Using Veritas to Construct the "Per…

29-04-2017 Hits:87116 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:81055 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:80891 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:85365 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:81871 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:84056 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:55105 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:83302 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:83048 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:82943 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:89183 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

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The Transformation of Television in Amer…

21-03-2017 Hits:86917 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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Another BoomBustBlog reader Op-Ed piece...

Table of Contents

  • Conclusions
  • General - How much debt did we pile on?
  • Household Debt, % of Disposable Income - OECD Nations, 1985-2005
  • Private Domestic Debt - All Countries - Current
  • Savings Rate Change, 1960-2006 - OECD Nations
  • Honing in on Australia - 1985 was the starting point
  • Honing in on the USA - 1985 was again when we *really* went out of control

Conclusions

These are the main conclusions:

  • Europe really messed up. They on average have household debtloads that are as big or bigger than ours, and they grew their debt a lot more quickly on average.
  • Germany was the only conservative OECD member. Sad.
  • Japan's having low private debt is a myth. Just check the data. They haven't raised it, for sure, but at the same time they came into their debt deflation with a very high level of debt which has persisted.
  • OECD countries have approximately doubled their debt as % of disposable income from 1985 to 2005. This was a global debt bubble!
  • 1985 seems like the hinging point where all countries went on a spending bonanza. Check out the savings rates. Also, check out the debt charts for Australia and the US.
  • China, S. Korea, Hong Kong are no better than the EU on private domestic debt. Well, that busts that myth.
  • Brazil, India, Russia and Saudi Arabia do indeed have very little debt. Brazil is 83%, India is 62%, Russia is 19%, Saudi Arabia is 13% - these guys are very low.

Taken together, this supports the notion that the world as a whole has heavily indebted itself greatly over the past 20 years. It appears the world has doubled its collective debt to spend and speculate on housing, which is about to lose $25-50T on them.

Required Reading:

  1. Debt - Thoughts On A Global Problem (Part 1),
  2. Banking out of Control (Part 2)
  3. Part (3) Global Debt Stats from the BoomBustBlog Community
  4. Reggie Middleton on the Irish Macro Outlook
  5.   The Big Bank Bust
  6. Continued Deterioration in Global Lending, Government Intervention in Free Markets
  7. The Butterfly is released!
  8. Global Recession - an economic reality
  9. The Banking Backdrop for 2009
  10. Reader's Op Ed

Recommended Reading - The Asset Securitization Crisis: 

  1.   Intro: The great housing bull run - creation of asset bubble, Declining lending standards, lax underwriting activities increased the bubble - A comparison with the same during the S&L crisis
  2.   Securitization - dissimilarity between the S&L and the Subprime Mortgage crises, The bursting of housing bubble - declining home prices and rising foreclosure
  3.   Counterparty risk analyses - counter-party failure will open up another Pandora's box (must read for anyone who is not a CDS specialist)
  4.   The consumer finance sector risk is woefully unrecognized, and the US Federal reserve to the rescue 
  5.    Municipal bond market and the securitization crisis - part I
  6.    Municipal bond market and the securitization crisis - part 2 (should be read by whoever is not a muni expert - this newsbyte may be worth reading as well)
  7.    An overview of my personal Regional Bank short prospects Part I: PNC Bank - risky loans skating on razor thin capital, PNC addendum Posts One and Two
  8.    Reggie Middleton says don't believe Paulson: S&L crisis 2.0, bank failure redux
  9.   More on the banking backdrop, we've never had so many loans!
  10.   As I see it, these 32 banks and thrifts are in deep doo-doo!
  11.   A little more on HELOCs, 2nd lien loans and rose colored glasses
  12.   Will Countywide cause the next shoe to drop?
  13.   Capital, Leverage and Loss in the Banking System
  14.   Doo-Doo bank drill down, part 1 - Wells Fargo
  15.   Doo-Doo Bank 32 drill down: Part 2 - Popular
  16.    Doo-Doo Bank 32 drill down: Part 3 - SunTrust Bank
  17.   The Anatomy of a Sick Bank!
  18.   Doo Doo Bank 32 Drill Down 1.5: Wells Fargo Bank
  19.   GE: The Uber Bank???
  20.   Sun Trust Forensic Analysis
  21.   Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street
  22.   Goldman Sachs Forensic Analysis
  23.   American Express: When the best of the best start with the shenanigans, what does that mean for the rest..
  24.   Part one of three of my opinion of HSBC and the macro factors affecting it
  25.   The Big Bank Bust
  26. Continued Deterioration in Global Lending, Government Intervention in Free Markets
  27. The Butterfly is released!
  28. Global Recession - an economic reality
  29. The Banking Backdrop for 2009
  30. Reggie Middleton on the Irish Macro Outlook




General - How much debt did we pile on?

The next question is, just how much debt did these other countries lump on top of their property bubbles, and how much change did we see in the past 30 years?

Well, we have some data on that. Clear data is available on Australia and the US. There was also a most prescient piece put out by the OECD (again!) in December 2006, titled "Has the Rise in Debt Made Households More Vulnerable?" (source).



Household Debt, % of Disposable Income - OECD Nations, 1985-2005

Consider these graphs of [Household Debt as % of Disposable Income ], and the % change in that figure, from 1995 to 2005 (source):

Observations:

  • We know how badly the US screwed up (badly) - it appears that Denmark, the Netherlands, New Zealand, Australia, the UK and Ireland are worse, while Sweden, Japan and Canada are not at all far behind.
  • From the prior analysis on global housing bubbles, Denmark, the Netherlands, New Zealand, Australia, the UK and Ireland all had some of the worst housing bubbles of anyone.
  • Germany was not affected, and France was affected, but less than average.
  • Incomes are probably inflated.

The graph below pulls us 10 years further back, comparing Household Debt / GDP for all OECD nations in 1985, 1995 and 2005 (source):

Observations:

  • Over the past 20 years we have nearly doubled our household debt as a % of GDP, from 43% in 1985 to 80% in 2005.
  • This just isn't right. This is prima fascie evidence of a debt bubble.



Private Domestic Debt - All Countries - Current

Below is the graph of Domestic Private Debt. This is different from household debt. It is defined by the CIA World Factbook (source) in the following way:

"the total quantity of credit, denominated in the domestic currency, provided by banks to nonbanking institutions. The national currency units have been converted to US dollars at the closing exchange rate on the date of the information."

What this can do for us is "plug in the gaps" to see where the major non-OECD members stand.

Observations:

  • China, at 110%, is basically on par with the EU as a whole, as well as Australia, South Korea, and Hong Kong. It appears the major Asian non-OECD nations do *not* have super-low debt.
  • Brazil is 83%, India is 62%, Russia is 19%, Saudi Arabia is 13% - these guys are very low.

What this says to me is that most of the world is quite heavily indebted. The only ones who aren't are the non-Asian, non-OECD countries. And Germany.


Savings Rate Change, 1960-2006 - OECD Nations

Below is a graph of the change in the savings rate for the major OECD countries, as well as a graph of the savings rate for many of these countries from 1960-2006 (where available) (source, source, source, source):

Observations:

  • 10 of 15 had their savings rate drop by 4% or more.
  • Only 1 of 15 actually went up!
  • For all countries, there really seemed to be a paradigm shift in 1985 - we all stopped saving as much starting then.



Honing in on Australia - 1985 was the starting point

It was shown above that Australia goofed up big time. They borrowed a ton, they stopped saving, and they had a huge housing bubble. Australia has been shown many times to have had a Private Debt bubble. The graph below shows that mortgage debt as a % of GDP went from ~16% in 1985 to ~85% in 2008 (source):

We really began shooting to the moon in 1985. Again, 1985 seems like the global starting point for the debt and spending craze.


Honing in on the USA - 1985 was again when we *really* went out of control

This is how much debt we lumped onto our housing bubble (source):

Once again we see 1985 as a starting point. Debt was growing - hard - beforehand, but it was in 1985 when we saw homeowners' equity take a concerted leg downwards. And that was off inflated pricing. If we were to adjust pricing to reality, home equity would be even less.