Using Veritas to Construct the "Per…

29-04-2017 Hits:84626 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:79093 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:78938 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:83426 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:79991 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:82298 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:53272 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:81302 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:81303 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:81110 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:86965 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:84982 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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Since so few people actually read government docs when they are released, I decided to post a summary of the report from the SIGTARP - the TARP special investigator. 

Summary of SIGTARP Report on TARP programs

TARP funds are expected to be deployed under 12 separate programs. Originally, TARP was envisioned to involve purchase, management, and sale of up to $700 billion of "toxic" assets, primarily troubled mortgages and mortgage-backed securities ("MBS"). However, subsequently, the scope of and the funds involved under these programs increased dramatically and the total funds involved, after including Federal Reserve loans, FDIC guarantees, and private money, are expected to reach nearly $3 trillion.

As of March 31, 2009, Treasury has announced the parameters of how $590.4 billion, out of $700 billion TARP funds, would be spent. Out of this, about $328.6 billion has actually been spent as of March 31, 2009. Following table summarizes the details of the 12 programs.

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Brief overview of the 12 programs

 

·         Capital Purchase Program ("CPP"). The total projected TARP funds of $218 billion under CPP will be invested in Qualifying Financial Institutions ("QFIs"), which include private and public U.S.-controlled banks, savings associations, bank holding companies, and certain savings and loan holding companies. As of March 31, 2009, Treasury had purchased $198.8 billion in preferred stock from 532 different QFIs. Out of this, Treasury has agreed to convert $25 billion of preferred stock of Citigroup to common equity subject to conversion of Citigroup's non -Treasury preferred stock of $27.5bn to common equity.

 

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Top 10 Public Recipients of the Capital Purchase Program ("CPP") by Market Cap ($billions)

Company

Market Cap

CPP Funding Received

% of Implied Government Ownership

 

JPMorgan Chase & Co.

99.9

25

25.03%

 

Wells Fargo & Co.

60.4

25

41.39%

 

Goldman Sachs

49

10

20.41%

 

Bank of America

43.7

25

57.21%

Majority Owner? Ask Lewis how he cowtows to contract negotiations with the Fed and the Treasury!

Bank of NY Mellon

32.5

3

9.23%

 

US Bancorp

25.7

6.6

25.68%

 

Morgan Stanley

24.6

10

40.65%

 

American Express

15.8

3.4

21.52%

 

Citigroup

13.9

25

179.86%

How is Citigroup going to pay back nearly 200% of its market cap?

Northern Trust Co.

13.4

1.6

11.94%

 

 

In order for the companies in the yellow to pay back the TARP, they will have to raise a minimum of 20% of their market capitalization. Some will have to raise nearly 200% of their market cap. There is absolutely no way in the world these stocks should be rallying. It is dilutionville for common shareholders of everybody listed above.

A key fact mentioned in the report was that In Feb 2009, the Congressional Oversight Panel ("COP")'s report, on valuation analysis of Treasury's investments, estimated that for every $100 spent on the eight largest CPP transactions of 2008, Treasury received assets worth approximately $78.47.  Talk about ROI! Later in April Congressional Budget Office ("CBO") issued a new estimate of $356 billion as the "ultimate cost to taxpayers" for assistance to financial institutions under TARP. That implies that Treasury will only recover $344 billion, or approximately 49%, of the $700 billion of TARP funds. The returns are marginally better at some slot machines in Atlantic City. Seriously!

Repayment terms under which a TARP recipient could pay back Treasury investments have been relaxed and the new repayment terms provide greater flexibility by removing time restrictions and no longer requiring the bank to demonstrate that it has received private equity investment in proportion to the funds that it seeks to repay.

As of March 31, 2009, Treasury had received approximately $2.5 billion in dividends from preferred stock investment through CPP. Most CPP recipients made a dividend payment on February 15, 2009; however, eight recipients did not declare dividends due to a lack of necessary regulatory and/or shareholder approvals. Be aware that this gives the government voting rights in these companies - a very significant development, indeed!

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Under CPP, Treasury received warrants of common stock of the publicly traded CPP participants. As of March 31, 2009, no warrants of common stock in public companies had been exercised.

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Isn't it too late to be discussing nationalization when the nation's largest banks are already nationalized?!!!!

·         Capital Assistance Program ("CAP"). The mechanics of CAP are similar to those of CPP, and both programs involve injecting capital into the financial system. Under CAP, 19 financial institutions with more than $100 billion in assets will have to participate in a "stress test" to determine if they have enough of a capital buffer to continue lending in worse-than-expected (this is the phrased used by the government, although I fully expect the conditions to come to fore) economic conditions. In addition to the 19 financial institutions participating in the stress test, all qualifying financial institutions may apply to CAP for additional capital without the stress-test requirement.

In lieu of the same, the regulators have created two forward-looking economic scenarios and QFIs will be asked to report their estimates of losses and resources to absorb them using a standardized template. After evaluation, the institutions that are found to need additional capital will have up to six months to raise private capital, after which they will be required to accept Treasury assistance under CAP.

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As was pointed out in my previous articles, we have already pierced and surpassed the 2009 baseline unemployment scenario (currently 8.5% and rising), which pretty much makes the metrics appear to be a joke, unless significantly revised.

Under CAP, Treasury will provide the QFI with additional capital by purchasing new convertible preferred stock ("convertible preferred"). If the QFI already received funds from either the CPP or TIP, the QFI may choose to use CAP to redeem the previously issued preferred stock. CAP allows the QFI effectively to exchange one type of equity for another by permitting the bank to convert preferred shares purchased under CPP to CAP convertible preferred shares, thus increasing the institution's tangible common equity ("TCE"). Treasury expects that most applicants will convert existing TARP preferred shares for CAP convertible preferred shares without seeking additional capital. Be aware that we are talking serious dilution here. The CPP share proportion ranges from 205 to 179% of the current market caps of these companies. However, those receiving additional capital will do so in exchange for convertible preferred shares under CAP.

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The convertible preferred stock issued under CAP will be mandatorily converted into common equity after seven years and this conversion takes place not at the market price, but at a 10% discount to the average price for the 20-day trading period prior to February 9, 2009.

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I'll post part two of this summary and analysis a little later on, along with a rash of granular subscriber content that shows that I have went through many financial companies' books asset by asset and applied current loss rates to them. There should not be too many surprises here.