Using Veritas to Construct the "Per…

29-04-2017 Hits:82074 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:77714 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:77284 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:82030 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:78619 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:80917 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:47800 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:79622 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:79149 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:79699 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:84665 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:81621 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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There has been a lot of chatter in the comment sections regarding how I have been wrong regarding my research for the last 6 weeks or so. These comments seem to be totally disregarding the last two years of outperformance! These comments also are short sighted and apparently unaware if how bear market rallies work.

This is not to say that I am not necessarily wrong, or could not be wrong, it is just that it is absolutely impossible to condemn or vindicate a medium or long term opinion in a 6 week period! I don't trade stocks, I invest in corporate and global macro opportunities, often through the stock and derivatives market. There is a very big difference! I also don't offer investment advice or trading recommendations. I do offer insight into my own investment style and research. I can't control or predict stock markets, prices or short term movements. Trying to predict such will simply cause me (and most likely anyone else who tries to do so) to underperform. I invite all to learn more about my proprietary investment style, see "The Great Global Macro Experiment, Revisited". In reading this, you will see that one cannot take advantage of the longer term fluctuations therein and predict short term price movements (at least consistently), simultaneously. I also invite readers to remain cognizant that the since inception modeled return of this blog's research should still be above 70%, and probably approaching 100% (I haven't crunched the numbers recently so can't give you an exact number) - see BoomBustBlog Performance, year to date. Granted this was done in March at the market lows, thus should be somewhere around 30% off, but hopefully you get the point.

 

The historical perspective

We have analyzed the bear market rallies during the 1929 recession/depression to check the average length and return in a severe bear market rally. We have identified 7 bear market rallies during the 1929 recession.  Dow Jones (S&P 500 data is not available that far back) was at its peak on September 1929 and reached bottom in July 1932 . It took about 25 years for Dow Jones to reach its previous high with Dow Jones crawling back to 380 in November 1954. Yeah, you read that correctly, 25 years!

Although the peak-to-trough during 1929 was nearly 90% there were nearly 7 bear market rallies during this period lasting 30 days on an average with average return of 17%. The longest rally was 42 days, and the sharpest % change was 26%. Remember this as I move on, and revisit this thought as I discuss the present day scenario...

historical_bear_rally_returns.png 

We have arrived at rallies based on 20 day, 10 day and 5 day cumulative return with minimum cumulative return of 5% for 5 days to begin a rally and end of rally identified when 20 day return peaked. 

Bear market rallies

Start date

End date

Staring Value

Ending Value

% change

No of days

13-Nov-1929

16-Dec-1929

199

246

24%

33

12-Aug-1930

11-Sep-1930

217

243

12%

30

3-Feb-1931

27-Feb-1931

170

190

12%

24

2-Jun-1931

6-Jul-1931

122

153

26%

34

1-Oct-1931

12-Nov-1931

96

112

17%

42

1-Jan-1932

14-Jan-1932

78

85

10%

13

8-Feb-1932

10-Mar-1932

73

86

17%

31

Average

 

 

 

17%

30

 

Peak

Through

   

3-Sep-1929

8-Jul-1932

% change

No of days

381.2

41.22

-89.2%

1039

  historical_dow_returns.png

The Current Perspective on Bear Market Rallies 

recent_bear_rally_duration.png

We have about a week and a half to go before we even hit the historical record for bear rally length. Unfortunately, history is no guarantee of future performance, but it does give you perspective, doesn't it?

S&P 500        
Bear market rallies Start date End date Number of days % Change
1 9-Mar-09 23-Apr-09 33.0 25.9%
2 20-Jan-09 28-Jan-09 7.0 8.6%
3 20-Nov-08 8-Dec-08 12.0 20.9%
4 27-Oct-08 4-Nov-08 7.0 18.5%
5 10-Oct-08 20-Oct-08 7.0 9.6%
  Average   13.2 16.7%

 

 

recent_bear_rally_performance.png

As you can see from the graph and the table above, we are about on par for a big bear rally, but it is not as if we are shattering records in a dramatic way. We are just a few point above the previous record. Long story short, if you have confidence in your research, exercise some patience. If you don't then the recent price movement should scream at you to go long! 

 

Now, back to what I do, and don't do 

What I can, and actually do succeed at is to manipulate to my benefit, the errors of central bankers, bureaucrats and corporate management, and on the bullish side benefit from their successes. To do such takes time. Every one of my 100% plus moves (save a few very short term hits last year that were a mere matter of chronological coincidence) took at least 3 months to come to fruition. Some took 18 months. Think of me as a private equity investor that uses public equity markets. My theses and ideas often take time to play out. Market manipulation merely postpones the inevitable. It cannot prevent if for our markets are too big for any single, or even group, of entities to successfully control for any lenght of time.

To date, I can't recall once where I have published a forensic analysis on the blog that was wrong. That is not to say I will not be wrong. Trust me, I will be wrong often enough, but I think it is only fair to wait until I am wrong to declare such. The key to success is to be right more often than you are wrong, to realize when you are wrong (as well as recognizing when you are right). Those of you who cannot see the extreme fissures in our banking system are, in my opinion of course, wrong. Having a share price go against you for a few weeks has nothing to do with fundamental research being right or wrong. If the market prices always reflected the actual values of the assets they represent, then one would probably never be able to outperform their peers by going long or going short!

What is causing such confusion and dismay is what I perceive to be purposeful manipulation of the markets, as well as the purposeful and doomed manipulation of the capitalistic, free market and legal underpinnings that have established said markets successes in the past. This cannot go on forever, and as a matter of fact it really just makes the day of reckoning that much worse. I actually doubt it can go on much longer. Reference the all so successful Japanese banks after a decade of their government's market warping assistance (see For those who believe the government can prop up the banks...). There are practically none left.

This rant ends as my exploration of this Bloomberg article begins, case in point as the chickens come home to roost. For all of those who feel the government and system is corrupt beyond repair, I bring you: Bank of America's Lewis May Face SEC Review of Merrill Disclosure to Cuomo

 April 24 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth D. Lewis may face scrutiny by the U.S. Securities and Exchange Commission for failing to disclose mounting losses at Merrill Lynch & Co. because of pressure from federal regulators to complete the takeover. "May face scrutiny"??? Isn't that thier job!

“We have been actively reviewing the disclosure surrounding the merger between Bank of America and Merrill Lynch,” said agency spokesman John Nester. “The issues identified in New York Attorney General Andrew Cuomo’s letter are part of our review.”

Cuomo revealed in a letter yesterday to Congress and federal regulators that Lewis testified in December that then- Treasury Secretary Henry Paulson may have threatened to remove the bank’s management and directors if the lender tried to back out of buying Merrill. Lewis said he was instructed by federal officials not to disclose Merrill’s losses, his desire to back out of the merger or the intervention of regulators, according to Cuomo. So, now we are all clear as to whether the government will go to extreme lengths to hide the extent that the trainwreck which is the US banking system is actually damaged. We know have it as a downloadable PDF document. See pdf  Cuomo Letter Regarding Ken Lewis 2009-04-24 06:22:59 2.33 Mb.

Former SEC Chairman Harvey Pitt said he has “no doubt” the agency will investigate. Lewis was obligated to make full disclosure to shareholders even with the regulators’ pressure, Pitt said in a Bloomberg Television interview.

“At least he could have demonstrated he was acting at the request of an official of the U.S. government,” Pitt said. Oh, I broke the law because a law breaker told me to do so!

The allegations in Cuomo’s letter suggest Paulson and other policy makers may have resorted to breaking securities laws to protect a fragile financial system, according to Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which has about $13.3 billion under management and doesn’t own stock in Charlotte, North Carolina- based Bank of America."Suggested"!!!! They blatantly told the CEO to conceal the fact that Merrill Lynch, the largest brokerage in the world was collapsing. They overtly concealed the fact the fact that they felt BofA was on insecure footing as a viable bank! And the best you can get from this is "Suggesting"??? For those that were short ML and felt burned by the unusually high purchase premium, well there you go. All you had to do was roll our shorts over to BAC and you would have been vindicated. For all of you long any of those stocks under the mistaken and misguided impression that the SEC would somehow enforce truth, honesty and transparecny in securities markets, well now you know where all of your money has been disappearing to!

‘Clear Violation’

“Everyone involved knew that was a clear violation, that’s material non-public information, so basically we just closed the rule book during the crisis and said we don’t care, we need to keep the lights on, and we’ll deal with that manana,” Sorrentino said. “Logic went out the window and they were just acting out of fear,” he said. It was “completely panic mode.” I think you are being too kind. It was dishonesty, to say the least.

Both Paulson and Federal Reserve Chairman Ben S. Bernanke said they hadn’t advised Lewis to conceal Merrill’s mounting losses from his shareholders. Surrrre!!!

“Questions of Bank of America’s disclosures were left up to Bank of America,” Paulson said in a statement e-mailed to Bloomberg by Michele Davis of the Brunswick Group, a corporate communications company. Of course, and the 9 mm barrel imprint is still in Lewis's temple. Now, who would you believe, Lewis or Paulson. Do search on BoomBustBlog for Paulson's name and read the articles. See how honest, consistent and trustworthy he has been. Shock and awe, man... Shock and awe.

Davis later issued another statement from Paulson:

“Secretary Paulson does not take exception with the Attorney General’s characterization of his conversation with Ken Lewis. His prediction of what could happen to Lewis and the Board was his language, but based on what he knew to be the Fed’s strong opposition to Bank of America attempting to renounce the deal.” Wait a minute, isn't that basically a contradiction to what was just stated in the previous full paragraph???

SEC Kept in ‘Dark’

Lewis testified for four hours in Cuomo’s New York offices on Feb. 26 as part of an investigation by Cuomo of $3.6 billion in bonuses paid at Merrill just before it merged with the bank. Cuomo’s letter was based on Lewis’s recollections of a Dec. 21 conversation with Paulson. Cuomo, in his letter to SEC Chairman Mary Schapiro and members of Congress, said the SEC “appears to have been kept in the dark” about talks between Bank of America and the Fed and Treasury.

Cuomo’s letter didn’t dissuade critics who want the 62- year-old Lewis ousted from the bank’s board at next week’s annual shareholders meeting in Charlotte.

“Mr. Lewis and the board owe their fiduciary obligation to the corporation and shareholders, not to the regulators who reportedly pressed them to close the deal,” Michael Garland, research director at CtW Investment Group, said in an e-mailed statement. He's got a point here, but if you look at it from Lewis's perspective, you are stuck without grease on one hand, or you not greased while getting stuck on the other. Pretty much a lose-lose situation.

‘Little Choice’

Lewis had little choice but to follow the Fed’s direction, Hugh McColl Jr., Lewis’s predecessor as Bank of America’s CEO, said in a telephone interview yesterday.

“Anyone who has ever run a big national bank knows that when the Fed tells you to do something, you will do it,” McColl said. “It’s an order.” Wait a minute, now. Just hold on. How about when the SEC tells you to do something? Let's see the SEC go after Paulson, Lewis and Bernanke and see what happens?

Scott Silvestri, a spokesman for Bank of America, defended the Merrill deal in a telephone interview yesterday. “We believe we acted legally and appropriately with regard to the Merrill Lynch transaction,” he said. I'm not a lawyer, but even I see this one as bogus.

Lewis and the board of the biggest U.S. bank by assets are under fire for not telling shareholders that New York-based Merrill’s fourth-quarter loss was spiraling toward $15.8 billion before they voted to approve the deal in December.

...

Schapiro said earlier this month that the SEC is already reviewing whether Bank of America violated the law by not disclosing to shareholders that Merrill Lynch employees were set to receive year-end bonuses that totaled $3.62 billion.

Former SEC Chairman Christopher Cox, who led the agency at the time of Lewis’s discussion with regulators, declined to comment.

John Coffee, a securities law professor at Columbia University Law School in New York, said Lewis’s testimony to Cuomo’s office puts the SEC in a “very difficult” position.

“They are under some pressure to bring action against Lewis if they feel that Lewis was withholding material information,” Coffee said. Companies can’t argue that it’s in “the national interest” to “withhold material facts from your shareholders,” he said. I'l bet you they'll at least think about trying!

‘Put Something in Writing’

Lewis testified that he asked Bernanke to “put something in writing” regarding the U.S. government’s plan to support Bank of America’s acquisition in view of Merrill’s mounting losses.

After Bernanke said he would consider the idea, Paulson called Lewis. He said, according to Lewis, “First it would be so watered down, it wouldn’t be as strong as what we were going to say to you verbally, and secondly, this would be a disclosable event and we do not want a disclosable event.” If I am not mistaken, the entire conversation was a disclosable event. It was material to the BofA shareholders as well as the deals viability and was know by their CEO.

Attached to Cuomo’s letter was a Dec. 22 e-mail from Lewis to his board. “I just talked with Hank Paulson,” the e-mail reads. “He said that there was no way the Federal Reserve and the Treasury could send us a letter of any substance without public disclosure which, of course, we do not want.” This is an SEC even right here, isn't it???

Paulson said in his first statement that his discussions with Lewis “centered on the Fed lawyers’ opinion that the merger contract was binding, and the U.S. Treasury’s commitment to ensuring that no systemically important financial institution would be allowed to fail.” Bullsh1t detection alerts are going beserk. If you thought there was a binding contract, the whole conversation would not be necessary and there is no need to issue threats, veiled, direct or otherwise.

“No one at the Federal Reserve advised Ken Lewis or Bank of America on any questions of disclosure,” said Michelle Smith, a Fed spokeswoman. Of course, they advised him on what was in his best interests if he crossed The Man!". “It has long been the Federal Reserve’s view that questions of this nature are best addressed by individual institutions and their legal counsel, as they are in a position to understand clearly their obligations and responsibilities,” said Fed spokeswoman Smith. And in case you don't understand clearly, this gun to your head may clarify things a little...

Senate Banking Committee Chairman Christopher Dodd and other congressional leaders said they would respond to Cuomo’s letter.

“We had suspected there was some behind the scenes work to get Bank of America to buy Merrill,” said Steven Adamske, spokesman for House Financial Services Chairman Barney Frank. “It does show the federal government needs to have greater tools to wind down non-bank institutions.”What???!!! Do you mean to tell me that extortion is not a satisfactory tool???