Using Veritas to Construct the "Per…

29-04-2017 Hits:88512 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:82212 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:82104 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:86603 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:83036 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:85156 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:56259 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:84484 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:84197 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:84056 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:90540 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:88116 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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We looked at Metlife last week as a potential short candidate. While there are certain observations (see below) on a negative side for the company, it is not in dire straights and is definitely not bankruptcy candidate material - although it is not a company that I would be willing to put my money in at this time. Following are some of our cursory observations:

 

 

Negatives

-   The company’s risk primarily emanates off the investments in fixed maturity and equity securities which account for about 44.4% of the total assets. The portfolio primarily comprises of fixed maturity US corporate securities (31%) and RMBS (22%) and foreign corporate securities (15.3%) and CMBS (7.5%). Almost all of the securities have been categorized as level 2 assets, accounting for 86.4% with level 3 and level 1 standing at 10.3% and 3.3%, respectively.

 

-   The company’s investment in RMBS stand at 9.8% of the total assets or 167.5% of the total shareholder’s equity while the investment in CMBS stand at 3.3% of the total assets and 56.6% of the total shareholder’s equity.

 

-   The accumulated unrealized losses relating to fixed maturity and equity securities rose to 12.2% of the total shareholder’s equity as of June 2008 against 1.5% and negative 9.8% as of March, 2008 and December, 2007. The spurt primarily came from US corporate securities, RMBS and CMBS in which the unrealized losses as % of total amortized value rose to 3.6%, 1.9% and 4.2%, respectively  as of June 2008 against 2.6%, 0.9% and 2.9%, respectively as of March 2008

 

-   The company’s exposure to credit default swaps entails a maximum possible loss (assuming the value of the underlying credits becomes worthless) of $1.9 billion which is about 5.8% of the total shareholder’s equity.

 

-   The company is also facing operating margin pressures with margins falling to 12.4% and 9.3% in the second and first quarter of 2008 against 14.8% and 13.8%, last year.

 

-   The company’s investment in unconsolidated VIE entail a maximum loss of $2.8 billion, representing 8.7% of its total equity. (50% of the maximum exposure is represented by asset backed securitization and collateralized debt obligations.

 

Positives

We believe that the company stands in a better position to withstand the current financial crisis relative to its nearest competitors. A key point to note is that the company’s exposure to CDS (unlike AIG which had more than 400% exposure of its equity) is only 5% to its equity, and the preliminary valuation doesn’t represent an outsized fundamental downside from the current price level.

Key observations:

  1. With $14 billion in cash, MetLife is not dependent on short-term funding. Also, the company has a huge amount available under its long-term facilities with only 10% of total debt amount payable in the next three years. ($458 million in 2008, $536 million in 2009, $285 million in 2010, $966 million in 2011, $471 million in 2012 and $6,912 million thereafter)
  2. Based on preliminary valuation exercise conducted using consensus estimates, Metlife’s valuation doesn’t suggest a significant downside from the current price levels (only 5% downside from the current level of $44.32 per share)
  3. Although the company’s investment in RMBS stands at 9.8% of the total assets or 167.5% of the total shareholder’s equity, more than 90% of these securities were rated Aaa/AAA by Moody’s, S&P or Fitch as of Dec 31, 2007. These ratings may have changed subsequently in favor of lower grade but it is something that is difficult to substantiate in view of limited disclosure in the latest 10Q. This is something that may come back to bite.
  4. The company’s exposure to AIG debt and Lehman Brothers debt is about $800 million, which seems very manageable level relative to the total investment portfolio
  5. MetLife’s CDS exposure stands at 5.8% of the total shareholder’s equity against 10.4% and 493.6% for Hartford and AIG, respectively
  6. In terms of quality of investment portfolio as reflected by the credit ratings and unrealized losses as % of amortized cost of investment portfolio, MetLife stands in a better position relative to its peers. The percentage of total investment portfolio invested in below investment grade is 6.5% against 31.7%, 18.0% and 6.3% for Hartford, AIG and Prudential. Further, the unrealized losses as % of amortized cost of investment portfolio is 1.6% against 5.2%, 2.4% and 1.3% for Hartford, AIG and Prudential
  7. In terms of operational performance, MetLife has delivered relatively better growth and margins
    1. MetLife’s trailing twelve months revenue growth in the last reported quarter grew 4.1% while peers like Hartford, AIG and Prudential recorded a decline of 30.1%, 32.1% and 5.5%, respectively
    2. MetLife’s underwriting costs as percentage of revenues on trailing twelve months basis stood at 19.0% against 32.1%, 32.3% and 23.1% for Hartford, AIG and Prudential, respectively
  8.  MetLife also seems to have relatively comfortable leverage levels. MetLife’s leverage ratio (total assets to total shareholder’s equity) stands at 17.1 versus 19.8, 11.8 and 22.0 for Hartford, AIG and Prudential, respectively.