Apple has been a money printing press for the last decade. At the behest of the late Steve Jobs, they have had one key, core ability that no other company has been able to match. No, it definitely wasn't innovation or engineering. It was... the RDF. The Reality Distortion Field! For some reason, when normal people look at Apple hardware or financials, they don't see reality, they see Reality Distooooorrrrtion! But before we get to that, let’s see what all of the smart people in the financial world had to say...

Apple Q1 117 earnigns google search

Published in BoomBustBlog

 As is stated on my website, I am an investor that generates his own independent research. I usually use two teams of analysts to generate fundamental analysis reports and pursue macro research.  These teams consist of consultants, CFAs and forensic CPAs. They often compete head to head, and they are encouraged to come up with their own independent ideas, openly challenge my thesis and findings, and most importantly to challenge each other's work in combination with a direct challenge to my theses, viewpoints and opinions. This creates a competitive, yet open environment where Hubris simply cannot survive, and where you must out your money where your mouth is in terms of backing up your viewpoints with facts and analysis. This is not the type of environment or analysis you can get from a sell side bank or brokerage firm!

I have just uploaded several internal documents illustrating a bull/bear debate we had over DeVry Inc. If you recall, I released a comparison of various companies in this sector along with a brief summary of DeVry. I never released the analytical and valuation work on DeVry, so the valuation portion of this is new to subscribers. All paying subscribers can download the debate here: The Battle of the BoomBustBlog Analysts - DeVry The Battle of the BoomBustBlog Analysts - DeVry 2009-06-09 16:51:13 771.03 Kb

 As is stated on my website, I am an investor that generates his own independent research. I usually use two teams of analysts to generate fundamental analysis reports and pursue macro research.  These teams consist of consultants, CFAs and forensic CPAs. They often compete head to head, and they are encouraged to come up with their own independent ideas, openly challenge my thesis and findings, and most importantly to challenge each other's work in combination with a direct challenge to my theses, viewpoints and opinions. This creates a competitive, yet open environment where Hubris simply cannot survive, and where you must out your money where your mouth is in terms of backing up your viewpoints with facts and analysis. This is not the type of environment or analysis you can get from a sell side bank or brokerage firm!

I have just uploaded several internal documents illustrating a bull/bear debate we had over DeVry Inc. If you recall, I released a comparison of various companies in this sector along with a brief summary of DeVry. I never released the analytical and valuation work on DeVry, so the valuation portion of this is new to subscribers. All paying subscribers can download the debate here: The Battle of the BoomBustBlog Analysts - DeVry The Battle of the BoomBustBlog Analysts - DeVry 2009-06-09 16:51:13 771.03 Kb

As I anticipated, Wells Fargo fails the stress test under all the three active scenarios (base case, optimistic and pessimistic scenarios) by a significant degree and will have to raise capital in order to achieve a Tangible Common Equity (TCE) ratio of 4.0%. The bank's TCE ratio stands at 3.06% which is significantly lower than the prescribed limit of 4.0%. Further, based on our projections, the bank's TCE will likely fall to 2.37% at the end of 2010 after adjusting for losses (both accounting as well as economic losses on account of its significant off-balance sheet exposure towards the QSPE's and SIV's) worth US$64 billion. In the base case scenario, to bring the TCE up to 4%, the bank would require to raise US$23.5 billion. Furthermore, in the pessimistic and optimistic cases, the bank must raise US$23.9 billion and US$22.8 billion respectively. 

Additionally, the bank's Tier 1 Capital stood at 8.28% as of March 31, 2009, which is marginally above the prescribed limit of 8%. However, due to significant off-balance sheet exposure of US$1.8 trillion as of December 31, 2008 and the risk associated with it, the bank Tier 1 capital will likely fall to 7.59% at the end of 2010 and WFC will have to raise significant capital to sustain the loan and lease losses and losses pertaining to off-balance exposure. According to our estimates, in the base case scenario, the bank would have to raise US$5.08 billion. In the pessimistic and optimistic cases, the bank would need to raise US$5.6 billion and US$4.3 billion respectively. Moreover, the deeper recessionary threat necessitates the bank to maintain higher capital. Depending on the asset quality of Wells, we have pegged the Tier 1 Capital to 9% instead of prescribed 8%. As per this measure, the bank would require to raise US$17.6 billion in the base case scenario.  WFC is actually up $1.74 as I type this, 10:41 am EST.

Note: Since leaks are starting to come out, I'll release my findings for the rest. Goldman and American Express can, according to my calculations, clear the 4% TCE hurdle without raising extra capital. I will not have the time to run JP Morgan, but I would not be shocked if it was found that they wouldn't be found to need more.