Summary: Bloomberg features what they consider to be the most successful and accurate financial analysts since 2008. Of course, the firm that "Does God's work" is the one that won! Reggie Middleton disagrees, and thinks a blog beat them all! I urge the mainstream media to look beyond the traditional banking centers of influence for analysis. Not only is it soooo old school in a new digital age, but they just might find comparable (if not superior) talent in the blogosphere.

I urge the mainstream media to take a look at more than just the traditional sources when they make these all star rankings...

Bloomberg Regports: Goldman No. 1 at Rating Financial Companies With 38% Right

Daniel Harris, a financial services analyst at Goldman Sachs

Daniel Harris, a financial services analyst at Goldman Sachs Group Inc. [Clean cut, meticulous, ivy league, cookie cutter Goldmanite, Hamptoms in the summer, straight out of the Wall Street handbook - I get it]

... Goldman Sachs and KBW did better than most at figuring out where markets were headed. Goldman is No. 1 and KBW No. 2 in the Bloomberg Markets ranking of the world’s best financial sector research firms. Goldman’s Harris is one of the top three analysts of financial service firms, according to data compiled by Bloomberg.

2,500 Analysts [but no bloggers, which is exactly where this story went awry, IMHO :-)]

The ranking is based on stock recommendations made by more than 2,500 analysts worldwide at 77 research firms and investment banks from January 2008 to July 2010. It looks at the analysts’ “buy,” “hold” and “sell” calls on shares of 90 of the largest banks, diversified financial service companies and insurers in the U.S., Europe and Asia with at least 20 analysts covering them.

Even the best of the firms and individual stock pickers failed to accurately predict the fall and rise of most big financial stocks. Goldman Sachs’s analysts won their No. 1 rank by making 30 accurate calls on the 79 financial stocks they follow, or 38 percent, while KBW’s No. 2 post was based on 27 prescient calls on 78 stocks.

... “It was a very difficult climate to make stock recommendations in,” says S.P. Kothari, a professor of management and deputy dean at Massachusetts Institute of Technology’s Sloan School of Management in Cambridge. “First, you had to predict the downfall of the financial sector in 2008, which only very few people did. Then, you had to change your outlook to catch the recovery -- all within a relatively short period of time.” [So true, at least sort of. The problem was not about changing your outlook, it was about going against the fundamentals to catch manipulated stock price action to capture bank stocks as they shot to the upside in an environment where they were doomed to simply crash back down. Of course, I don't really expect to hear a lot of that in the MSM, but it does peek its nose out every now and then]

Looking for Ideas... Jason Brady, a managing director at Santa Fe, New Mexico- based Thornburg Investment Management, which oversees about $56 billion, says he doesn’t read analyst reports for picks on individual stocks. “It’s unusual to see original thinking in these reports, even though that’s what’s most valuable to me,” he says. “The ones who are different aren’t always right, but they’re frequently the most interesting and thoughtful.” [May I suggest you subscribe to BoomBustBlog, I am the antithesis of the sell side, and have nothing but crazy ideas - that is until a year  has gone past, and people say "hmmmm..."]

Yeah, I bet these guys get paid an awful lot of money for that as well. I hope Bloomberg's editors dont' forget us poor bloggers in the future comparisons. Uhh.... Not that I'm hating or anything (I definitely want to give these Goldman dudes credit where their due), but I think I may have just BLOWN THESE GUYS OUT OF WATER with damn near zero recognition. Come on mainstream media, it's a new day and age and you should know by now there are other places to look for analysis other than the big banks that "Do God's work"! Give the little man some luv! You know times are hard when you get featured as the best of the best with only a 38% success rate! Then again, and admittedly, these last few years were very hard - all jokes aside. Let me recast this Bloomberg article in BoomBust fashion.

Published in BoomBustBlog
Thursday, 14 October 2010 16:33

A Miami-Dade Resident Calls Bull[green]shoots!

A note from a regular BoomBustBlogger,  self-explanatory:

Look, Miami-Dade County Clerk of Courts has a page for foreclosure filing nos.  Lots of Clerks of Courts do.   Miami lists the nos since 2004......here is the page

http://www.miami-dadeclerk.com/property_mortgage_foreclosures.asp

3,206 were filed last month in Miami-Dade County alone.  There are 67 counties in Florida.....let's not forget CA, AZ, NV, etc.

100,000/month?  I cry b.s.   Let's just assume 1,000/month are being filed in each county in Florida.  That is 67,000.   Why is no one reporting the nos. lies??????

Published in BoomBustBlog

Summary: Without an economic incentive to foreclose, it would not be in the bank shareholders best interests to pursue foreclosure even though borrowers clearly defaulted & owe money to the lender. The economics of distressed assets in mortgage and commercial banking are quickly changing. I am quite open to discussing this in the mainstream media if any are interested in hearing the "Truth go Viral!" I want all to keep this in mind when pondering the release of reserves by the banks. My JPM quarterly review is still on its way, and I will share a substantial amount with the public.

About a week or so ago, I posed a controversial question, Is the US Government About to Forgive Mortgage Debt? Let’s Crowdsource Our Way Through a Scenario or Two! In that missive I warned that the recovery rate on many of the repossessed properties was not only at a historic low, but actually approaching zero, save a few blips from .gov bubble blowing and shenanigans by banks in the form of kicking cans down the road. I also said that the time may very well come when there may be no economic incentive for banks to foreclose on certain properties, and that pool of properties may grow larger than many could imagine. I know it is difficult for many to come to grips with this, but the math really ain't that hard.

Even Tyler Durden, whose controversial ZeroHedge site I read and contribute to with a passion, is being too optimistic. Yeah, that's right! You know things are bad when ZeroHedge is too optimistic! In his post "Quantifying The Full Impact Of Foreclosure Gate: Hundreds Of Billions To Start", he assumes there WILL be something to foreclose upon. I assert that in increasingly more common instances, there will be no economic interest to foreclose upon. It is starting at the fringes and the margin, but it is moving closer to the center faster than many think. And the longer, and deeper "Fraudclosure" investigations continue, the closer and faster to the center it will get. This is, of course, not even considering the fact that all of this investigating and shining the light in dark corners will reveal the true elephant in the room (and it is not hastily signed affidavits that can be quickly fixed) which is that many, if not most, high LTV mortgage originations were fraudulent to begin with. That means that not only would it not be cost effective to foreclose, but everybody and their momma will be scrambling to put the fraudulent loans back to the originating banks - see The Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008! for my realistic take on the situation and the expenses that it entails. Yes, the elusive recovery rate is going to be pushed that much lower. Long story short, bank expenses will skyrocket, along with efficiency ratios, which were already increasing to begin with at the same time housing sales economic activity and prices will drop and credit losses will spike. Oh, what fun we have in store.

Here is and excerpt from Is the US Government About to Forgive Mortgage Debt? Let’s Crowdsource Our Way Through a Scenario or Two to refresh your collective memories and then I will run through an example that clearly shows a high LTV property in Nevada that the lender literally has no economic incentive to foreclose upon if there is litigation to be had.

Published in BoomBustBlog

As those that follow me know, I have been bearish on US banks since 2007. That bearish outlook resulted in massive returns ensuing years, just to have nearly half of it returned due to rampant shenanigans and outright fraud. Needless to say, it pissed me off - but it did much more than that. It created a re-bubble before the bubble that was bursting had a chance to fully deflate. As a result, what we have now is one big mess that is getting messier by the minute.

On Friday, July 16th, 2010 I posted "After a Careful Review of JP Morgan’s Earnings Release, I Must Ask – “What the Hell Are Those Boys Over at JP Morgan Thinking????”. The impetus of such was that this bank that all seem to be in awe of was taking a big risk in order to pad accounting earnings for a quarter or two. Below is an excerpt of my thoughts:

Trust me, the collateral behind many more mortgages will continue to depreciate materially as government giveaways and bubble blowing for housing fade!

The delinquency and NPA levels drifted down a bit, but they are still at very high levels. Charge-offs came down but the reduction in provisions has been quite disproportionate bringing down the allowance for loan losses. In 2Q10, the gross charge- offs declined 26.6% (q-o-q) to $6.2 billion (annualized charge off rate – 3.55%) from $8.4 billion in 1Q10 (annualized charge off rate – 4.74%). But the provisions for loan losses were slashed down 51.7% (q-o-q) to $3.4 billion (annualized rate – 1.9%) against $7.0 billion (annualized rate – 3.9%) in 1Q10. Consequently, the allowance for loan losses declined 6.2% (q-o-q) from $35.8 billion from $38.2 billion in 1Q10. Non performing loans and NPAs declined 5.1% (q-o-q) and 4.5% (q-o-q) respectively. Thus, the NPLs and NPAs as % of allowance for loan losses expanded to 45.1% and 50.7%, respectively from 44.6% and 49.8% in 1Q10. Delinquency rates, although moderated a bit, are still at high levels. Credit card – 30+ day delinquency rate was 4.96% and the real estate – 30+ day delinquency rate was 6.88%. The 30+ days delinquency rate for WaMu’s credit impaired portfolio was 27.91%.

While the lower provisioning was able to beef up the bottom line in this quarter, the same is not sustainable in the future as JPM cannot afford to reduce its allowance for loan losses substantially. This is a one shot, blow your wad and go to sleep deal!  There is no margin for error in the future, and one can only assume that the reason this was done was to pad accounting earnings and to take advantage of the extremely short term, and obviously naïve, memory of the financial media and retail/institutional investor. Given the high charge-off rates and delinquency levels, the provisioning will probably need to be bolstered again in the not too distant future.

Published in BoomBustBlog

Now that the Robo-Signing scandals have achieved full notoriety through the media, it is time to address the real issues facing investors in bank stocks. We also believe that the media is staring at the wrong target. Each major media outlet is copying what is popular or what the next outlet broke as a story versus where the true economic risks actually lie - which is essentially the real story and where the meat actually is. This is what is truly at stake - the United States is now at risk of losing its hegemony of the financial capital of the world! Why? Because when we had the chance to put the injured banks to sleep and redirect resources to into new productivity, we instead allowed politics to shovel tax payer capital into zombie institutions as they turned around and paid it right back out as bonuses. As a result, significant capital has been destroyed, the original problem has metastized, and the banks are still in zombie status, but with share prices that are multiples of the actual values of the entities that they allegedly represent - a perfect storm for a market crash that will make 2008 look like a bull rally! For those who feel I am being sensationalist, I refer you to my track record in making such claims.

The Japanese tried to hide massive NPAs in its banking system after a credit fueled bubble burst by sweeping them under a rug for political reasons. Here's a newsflash - it didn't work, it hasn't worked for 20 years, and despite that Japan is embarking on QE v3.3 because it simply doesn't believe that it is not working. Here are the steps the US is consciously taking it its bid to enter a 20 year deflationary spiral like Japan, and may I add that these steps were clearly delineated on BoomBustBlog ONE YEAR ago (Bad CRE, Rotten Home Loans, and the End of US Banking Prominence? Thursday, November 12th, 2009), so no one can say this is a surprise.

Step one: Hide the Truth!

Published in BoomBustBlog

Is it possible for the US Government to choose to forgive mortgage debt? Sounds outrageous? Read on for the legal theory behind this claim and let me know what you think? I thought it was little esoteric as well, but as I looked deeper... Well, I'll let you be the judge.

A lot of attention accrued to Representative Grayson's calling out of foreclosure fraud, and for good reason. The story is absolutely amazing, and kudos to a member of congress that defends his constituency.

[youtube AqnHLDeedVg]

It's not as if other entities have failed to take notice. ZeroHedge has its usual witty commentary regarding the possibility of foreclosure transactions potentially being unwound due to fraudulent foreclosure activity. The NYT ran an article stating that Fitch will look into lowering the credit rating of companies that participated in the submission of inappropriate foreclosure paperwork, which apparently seems to include an awful lot of companies. It goes on to state (as excerpted by Zerohedge):

Fitch Ratings said that Wednesday it was asking mortgage companies about their internal processes for executing foreclosure affidavits. If it finds the processes lacking, Fitch will consider downgrading the company’s rating.

The agency also said if the issue is widespread, the resulting delays and extra costs to foreclose could increase losses related to residential mortgage-backed securities.

Here's the twist. A lawyer who happens to have followed my writings over the years has suggested that most are missing the big picture in focusing on fraudulent foreclosure documents. He contends (and I'm paraphrasing here, these are not my words, per se) "that since the U.S. has ownership interest in many (if not most) delinquent and distressed mortgages, this fact will be counted as policy in litigation. As a consequence it matters A LOT if you can say that your client has a Fifth Amendment Due Process right (or third party beneficiary Federal common law right) to a HAMP modification which is in FACT a minimization of the risk of default (not that flaky 31% number) BECAUSE, among other things, the U.S. has no economic incentive to foreclose". Now, I am no lawyer and thus the legal issues are beyond my domain, but I must admit I found the theory interesting. So, I've decided to crowdsource this one in anticipation that some of the more astute legal minds can shed some light on the validity of the theory. I'll supply the financial stuff in this post, and I'll rely on the legal eagles to peer review the theory.

Published in BoomBustBlog

FHFA authorizes Fannie Mae and Freddie Mac to raise LTV limits to 125%: HUD Press Release

  • Deteriorating consumer finance conditions have made many homeowners fall short of previous HUD stimulus plans

    [caption id="" align="alignleft" width="407" caption="How Big A Bubble Can We Blow with Taxpayer Monies???"][/caption]

  • Homeowners can only qualify if they are current on their mortgage payments, severely effecting the “effectiveness” of the program
  • The FHA continues to swallow up the mortgage origination market, which is no surprise considering the wild, bubblicious loan terms that they are offering

Published in BoomBustBlog

As predicted in May, DB honors its obligation to flush good shareholder capital down the toilet. Deutsche Bank Plans to Raise at Least $12.4 Billion, Bids to Buy Postbank

Sept. 13 (Bloomberg) -- Deutsche Bank AG, Germany’s largest bank, plans to raise at least 9.8 billion euros ($12.5 billion) in its biggest-ever share sale to take over Deutsche Postbank AG and meet stricter capital rules.

Deutsche Bank expects to offer between 24 euros and 25 euros a share in cash to Postbank stockholders to increase its 29.95 percent stake in the lender, the Frankfurt-based bank said yesterday. The company intends to book a charge of about 2.4 billion euros in the third quarter as it marks down the value of its existing Postbank holding.

Chief Executive Officer Josef Ackermann is planning the biggest rights offer in Europe this year as he seeks to reduce Deutsche Bank’s dependence on investment banking by gaining control of Postbank, a consumer lender based in Bonn. The capital increase will also help Deutsche Bank meet new rules from global regulators that more than doubled banks’ capital ratios.

Published in BoomBustBlog

Update: This just in, Anglo Irish Will Be Split Into Two Banks With Portion Wound Down or Sold.Talk about timely articles. The reason the bank was split is actually explained in a few lines down in this post - an attempt to prevent a run on the bank while in run-off mode. Now, do we get to see what's under the hood? Cause if we do, expect more splits from a UK bank near you!

We can only warn about Ireland so many times (It's been done nearly monthly since January), with the latest iteration coming just a week ago in the form of "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!" Ireland has captured headlines TWICE since then. It appear that the mainstream media is catching on, but are they missing the forest because of all of that bark in the way? First, this story from Bloomberg: Ireland Default Swaps Surge to Record on Bank Funding Concerns:

Sept. 8 (Bloomberg) -- The cost of insuring against losses on Irish sovereign debt surged to a record on concern the government will struggle to support the nation’s banks.

Investors are losing confidence in the ability of governments to absorb mounting costs from bank bailouts. Ireland’s cabinet is today discussing the future of nationalized Anglo Irish Bank Corp., which last week said it needs about 25 billion euros ($32 billion) in state funding.

“The problems of Irish banks are seen as the problems of Ireland,” said Zoso Davies, a credit strategist at Barclays Capital in London. “The market is focused on debt coming due at Irish banks and the impact this could have on the Irish government.”

Published in BoomBustBlog

I know many of you don't like to hear I told you so, but if you don't subscribe to the blog you can always take the advice that I proffered last week: "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!". Anyone who truly believes that the current pan-European fiasco is not going to end badly will most assuredly get their feelings hurt. In the following Bloomberg article that ran this morning I took the liberty of adding extended analysis, data, and my rather strong opinion. I query, imagine if a media organization with the reach of Bloomberg took advantage of the unbiased Deep Dive analytical ability of an entity such as BoomBustBlog on a regular basis. There would probably not be a recognized need for sell side research. Just a thought to ponder as you read though Greek Debt Deals Hidden From EU Probed as 400% Yield Gap Shows Bond Doubts

Sept. 8 (Bloomberg) -- Four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt.

“We have not seen the real documents,” Walter Radermacher, head of the European Union’s statistics agency Eurostat, said in a Sept. 2 interview in his Luxembourg office. Eurostat first requested the contracts in February.

Well, 6 months ago in Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!, I illustrated how many all of the countries in the EU played hide the sausage games in order to qualify for what apparently was an unrealistic debt criteria., but since we are picking on Greece right now, let's refresh our collective memories (just remember, everybody else did the Grease, ummm... I mean Greece as well) :

Published in BoomBustBlog