Using Veritas to Construct the "Per…

29-04-2017 Hits:88495 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:82202 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:82094 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:86590 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:83026 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:85147 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:56248 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:84473 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:84186 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:84047 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:90532 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:88104 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 believe Morgan Stanley is doing the smoke and mirrors thing again. I have a relatively heavy bearish position and don't want to concentrate any more, but I smell opportunity. Contrary to what management has to say, Reggie Middleton says this company is in trouble. One of us is wrong! Hey, I'm putting my money where my mouth is.

Let's walk through what we know thus far about Morgan's last quarter (keep in mind that the 10Q has not been released yet - but when it is I will be all over it):

Key highlights:

  • Morgan Stanley's reported revenues increased 1% y-o-y to $8,049 mn. However excluding a pre-tax gain of $745 mn and $1.5 bn impact of widening credit spreads on firms own debt, revenues declined 27% to $5,804 mn in 3Q2008 over 3Q2007.
  • As result of slowdown in capital markets activity, Morgan Stanley's M&A transactions, global IPO and debt volumes declined 63%, 66% and 46%, respectively.
  • Morgan Stanley's leverage declining to 23.5x in August 2008 from 25.1x in May 2008. However Morgan Stanley's level 3 assets-to-total assets increased from 6.7% as of May 2008 to 8.0% as of August 2008.
  • As of August 2008, Morgan Stanley's exposure towards U.S. subprime mortgage stood at a 44.3% of its shareholder's equity.

Results analysis

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In 3Q2008, Morgan Stanley reported net revenues increased 1% y-o-y to $8,049 mn over $7,958 mn in 3Q2007. However reported net revenues included a pre-tax gain of $745 mn relating to follow-on offering of MSCI in 3Q2008. Excluding the impact of above pre-tax gains, adjusted net revenues declined 8% to $7,304 mn in 3Q2008. In 3Q2008 institutional securities revenues included $1.5 bn of revenue from widening of credit spreads on firm issued structured notes. Excluding the impact of widening credit spread on firm's debt, Morgan Stanley's revenues declined 27% to $5,804 mn in 3Q2008. Morgan Stanley's institutional securities adjusted revenues (excluding the impact of pre-tax gain and widening credit spread on firm's own debt) declined 26.4% to $3,666 mn. Global wealth management group and asset management segment revenues declined 8% and 53%, respectively to $1,555 mn and $647 mn, respectively in 3Q2008 from $1,683 mn and $1,364 mn, respectively in 3Q2007. Morgan Stanley's compensation expenses increased 3% to $3,695 mn in 3Q2008 with compensation expenses-to-net revenues of 46% in 3Q2008 versus 45% last year. Non-compensation increased 15% to $2,406 mn against $2,097 mn in 3Q2007 primarily of higher occupancy cost and $288 mn charge related to the auction rate securities settlement. As a result of higher non-compensation expenses, non-compensation expenses to net revenues increased to 30% in 3Q2008 over 26% in 3Q2007. Net income from continuing operations including pre-tax gain and impact of widening of credit spreads on Morgan Stanley's own debt recorded in 3Q2008, declined 3% to $1,425 mn versus $1,474 mn in 3Q2007. Overall reported net income available to common shareholders' declined 7% to $1,414 mn (or $1.32 per share) in 3Q2008 compared with $1,526 mn (or $1.44 per share) in 3Q2007.

As a result of slowdown in capital markets activity, Morgan Stanley's announced M&A transactions declined 63% y-t-d to $390 bn while Morgan Stanley's global IPO and debt volumes declined 66% and 46%, respectively to $4.9 bn and  $148 bn, respectively. However in an endeavor to de-lever its balance sheet, Morgan Stanley reduced its balance sheet size with total assets declining 4.1% q-o-q and 16.6% y-o-y. Resultantly Morgan Stanley's leverage declined to 23.5x in August 2008 compared with 25.1x in May 2008 and 32.3x in August 2007. However despite deleveraging, Morgan Stanley's level 3 assets-to-total assets increased from 6.7% as of May 2008 to 8.0% as of August 2008. As of August 2008, Morgan Stanley's exposure towards U.S. subprime mortgage stood at a staggering 44.3% of its shareholder's equity.

 

See The Riskiest Bank on the Street and Reggie Middleton on the Street's Riskiest Bank - Update for a broader analytical take.