Using Veritas to Construct the "Per…

29-04-2017 Hits:90746 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:82713 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:82600 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:87109 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:84176 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:85620 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:56726 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:85005 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:84668 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:84535 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:91073 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:88600 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 decided to dedicate some resources into the reason stock prices have diverged so far, and so fast from the underlying fundamentals. The preliminary results of my findings will be released over the next day or two, hopefully. In the meantime, enjoy this precursor.

Market volumes

Volumes in the markets are tapering down and are undermining the strength and sustainability of the recent rally. The average volume of both Dow Jones and S&P 500 in June were below the average volumes (since Jan 2008)

image001.png 

image004.gif

As a matter of fact, you can easily and visually discern from the charts above that there is a clear inverse correlation between volume and index price. The higher the volume, the lower the index goes, the lower the volume the higher the index goes. I attribute this to the observation that most REAL investors realize that there are too many headwinds in the market to truly commit significant long capital. Well, if that is the case, what is causing the stock prices to rise on light volume????

Growth in program trading

There has been a phenomenal surge in program trading over the past one year with program trading accounting for 40.4% of total trading volumes on NYSE for week ended June 19, 2009 against 35.1% in January 2009 and 27.8% for the previous 52 weeks. The growth has been exceptional particularly since the last week of May 2009. This smells quite fishy, after all the last week in May also saw a significant jump in both the S&P and DJIA  on diminished volume.

 

(Average Daily - in mn shares)

 

Current week

 

S&P 500 Index

Buy Programs

Sell Programs

Total Programs

Total NYSE Volume

Program Trading as % of Total NYSE  volumes

Total NYSE Volume (previous 52 Week Avg)

Dec 29-Jan 2, 09

           932

414

366

            779

         2,221

35.1%

23.7%

Jan 5-Jan 9, 09

           890

433

438

            871

         2,660

32.7%

23.7%

Jan 12-Jan 16, 09

           850

508

506

         1,014

         3,034

33.4%

23.7%

Jan 20-Jan 23, 09

           832

520

530

         1,050

         3,305

31.8%

23.7%

Jan 26-Jan 30, 09

           826

435

432

            868

         2,849

30.4%

23.8%

Feb 2-Feb 6, 09

           869

471

454

            924

         3,000

30.8%

23.8%

Feb 9-Feb 13, 09

           827

428

456

            885

         2,916

30.3%

23.9%

Feb 17-Feb 20, 09

           770

547

573

         1,119

         3,434

32.6%

24.3%

Feb 23-Feb 27, 09

           735

606

614

         1,220

         3,728

32.7%

24.0%

Mar 2-Mar 6, 09

           683

633

637

         1,270

         3,853

33.0%

24.1%

Mar 9-Mar 13, 09

           757

589

537

         1,126

         3,659

30.8%

24.3%

Mar 16-Mar 20, 09

           769

704

637

         1,341

         4,112

32.6%

27.0%

Mar 23-Mar 27, 09

           816

535

503

         1,037

         3,549

29.2%

24.5%

Mar 30-Apr 3, 09

           843

566

523

         1,089

         3,344

32.6%

24.6%

Apr 6-Apr 10, 09

           857

482

439

            920

         2,978

30.9%

24.8%

Apr 13-Apr 17, 09

           870

528

489

         1,017

         3,418

29.8%

25.0%

Apr 20-Apr 24, 09

           866

505

460

            965

         3,511

27.5%

24.9%

Apr 27-May 1, 09

           878

437

441

            878

         2,979

29.5%

25.1%

May 4-May 8, 09

           929

507

456

            963

         3,742

25.7%

25.2%

May 11-May 15, 09

           883

465

462

            927

         3,265

28.4%

25.6%

May 18-May 22, 09

           887

387

374

            761

         2,877

26.5%

25.2%

May 26-May 29, 09

           919

556

514

         1,070

         3,173

33.7%

25.3%

June 1-June 5, 09

           940

422

398

            821

         2,901

28.3%

25.4%

June 8-June 12, 09

           946

352

334

            686

         2,233

30.7%

25.5%

June 15-June 19, 09

           921

579

575

         1,155

         2,855

40.4%

27.8%

 

 

image005.png

Influence on market

Since April 6, 2009 when S&P 500 index was at 857 points program trading accounted for 30.9% of total NYSE volumes.  Over the past two months when S&P 500 increased to 921 points program trading has increased to 40.4%. Similarly, the relation between program trading and the S&P index was also witnessed during December, 2008 - February, 2009.  Increase in program trading historically has been a major contributor of increased volatility due to abrupt price changes due caused by automated rule based trading. Widespread use of program trading has been one of the causes for the stock market collapse on October 19, 1987, also referred as Black Monday. However, there are numerous other factors that could explain the increased volatility and it would be difficult to discern the sole impact of program trading on volatility. 

image007.png

Major Players

Goldman Sachs is the largest player in the program trading market space with nearly 20.6% of program trading volumes as of June 19, 2009. Overall, Goldman Sachs program trading volumes alone form a substantial 8.3% of NYSE total volumes, up from 7.0% since 2009 beginning. Although, Goldman Sachs trading volumes still dominate the program trading there has been significant surge in program trading volumes of Deutsche Bank, Morgan Stanley, Barclays and Credit Sussie with 158%, 89%, 152% and 118% increase in program trading volumes.  Deutsche Bank, Morgan Stanley‘s share have increased to 12.3% and 11.6%, respectively for the week ended June 19, 2009 compared with 8.3% and 4.0%, respectively for the week ended January 2, 2009 suggesting that some of the recent rally could be driven by increased trading by these institutions.

 

NYSE Program Trading - 15 Most Active Members Firms (mn shares)

Total

Share of program trading volumes

% of total NYSE volumes (June Mid)

Share of program trading volumes (2009 beg)

Change

June 15-June 19, 2009

 

 

 

 

 

Goldman, Sachs & Co.

1,192

20.6%

8.3%

24.9%

-4.3%

Credit Suisse Securities (USA) LLC.

953

16.5%

6.7%

14.0%

2.5%

Morgan Stanley & Co. Inc.

712

12.3%

5.0%

8.3%

4.0%

Deutsche Bank Securities

667

11.6%

4.7%

4.0%

7.6%

Merrill Lynch, Pierce, Fenner, & Smith, Inc.

436

7.5%

3.1%

12.0%

-4.5%

Barclays Capital Inc

408

7.1%

2.9%

n/a

2.9%

RBC Capital Markets Corp.

310

5.4%

2.2%

6.6%

-1.3%

JP Morgan Securities

219

3.8%

1.5%

5.2%

-1.4%

BNP Paribas Brokerage Services Corp

214

3.7%

1.5%

1.4%

2.3%

Citigroup Global Markets

116

2.0%

0.8%

4.7%

-2.7%

UBS Securities, LLC.

96

1.7%

0.7%

2.9%

-1.2%

SIG Brokerage LP

92

1.6%

0.6%

1.4%

0.2%

Interactive Brokers LLC

72

1.2%

0.5%

n/a

0.5%

SG Americas Securities, LLC

49

0.9%

0.3%

1.2%

-0.4%

CIBC World Markets Corp.

42

0.7%

0.3%

n/a

0.3%

Total for 15 Member Firms

5,577

96.6%

39.1%

 

 

Total for All Firms Reporting

5,773

100.0%

40.4%

 

 

Goldman Sachs program trading

Program trading volumes

% of total NYSE volumes

Dec 29-Jan 2, 09

776

7.0%

Jan 5-Jan 9, 09

847

6.4%

Jan 12-Jan 16, 09

1,092

7.2%

Jan 20-Jan 23, 09

1,049

6.3%

Jan 26-Jan 30, 09

1,056

7.4%

Feb 2-Feb 6, 09

1,048

7.0%

Feb 9-Feb 13, 09

1,119

7.7%

Feb 17-Feb 20, 09

1,152

6.7%

Feb 23-Feb 27, 09

1,604

8.6%

Mar 2-Mar 6, 09

1,561

8.1%

Mar 9-Mar 13, 09

1,427

7.8%

Mar 16-Mar 20, 09

1,378

6.7%

Mar 23-Mar 27, 09

1,360

7.7%

Mar 30-Apr 3, 09

1,423

8.5%

Apr 6-Apr 10, 09

1,042

7.0%

Apr 13-Apr 17, 09

1,235

7.2%

Apr 20-Apr 24, 09

1,178

6.7%

Apr 27-May 1, 09

931

6.2%

May 4-May 8, 09

1,059

5.7%

May 11-May 15, 09

1,008

6.2%

May 18-May 22, 09

866

6.0%

May 26-May 29, 09

871

5.5%

June 1-June 5, 09

1,010

7.0%

June 8-June 12, 09

805

7.2%

June 15-June 19, 09

1,192

8.3%

image009.png

Now, I have warned about Goldman's increased VaR and exposure to trading activities over a year ago (see "Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street"). For those that believe Goldman is invincible in the trading markets, I strongly suggest you query their December 2008 trading performance, which resulted in a big loss. These results somehow became "orphaned", not being included in Q4-08 or Q1-09 results. This was a convenient exercise of hide the sausage, since the December result would have skewed either quarter significantly to the negative. Goldman is now basically a big hedge fund, and would (and should) be valued as such if not for the premium, "mystique" brand name that has been attached to it by those who do not adequate vet the financial statements. I will bring more on this topic tomorrow. In the mean time, I suggest all re-read my missive from April of this year - "Who is the Newest Riskiest Bank on the Street?". I saw this coming a while back.

Maybe readers should send their local elected official a copy of "Newest Riskiest Bank" as well as this article to their fellow taxpayers and elected officials in Congress so all can see what our tax monies have been bailing out and supporting over the last year - the continued and blatant risk taking that was the root cause of this mess to begin with. I pray thee tell me, what happens if Goldman crashes in a programmed trading meltdown??? More taxpayer TARP, bank bailouts, supports and guarantees. Now, what do you think happens if things go well for their trading program? The biggest bonuses in the history of the company, in order to "incentivize" stars to stay. This is absolute nonsense, and the takers of the risk need to be the ones to bear the consequences of said risk, not simply be the sole persons and entities to benefit from the rewards of said risk. I say the taxpayer should share in the Q1 Goldman bonuses, since it was the taxpayers support that kept Goldman alive through Q1 (remember the Decemember loss, the expedited federal bank charter, the debt guarantees, the TARP, the ZIRP, the taking of junk assets as collateral, the TALF, the PPIP, the AIG bailout funds forwarded to GS, and the whole enchilada???). Does anyone really think that Goldman earned those bonuses without government assistance. Now, I feel I should keep my bonus, if I were to get one, because no one gave me $55 billion to keep me in business while I waded through risky mistakes until I found some that paid off! Can Goldman say the same???

 Do not simply follow accounting earnings without taking into consideration the risk involved in generating said earnings. Consider yourself warned!