I'll just post these graphs again...

Wells Fargo observations
 

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Large Second Lien Home Equity exposure with rising NPAs: As of 3Q2007, Wells Fargo had second highest home equity loans exposure among all US banks in absolute amount. In 1Q2008, Wells Fargo had $83 bn loans in home equity comprising nearly 19% of total loans and a staggering 174% of its shareholder’s equity.

·  Within its home equity exposure 37% of loans are in California comprising 7% of its total loan or 64% of its shareholders equity.

·  In 1Q2008 Wells Fargo’s annualized loss rate on home equity loan portfolio increased to 2.12% from 1.42% in December 31, 2007.

·  As of December 31, 2007 nearly 29% of the bank’s home equity exposure had LTV greater than 90%. With housing prices expected to continue to decline over the reminder of 2008, Wells Fargo’s significant exposure in high LTV home equity loans with concentration towards California could pose a much harder time for the bank in the quarters to come. 

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Large exposure in Construction and Development (C&D) loans: Of its total loans of $386 bn, Wells Fargo (WFC) had $19 bn exposure in construction and development loans in 1Q2008. WFC’s exposure was the fourth largest among all US banks in absolute amount after Bank of America, Wachovia and BB&T, comprising nearly 36% of its shareholder’s equity (this is unadjusted for bullsh1t). In 1Q2008, C&D loans witnessed the highest stress with NPA to loan ratio of 2.32%, followed by real estate 1-4 family first mortgage with NPAs to loan ratio of 1.91%. C&D NPAs (Non-performing or dead assets) witnessed a 114% increase over 1Q2007 and 38% increase over 4Q2007. In Wells Fargo loan portfolio, as of December 31, 2007 California represented nearly 32% of total C&D loans, Florida represents 5%. These areas are experiencing extreme stress due to thier high (the highest in the country) residential delinquency, foreclosure and REO rates.

This stress is real, and is already causing losses in the condo construction and sales markets, retail malls and now office buildings.  Please see my primer and series on the Commercial Real Estate Crash and ongoing series of financial shenanigans and excessive debt issues of General Growth Properties for additional information.

 
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Sizeable Real Estate loans exposure in troubled markets:  Wells Fargo had $148 bn loan in 1-4 Family Mortgages (WFC has a high correlation to industry-wide losses) which represented nearly 38% of the banks’ total loan. Out of these loans nearly 51% comprised junior lien mortgage loans (much higher probability of total loss and no recovery). After C&D loans, real estate loans have highest NPAs as proportion of total loans.  In 4Q2007, real estate 1-4 family first mortgage NPAs to total loans stood at nearly 1.91% of total loans with total NPAs of $1.4 bn. In terms of geographic exposure, real estate loans from California and Florida comprised 33% and 4% of total real estate loans (i.e 13% and 2% of WFC’s total loan portfolio).

 

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WELLS FARGO 1Q-2008 4Q-2007 3Q-2007 2Q-2007
         
Loan Composition        
Commercial 92,589 90,468 82,598 77,560
Other real estate mortgage 38,415 36,747 33,227 32,336
Real estate construction 18,885 18,854 17,301 16,552
Lease financing 6,885 6,772 6,089 5,979
Total commercial and commercial real estate 156,774 152,841 139,215 132,427
Real estate 1-4 family first mortgage 73,321 71,415 66,877 61,177
Real estate 1-4 family junior lien mortgage 74,840 75,565 74,632 72,398
Credit card 18,677 18,762 17,129 15,567
Other revolving credit and installment 55,505 56,171 57,180 53,701
Total consumer 222,343 221,913 215,818 202,843
Foreign 7,216 7,441 7,889 7,530
Total Loans 386,333 382,195 362,922 342,800

 

Wells Fargo haa increased their loan assets every quarter for the past 4 quarters. Those past 4 quarters are just past the peak of the largest equity real asset and credit bubble of the century? Question: Why is Wells Fargo increasing the amount of these quickly depreciating assets on its books while the underlying properties are rapidly decreasing in price? 

 
image005_copy.png

image003_copy.png

 

 

Wells Fargo observations
 

Large exposure in Construction and Development (C&D) loans: Of its total loans of $386 bn, Wells Fargo (WFC) had $19 bn exposure in construction and development loans in 1Q2008. WFC’s exposure was the fourth largest among all US banks in absolute amount after Bank of America, Wachovia and BB&T, comprising nearly 36% of its shareholder’s equity (this is unadjusted for bullsh1t). In 1Q2008, C&D loans witnessed the highest stress with NPA to loan ratio of 2.32%, followed by real estate 1-4 family first mortgage with NPAs to loan ratio of 1.91%. C&D NPAs (Non-performing or dead assets) witnessed a 114% increase over 1Q2007 and 38% increase over 4Q2007. In Wells Fargo loan portfolio, as of December 31, 2007 California represented nearly 32% of total C&D loans, Florida represents 5%. These areas are experiencing extreme stress due to thier high (the highest in the country) residential delinquency, foreclosure and REO rates.

This stress is real, and is already causing losses in the condo construction and sales markets, retail malls and now office buildings.  Please see my primer and series on the Commercial Real Estate Crash and ongoing series of financial shenanigans and excessive debt issues of General Growth Properties for additional information.