Using Veritas to Construct the "Per…

29-04-2017 Hits:85885 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:80099 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:79956 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:84437 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:80975 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:83208 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:54229 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:82358 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:82201 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:82065 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:88123 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:85978 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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Everybody on this blog was explicitly warned about this in regards to Goldman. This weekend, I will go through some the other banks in granular detail, as well.

From Bloomberg: Regulators May Make Banks Raise Capital Levels With Stress-Test Accounting

Financial regulators may force many of the largest U.S. banks to raise new capital or conserve extra cash after accounting for assets held off their balance sheets.

The Federal Reserve yesterday released the methods used in stress tests on the 19 largest U.S. banks, which incorporated an accounting proposal that would bring about $900 billion onto lenders’ books. there is no reason why GS should not be tanking now. They knew this was coming which is why they decided to sell a secondary offering at what was near an historical low. To think they actually got enough patsies to buy it.

The accounting change suggests most of the 19 will need to take some action to buttress their capital, analysts said. Stronger banks may keep dividend payments low or apply retained earnings, with others selling new shares to make up the amounts, they said.
“We think that most banks are going to have raise capital through some or all of those means,” said Dino Kos, a former markets director at the Federal Reserve Bank of New York who is now a managing director at Portales Partners LLC, a New York research firm. “All of them will need to conserve capital through retained earnings.”

The assessments calculated the capital buffer the 19 biggest banks will need to keep making loans even if the economic downturn worsens this year and next. They also put a focus on common stock as a key component of capital.

Karen Petrou, managing partner of Washington-based research firm Federal Financial Analytics, said banks may need as much as $70 billion in new capital just to cover the added burden of the accounting changes.

Hit to Capital

The report is part of a federal effort to restore public confidence in banks, some of which have seen their capital “substantially reduced” by the recession and financial crisis.

Banks were given preliminary results from the stress tests yesterday, with final results due for publication May 4.

Financial stocks advanced yesterday even as the report stopped short of indicating how much new money regulators will demand to be raised. The report said “most” banks have capital “well in excess” of regulatory requirements, without specifying how the stress tests would impact those levels. You see, this is a matter of semantics. The admin made it very clear that they will be requiring more stringent capital reserves than regulatory requirements. In addition, no regulators made capital issues out of Indy Mac bank, Countrywide, WaMu, Lehman or Bear Stearns, yet they were all severely undercapitalized and collapsed under their own weight. It should be obvious to the prudent observer that regulatory requirements are not necessarily corollary to a surviving bank!

The Standard & Poor’s 500 index rose 1.7 percent to 866.23, and the S&P 500 Financials Index, which includes 80 banks, insurers, brokers and credit-card companies, gained 2.5 percent. Go figure!

White House Chief of Staff Rahm Emanuel said the tests will reveal “gradation,” with some being “very, very healthy” and others needing assistance. Emanuel made the comments in an interview on Bloomberg Television’s Political Capital With Al Hunt.

‘Solvency’ Issue

The Fed’s report said that a bank’s capital buffer assessment is “not a measure of the current solvency or viability of the firm.” Regulators have been concerned that the release of the test results may roil the shares of banks with the largest capital needs, people familiar with the matter have said in the past week.

The 19 firms include Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc., GMAC LLC, MetLife Inc. and regional lenders including Fifth Third Bancorp and Regions Financial Corp.

While the report said that banks’ own assessments were “not necessarily consistent” with the estimates of the regulators, a Fed official added that the firms shouldn’t be surprised at the figures. The official spoke to reporters on a conference call on condition of anonymity.

Proposed Changes

In calculating the capital buffers, regulators accounted for off-balance sheet securities that banks will be incorporating in 2010 as a result of proposed accounting rules changes. It's about damn time. The current off balance sheet rules made aboslutely no sense at all unless you were a bank trying to hide risk! Banks may bring on about $900 billion to their balance sheets as a result of the change by the Financial Accounting Standards Board. Supervisors boosted the risk-weighted assets in their assessments by $700 billion, the Fed said. This is very significant. Nearly at trillion $ coming on the balance sheet, or on the conservative side, nearly $700 billion! That is about the total writedowns that US banks have taken thus far throughout the crisis - coming all at one time! Even more exciting/interesting/dangerous is the nature of what is coming on the balance sheet. Banks don't keep treasuries off balance sheet, if you know what I mean. This will be the most nasty, deprecative, hard to value stuff that the banks had. Don't say I didn't tell you so. 
For those who don't remember, let's look at what Goldman has off-balance sheet...

Unconsolidated VIE's  ($ mn)

VIE assets

Maximum loss exposure

Maximum loss as % of assets

 

Mortgage CDOs

13,061

5,858

45%

 Real estate derivatives, think GGP bankruptcy

Corporate CDOs and CLOs

8,584

1,079

13%

Think the GM bonds trading at 9 cents on the dollar, leveraged 20x at par!

Real estate, credit-related and other investing

26,898

3,366

13%

 Raw real estate & credit sec. - 'nuff said!

Municipal bond securitizations

111

111

100%

 murky, but should have recoverables. Problem is this is the smallest holding they have.

Other mortgage-backed

0

0

0%

 

Other asset-backed

4,355

1,084

25%

 Credit cards, auto student loans, you get the picture

Power-related

844

250

30%

 Whaaaatt!!!!

Principal-protected notes

4,516

4,353

96%

 This is what is killing the life insurers. They guarantee 100% of the principal of equity backed notes in an equity market that has tanked 50% and is about to take a steep downturn again.

Total

58,369

16,101

27.60%

 
Now imagine all of these crown jewels being stuffed onto the balance sheet and simultaneously marked to market. It appears evident (to me at least) that this admin will be sidestepping the waffling of the weak handed FASB organization (I say this because they succumbed to political pressure on this mark to market thing, they are accountants, not politicians) and forcing the banks to realistically address risk. The only issues left that concern me are a) the not so stressful economic parameters of the stress test (you need stress to stress test) and b) the potential for rife collusion in the PPIP. A) is addressed by releasing the methodology to the public so they can plug in their own realistic numbers (I think, I haven't gone over it in enough detail yet), and b) is address by the admin's enabling of the SIGTARP (the TARP special investigator, who is pulling no punches in his 250 page report, which I will post on a little later). If the admin successfully pulls these together, I personally will consider him to have trounced the Bush admin's 8 years of service in less than 6 months, considering legislation, balls for change, international diplomacy, and (again) the balls to directly tackle this banking mess head on. Conversely, I will be severely disappointed if the admin doesn't fully address the holes pointed out herein. Now, back to the Bloomberg article...
  “The regulators have decided to err on the very cautious side, assuming FASB finalizes the rule and throws $700 billion of risk-adjusted assets into the capital calculation,” said Petrou of Federal Financial Analytics. That change, she said, “makes the test considerably more stringent.”

“We conclude that it will be very, very difficult for any big bank to get out” of the government’s capital assistance program, she added. I concur, wholeheartedely! This is what Bush and Paulson should have been doing instead of curtailing to the banking lobby!

JPMorgan Chase & Co., Bank of America, Citigroup and Wells Fargo & Co. are among the major banks with off-balance-sheet assets, analysts said. Actually, You heard it first, here, at BoomBustBlog!

Share of Market

The 19 banks in the test hold two-thirds of the assets and more than one-half of the loans in the U.S. banking system, the study said.

Regulators used a consistent metric for all the firms to measure how much of an additional capital buffer is needed over standard regulatory ratios of capital to risk-weighted assets, officials said, declining to identify what the measure was.

The Fed officials said supervisors will work with banks to maintain the buffer over time, indicating that firms with high- risk portfolios will face a larger challenge to maintain it.

Regulators used the market shocks of the second half of 2008, when Lehman Brothers Holdings Inc. declared bankruptcy, as the model for testing banks with trading portfolios of $100 billion or more.

Supervisors will weigh how much capital each company holds, its ability to retain earnings over the next few years, future access to private capital and the extent any asset writedowns.

Taxpayer aid for a troubled bank will come from the Treasury’s $700 billion Troubled Asset Relief Program for banks that need a stronger buffer. The Treasury is also open to converting its current preferred shares into common equity, a step that would boost capital levels and reduce banks’ dividend payments.