Using Veritas to Construct the "Per…

29-04-2017 Hits:87100 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:81042 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:80878 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:85351 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:81858 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:84041 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:55090 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:83287 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:83034 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:82930 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:89168 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:86904 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 Bloomberg: Former Bear Stearns CEO Greenberg Says Investment Banks ‘Gone’ .

“There’s no more Wall Street,” Greenberg, 81, said today in an interview to be aired on Bloomberg’s “Money & Politics” television program. “That model just doesn’t work because it’s at the mercy of rumors.” Really??!! Would these be the rumors that you bought a bunch of bad assets with a lot of leverage at the top of bursting bubble?

Greenberg elected to stay when JPMorgan Chase & Co. acquired Bear Stearns through a forced sale in March. The acquisition followed a run by clients and lenders that left Bear Stearns on the brink of bankruptcy. Market rumors helped cause customers to pull their money from Bear Stearns and Lehman Brothers Holdings Inc., and pushed down the stock prices, he said. I would think your balance sheet and opaque reporting helped to cause customers to pull their money from Bear Stearns and Lehman Brothers. See Is this the Breaking of the Bear? and Bear Fight - A most bearish view on Bear Stearns in a bear market.

The entire make-up of Wall Street has changed “forever,” Greenberg said. This year has seen the demise of Bear Stearns and Lehman, Bank of America Corp.’s purchase of Merrill Lynch & Co. and the conversion of Morgan Stanley and Goldman Sachs Group Inc. into bank holding companies.

“Rumors can start and turn into a self-fulfilling prophesy,” Greenberg said during an interview in Washington. He said he’s “never seen anything close” to the current economic decline and turmoil in the financial markets. Excessive leverage and economically imprudent asset purchases can turn massive profit into the truth, as well.

Financial firms worldwide have taken $980 billion in writedowns, losses and credit provisions since the start of the crisis. More than 201,000 employees have lost their jobs. Is this all due to rumors?!

And on the flip side…

Behind Schwarzman Spat With Wasserstein Over Fair Value Lies FASB Rule 115

An argument between two Wall Street titans seated in director’s chairs at Per Se restaurant in New York in October has escalated into a fight over an obscure accounting rule known as Statement No. 115. Five weeks ago the dispute was over so-called fair-value accounting, which requires companies to record assets every quarter to reflect market value. In one chair was Blackstone Group LP Chairman Stephen Schwarzman, who said the standard had aggravated the worst financial crisis since the Great Depression (the Fiction, how dare investors find the gall to ask us what our assets really worth in the open market???). In the other was Lazard Ltd. Chairman Bruce Wasserstein, who said the rule gives investors an honest look at corporate earnings (the Facts: The Truth! The Truth! You can’t handle the TRUTH! – channeling Jack Nicholson in “A Few Good Men”).

Now banks, which have been unsuccessful in getting regulators to revamp fair-value, also known as mark-to-market, are trying to win revisions to another U.S. Financial Accounting Standards Board requirement that could preserve billions of dollars of their capital. Hey, if at first you don’t succeed, lobby, lobby again…

“Financial institutions, which have been woefully incompetent in running their own firms, are now trying to avoid providing investors with accurate numbers depicting the large losses they have suffered under their mismanagement,” said Lynn Turner, the Securities and Exchange Commission’s former chief accountant, in an interview.

… In a Nov. 12 letter to the SEC, Robert Traficanti, Citigroup’s head of accounting policy, gave an example of mortgage-backed securities the bank owns and said the rule change would reduce a third-quarter charge to earnings to $19.2 million from $76.2 million. The proposed switch “is a much better reflection of the losses we expect to incur,” he wrote. I think the problem with this statement is that the losses that you expected to incur really did not coincide with the losses that you actually incurred. That is really the crux of the entire asset securitization crisis, now isn’t it?

By using standard 115, banks could take into account cash generated from underlying assets such as mortgages and not rely on a market price dictated by the fair-value rule. If I am not mistaken, if the cash generated by the assets were so sufficient, and the market undervalues these assets so greatly, then what we have on our hands are the best yielding deals of the century. That being the case, all of us (or those, since I am not really all that bright) smart guys with those high falutin’ C++ fortified, Mathematica mutated Excel spreadsheets should be knockin’ ya door down to get these assets off of your books for you. Hmmmm… I wonder why nobody is biting. Well, I guess it doesn’t matter that nobody wants them. It doesn’t matter that earlier this year banks were willing to finance the sale of these assets at cut rate interest to get them off of their books at discounts steeper than 50%. It doesn’t matter that the only one’s willing to buy them now are the same guys still looking for WMDs in Iraq. You just want us to ignore what their transfer price is, and allow you to project future cash flows as a valuation. I do believe we have had enough of projections, which is why investors want to rely on market pricing. Hey, you can always take extant cash flows and inure them to the income statement, right? Just don’t start that projection, in perpetuity stuff.

Moving to the impaired debt and equity standard would help “stop the downward spiral caused by the inability of ivory tower accounting rules to recognize the economic value of an asset,” Scott Talbott, the Washington-based roundtable’s chief lobbyist, said in an interview.

Now, this is interesting. If the economic value of the asset is not matching the market value of the asset, as I stated earlier, why isn’t everyone who knows how to count buying this stuff up? Particularly private equity, who need not be bothered by the whims of the public equity markets. I think I know the answer.

… The rule “and the way it’s been implemented has been a major contributor to the financial crisis,” Schwarzman said at the Oct. 30 discussion hosted by Fortune magazine at Per Se. Or… Leverage, valuation, risk assessment, and the way they have been implemented have been the major contributors to the financial crisis.

Wasserstein, 60, who has a better track record this year with Lazard declining 37 percent in NYSE composite trading, took the opposite position. “Accounting has now become an exercise in creative fiction,” he said. “Saying assets are worth a lot doesn’t make them worth a lot.” … Ya’ think??? Hey, don’t say that in public. I want to say my assets are worth a lot…

Two of Obama’s closest economic advisers, former Treasury Secretary Lawrence Summers and former Federal Reserve Chairman Paul Volcker, have expressed support for fair-value accounting. So have Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson, who said on Nov. 20 that he knows of “no better accounting method,” even as he welcomed “steps to review and modify its implementation during severe market stress.” Uh, oh. The market may be turning. I actually agree with Paulson on something.

Private-equity executives, including Schwarzman, say mark- to-market accounting unfairly forces them to value holdings even if they have no intention of selling them at that time, hindering the business model of fixing up companies and disposing of them years later for a profit. WHAAAT????!!!! What the hell does that mean? How does it hinder the business model? You acquire assets, you work on them until you can sell them for more, then you do so. The fact that until you can sell them for more, they are not worth more makes perfect sense – doesn’t it? Do these guys actually expect us to believe that we should allow them to value these assets for more despite the fact that their own business model dictates that they are not worth more? After all, the entire premise behind private equity is buy low and sell high. They want us to change this to buy low, value high, and then sell high when the market value really is high. Wheww!!! You need to be high just to wrap your head around that oneJ You guys must be smoking some of that high grade cannibus that only private equity guys can afford.

Brian Wesbury, chief economist at First Trust Advisors LP in Lisle, Illinois, compared the idea of forcing banks to price their assets now to a homeowner in California having to sell his house at the moment a fire is at his doorstep. “If the bank knocked on your door and forced you to mark to market at that moment, you’d be bankrupt,” Wesbury said. What a silly statement. Whether you are forced to mark at the moment or not, your house is worth what it is worth. Do you mean to tell me that the guy whose house is burning down should now be allowed to say his house is worth a million dollars even though it is burned to the ground? He gets that million dollar valuation why? Because if he doesn’t he will be broke? Since when does a company’s financial dependency on an asset’s valuation affect that asset’s valuation? Oh yeah, that’s the way its always been, it’s just that light is being shined on it now.

Citigroup Senior Vice Chairman William Rhodes and Deutsche Bank AG Chief Executive Officer Josef Ackermann are also fair- value critics. The two men, speaking in October in Washington on behalf of the Institute of International Finance, a global association of financial institutions, said the rule needs a review because it doesn’t work in illiquid markets. It works just fine in illiquid markets. If you can’t sell it for X price, it is not worth X. That is why there is a discount given an asset for a lack of liquidity. That is why public company shares are given a premium over private companies’ shares, because they are easier to sell. Think long and hard about this. If we allow banks to totally disregard the liquidity premium, do we mark down all publicly traded securities in kind, or do we must model/mark up all private securities. When does this nonsense cease?

 

… Fair-value’s fans portray the complaints as sour grapes by banks that don’t want to admit how bad their subprime investments were. Sour grapes, bad weed, whatever. Blaming the rule for the credit crisis “is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick,” JPMorgan Chase & Co. analyst Dane Mott wrote in a September report. What do you mean? I’m not sick, because my model tells me I’m healthy - Cough, Cough!!!

Matthew Schroeder, managing director for accounting policy at Goldman Sachs Group Inc., is another fair-value advocate. “For us, fair value is the oxygen of the firm,” he told the SEC in July. “It’s part of our fabric. We follow a daily discipline of marking to market at our firm. It can be done.”

This all boils down to the fact that big banks believe that even in this day and age of instant information transmittal and topic experts blogging on every conceivable issue without big brother watching over them (yet), they can still (and worse yet, believe they have the right to) purposely pull the wool over investors eyes by outright declaring that market values should not be reflected in their holdings. The next time a bank tries to buy something from me, I should play the same game. “You will have to pay me a lot more for this sir. Although everybody else is paying $100,000, my models say the market is not valuing my stuff correctly and I want $250,000 for it. After all, it threw off $1,000 of cash last month and it has a maturity of 360 months. That means I should get the present value of $360,000, which is about a cool quarter million.

What?! What did you say? You dare compare my prime, Moody’s and S&P AAA rated assets to that junk that guy over there has?!!! My underwriting insisted on high FICO scores and special “expedited appraisals performed by the bank’s specially trained inhouse staff and custom written software. We own debt collateralized by the best areas of Vegas, LA and Miami. Prime sh1t, do you understand!!!??? We don’t adhere to the market here. Just because those guys assets defaulted doesn’t mean ours will. Those collateral values will shoot right back up to the 30% per year appreciation rate that was used to underwrite the securities in no time. Now hurry up and buy mortgage bonds before rates reset and these guys default on their 3rd forbearance agreement!”