LedgerX's "SOLIDX BITCOIN TRUST" has an approval deadline this March 30th, 2017.If it is approved, Bitcoin is due for one hell of a bump, but...

LedgerX S1 filing for Bitcoin ETF the index pt 3 

Published in BoomBustBlog

 The Winkelvoss ETF application was rejected by the SEC, and bitcoin dropped about 20% in price. I repetitively warned those that followed me that a very low risk buying opportunity will present itself should the SEC deny the ETF application. Like clockwork, instant 30% profit opp. If you were monitoring hte prices and bought in after prices started rising (almost immediately) the buy returned over $250/coin (~30%) for anyone who took my advice.

ETF SEC buy the dip 

Published in BoomBustBlog

For those who haven't been reading me, I am of the belief that Prepaid Legal, a publicly traded company, is actually running a pyramid scheme and a ponzi scheme (potentially illegal, but arguably legal due to the current share buyback laws of the land). They are also employing a self-destructive business (pyramid) model and instead of revamping that model and reinvesting heavily in marketing, they spend money on share buybacks (ponzi) to enrich management who are compensated in stock that is sold directly into the share buyback scheme. 

Wikipedia defines "ponzi " as "any scam that pays early investors returns from the investments of later investors." The share buyback plan]. It defines a pyramid scheme as a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered (in my opinion, this hits PPD business model right on the head). Pyramid schemes are a form of fraudPyramid schemes are illegal in many countries including AlbaniaAustralia,[1] BrazilBulgariaCanadaChina,[2] Colombia,[3] France,GermanyHungaryIran[4]Italy,[5] Japan,[6] MalaysiaMexicoNepal[citation needed], The Netherlands,[7] New Zealand,[8] Norway[9], the Philippines,[10] PolandPortugalRomania,[11] South Africa,[12] Sri Lanka,[13] SwitzerlandThailand,[14] theUnited Kingdom, and the United States.[15] according to the Wikipedia definition.

These types of schemes have existed for at least a century some with variations to hide their true nature and there are people who hold that multilevel marketing, even if it is legal, is nothing more than a pyramid scheme.[16][17][18][19]

A successful pyramid scheme combines a fake yet seemingly credible business with a simple-to-understand yet sophisticated-sounding money-making formula which is used for profit. The essential idea is that the mark, Mr. X, makes only one payment. To start earning, Mr. X has to recruit others like him who will also make one payment each. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the "business" expands.


 
 The "eight-ball" model contains a total of fifteen members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to anarithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15.  No matter how large the model becomes before collapse, approximately 88% of all people will lose.

Such "businesses" seldom involve sales of real products or services to which a monetary value might be easily attached. However, sometimes the "payment" itself may be a non-cash valuable. To enhance credibility, most such scams are well equipped with fake referrals, testimonials, and information. The flaw is that there is no end benefit. The money simply travels up the chain. Only the originator (sometimes called the "pharaoh") and a very few at the top levels of the pyramid make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Individuals at the bottom of the pyramid (those who subscribed to the plan, but were not able to recruit any followers themselves) end up with a deficit. Professor Benjamin Fine, PhD and director of the MS program in mathematics at Fairfield University explains the concept of market saturation as it relates to PPD, which elaborates on the pyramid diagrams above.

They are currently being investigated by the FTC and the SEC, but they are a slippery company. I would hope that the SEC takes notice of the third to the last chart of this review that shows the company, if whose shares are indexed to a fixed point in time, has made absolutely no material gain in value despite using company resources to enrich corporate insiders. As Senator Kaufman said in his recent speech and as excerpted from When the Patina Fades... The Rise and Fall of Goldman Sachs???:

"...fraud and potential criminal conduct were at the heart of the financial crisis".

"transactions as “window dressing,” a nice way of saying they were designed to mislead the public."

... Mr. President, it is high time that we return the rule of law to Wall Street, which has been seriously eroded by the deregulatory mindset that captured our regulatory agencies over the past 30 years...

we must help regulators and other gatekeepers not only by demanding transparency but also by providing clear, enforceable “rules of the road” wherever possible.  That includes studying conduct that may not be illegal now, but that we should nonetheless consider banning or curtailing because it provides too ready a cover for financial wrongdoing. [BINGO!!!]

I addressed this issue when I first wrote about this company last year, see The Flim Flam Scam gets SEC'd - I'm not going to say I told you so, again! and A Demonstration of How PPD Management is Destroying the Company.

A Review of Prepaid Legal's Last Fiscal Quarter  

Falling membership revenues and share buyback remains a key concern for the company 

For those who haven't been reading me, I am of the belief that Prepaid Legal, a publicly traded company, is actually running a pyramid scheme and a ponzi scheme (potentially illegal, but arguably legal due to the current share buyback laws of the land). They are also employing a self-destructive business (pyramid) model and instead of revamping that model and reinvesting heavily in marketing, they spend money on share buybacks (ponzi) to enrich management who are compensated in stock that is sold directly into the share buyback scheme. 

Wikipedia defines "ponzi " as "any scam that pays early investors returns from the investments of later investors." The share buyback plan]. It defines a pyramid scheme as a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered (in my opinion, this hits PPD business model right on the head). Pyramid schemes are a form of fraudPyramid schemes are illegal in many countries including AlbaniaAustralia,[1] BrazilBulgariaCanadaChina,[2] Colombia,[3] France,GermanyHungaryIran[4]Italy,[5] Japan,[6] MalaysiaMexicoNepal[citation needed], The Netherlands,[7] New Zealand,[8] Norway[9], the Philippines,[10] PolandPortugalRomania,[11] South Africa,[12] Sri Lanka,[13] SwitzerlandThailand,[14] theUnited Kingdom, and the United States.[15] according to the Wikipedia definition.

These types of schemes have existed for at least a century some with variations to hide their true nature and there are people who hold that multilevel marketing, even if it is legal, is nothing more than a pyramid scheme.[16][17][18][19]

A successful pyramid scheme combines a fake yet seemingly credible business with a simple-to-understand yet sophisticated-sounding money-making formula which is used for profit. The essential idea is that the mark, Mr. X, makes only one payment. To start earning, Mr. X has to recruit others like him who will also make one payment each. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the "business" expands.


 
 The "eight-ball" model contains a total of fifteen members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to anarithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15.  No matter how large the model becomes before collapse, approximately 88% of all people will lose.

Such "businesses" seldom involve sales of real products or services to which a monetary value might be easily attached. However, sometimes the "payment" itself may be a non-cash valuable. To enhance credibility, most such scams are well equipped with fake referrals, testimonials, and information. The flaw is that there is no end benefit. The money simply travels up the chain. Only the originator (sometimes called the "pharaoh") and a very few at the top levels of the pyramid make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Individuals at the bottom of the pyramid (those who subscribed to the plan, but were not able to recruit any followers themselves) end up with a deficit. Professor Benjamin Fine, PhD and director of the MS program in mathematics at Fairfield University explains the concept of market saturation as it relates to PPD, which elaborates on the pyramid diagrams above.

They are currently being investigated by the FTC and the SEC, but they are a slippery company. I would hope that the SEC takes notice of the third to the last chart of this review that shows the company, if whose shares are indexed to a fixed point in time, has made absolutely no material gain in value despite using company resources to enrich corporate insiders. As Senator Kaufman said in his recent speech and as excerpted from When the Patina Fades... The Rise and Fall of Goldman Sachs???:

"...fraud and potential criminal conduct were at the heart of the financial crisis".

"transactions as “window dressing,” a nice way of saying they were designed to mislead the public."

... Mr. President, it is high time that we return the rule of law to Wall Street, which has been seriously eroded by the deregulatory mindset that captured our regulatory agencies over the past 30 years...

we must help regulators and other gatekeepers not only by demanding transparency but also by providing clear, enforceable “rules of the road” wherever possible.  That includes studying conduct that may not be illegal now, but that we should nonetheless consider banning or curtailing because it provides too ready a cover for financial wrongdoing. [BINGO!!!]

I addressed this issue when I first wrote about this company last year, see The Flim Flam Scam gets SEC'd - I'm not going to say I told you so, again! and A Demonstration of How PPD Management is Destroying the Company.

A Review of Prepaid Legal's Last Fiscal Quarter  

Falling membership revenues and share buyback remains a key concern for the company 

Let's get something straight right off the bat. We all know there is a certain level of fraud sleight of hand in the financial industry. I have called many banks insolvent in the past. Some have pooh-poohed these proclamations, while others have looked in wonder, saying "How the hell did he know that?"

The list above is a small, relevant sampling of at least dozens of similar calls. Trust me, dear reader, what some may see as divine premonition is nothing of the sort. It is definitely not a sign of superior ability, insider info, or heavenly intellect. I would love to consider myself a hyper-intellectual, but alas, it just ain't so and I'm not going to lie to you. The truth of the matter is I sniffed these incongruencies out because  2+2 never did equal 46, and it probably never will either. An objective look at each and every one of these situations shows that none of them added up. In each case, there was someone (or a lot of people) trying to get you to believe that 2=2=46.xxx. They justified it with theses that they alleged were too complicated for the average man to understand (and in business, if that is true, then it is probably just too complicated to work in the long run as well). They pronounced bold new eras, stating "This time is different", "There is a new math" (as if there was something wrong with the old math), etc. and so on and associated bullshit.

Let's get something straight right off the bat. We all know there is a certain level of fraud sleight of hand in the financial industry. I have called many banks insolvent in the past. Some have pooh-poohed these proclamations, while others have looked in wonder, saying "How the hell did he know that?"

The list above is a small, relevant sampling of at least dozens of similar calls. Trust me, dear reader, what some may see as divine premonition is nothing of the sort. It is definitely not a sign of superior ability, insider info, or heavenly intellect. I would love to consider myself a hyper-intellectual, but alas, it just ain't so and I'm not going to lie to you. The truth of the matter is I sniffed these incongruencies out because  2+2 never did equal 46, and it probably never will either. An objective look at each and every one of these situations shows that none of them added up. In each case, there was someone (or a lot of people) trying to get you to believe that 2=2=46.xxx. They justified it with theses that they alleged were too complicated for the average man to understand (and in business, if that is true, then it is probably just too complicated to work in the long run as well). They pronounced bold new eras, stating "This time is different", "There is a new math" (as if there was something wrong with the old math), etc. and so on and associated bullshit.

Wednesday, 06 January 2010 19:00

Methinks It May Be Time for Mr. Geithner to Go

It's going to be pretty hard extracting your metatarsus from your anus this time around. I mean, everyone makes mistakes with taxes, but the multi-billion dollar back door bailout that you tried to hide via EMAIL???!!! Come on, guys. If you're not smarter than that then you definitely won't be able to solve this financial situation thingy... Unless he knew absolutely nothing about the biggest bailout in the history of his country - under his watch, that is...

Jan. 7 (Bloomberg) -- The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show. And I must ask, Why???!!! If it was to be secret, why use email. If it wasn't to be a secret, why'd you do it anyway! Did you assume that there would be de minimus blowback in the form of repercussions?
Wednesday, 06 January 2010 19:00

Methinks It May Be Time for Mr. Geithner to Go

It's going to be pretty hard extracting your metatarsus from your anus this time around. I mean, everyone makes mistakes with taxes, but the multi-billion dollar back door bailout that you tried to hide via EMAIL???!!! Come on, guys. If you're not smarter than that then you definitely won't be able to solve this financial situation thingy... Unless he knew absolutely nothing about the biggest bailout in the history of his country - under his watch, that is...

Jan. 7 (Bloomberg) -- The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show. And I must ask, Why???!!! If it was to be secret, why use email. If it wasn't to be a secret, why'd you do it anyway! Did you assume that there would be de minimus blowback in the form of repercussions?

You've heard me bitch and moan about Goldman for over a year. Their preferential treatment and their extreme risk taking at the expense of the taxpayer is now on record, and not just illustrated by my analysis. Courtesy of ZeroHedge.com, who deserves an award for breaking this story!

Lately the topic of Goldman's VaR has taken on significant prominence, not least because as Zero Hedge disclosed yesterday, it hit a record high. The implications for this were large enough that even Bloomberg picked up on this story. Many readers raised questions of how is it even remotely possible for the company to have a VaR in the low-mid $200 MM ballpark, yet to post a record number of $100MM+ trading days in Q1; Zero Hedge is willing to wager that the upcoming 10-Q release will demonstrate another record number of $100MM+ days in the just closed quarter as well. How is that possible?

The clue may come from a February 5 letter by the Federal Reserve to Goldman CAO Sarah Smith. The letter had come in response to GS requests for "temporary exemptions from the application of certain aspects of the Board's Market Risk Rules for state member banks and bank holding companies and the Board's general risk-based capital rules for bank holding companies." Basically through the end of 2009 Goldman is basically using non-traditional. SEC approved VaR models as can be seen here:

GSGI has requested that (1) through December 31, 2009, GSGI and Bank be permitted to use certain Value-at-Risk ("VaR") models approved by the SEC... to determine their capital requirements for specific risk under the Market Risk Rules; (2) through December 31, 2009, GSGI and Bank be permitted to use methods approved by the SEC to determine their capital requirements under the Market Risk Rules for those trading assets, including distressed debt and restricted stock investments that the SEC did not require to be included in the VaR-based models of GSGI and Bank; and (3) GSGI be allowed to use methods approved by the SEC to calculate risk-based capital requirements for its nonfinancial equity investments that are subject to the Board's Credit Risk Capital Rules.

The letter goes into detail explaining why a bank needs to follow a MRR VaR methodology. Yet what is not made clear is i) why does Goldman need almost a full year of alternative VaR calculation and MRR exemption and ii) what is the protocol for the SEC to enforce VaR compliance when Goldman's ultimate regulator is the Federal Reserve. The exemption raises critical questions not only with regard to the validity of the company's indicate VaR, but also downstreaming capital requirement reports. Zero Hedge would be remiss to point out that a very close relationship between the most critical financial company in the world and the most discredited regulator (SEC) does not bode well for confidence in this critical risk indicator, which as many have pointed out, is clearly the main metric by which to measure not only the performance, but the risk capacity of the world's largest government-backstopped hedge fund. Mr. Canaday, Mr. Van Praag - the floor is, again, yours. In your absence, Zero Hedge will, and encourages it readers to, contact Mr. Homer Hill at the Federal Reserve Bank Of New York at (212) 720-2164 to provide additional clarity on the matter.

The actual letter can be downloaded here - GS VaR Request.pdf.

To add to this is my structured products heroin, Janet Takavoli, on the topic. Be sure to view the whole video. She agrees with me that Goldman employees are not necessarily the best and the brightest, just the best connected.

For those who insist that Goldman is still the best thing since sliced bread, let (again, for the 3rd time) illustrate the premium that you are paying for this pool of extreme taxpayer underwritten hedge fund risk, deteriorating assets and potential manipulation through political back door favors.

gs_premium_history.png

If you consider buying on a spike and respect the price of earnings, keep this chart in mind.

As a matter of fact, even with their new SEC-powered exemption from proper risk reporting, this is still the riskiest quarter they have EVER reported. Just think about what would happen if they weren't so connected and had to report the truth.

gs_risk_throuhg_var.png

If and when adjusted for risk (even just a portion of the risk reported through the back door agreements with the SEC), Goldman is the least profitable it has been in many years, if not ever. Think about it! Now, if we were to add the full VaR number into the equation...

If one were to factor in the extreme multiple that GS is trading at into its risk adjusted return and reconcile it with the regulations coming down the pike (see Bair, Bernanke Want Tougher Curbs on Biggest Banks (Update1) July ...

Federal Reserve officials, is pushing for tougher measures to curb the size and
risk-taking of the nation’s largest financial firms. The FDIC will propose ...), one would think this company should get reigned in. If this company doesn't get reigned in, I would recommend that small retail investors seriously consider the US equity markets seriously rigged beyond one's ability to trust it enough to invest on a equitable level. 

 

You've heard me bitch and moan about Goldman for over a year. Their preferential treatment and their extreme risk taking at the expense of the taxpayer is now on record, and not just illustrated by my analysis. Courtesy of ZeroHedge.com, who deserves an award for breaking this story!

Lately the topic of Goldman's VaR has taken on significant prominence, not least because as Zero Hedge disclosed yesterday, it hit a record high. The implications for this were large enough that even Bloomberg picked up on this story. Many readers raised questions of how is it even remotely possible for the company to have a VaR in the low-mid $200 MM ballpark, yet to post a record number of $100MM+ trading days in Q1; Zero Hedge is willing to wager that the upcoming 10-Q release will demonstrate another record number of $100MM+ days in the just closed quarter as well. How is that possible?

The clue may come from a February 5 letter by the Federal Reserve to Goldman CAO Sarah Smith. The letter had come in response to GS requests for "temporary exemptions from the application of certain aspects of the Board's Market Risk Rules for state member banks and bank holding companies and the Board's general risk-based capital rules for bank holding companies." Basically through the end of 2009 Goldman is basically using non-traditional. SEC approved VaR models as can be seen here:

GSGI has requested that (1) through December 31, 2009, GSGI and Bank be permitted to use certain Value-at-Risk ("VaR") models approved by the SEC... to determine their capital requirements for specific risk under the Market Risk Rules; (2) through December 31, 2009, GSGI and Bank be permitted to use methods approved by the SEC to determine their capital requirements under the Market Risk Rules for those trading assets, including distressed debt and restricted stock investments that the SEC did not require to be included in the VaR-based models of GSGI and Bank; and (3) GSGI be allowed to use methods approved by the SEC to calculate risk-based capital requirements for its nonfinancial equity investments that are subject to the Board's Credit Risk Capital Rules.

The letter goes into detail explaining why a bank needs to follow a MRR VaR methodology. Yet what is not made clear is i) why does Goldman need almost a full year of alternative VaR calculation and MRR exemption and ii) what is the protocol for the SEC to enforce VaR compliance when Goldman's ultimate regulator is the Federal Reserve. The exemption raises critical questions not only with regard to the validity of the company's indicate VaR, but also downstreaming capital requirement reports. Zero Hedge would be remiss to point out that a very close relationship between the most critical financial company in the world and the most discredited regulator (SEC) does not bode well for confidence in this critical risk indicator, which as many have pointed out, is clearly the main metric by which to measure not only the performance, but the risk capacity of the world's largest government-backstopped hedge fund. Mr. Canaday, Mr. Van Praag - the floor is, again, yours. In your absence, Zero Hedge will, and encourages it readers to, contact Mr. Homer Hill at the Federal Reserve Bank Of New York at (212) 720-2164 to provide additional clarity on the matter.

The actual letter can be downloaded here - GS VaR Request.pdf.

To add to this is my structured products heroin, Janet Takavoli, on the topic. Be sure to view the whole video. She agrees with me that Goldman employees are not necessarily the best and the brightest, just the best connected.

For those who insist that Goldman is still the best thing since sliced bread, let (again, for the 3rd time) illustrate the premium that you are paying for this pool of extreme taxpayer underwritten hedge fund risk, deteriorating assets and potential manipulation through political back door favors.

gs_premium_history.png

If you consider buying on a spike and respect the price of earnings, keep this chart in mind.

As a matter of fact, even with their new SEC-powered exemption from proper risk reporting, this is still the riskiest quarter they have EVER reported. Just think about what would happen if they weren't so connected and had to report the truth.

gs_risk_throuhg_var.png

If and when adjusted for risk (even just a portion of the risk reported through the back door agreements with the SEC), Goldman is the least profitable it has been in many years, if not ever. Think about it! Now, if we were to add the full VaR number into the equation...

If one were to factor in the extreme multiple that GS is trading at into its risk adjusted return and reconcile it with the regulations coming down the pike (see Bair, Bernanke Want Tougher Curbs on Biggest Banks (Update1) July ...

Federal Reserve officials, is pushing for tougher measures to curb the size and
risk-taking of the nation’s largest financial firms. The FDIC will propose ...), one would think this company should get reigned in. If this company doesn't get reigned in, I would recommend that small retail investors seriously consider the US equity markets seriously rigged beyond one's ability to trust it enough to invest on a equitable level. 

 

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