Tuesday, 31 August 2010 00:41

How Has BoomBustBlog Research Done for the 3 Quarters of 2010?

Crains NY ran a happy, go lucky article today:

The stubbornly dismal economy means at least one thing: an extended stay in the spotlight for a handful of star analysts whose defining characteristic is their extraordinary bearishness. And, of course, their accuracy.

There's Albert Edwards, a London-based analyst from France's Société Générale, who believes the Standard & Poor's 500 will sink to 450, a sickening 57% drop from its current level. There's David Rosenberg, chief economist at Toronto money manager Gluskin Sheff, who warns that deflation is going to pull down the U.S. economy for years.

And then there's the New York star of this gloomy show: Reggie Middleton, a Brooklyn entrepreneur who turned to analyzing global markets after a stint buying and renovating apartments in Fort Greene and Clinton Hill. (See “Prophet of doom,” April 19.)

Bad as things may be for the economy, Mr. Middleton warns that they're poised to get much worse. Prices of real estate, stocks and bonds are all headed for serious falls... Wages will decrease, unemployment will increase. Fun, eh?

...

The culprit, Mr. Middleton says, is Washington. The bank bailouts, nationalization of Fannie Mae and Freddie Mac, and other interventions during two presidencies prevented the market from bottoming out in 2009 like it should have, he says. Now that the economy is weakening again and the heavily indebted U.S. government has fewer rescue options, the reckoning is coming. Markets of all kinds in the United States and Europe will get hit—hard.

“In my opinion, the amount of risk in the system is even higher than in 2008,” he says, adding this rare dash of hope: “2013 might be a good time to start taking a look at buying assets again.”

Mr. Middleton has been startlingly accurate in the past. He forecast the collapse of the housing market in 2007, and in early 2008 warned of the demise of Bear Stearns weeks before it happened. Earlier this year, he said that Ireland's finances were in terrible shape long before Standard & Poor's got around to downgrading that nation's credit rating.

For those of you who don't follow my blog, Mr. Elstein (the article's author) was referring to:

  1. The Housing Market in 2007 (as it turns out, I was actually overoptimistic - and to think that some call me a bear!): Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
  2. Bear Stearns in January 2008 ( 2 months before they popped, while trading in the $180s and still had buy ratings and investment grade AA or better from the ratings agencies, may I add): Is this the Breaking of the Bear? This  was also about the time I got into it with GGP's CFO for calling out their insolvency. He called me names, and then they filed for bankruptcy. Of course, they had an investment grade and buy ratings from the ratings agencies and the sell side: BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for "GGP" for more research).
  3. My views on Ireland, austerity, and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!

Those of you who follow my blog may remember that Crains ran an article earlier this summer as well (see Prophet of Doom!), wherein I wasn't very bullish then, either (or even the summer before that, see Forbes, Going short). I want to be crystal clear here. I am not a perma-bear, bull, or anything of the sort. I'm just your typical brother that has a keen nose for BS and seeks the truth. 2+2=4. It always equals 4. If you are in an investment environment where the number after the "=" sign is greater than 4, you are in a bubble. If the number is less than 4, the market has over-discounted the price of assets. The vast majority of the first decade of the new millennium has seen 2+2=16, and sell side analysts, bankers, brokers, and private funds have been trying to tell us that there is a new math in town. No, my friends. Its the same math, the same story, and the eventually, the end result.

  1. BOOM: the bubble blows high and wide
  2. BUST: the bubble pops and deflates
  3. (this is new) Central banker and policy maker re-BOOM: governments around the globe actually try to reinflate the bubbles of yore before they even finish popping.
  4. BlOG: I get to blog about my investment adventures in taking advantage of egregious policy errors in the greatest macro experiment of mankind. See "The Great Global Macro Experiment, Revisited" for more on this topic.

So, how has my bearishness empirically driven realism fared? Well, after riding the real estate boom up (I told you I wasn't a permabear), since the inception of the blog (2007) until the second quarter of 2009 I knocked the ball out of the park with personal returns pushing nearly 500%, while profitably predicting and shorting the downfall of nearly every major financial, insurance, banking and real estate institution during the period in question (I did miss a few, though). I then gave back half of those profits by underestimating the depth, breadth and ferocity of the government blown bubble 2009. I seriously didn't think our government would attempt to mortgage our collective future to such an extent for the benefit of so few in the present. The losses in the last 3 quarters 2009 hurt, and they hurt a lot! Well, that's what I get for thinking! See Updated 2008 performance, and 2009 Year End Note to BoomBustBlog Readers and Subscribers. for the full performance story and the numbers behind it.

As for 2010, let's recap...

Jauuary and February 2010

I warned in explicit detail, the travails coming for Greece, and by both extension and association, much of western, southern, central and eastern Europe as well. A month or two later, the ratings agencies follow suit (as usual, late to the party). See The Beginning of the Endgame is Coming??? Monday, February 22nd, 2010:

So, Fitch finally get’s around to downgrading the Greek banks. The sovereign debt short is probably a bit crowded right now, and may be due for a squeeze, but the fundamentals and the macro situation still stands. As a matter of fact, I really believe that most investors, speculators, pundits and regulators are actually looking at the wrong sets of risks – hence may truly be surprised when the choco-pudding hits the fan blades.

From Fitch:

Fitch Ratings-Barcelona/London-23 February 2010: Fitch Ratings has today downgraded the Long-term and Short-term Issuer Default Ratings (IDR) of Greece’s four largest banks,  National Bank of Greece (NBG), Alpha Bank  (Alpha), Efg Eurobank Ergasias (Eurobank) and Piraeus Bank (Piraeus) to ‘BBB’ from ‘BBB+’ and ‘F3′ from ‘F2′ respectively. The Outlook on the Long-term IDRs is Negative.

      • Alpha Bank warned about in subscriber reports last week – Check!
      • National Bank of Greece warned about in subscriber report last week – Check!
      • Efg Eurobank Ergasias (Eurobank) warned about in subscriber report last week -Check!
      • Piraeus Bank (Piraeus)  warned about in subscriber report last week -Check

See the entire Pan-European Sovereign Debt Crisis series, for that was (and is) a recurring theme throughout the year. Oh yeah, and for a visual effect...

Practically every stock and bond negatively opined in the entire Pan-European Sovereign Debt Crisis series is down dramatically. I have also included haircut analysis for much of the sovereign debt for this is far from over.

February 2010

I reiterate my warnings about the Golden Boys who, at the time, were believed by the sheeple to be untouchable. See For Those Who Chose Not To Heed My Warning About Buying Products From Name Brand Wall Street Banks, wherein I state explicitly:

This is not a short post, for it is packed with a lot of supporting information, analysis and data. If you are looking for quippy paragraph, soundbyte or quick headline to get an overview of,,, well whatever, click here, or better yet, click here. For everyone else who may be looking for deeper investigative analysis and the unbridled TRUTH for a change, please continue on.

First a little background info. Goldman is supremely overvalued in my opinion. It is even more so considering much of its profit is generated solely from the raping of its clients. I say this holding absolutely no ill will towards Goldman. This is strictly factual. Let’s walk through the evidence, of profit potential, valuation, and the stuff behind some of the value drivers in their business model, like brokerage and investment banking…

Even after the "big Goldman event" pundits held on to that brand name nonsense. See Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look

I invite all who may be new to my blog to peruse the plethora of writings and research from the year (or years) past, for I feel that fundamentals are going to return to these markets, and return in a very big way! There is a deluge of useful information on the site for those who are serious about hardcore, forensic analysis. Although BoomBustBlog is a subscription site, we feature tons of free analysis available to the public. Topics covered for this year include commercial real estate, residential real estate, technology (particularly Apple/Google/Microsoft, which was been quite controversial), investment banks, commercial banks, retail stocks, etc.

The archives are available via drop down menu in the lower left hand corner of the site's left side bar. Directly above the archives is the ability to browse by topic. There is also a search bar in the upper right had corner for textual searching in lieu of browsing.


Last modified on Tuesday, 31 August 2010 08:18

5 comments

  • Comment Link shuttle Tuesday, 31 August 2010 22:18 posted by shuttle

    Hi Reggie - I don't know which I like more the accuracy of your research or your entertaining writing style. Keep up the good work.

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  • Comment Link Reggie Middleton Tuesday, 31 August 2010 12:43 posted by Reggie Middleton

    Thank you very, very much. Heartfelt comments such as that mean a lot. Seriously.

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  • Comment Link whiteshadow Tuesday, 31 August 2010 12:28 posted by whiteshadow

    CONGRATULATIONS Mr. Reggie.

    From the first time I read your blog, I felt you had a uniqueness I had hardly seen. you content are the best and if quarter of the wall street analysts had your way of clear thinking then we could not witness these sad days....
    looking forward to more of your opinion and if anyone deserves much credit..it's you.

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  • Comment Link Reggie Middleton Tuesday, 31 August 2010 11:11 posted by Reggie Middleton

    Thanks, seriously!

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  • Comment Link shaun noll, CFA Tuesday, 31 August 2010 10:37 posted by shaun noll, CFA

    your honesty is rare Reggie, refreshing to see someone not afraid to go against the crowd even when it is not popular to do so, ie: earlier this year.

    I have a feeling that 2h2010 will be all Reggie again though and look forward to watching it unfold!

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