Using Veritas to Construct the "Per…

29-04-2017 Hits:39968 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:40714 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:40125 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:41903 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:41460 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:44020 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:28620 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:42644 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:42586 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:42828 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:44929 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:44293 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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The other shoe is dropping on the banking industry, and market reaction seems muted. This is interesting, for the demands of cash, deviations from expected returns (the technical definition or risk) and murkiness in realistic valuation of assets and liabilities are all converging to a point that bank insiders fear to tread.

First we will go through yesterdays news, then prance through some BoomBustBlog.com exclusives in a separate post...

Several papers citing anonymous sources, stated the FDIC is expected to propose at a board meeting yesterday that banks prepay three years' worth of fees to replenish the deposit insurance fund. The WSJ opined having banks prepay for 2010, 2011 and 2012 could bring between $36 billion and $54 billion to the FDIC, which insures deposits at more than 8,000 banks - the majority of them smaller banks which have been basically underwriting the outsized risks taken by the bigger banks. With this latest development, that statement could not be more true (reference the "related links" list below). The journal said the move "is expected to be met by complaints from the banking industry because of the amount of money that would have to be paid upfront. Still, some might see prepaid assessments as preferable to another option, a one-time charge that wouldn't offset any future obligations to pay into the fund."

FT.com lists prepayment as just one of the options the board will discuss; others include a special assessment on banks or a move to borrow money from the Treasury Department. The ABA posits that there is "growing resistance by the industry as well as some regulators against one-off fees," and under prepayment the banks would not have to recognize the charges until the quarter when each payment was actually due. Wall Street Journal, Financial Times

As for why the big rush to tax the banks, Zero Hedge notes that the FDIC insurance fund is now probably running a deficit, as in negative, in the red, less than zero:

In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon.

Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.

Additionally, the FDIC has now raised its expectation for bank failure costs from $70 billion $100 billion. Feel free to expect this number to continue growing.

Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010.

First Mary Schapiro has failed at her task of "regulating" anything on Wall Street, and now Sheila Bair presides over a newly insolvent institution. Chalk one up to Washington's success at "containing" the crisis. Zero Hedge wishes Ms. Bair all the luck in the world in returning the DIF to its statutory minimum requirement of 1.15% of all insured deposits (a shortfall of a mere hundred billion or so). Maybe she can convert the FDIC to a REIT and have Merrill Lynch do a concurrent IPO and follow-on offering (while Goldman raises it to a Conviction Buy which incorporates the firm's expectations for 10% GDP growth in 2010 coupled with projections for $1,000 per barrel of crude)?

FDIC's full memorandum outlining its failure can be found here.

 

From the well followed strategist/analyst Mr. Rosenburg, via Zerohedge, on his earlier brief on the mischaracterization of Case Shiller indices (btw, you have heard this many times from me, as well):

THE SHADOW HOUSING INVENTORY IS HUGE

The bulls had a field day with the “improved” housing inventory data in the August reports, but what they can’t explain is why it is that prices continued to deflate. That can only mean that at the last price point, there were still more sellers (supply) than buyers (demand). Indeed, the “shadow’” inventory that does not show up in the official data is closer to 7 million housing units (equivalent to two years of supply!) when you add up all the current foreclosures, the homes entering into the foreclosure process and the number of mortgage borrowers who have not made a payment in the past year.

Let’s examine the data (courtesy of the WSJ):

  • The “shadow’” housing inventory in the U.S. is closer to 7 million units (equivalent to two years of supply!)
  • As of July, there were 1.2 million loans that had just entered the foreclosure process.
  • There are an additional 1.5 million existing units making their way through the foreclosure process.
  • And, a further 217,000 homes in which the borrower has not made a mortgage payment in the past year, but the lender has yet to file notice. In other words, 17% of the homes that are a year past due or more are not yet in foreclosure, up from 8% a year ago.

This inventory has yet to hit the market, but it will. So pundits that get excited about two or three months of Case-Shiller data are spending too much time looking out the back window. More deflation is coming in residential real estate — this bear market in housing ain’t over yet. Remember, homes that are foreclosed typically go on to the market at discounts ranging between 10% and 50%.

Amusingly, Rosenberg, also take a quick jab at Jim Grant who is the latest convert to the V-shaped recovery camp. When the dust settles, after all the government stimuli, incentives, subsidies, backstops, and guarantees (all $23 trillion of them), have been exhausted, the pundit landscape sure will look different (and much, much more discredited).

The latest trend in the labour market is a growing shift towards claimants for disability benefits — the number of people that have filed for Social Security disability has surged 23% in the past year; yet another disturbing outcome from the severity of the recession’s impact on the labour market. Also have a read of the somber job market outlook on the front page of the Sunday NYT — U.S. Job Seekers Exceed Openings by Record Ratio. Those economists calling for a V-shaped recovery because the greater the decline, the greater the rebound clearly have no clue as to what role the trauma on the household balance sheet from the record amount of wealth that has evaporated in the past two years, and the trauma on the personal income statement from the lingering strains in the labour market, are going to exert on consumer attitudes and spending going forward. Those that refuse to believe how the nature of this particular asset and credit recession has altered the consumer approach towards the household budget, should really have a read of Clip-and Save Renaissance that made its way onto page B1 of last Thursday’s NYT — coupon usage is up 23% from a year ago and the survey found that the income group that is now using coupons the most are the highest ($70k and up).

 Believe it or not, CNBC actually has a decent source of "on the ground" information on the housing market, in the form of Diana Olick's blog, REality Check. Reference her take on this topic in "Home Price Gains Are Seasonal, Federally Fueled"

I'm not a bear, I'm a realist. Let's get that out first.

Today's headlines from the folks at S&P/Case Shiller are not untrue, they're just not the whole picture. Yes, home prices, in most areas (and by no means everywhere) are no longer in freefall. Some local markets have hit bottom, others are falling less precipitously, and still others are showing some strength.

But if we're going to be forced to spew these national numbers, that the markets seem to crave (for some reason that I generally and specifically don't understand), then we have to take them with not a grain, but a shaker of salt. The top ten and top twenty market composites that the S&P/CS folks report are off their lows that we saw at the end of 2008 and beginning of 2009. Even the year over year numbers show it.

But take a look at the market breakdowns, month to month, which all the bulls tend to push, seasonally adjusted vs. non-seasonally adjusted.

Source:Standard & Poor's and FiservData through July 2009

So here you can see that the gains are moderated quite a bit when seasonally adjusted.

Why?

Because whether we're in a housing boom or bust, home prices always rise in the spring/summer months, due to the type of buyer largely in the market.

Families, i.e. move-up home buyers, looking to close and move over the summer so as not to disrupt school, dominate the market in the spring and summer.

They are, for the most part, buying larger, more expensive homes, and they therefore skew the median home price in their market higher.

In the fall and winter, you tend to see more first-time buyers as well as more single buyers who want smaller, lower-priced homes.

That's just a fact.

A quick note to Ms. Olick:Now the Case Shiller index is not a sloppy piece of work, and uses a matched pair methodology that allegedly minimizes the effects of larger properties skewing the median prices higher. I strongly suspect the seasonality effect has not been properly factored out though, and the Obama tax credit is total distortion that will not be available in the upcoming months unless it is extended, and even if it is it cannot be done indefinitely...

 Relevant links of interest:

  1. The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
  2. Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
  3. As the markets climb on top of one big, incestuous pool of concentrated risk...
  4. Any objective review shows that the big banks are simply too big for the safety of this country
  5. Why hasn't anybody questioned those rosy stress test results now that the facts have played out?
  6. A Must Read: An Independent Look into JP Morgan. This contains the "public preview" document (JPM Public Excerpt of Forensic Analysis SubscriptionJPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb), which is free to download.

For subscribers:

JPM Forensic Report (092209) Final- Retail JPM Forensic Report (092209) Final- Retail 2009-09-24 03:12:17 130.93 Kb

JPM Report (092209) Final - Professional JPM Report (092209) Final - Professional 2009-09-24 03:13:31 550.72 Kb