Using Veritas to Construct the "Per…

29-04-2017 Hits:87208 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:81126 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:80968 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:85442 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:81940 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:84128 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:55191 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:83386 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:83126 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:83016 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:89275 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:86990 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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I recently recieved this question via email, and have put my reply below:

Reggie,

  I would like to know if you thought the stress test results would be too tough, too lenient, or just right, given that (per Bloomberg), some 6 out of the 19 banks need to raise more capital.

  Personally, I think the real number of banks failing the stress tests should be higher, especially because of their credit default swap exposure, etc.

  You are probably the best guy to ask about this (and I don't have a paid subscription so as to read your stress test results).

  What is your estimate about how many of the 19 banks should really fail a real stress test?

 

 

From what I know of the government’s stress testing, the assumptions are too lenient but the methodology is approaching just right. Their assumptions regarding unemployment have already been surpassed, thus is obviously too optimistic, but by bringing off balance sheet debt onto the balance sheet and recognizing the differences in underwriting quality in being just as important (if not more important) than the macro data, they are on the right track. This is probably why the banks are in such protest.

I think the majority of the banks are undercapitalized. Any institution that holds consumer deposits should be extremely low risk, hence sparsely leveraged – as should any institution that could pose a systemic threat. Thus size limits should be instituted for any banks that want to lever up. To take risk, you can’t get too big and you can’t carry consumer deposits – plain and simple. The easiest way to enforce this is to raise reserve requirements, ex. Force those institutions to raise capital or have them divest of their risk taking arms. Those arms aren’t even discernable until you bring off balance sheet assets and liabilities back onto the balance sheet. As you may very well be able to discern, the risks that the banks didn’t want anybody to see are those that they shoved away in special purpose off balance sheet vehicles. If you thought the stuff in plain sight was toxic, you ain't seen nuthin' yet. It is estimated that nearly a trillion US dollars are to come onto the bank’s balance sheets next year. What do you think the real value of those assets are as compared to the value that they are booked at? Subtract those two numbers, multiply the difference by the bank’s leverage factor (6x to 20x), and that is the amount you will have to slice off of the bank’s tangible common equity.

Now you see why the government is forcing the banks to raise capital against their will. Remember, most of these off balance sheet assets were bought/created with leverage using underlying assets that were in one of the biggest bubbles in the history of this country. The bubbles have popped. Just think about your buying Yahoo stock for $170 at the height of the dot.com bubble, using a super margin account that gave you 20x leverage (instead of the usual 2x leverage)… You would lose thousands of percent of any dollar you put into that trade if you look at Yahoo now. Or you could argue that mark to market is unfair because you are planning to hold on to the Yahoo stock until it goes back up to $170… Hint: Yahoo is trading at about $14 now. 

If one didn't know any better, one would think that the UK regulators follow my blog:

Bankers Slammed for 'Astonishing' Financial Mess


A culture of easy reward encouraged British bankers to make an "astonishing mess of the financial system" and regulators need to consider whether banks should be broken up, British politicians said on Friday.