Using Veritas to Construct the "Per…

29-04-2017 Hits:84698 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...

Read more

The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:79156 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.

Read more

What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:78997 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...

Read more

Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:83490 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...

Read more

This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80048 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...

Read more

What is the Value Proposition For Verita…

01-04-2017 Hits:82355 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...

Read more

This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:53328 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...

Read more

Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:81367 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...

Read more

Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:81358 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...

Read more

The Country's First Newly Elected Lame D…

27-03-2017 Hits:81175 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...

Read more

Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:87033 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.

Read more

The Transformation of Television in Amer…

21-03-2017 Hits:85048 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...

Read more

I am about to forensically pick apart  Goldman Sachs for my subscribers. I am posting this quick update and explanation of the new FASB mark to market rules in the mean time and will start posting Goldman stuff later on tonight. This is good stuff peoples, hard to find elsewhere in the blogosphere.

FASB given more flexibility to the management of financial institutions in valuing debt securities and has provided for increased disclosures regarding security valuation.

Determining Fair Value

When the volume and level of activity for the asset or liability have significantly decreased

  • If the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity, transactions or quoted prices may not be determinative of fair value.
  • In the above case a change in valuation technique or the use of multiple valuation techniques may be appropriate (for example, the use of a market approach and a present value technique).

Example: Company X used to value its RMBS tranche, of which was previously traded through a brokered market, via completed transactions; however, trading volume was infrequent, with only a few transactions per month and the company now decides to value the security not based on the actual transacted price but based on a market value approach (of similar securities after adjusting for risk premium) and / or present valuation technique. As a result the RMBS tranche initially reported as part of level 1 assets would now be part of level 3 assets with valuation subject to management's discretion. Thanks to new media publications and blogs such as BoomBustBlog.com, prudent investors are wary of mass movement of assets into the level 3 category.

 

The transactions that are not considered orderly

  • If evidence indicates that the transaction is not orderly, a reporting entity shall place little, if any, weight (compared with other indications of fair value) on that transaction price when estimating fair value or market risk premiums.
  • If the weight of the evidence indicates the transaction is orderly, a reporting entity shall consider that transaction price when estimating fair value or market risk premiums.

Thus in determining the reference transaction more discretion is given to management, particularly in the interpretation of what an "orderly" transaction is. Be aware that I feel that some fire sales are orderly transactions if the entire asset category is on fire.

 

Treatment of Other than temporary

If the fair value of a debt security is less than its amortized cost basis at the measurement date, U.S. GAAP requires that an entity assess the impaired security to determine whether the impairment is other than temporary.

 

The difference between the present value of the cash flows expected to be collected and the amortized cost basis would be referred to as credit losses while remaining other than temporary impairments would be due to other factors.

 

When an "other-than-temporary" impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.

 

If an entity intends to sell the debt security or if it would be required to sell the security before the recovery of its amortized cost basis then other-than-temporary impairment shall be considered to have occurred. In these cases other-than-temporary impairments would be charged into earnings. This leaves entities with large AFS (available for sale) securities portfolios exposed to accounting risk from this rule. Of course, the economic risk remains the same for all. A loss is a loss, is a loss.

 

If an entity does not intend to sell the debt security nor would it be required to sell the security before the recovery the other-than-temporary impairment shall be separated into the following:

 

  • The amount representing the credit loss - recognized in earnings
  • The amount related to all other factors - recognized in other comprehensive income, net of applicable taxes