Reggie Middleton

Reggie Middleton

Resident Contrarian Badass at BoomBustBlog (you can call me Editor-in-Chief)...

Disruptor-in-Chief at Veritaseum.com, where we're ushering the P2P Economy.

 

Citibank

About two weeks ago I answered what was at the time one of the most amateurish reports coming out of the bit money center banks in some time in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing. Well, it appears that there's a contest for the hypocritical hypothesis and Citibank intends to go for the gold, likely toppling JP Morgan's lead. In a nutshell, we have a gaggle of US based banks that have exhibited horrendous risk management, business judgement and trading/investment acumen nearly topple the global financial system, demand (as in ransom money) trillions of dollars of welfare (which they recieved and are still recieving) from the US taxpayer, and still pay out billions of dollars in bonuses and salaried compensation - all the while the US dollar is still safe and sound as the worlds deepest, most liquid currency market not to mention still being the world's reserve currency.

Now, a much, much, much smaller Bitcoin exchange fails after flashing obvious warning signs for months and does not require bailing out by the tax payer or the Federal Reserve (how can I emphasize how big a plus this is for Bitcoin), and bitcoin dips in price for a single evening - rebounding nigh immediately! Citibank and JP Morgan's incompetence threw the entire world into a near depression - and that's with globally collaborative ZIRP, trillion's of dollars of bailouts and the clandestive changing of accounting rules and the morphing if simple  math to make it look like the insolvent were really not so.

Re: Mt. Gox failure -  Would Mt. Gox still be in business today, like JPM and Citi if the Federal Reserve dropped rates to a negative level, FASB authorized the changing of accounting standards to minimize Gox's liabilities and no one at the exchange was held liable for what appeared to be outright fraud, as claimed by the SEC? would there be analysts in Mt. Gox writing silly papers overflowing with hypocritical hypothesis about how XYZ the dollar was dead because a US bank went bust? Probably!

Remember, I turned JP Morgan's alleged research upside down in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing, to wit:

I've worked hard to establish a strong reputation - not only in terms of competence but in terms of integrity. For those who don't know of me, you canview my media apearances and calls as well as my Wikipedia page. You see, my mommy and daddy raised me to appreciate both aspects of success - not only one. With that in mind I'd like to address the recent report from JP Morgan slamming Bitcoin. Just so most know my viewpoint, the typical Bitcoin enthusiast and entrepeneur is primarily technologist leaning, thus may or may not see all of the aspects of the financial side of this new... "thing". In addition, and because of that, the financial guys often get away with some outrageous bullshit that they'd never even try under different circumstances. Let's apply this perspective to JPM's latest FX strategic outlook report, "The Audacity of Bitcoin". I will refute this report, point by point, and in the process make the managing director whose name is on the report look downright ignorant and uneducated. This is not a personal attack or an attempt at sleight (hey, he may be a downright stand-up guy), I am simply calling it as I see it.

Before we get to the report though, I want to address the foolishness of following these "reports" from the big name brand money center banks.

Mainstream media entities such as the Wall Street Journal and Business Insider take the conflicted interest ridden drivel from these investment banks as actual legitimate analysis and actually base their reporting on it. That really gives me pause! Now on to addressing what Citibank claims as espoused through Business Insider, and I quote:

In a new note, Citi currency strategist — and the bank's defacto Bitcoin analyst — Steven Englander basically asks: What's the point of Bitcoin now?

Many of his comments echo our take in the week leading up to Gox's shutdown about how huge a setback this was not only for mainstream Bitcoin adoption, but also for the central tenets that got Bitcoin off the ground in the first place.

But for Englander, the technical glitch that hit not only Gox but other exchanges "seems to have been known for years without the Bitcoin developers instituting a complete fix,"... "So one question is whether the decentralized structure, which is the attraction to many, makes it too cumbersome to enact essential fixes."

"Bitcoin transactions [were] thought to be impregnable and turned out not to be," said Englander. "Earlier security questions had centered around everything except the possibility that there might be a fraudulent transactions record. The imperviousness to fraud was one the big attractions of Bitcoin and the surprise exploitation of a known defect is a setback. Now it looks like just another payments system that has to worry about fraud."

Where am I to start with this? Long story short, this is plain old simple ignorance! Bitcoin is open source software. That is why you get it for free! It's not as if the core Bitcoin development team ran a company and Mt. Gox bought a commercial software package from them with a warranty and represenations. Mt. Gox relied on an open sourced code base and refused to both contribute back to the community and even keep abreast of what was going on in the community. The end result? A problem that was recognized and solved 3 years ago went unseen by Mt. Gox until they were bled of hundreds of million of dollars worth of bitcoin.  JPM acts as if it is the open source communty's responsibility to instruct Mt. Gox on how to write and maintain software when in actuality it was Mt. Gox's responsibility to give back to and monitor the open source community!!! Notice how entities that were paying attention and playing by the open source communities rules were unscathed by this so-called "defect". If I say there is a hole in the ground and I send out a report that there is a hole in the ground, but you don't read that report and continue to walk until you fall into the hole - all the while knowing you gained access to the ground for free, are you going to blame the ground for being imperfect or yourself for ignoring the community that gave you free access when the warned you about the hole and even gave you instructions on how to avoid the hole?

"Bitcoin's market cap on paper by far exceeds that of the competition and that are many Bitcoin holders heavily invested in Bitcoin, so it has a first mover advantage. However as a store of value, its only value is reputational, and recent developments have shaken that reputation."

Go to 1:25 in this video for an answer to the statement above...

 

Business insider goes on to warn of the following risk: "That big banks themselves co-opt the still-relevant technological developments embedded in Bitcoin and junk all the bad parts". Actually, the banks will implement bad parts and junk all the good parts. You see, this is all relative. In general, what's good for you and me is generally bad for the banks, and vice versa. Why do Citibank and JP Morgan harp on the pitfalls of decentralization? It's because the banks are the guys with the centralized servers!!! If you eliminate the need for centralized servers you eliminate the need for banks! 

Why harp on the dangers of peer to peer? Because bank branches will disappear in a heartbeat, as will centralized exchanges and the ability to pack in massive fees and charges unbenknownst to the client, the same fees and charges that fund those oh so many decimillionaire annual bonuses. It means a paycut for Wall Street and Wall Street is known to be vociferous in its attempts to avoid paycuts.

Reference UltraCoin: The Future of Money!!! for a long list of reasons why the banks fear and loathe Bitcoin, and by extension, UltraCoin!

Citibank

About two weeks ago I answered what was at the time one of the most amateurish reports coming out of the bit money center banks in some time in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing. Well, it appears that there's a contest for the hypocritical hypothesis and Citibank intends to go for the gold, likely toppling JP Morgan's lead. In a nutshell, we have a gaggle of US based banks that have exhibited horrendous risk management, business judgement and trading/investment acumen nearly topple the global financial system, demand (as in ransom money) trillions of dollars of welfare (which they recieved and are still recieving) from the US taxpayer, and still pay out billions of dollars in bonuses and salaried compensation - all the while the US dollar is still safe and sound as the worlds deepest, most liquid currency market not to mention still being the world's reserve currency.

Now, a much, much, much smaller Bitcoin exchange fails after flashing obvious warning signs for months and does not require bailing out by the tax payer or the Federal Reserve (how can I emphasize how big a plus this is for Bitcoin), and bitcoin dips in price for a single evening - rebounding nigh immediately! Citibank and JP Morgan's incompetence through the entire world into a near depression - and that's with globally collaborative ZIRP, trillion's of dollars of bailouts and the clandestive changing of accounting rules and the morphing if simple  math to make it look like the insolvent were really not so.

Re: Mt. Gox failure -  Would Mt. Gox still be in business today, like JPM and Citi if the Federal Reserve dropped rates to a negative level, FASB authorized the changing of accounting standards to minimize Gox's liabilities and no one at the exchange was held liable for what appeared to be outright fraud, as claimed by the SEC? would there be analysts in Mt. Gox writing silly papers overflowing with hypocritical hypothesis about how XYZ the dollar was dead because a US bank went bust? Probably!

Remember, I turned JP Morgan's alleged research upside down in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing, to wit:

I've worked hard to establish a strong reputation - not only in terms of competence but in terms of integrity. For those who don't know of me, you canview my media apearances and calls as well as my Wikipedia page. You see, my mommy and daddy raised me to appreciate both aspects of success - not only one. With that in mind I'd like to address the recent report from JP Morgan slamming Bitcoin. Just so most know my viewpoint, the typical Bitcoin enthusiast and entrepeneur is primarily technologist leaning, thus may or may not see all of the aspects of the financial side of this new... "thing". In addition, and because of that, the financial guys often get away with some outrageous bullshit that they'd never even try under different circumstances. Let's apply this perspective to JPM's latest FX strategic outlook report, "The Audacity of Bitcoin". I will refute this report, point by point, and in the process make the managing director whose name is on the report look downright ignorant and uneducated. This is not a personal attack or an attempt at sleight (hey, he may be a downright stand-up guy), I am simply calling it as I see it.

Before we get to the report though, I want to address the foolishness of following these "reports" from the big name brand money center banks.

Mainstream media entities such as the Wall Street Journal and Business Insider take the conflicted interest ridden drivel from these investment banks as actual legitimate analysis and actually base their reporting on it. That really gives me pause! Now on to addressing what Citibank claims as espoused through Business Insider, and I quote:

In a new note, Citi currency strategist — and the bank's defacto Bitcoin analyst — Steven Englander basically asks: What's the point of Bitcoin now?

Many of his comments echo our take in the week leading up to Gox's shutdown about how huge a setback this was not only for mainstream Bitcoin adoption, but also for the central tenets that got Bitcoin off the ground in the first place.

But for Englander, the technical glitch that hit not only Gox but other exchanges "seems to have been known for years without the Bitcoin developers instituting a complete fix,"... "So one question is whether the decentralized structure, which is the attraction to many, makes it too cumbersome to enact essential fixes."

"Bitcoin transactions [were] thought to be impregnable and turned out not to be," said Englander. "Earlier security questions had centered around everything except the possibility that there might be a fraudulent transactions record. The imperviousness to fraud was one the big attractions of Bitcoin and the surprise exploitation of a known defect is a setback. Now it looks like just another payments system that has to worry about fraud."

Where am I to start with this? Long story short, this is plain old simple ignorance! Bitcoin is open source software. That is why you get it for free! It's not as if the core Bitcoin development team ran a company and Mt. Gox bought a commercial software package from them with a warranty and represenations. Mt. Gox relied on an open sourced code base and refused to both contribute back to the community and even keep abreast of what was going on in the community. The end result? A problem that was recognized and solved 3 years ago went unseen by Mt. Gox until they were bled of hundreds of million of dollars worth of bitcoin.  JPM acts as if it is the open source communty's responsibility to instruct Mt. Gox on how to write and maintain software when in actuality it was Mt. Gox's responsibility to give back to and monitor the open source community!!! Notice how entities that were paying attention and playing by the open source communities rules were unscathed by this so-called "defect". If I say there is a hole in the ground and I send out a report that there is a hole in the ground, but you don't read that report and continue to walk until you fall into the hole - all the while knowing you gained access to the ground for free, are you going to blame the ground for being imperfect or yourself for ignoring the community that gave you free access when the warned you about the hole and even gave you instructions on how to avoid the hole?

"Bitcoin's market cap on paper by far exceeds that of the competition and that are many Bitcoin holders heavily invested in Bitcoin, so it has a first mover advantage. However as a store of value, its only value is reputational, and recent developments have shaken that reputation."

Go to 1:25 in this video for an answer to the statement above...

 

Business insider goes on to warn of the following risk: "That big banks themselves co-opt the still-relevant technological developments embedded in Bitcoin and junk all the bad parts". Actually, the banks will implement bad parts and junk all the good parts. You see, this is all relative. In general, what's good for you and me is generally bad for the banks, and vice versa. Why do Citibank and JP Morgan harp on the pitfalls of decentralization? It's because the banks are the guys with the centralized servers!!! If you eliminate the need for centralized servers you eliminate the need for banks! 

Why harp on the dangers of peer to peer? Because bank branches will disappear in a heartbeat, as will centralized exchanges and the ability to pack in massive fees and charges unbenknownst to the client, the same fees and charges that fund those oh so many decimillionaire annual bonuses. It means a paycut for Wall Street and Wall Street is known to be vociferous in its attempts to avoid paycuts.

Reference UltraCoin: The Future of Money!!! for a long list of reasons why the banks fear and loathe Bitcoin, and by extension, UltraCoin!

Citibank

About two weeks ago I answered what was at the time one of the most amateurish reports coming out of the bit money center banks in some time in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing. Well, it appears that there's a contest for the hypocritical hypothesis and Citibank intends to go for the gold, likely toppling JP Morgan's lead. In a nutshell, we have a gaggle of US based banks that have exhibited horrendous risk management, business judgement and trading/investment acumen nearly topple the global financial system, demand (as in ransom money) trillions of dollars of welfare (which they recieved and are still recieving) from the US taxpayer, and still pay out billions of dollars in bonuses and salaried compensation - all the while the US dollar is still safe and sound as the worlds deepest, most liquid currency market not to mention still being the world's reserve currency.

Now, a much, much, much smaller Bitcoin exchange fails after flashing obvious warning signs for months and does not require bailing out by the tax payer or the Federal Reserve (how can I emphasize how big a plus this is for Bitcoin), and bitcoin dips in price for a single evening - rebounding nigh immediately! Citibank and JP Morgan's incompetence through the entire world into a near depression - and that's with globally collaborative ZIRP, trillion's of dollars of bailouts and the clandestive changing of accounting rules and the morphing if simple  math to make it look like the insolvent were really not so.

Re: Mt. Gox failure -  Would Mt. Gox still be in business today, like JPM and Citi if the Federal Reserve dropped rates to a negative level, FASB authorized the changing of accounting standards to minimize Gox's liabilities and no one at the exchange was held liable for what appeared to be outright fraud, as claimed by the SEC? would there be analysts in Mt. Gox writing silly papers overflowing with hypocritical hypothesis about how XYZ the dollar was dead because a US bank went bust? Probably!

Remember, I turned JP Morgan's alleged research upside down in Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing, to wit:

I've worked hard to establish a strong reputation - not only in terms of competence but in terms of integrity. For those who don't know of me, you canview my media apearances and calls as well as my Wikipedia page. You see, my mommy and daddy raised me to appreciate both aspects of success - not only one. With that in mind I'd like to address the recent report from JP Morgan slamming Bitcoin. Just so most know my viewpoint, the typical Bitcoin enthusiast and entrepeneur is primarily technologist leaning, thus may or may not see all of the aspects of the financial side of this new... "thing". In addition, and because of that, the financial guys often get away with some outrageous bullshit that they'd never even try under different circumstances. Let's apply this perspective to JPM's latest FX strategic outlook report, "The Audacity of Bitcoin". I will refute this report, point by point, and in the process make the managing director whose name is on the report look downright ignorant and uneducated. This is not a personal attack or an attempt at sleight (hey, he may be a downright stand-up guy), I am simply calling it as I see it.

Before we get to the report though, I want to address the foolishness of following these "reports" from the big name brand money center banks.

Mainstream media entities such as the Wall Street Journal and Business Insider take the conflicted interest ridden drivel from these investment banks as actual legitimate analysis and actually base their reporting on it. That really gives me pause! Now on to addressing what Citibank claims as espoused through Business Insider, and I quote:

In a new note, Citi currency strategist — and the bank's defacto Bitcoin analyst — Steven Englander basically asks: What's the point of Bitcoin now?

Many of his comments echo our take in the week leading up to Gox's shutdown about how huge a setback this was not only for mainstream Bitcoin adoption, but also for the central tenets that got Bitcoin off the ground in the first place.

But for Englander, the technical glitch that hit not only Gox but other exchanges "seems to have been known for years without the Bitcoin developers instituting a complete fix,"... "So one question is whether the decentralized structure, which is the attraction to many, makes it too cumbersome to enact essential fixes."

"Bitcoin transactions [were] thought to be impregnable and turned out not to be," said Englander. "Earlier security questions had centered around everything except the possibility that there might be a fraudulent transactions record. The imperviousness to fraud was one the big attractions of Bitcoin and the surprise exploitation of a known defect is a setback. Now it looks like just another payments system that has to worry about fraud."

Where am I to start with this? Long story short, this is plain old simple ignorance! Bitcoin is open source software. That is why you get it for free! It's not as if the core Bitcoin development team ran a company and Mt. Gox bought a commercial software package from them with a warranty and represenations. Mt. Gox relied on an open sourced code base and refused to both contribute back to the community and even keep abreast of what was going on in the community. The end result? A problem that was recognized and solved 3 years ago went unseen by Mt. Gox until they were bled of hundreds of million of dollars worth of bitcoin.  JPM acts as if it is the open source communty's responsibility to instruct Mt. Gox on how to write and maintain software when in actuality it was Mt. Gox's responsibility to give back to and monitor the open source community!!! Notice how entities that were paying attention and playing by the open source communities rules were unscathed by this so-called "defect". If I say there is a hole in the ground and I send out a report that there is a hole in the ground, but you don't read that report and continue to walk until you fall into the hole - all the while knowing you gained access to the ground for free, are you going to blame the ground for being imperfect or yourself for ignoring the community that gave you free access when the warned you about the hole and even gave you instructions on how to avoid the hole?

"Bitcoin's market cap on paper by far exceeds that of the competition and that are many Bitcoin holders heavily invested in Bitcoin, so it has a first mover advantage. However as a store of value, its only value is reputational, and recent developments have shaken that reputation."

Go to 1:25 in this video for an answer to the statement above...

 

Business insider goes on to warn of the following risk: "That big banks themselves co-opt the still-relevant technological developments embedded in Bitcoin and junk all the bad parts". Actually, the banks will implement bad parts and junk all the good parts. You see, this is all relative. In general, what's good for you and me is generally bad for the banks, and vice versa. Why do Citibank and JP Morgan harp on the pitfalls of decentralization? It's because the banks are the guys with the centralized servers!!! If you eliminate the need for centralized servers you eliminate the need for banks! 

Why harp on the dangers of peer to peer? Because bank branches will disappear in a heartbeat, as will centralized exchanges and the ability to pack in massive fees and charges unbenknownst to the client, the same fees and charges that fund those oh so many decimillionaire annual bonuses. It means a paycut for Wall Street and Wall Street is known to be vociferous in its attempts to avoid paycuts.

Reference UltraCoin: The Future of Money!!! for a long list of reasons why the banks fear and loathe Bitcoin, and by extension, UltraCoin!

Friday, 21 February 2014 17:47

Facebook Ad Model As A Scam, part 2

Earlier today I educated my readers and subscribers about the true reason Facebook paid $19 Billion for Whatsapp. There's more to this story, though. On December 12th, 2012 I warned "Real Numbers That Show Why Facebook's Ad Model Means Google Will Put It Out Of Business". In essence, I allege that the Facebook ad model is essentially a sham! 

Now, there are a few people who may disagree with me.  I can show you a bunch of videos that I made that support this assertion, or you can view this one below...

And... here's the inevitable "I told you so's"...

I made it clear that those who lost roughly half of their capital at or near the IPO price simply forfeited those funds from not reading BoomBustBlog, and this situation was virtually guaranteed. I felt so strongly about it that I made much of my opinion available for free this time.

Here's where I broke it down on Capital Account

I also happened to do the same on the Max Kesier show...

I discussed Facebook on the Peter Schiff radio show, the Facebook excerpt is below...

Additional Facebook analysis, valuation and commentary.

On Max Keiser, go to the 13:55 marker for more on Facebook...

Double your money by shorting the Street's advice! Once Again!

How the Facebook story got started...

Facebook started its institutional investment life as a very popular, very well known company. Goldman took this story (private) stock and went bananas with it, as meticulously illustrated in the following blog posts:

  1. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
  2. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
  3. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
  4. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
  5. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!

I issued private research to my subscribers while publicly warning that Facebook at, or anywhere near, its IPO price was a blatant bald faced SCAM & RIPOFF!!!

  1. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
  2. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly

As the actual IPO arrived, JP Morgan, Morgan Stanley, Goldman Sachs, etc. piled on the Bullshit, basically espousing how great an investment this was at $38, screaming that this was a once in a lifetime opportunity. Basically, they took the opposite stance of yours truly. And how did that worked out??? BoomBustBlog Challenges Face Ripping Facebook Share Peddlers That Left Muppets Faceless And Nearly 50% Poorer After IPO.

No, Facebook is not stupid for paying $19B for Whatsapp! If they didn’t do it, Google would have!

No, contrary to popular pro-Facebook belief, Whatsapp is not a synergistic buy. Remember, Facebook already has a near identical application (Facebook Messenger) already used by probably hundreds of millions.

So, why did Facebook spend this money (stock)? It’s quite simple and rather obvious, but my competitors in the sell side are remiss in not discussing it... Facebook is DYING as a GROWTH company! My analysis of Facebook's Q1-2013  results read much differently from all of sell side Wall Street's -  The Truth About Facebook That No Media Outlet Or Analyst Has Bothered To Notice:

In my previous warnings of Facebook euphoria, I brought up the topic of growth many times, particularly active user growth. Reference The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1, while remaining cognizant that this was written exactly 1 year ago:

Thus, it is highly unlikely one can legitimately factor in the type of growth needed to justify the current Goldman $50B valuation - particularly when you consider that Facebook's growth is already slowing!

Well, let's see if I had a valid point now that we have clear and convincing historical evidence from which to base our analysis... (click any of these graphics to enlarge to print quality size)c

thumb image008 copythumb image008 copy

Uh huh! Facebook is MOVING BACKWARDS! IT'S LOSING USERS! LOOK OUT BELOW!!!

thumb image014 copythumb image014 copy

At this point, I can't help myself. I MUST point out the literal rippoff that Goldman Sachs pushed as a once in a life time investment a year and a half ago. As excerpted from Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman's Pricing: Here's What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week! while remaining cognizant that this was written exactly 1 year ago...

Just a day or two later I penned Facebook Is Now Relying on Developing Markets For Growth, Is It Working? Let's Delve Into The Numbers...

Facebook is a farce even with the froth taken off of the IPO price. Why? As gleaned fromInternet World Stats...

 image004 copyimage004 copyimage012image012image013image013

These stats are from the 2011-2012 YEAR! Growth has likely slowed more since then! Here's a tidbit for those who don't subscribe that clearly illustrates... When it sounds too good to be true, it's probably not true!

FB IPO Analysis  Valuation Note Page 01FB IPO Analysis Valuation Note Page 01FB IPO Analysis  Valuation Note Page 02FB IPO Analysis Valuation Note Page 02FB IPO Analysis  Valuation Note Page 03FB IPO Analysis Valuation Note Page 03FB IPO Analysis  Valuation Note Page 04FB IPO Analysis Valuation Note Page 04

 

In More Doubts About "Liking" Facebook, I referenced the following infographic from Finance Degree Center:

facebook

As luck would have it, Whatsapp is the fastest growing company (in terms of active users) in the history of technology. Whatsapp also is the messaging market leader in nearly all major developing nations.

So, what Facebook is doing is buying user growth. It’s doing so because…

  • Not only can it not generate said user growth organically anymore, but
  • It is actually losing subscribers

How does Facebook remedy its growth problems? Well, it should be evident at this point, it’s buying the growth! Of course, this begs the question, does a growth company really have to purchase growth? This is a rhetoric question, which leads to this rather painful discovery (posed as a question): If Facebook is no longer a growth company, why doesn’t its valuation reflect that of a rollup instead of a growth company?

If Mr. or Mrs. Market Participant broaches this question, look out belowwwwwwwwww……

Dated Facebook analysis is available to download for all paying subscribers (FB Q4-2012 Analysis & Valuation Note - update with per share valuation). I'm available to discuss this with professional and institutional subscribers via phone or Google+. Click here to subscribe or upgrade.

Cryptocurrencies have been on a tear over the last 2 years, both in terms of mindshare and returns. This is particularly true of the last year, in which Bitcoin (the de facto proxy for cryptocurrencies) has heaved from $13 to $950, making a pit stop at $1200 along the way. This 7,308% return looks to be outrageously delectable to many a speculator and has even caught the eye of an institutional fund or two. The problem is, and what many novice investors have a problem conceptualizing, that astute institutional “investment” funds actually have a problem dipping their toes in the wilding appreciative yet hyper-volatile world that is cryptocurrencies.

The reason is because “investment funds” as opposed to beta chasing “trading” or “hedge" funds seek a measured return on investment. The raw returns that you see spouted for Bitcoin and the various alt.coins are actually not what the smart institutional money is looking for.

Put another way, you tend to get what you pay for. Risk is the price of reward, with risk being defined as deviation from expected return. You nearly never get a reward without bearing some risk to attain said reward. On the flip side, you should always demand a commensurate reward for the risk that you take. Measuring reward without taking into consideration the risk paid to attain such reward is akin to jumping out of the top floor of a 50 story building to revel in the exhilaration of the drop without taking into consideration what happens when you reach ground level. All in all, it tends to end ugly.

My clients are told that if you assumed $1 of risk to reap $1 of reward, then you effectively made nothing from an economic, risk adjusted reward perspective. This is difficult for the layperson to understand since those who reaped said dollar are left holding one dollar of nominal returns which looks, smells and spends like a dollar. They don't seem to get it until that third or fourth go around when they get 30 cents back for the dollar they invested (versus an amount over a dollar, hence a negative return). You see, probabilistically, you can reap more than you sow over the short term simply out of dumb luck. Realistically, the law of averages will catch up to you and eventually (and most likely close to immediately) you will reap what you sow, or... you get what you pay for!

Similarly, if bitcoin investors/traders believed they are doing well when bitcoin jumps from $13 to $950, they may be mistaken. The reason? Bitcoin has a modified beta of roughly 673! That means that it is volatile. Very volatile! More volatile than practically any basket of currencies or stocks you can think of. This volatility means that in a short period of time it's just as easy to be on the losing side of the trade of this asset as it is to be on the winning side. So, you're lucky if you bought at $500 and rode it to $950, but you could have just as easily bought at $1,200 and rode it down to $500.

With these concepts in mind, you should always adjust for risk before attempting to measure reward. By doing that you will find that you can compare disparate assets, ventures and opportunities that have different reward propositions and even different horizons by measuring the risk (or the economic cost) of the investments and then adjusting the actual or expected reward desired to compensate for said risk commensurately.

Notice how, if one were to take this approach, one can see the different risk adjusted returns between the top two cryptocurrencies by market value. Bitcoin is the most popular, but Litecoin is the most profitable - even when fully adjusted for risk.

ridk reward

The UltraCoin team has run these calculations, among many other currencies, on every cryptocurrency with a market value over $1 million. In addition, these currencies have been aggregated to form what we have coined as the "UltraCoin Cryptocurrency Composite Index" - a basket of cryptocurrencies upon which our custom UltraCoin derivatives can trade, hedge, invest and speculate.

These indices and calculations (not to mention a bevy of other calculations to assist in trading) are part and parcel of the UltraCoin client.

CryptoCurrencyComposite Index

The graph below depicts the outrageous raw returns had by holders of bitcoin. It also denotes the extreme volatility experienced therein, particularly from late 2013 onward.CryptoCurrencyComposite Index graphIf one were to place a hurdle rate of required return to compensate for said volatility, the return curve will look somewhat different.CryptoCurrencyComposite Index graph - adjusted

As you can see, all that glitters is not necessarily gold! I will be pushing for the beta release of the UltraCoin client quite soon, quite possibly at the Berlin Bicoin conference. In the meantime, for those of you who have not had a chance to play with the software, here are a few screen shots.

currency transalation errortest 

1Google reported Thursday later afternoon and the early morning traders didn't know what to make of the numbers - with the stock gyrating up and down. The following day, CNBC's 2nd annual stock draft stock picking contest ended. Guess what happened? For the impatient, I can put the video here...

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This is a very educational show put on by Kim Greenhouse of "It's Rainmaking Time". She is one of the very few who eschew the soundbite driven media economy and chooses the long format, deep dive approach. While it may be too long for ADD crowd, it digs deep into a not so simple subject to foster understanding and comprehension. This was a pretty good show with an interesting cast of guests:

  • Reggie Middleton - brash blogger, entrepenurial investor and founder of UltraCoin ZeroTrust financial contracts
  • RootEleven founder, visionary, and Bitcoin programmer Andreas Antonopolous, who will explain why Bitcoin is like "the internet for money".
  • Bitcoin trader and programmer Dave Scotese will provide deep thinking about what makes Bitcoin so important, and why the public should be involved in its development.
  • Sam Guzik, one of the most sophisticated and knowledgeable SEC lawyers regarding crowdfunding and investment, will cut through the hype, misinformation, and wrong perceptions surrounding equity crowdfunding to highlight current SEC conditions and real opportunities in the crowdfunding arena.

This show is over an hour and a half long and I don't want the contet to be avoided simply because of its length, so I have included a hyperlinked menu below to assist in navigating to the topcis of your individual interests.

Bloomberg reports Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, is on track for its largest pretax loss since 2008 after setting aside 3.1 billion pounds more ($5.1 billion) for legal and compensation claims. We will delve into this report in detail, but first a little background so we're all viewing 20/20.

I've been spending a lot of time rebuilding the banking system as software over a cryptocurrency framework. Basically, I'm building a more efficient, more "Trustworthy" financial system. Many are doubtful of these endeavors. I say, don't underestimate the effort. For one, a more efficient, more trustworthy system is sorely needed. Here we are, 7 years after the start of the great financial trainwreck that I'm known for predicting, and I'm still at it doing the same thing to the same industry. This is only possible when there's a structural problem in the industry. A problem that rapid advancements in technology are ripe to solve.

On Thursday, 11 April 2013 I penned, I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets! wherein I clearly illustrated that RBS is materially understating its liabilities AND even went so far as to include links to the SEC and the UK banking regulator so that US/UK taxpayers and investors can notify our erstwhile regulator(s) to the potential of financial shenanigans. The root of the problem is that RBS has materially under-reported its liabilities (in my oh so humble opinion.) Those that stress tested RBS (the same erstwhile professionals that allowed the Irish banks to pass their stress tests 3 months before they started collapsing) apparently overlooked humongous swaths of liabilities. 

The amount of evidence that I produced to back my claims was prodigous...

What happened behind closed doors?

Ulster Bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland. U.S. investors would have had to rely on the contents of The Royal Bank of Scotland's 2008 Annual Accounts which apparently (in my opinion) concealed the existence of the CRO registered charges to the Bank of Ireland.

Ulster Bank RBS charge doc 2 Page 1

Now, back to the Bloomberg article...

The provision includes 1.9 billion pounds for lawsuits and fines tied mostly to the sale of $91 billion of mortgage-backed securities from 2005 to 2007, the lender said yesterday. It follows agreements Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG (UBSN) struck with U.S. regulators to settle claims they didn’t provide adequate disclosure about mortgage-backed debt sold in the housing bubble that preceded the 2008 financial crisis.

Are they referring to claims similar to the ones I made that RBS  bought Ulster Bank full of unrecognized mortgage crap, levered up off it and hid the debt? I strongly suggest my readers brush up on how The Irish Banking Cancer Spreads to the UK.

More than five years after giving RBS the biggest bank bailout in history, the government still hasn’t been able to cut its 80 percent stake.

... “When the crisis broke, the bank was involved in a number of different businesses in multiple countries that have subsequently faced heavy scrutiny by customers and regulators,” McEwan, 56, said in yesterday’s statement. “The scale of the bad decisions during that period means that some problems are still just emerging.”

... The charges led the bank to cut its forecast for its core Tier 1 capital ratio, a measure of financial strength. RBS expects the ratio will be about 11 percent at the end of 2013, or as much as 8.5 percent under the latest rules set by the Basel Committee on Banking Supervision. That’s down from the company’s estimate of 11.6 percent and 9.1 percent in November.

“Fronting up to our past mistakes is very expensive, but RBS is a much stronger bank that can deal with these costs on its own while running a good capital position,” McEwan said on the call. “Dealing with these litigation and conduct issues is essential if we are to move the bank forward.”

Well, I still haven't noticed them come clean on the Ulster Bank charge issue. If they really are going to "Front[ing] up... past mistakes" then they really need to address this, no? If the Ulster Bank charges are included in the Basel capitalization guidelines, then RBS needs a bailout, and needs one Now! It doesn't end their though. On Monday, 20 May 2013 I queried Who is RBS? Royal BS... or the Royal Bank of Scotland, to wit:

"An independent Scotland would have an exceptionally large banking sector compared to the size of its economy - with banking assets of more than 1250 percent of Scottish [gross domestic product] - making it more vulnerable to financial shocks and the volatility of the sector," the Treasury report said on Monday.

The report pointed out Scotland's banking exposure would dwarf that of Iceland and Cyprus, two countries that faced severe banking collapses in recent years. Iceland's banks, for example, had assets equivalent to 880 per cent of GDP, while Cyprus, which faced a banking crisis in March, had total banking assets of around 700 per cent of GDP.

The report as cited by the article then goes on to make more direct comparisons to Cyprus, not unlike I did two months ago, but with Ireland (see As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come). 

"At the end of September 2012, the two largest banks – the Cyprus Popular Bank and Bank of Cyprus – had assets in the region of 210 per cent and 175 per cent of Cyprus's GDP respectively."

"It is worth noting that, if Scotland became independent, its banking sector would be similarly concentrated (with two large players, Bank of Scotland and Royal Bank of Scotland and a number of smaller firms), and that an independent Scotland's domestic banking sector would be likely to be significantly larger than that of Cyprus (assuming no change to firms' domicile arrangements)."

I penned, I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets! wherein I clearly illustrated that RBS is materially understating its liabilities AND even went so far as to include links to the SEC and the UK banking regulator so that US/UK taxpayers and investors can notify our erstwhile regulator(s) to the potential of financial shenanigans. The root of the problem is that RBS has materially under-reported its liabilities (in my oh so humble opinion.) Those that stress tested RBS (the same erstwhile professionals that allowed the Irish banks to pass their stress tests 3 months before they started collapsing) apparently overlooked humongous swaths of liabilities. The charge documents referred to in the aforelinked article are definitively not apparent in the recent bank stress testing’ conducted by the European Banking Authority, at least not in the summary results that the EBA have made available. For those who are still skeptical, I beg thee reference the RBS Stress Test download.

To think, there are actually many who query as to why I seek to make a more efficient financial system...

With the latest advances in technology, I can literally replace large swaths of bank functions with software. Software that doesn't lie, cheat, steal, or screw you for a bonus! Zero Trust software...

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If the RBS/Ulster Bank mortgage-backed secutities would have been traded through UltraCoin, rehyppthecation, double-spending, over-leverage, and thrice pledged assets would have been a thing of the past. These contracts are overollateralized (200%) and use no leverage, yet still hold the promise of significant return, not to mention a mere fraction of the cost of the big bank stuff. Will the dawn of this technology herald the end of fractional reserve banking as we know it?

Let it be known, Wall Street banks' profit margin IS my business model!!!

Here is the next segment in the presentations given at the North American Bitcoin Conference in Miami Beach.