Bloomberg reports S&P Downgrades Spain, Citing Region Backtracking on Bank:

Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited euro-region peers’ backtracking on a pledge to severe the link between the sovereign and its banks as it considers a second bailout. The country was lowered two levels to BBB- from BBB+, New York-based S&P said in a statement yesterday. S&P assigned a negative outlook to the nation’s long-term rating and lowered the short-term sovereign level to A-3 from A-2.

The downgrade comes after Spain announced a fifth austerity package in less than a year and published details about stress tests of its banks. Creditworthiness concerns have grown since the government requested as much as 100 billion euros ($129 billion) in European Union aid in June to shore up its lenders and amid signals that the deficit target is in jeopardy.

CNBC adds:

Spain’s credit rating downgrade was necessary because of a deepening recession and the uphill battle the country faces in pushing through an unpopular reform program, Moritz Kraemar, managing director for European Sovereign Ratings at Standard & Poor’s told CNBC Thursday. S&P cut Spain’s credit rating to just one notch above junk late or BBB-minus on Wednesday with a negative outlook — the third cut this year — as the embattled country tries to fight off growing calls for a bailout. Spain expressed surprise at the downgrade claiming it was “unhelpful.”“Politically and socially the reform agenda is very difficult. This recession could keepunemployment up and intensify the social discontent and friction between Madrid and the regional governments,” he said.

Query: Why has this taken so long? Let's do this by the numbers...

Monday, 08 February 2010: I warned of the undeniable storm that was the Pan-European Sovereign Debt Crisis, with a specific note on Spain simply being a bigger Greece!!! This was TWO AND A HALF YEARS AGO!


March 30th, 2010: I forensically explained that Spain was essentially a default waiting to happen, in explicit detail via a report for paying subscribers - File Icon Spain public finances projections_033010

April 27th, 2010: I explicitly warned on Spanish bank sovereign exposure for paying subscribers: File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf and File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

Fast forward roughly TWO YEARS and the rating agencies jump into the mix - yes, all after the fact... I penned S&P Downgrades Spain (After I Did) Two Notches ... as a response:

Of course, we all know how reliable and timely the rating agencies are, right? See Rating Agencies vs Reggie Middleton, Part 3 and the Interesting Documentary on the Power of Rating Agencies, with Reggie Middleton Excerpts. You can see the full video here, but only about half of it is in English. I appear in the following spots: 22:30 and 40:00... You really need to see this video if you haven't for nothing like this will ever get aired in the states, particularly right before presidential elections!!!

spain vs greece

Spain public finances projections 033010 Page 01Spain public finances projections 033010 Page 02Spain public finances projections 033010 Page 03Spain public finances projections 033010 Page 04Spain public finances projections 033010 Page 05Spain public finances projections 033010 Page 06Spain public finances projections 033010 Page 07Spain public finances projections 033010 Page 08spain vs greeceI


made clear that You Have Not Known Pain Until You've Seen The True Borrowing Costs Of Spain... -

Yes, I got carried away with this one... The Economic Bloodstain From Spain's Pain Will Cause European Tears To Rain... 

Let's peruse the first four pages of the report from issued to BoomBustBlog subscribers two years ago to see if this last minute downgrade to effectively junk could have been expedited or foreseen...


To prevent this post from getting too long, I will post the rest of this nearly three year report in my next rant on this topic. Note how this aged document has been more accurate than the rating agencies reports of today... Hmmm!!!!!

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Published in BoomBustBlog

When is the banking system going reboot? Start listening below at 10:40 to about 12:45 (or the whole thing if you want to hear how the Justice Department should take the bad banks down), then read on...

From American Banker:

'Yet Another Bank': One week after New York Attorney General Eric Schneiderman filed a civil case against JPMorgan Chase alleging fraud in how Bear Stearns packaged and sold mortgage-backed securities, Wells Fargo finds itself being sued by the government for nearly a decade's worth of "reckless" mortgage lending. U.S. prosecutors (not affiliated with Schneiderman's mortgage task force, though he has promised more suits are on the way) are seeking "hundreds of millions of dollars" in civil damages from the bank on behalf of the Federal Housing Administration, alleging Wells "made false certifications" about the condition of their mortgage loans so that the government agency would insure them. FHA then had to foot the bill when the bank's alleged "mortgage factory" — Dealbook's interpretation of the complaint — output went belly up. "Yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," United States attorney in Manhattan Preet Bharara said in a (perhaps obvious) statement.

The Times notes the lawsuits are being filed amidst public criticism of the Justice Department's lack of actual criminal action against banks and their executives regarding the housing boom.

Get the f2*k out of here! Really!!!???

Meanwhile, the Post notes the case is particularly problematic for Wells, which "has been hit with a series of civil actions" related to its mortgage business in recent years (and we would add, unlike JPMorgan, can't blame Bear Stearns for its latest problem). The bank is denying the most recent allegations, saying it acted in "good faith and in compliance" with federal rules.

This is what we saw in WFC 5 years ago, before most bothered to take noticw (rerference Doo-Doo bank drill down, part 1 - Wells Fargo - BoomBustBlog):


This stress is real, and is already causing losses in the condo construction and sales markets, retail malls and now office buildings. Please see my primer and series on the Commercial Real Estate Crash and ongoing series of financial shenanigans and excessive debt issues of General Growth Properties for additional information.


Sizeable Real Estate loans exposure in troubled markets:  Wells Fargo had $148 bn loan in 1-4 Family Mortgages (WFC has a high correlation to industry-wide losses) which represented nearly 38% of the banks’ total loan. Out of these loans nearly 51% comprised junior lien mortgage loans (much higher probability of total loss and no recovery)After C&D loans, real estate loans have highest NPAs as proportion of total loans.  In 4Q2007, real estate 1-4 family first mortgage NPAs to total loans stood at nearly 1.91% of total loans with total NPAs of $1.4 bn. In terms of geographic exposure, real estate loans from California and Florida comprised 33% and 4% of total real estate loans (i.e 13% and 2% of WFC’s total loan portfolio).


This research and more  is available to all paying subscribers here, with a full set of charts, tables and graphics: File Icon WFC 1Q10_Review. Pro subscribers can also reference the full forensic report here: WFC Investment Note 22 May 09 - Pro. Retail subscribers should access it through the subscription content link in the main menu, under commercial and investment banks.

As for Jamie's house, as posted on Thursday, 21 June 2012 11:06

Does JPM Stand For "Just Pulling More" Wool Over Analyst's Eyes?

The latest Q2 qualitative observations for JPM are now available for all paying subscribers to download: JPM June 20 2012 Observations. This document contains a few interesting tidbits that, of course, you will get from nowhere else. For instance, did you know that the Q1 2012 financial results have many hidden secrets? We have looked at the Bank’s Q1 2012 financial results and have the following observations:

  • The Bank reported Q1 2012 revenues of $26.7 billion , an increase of $1.5 billion , or 6% , from the prior-year quarter. That sounds decent for a big bank in tough recessionary times, eh? However, the increase was primarily driven by a $1.1 billion benefit from the Washington Mutual bankruptcy settlement. Excluding this benefit, the revenues were almost the same as that in Q1 2011. With flat revenues like these, just imagine what could happen to the bottom line when a multi-billion dollar trading loss occurs.
  • The Bank had booked a loss on fair value adjustment of Mortgage Service Rights (MSR) in Q1 2011 of $1.1 billion. Hey, you know they just don't make those ephemeral, totally contrived 2nd order derivative products like they used to, eh?

Excluding the effect of the MSR loss along with the impact of gain from Washington Mutual bankruptcy, the bank’s Q1 2012 revenues actually decreased compared to Q1 2011.

Combine these secrets, derivative trading (oops, I mean hedging) losses and that bland ZIRP sauce that sucks profits in an increasingly expensive compensation landscape and you'll get one hell of a safe return for your 401k, right Mr Bove, et. al.? 

From the 2009 BoomBustBlog "I told you so" archives...

To wit regarding JP Morgan, on September 18th 2009 I penned the only true Independent Look into JP Morgan that I know of. It went a little something like this:

Click graph to enlarge


Cute graphic above, eh? There is plenty of this in the public preview. When considering the staggering level of derivatives employed by JPM, it is frightening to even consider the fact that the quality of JPM's derivative exposure is even worse than Bear Stearns and Lehman‘s derivative portfolio just prior to their fall. Total net derivative exposure rated below BBB and below for JP Morgan currently stands at 35.4% while the same stood at 17.0% for Bear Stearns (February 2008) and 9.2% for Lehman (May 2008). We all know what happened to Bear Stearns and Lehman Brothers, don't we??? I warned all about Bear Stearns (Is this the Breaking of the Bear?: On Sunday, 27 January 2008) and Lehman ("Is Lehman really a lemming in disguise?": On February 20th, 2008) months before their collapse by taking a close, unbiased look at their balance sheet. Both of these companies were rated investment grade at the time, just like "you know who". Now, I am not saying JPM is about to collapse, since it is one of the anointed ones chosen by the government and guaranteed not to fail - unlike Bear Stearns and Lehman Brothers, and it is (after all) investment grade rated. Who would you put your faith in, the big ratings agencies or your favorite blogger? Then again, if it acts like a duck, walks like a duck, and quacks like a duck, is it a chicken??? I'll leave the rest up for my readers to decide. 

This public preview is the culmination of several investigative posts that I have made that have led me to look more closely into the big money center banks. It all started with a hunch that JPM wasn't marking their WaMu portfolio acquisition accurately to market prices (see Is JP Morgan Taking Realistic Marks on its WaMu Portfolio Purchase? Doubtful! ), which would very well have rendered them insolvent...

... You can download the public preview here. If you find it to be of interest or insightful, feel free to distribute it (intact) as you wish. JPM Public Excerpt of Forensic Analysis Subscription JPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb

Recent Articles on JPM

Who Will Be The Next JPM? Simply Review The BoomBustBlog Archives For The Answer

Who Caused JP Morgan's Big Derivative Bust? The Shocker - Ben Bernanke!!!

Published in BoomBustBlog
Tuesday, 28 August 2012 10:05

European Bank Run Watch: Spaniard Edition

As part of my ongoing series which I started in January of 2010 - Pan-European sovereign debt crisis, I detailed the rapidly developing financial malaise in Europe, detailing the risk to the larger more respected western European nations as well as their perceived profligate brethren to the south. One name popped up that analysts and media failed to harp on... Spain - at least back then. Now, people are wondering how Spain will handle its new found (at least to non-BoomBustBlog subscribers) funding crisis. To wit, and as excerpted from The Spain Pain Will Not Wane:

Professional subscribers can now actually download the original Spanish Bond Haircut Model that we used to calculate loss scenarios - Spain maturity extension_010610 (The Man's conflicted copy). Despite the fact I was probably the most realistically bearish out of the bunch, things have actually gotten materially worse since this model was constructed two years ago, hence it can use a refresh. Alas, it is still quite useful.

In the general subscriber document Spain public finances projections_033010, the first four (or 12) pages basically outline the gist of the Spanish problem today, to wit:





The stress caused by Spain breaking the central bank will bring to full fruition the theory behind our European Banking and Insurance research from the last few quarters. All would do well to remember (and re-read, if need be),

This research, although over 2 years old, has proved to be quite useful and prophetic, till this very day. Ask the editors at CNBC as they ran this story: Spain Recession Deepens as Austerity Weighs

Spain's economy shrank further in the second quarter of the year and a slump in domestic spending accelerated, signaling a protracted recession as the country presses on with efforts to slash its public deficit.

Spain's economy fell back into recession in the first quarter of the year, when output fell 0.3 percent, and government estimates show GDP will probably fall for this year and next year as it pushes through further measures aimed at slashing a bloated deficit.Gross domestic product fell by 0.4 percent in the second quarter of the year, according to final data that confirmed a preliminary reading. But on an annual basis it dropped by 1.3 percent, worse than initial estimates of 1.0 percent.

The data came a day after Spain said its economy performed less well than expected in both of the last two years.

On Tuesday, the National Statistics Institute, INE, also revised down 2011 fourth quarter GDP to -0.5 percent from -0.3 percent.

Close to record high borrowing costs and an economy showing little sign of picking up any time soon is nudging Spain closer to calling for a European bailout, which analysts say is only a matter of time.

Those that follow me know that I have been warning on Europe and its banking system years before the sell side and mainstream financial media (reference the Pan-European Sovereign Debt Crisis series).

Well, fast forward to today's CNBC headlines and you get: Spaniards Pull More Money Out of Banks in July. What a surprise, eh? As excerpted:

A rush by consumers and firms to pull their money out of Spanish banks intensified in July, with private sector deposits falling almost 5 percent as Spain was sucked into the centre of the euro zone debt crisis. Private-sector deposits at Spanish banks fell to 1.509 trillion euros at end-July from 1.583 trillion in the previous month.

Hmmm!!! How's that bank run thingy work again? Oh yeah, as excerpted from the prophetic piece from July 23, 2011 - The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs! which detailed for my readers and subscribers the mechanics of the modern day bank run, particular as I see (saw) it occurring in Europe.



 Related links:

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Published in BoomBustBlog
Tuesday, 28 August 2012 09:48

European Bank Run Watch: Swiss Edition

 On July 23, 2011 I penned The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs! which detailed for my readers and subscribers the mechanics of the modern day bank run, particular as I see (saw) it occurring in Europe.


Those that follow me know that I have been warning on Europe and its banking system years before the sell side and mainstream financial media (reference the Pan-European Sovereign Debt Crisis series).

 A reader has convinced me to consult with him on a specific situation, regarding overseas monies and the (lack of) safety of those funds, which prompted me to dig up the Sovereign Contagion Model that we developed n 2010. In a nutshell, the Swiss banking industry was built upon impenetrable bank privacy for high net worth clients. Once the US decided it needed to boost its tax revenues during hard times, it literally collapse the Swiss hegemony in secret banking and left that banking industry to compete in actual banking versus asset concealment. This left Swiss banks naked, for they don't appear to me to truly be able to compete aggressively and successfully in other areas. 

Add to this mix potential contagion issues for the Swiss banking industry due to the fact that Switzerland has a veritable cornucopia of exposure all over the soon (if not already) serial recession ridden world, and well...

The first chart is raw contagion exposure as a % of GDP. The 2nd chart is the same exposure ran through our “reality” model. Food for thought.

The BoomBustBlog Sovereign Contagion Model

Nearly every MSM analysts roundup attempts to speculate on who may be next in the contagion. We believe we can provide the road map, and to date we have been quite accurate. Most analysis looks at gross claims between countries, which of course can be very illuminating, but also tends to leave out many salient points and important risks/exposures.

Description: foreign claims of PIIGSforeign claims of PIIGSforeign claims of PIIGS

In order to derive more meaningful conclusions about the risk emanating from the cross border exposures, it is essential to closely scrutinize the geographical break down of the total exposure as well as the level of risk surrounding each component. We have therefore developed a Sovereign Contagion model which aims to quantify the amount of risk weighted foreign claims and contingent exposure for major developed countries including major European countries, the US, Japan and Asia major.

image002 copy

I.          Summary of the methodology

·         We have followed a bottom-up approach wherein we have first identified the countries/regions with high financial risk either owing to rising sovereign risk (ballooning government debt and fiscal deficit) or structural issues including remnants from the asset bubble collapse, declining GDP, rising unemployment, current account deficits, etc. For the purpose of our analysis, we have selected PIIGS, CEE, Middle East (UAE and Kuwait), China and closely related countries (Korea and Malaysia), the US and UK as the trigger points of the financial risk dissemination across the analysed developed countries.

·         In order to quantify the financial risk emanating in the selected regions (trigger points), we looked into the probability of the risk event happening due to three factors - a) government default b) private sector default c) social unrest. The probabilities for each factor were arrived on the basis of a number of variables determining the relative weakness of the country. The aggregate risk event probability for each country (trigger point) is the average of the risk event probability due to the three factors.

·         Foreign claims of the developed countries against the trigger point countries were taken as the relevant exposure. The exposures of each developed country were expressed as % of its respective GDP in order to build a relative scale for inter-country comparison.

·         The risk event probability of the trigger point countries was multiplied by the respective exposure of the developed countries to arrive at the total risk weighted exposure of each developed country.

·         Description: File Icon Sovereign Contagion Model - Retail - contains introduction, methodology summary, and findings

·         Description: File Icon Sovereign Contagion Model - Pro & Institutional - contains all of the above as well as a very detailed methodology map that explains what went into the model across dozens of countries.

The bank run in other European nations:


Related Pan-European Sovereign Risk Non-bank Subscription Research Archives

·         Ireland public finances projections_040710

·         Spain public finances projections_033010

·         UK Public Finances March 2010

·         Italy public finances projection

·         Greece Public Finances Projections

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Published in BoomBustBlog - The stock market rallied on news the European debt crisis is on its way to being fixed, but is it really? Not a chance, says today's guest. Reggie Middleton of says, "Europe is insolvent," and nothing is fixed. Middleton contends, "Collapse in Europe is absolutely unavoidable. It's a foregone conclusion." Why should you listen to this entrepreneurial investor? He has made many stunning calls. He said Bear Stearns was insolvent when its stock was trading for well over $100 per share. He warned about Lehman Brothers and predicted the financial crisis of 2008 long before they happened. Now, he says, "Europe is coming to the end of the road very soon," and a "system crash is the only way to fix the problem." Greg Hunter of goes "One-on-One" with Reggie Middleton.

Published in BoomBustBlog

Below is a graphic from 2 weeks ago... 

FB Sep 21 12 18 puts

Here's a snapshot of the situation as of today...

fb sep 12 18 puts

4x to 6x return on your money and all you had to do was follow BoomBustBlog in betting against the sell side salesmen of the Street. Hmmmm.... CNBC runs the following headlines today:

 I made it clear that this sitaution 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, valuationa and commentary.

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

It's not just the Facebook IPO, either. I warned heavily that snake oil salesman were out to get you with the Groupon offering as well, as I posted earlier this week - Muppets Get MASHED Once Again - Groupon …. Here's what the situation looks like graphically as of today...

grpn oct 12 4 puts

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

Here is a full year of free blog posts and paid research material warning that ANYBODY following the lead of Goldman, Morgan Stanely and JP Morgan on the Facebook offereing would get their Face(book)s RIPPED!!! Could you imagine me on a reality TV show based on this stuff??? Well, it's coming...

  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!
  6. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
  7. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly
  8. On Top Of The 2x-10x Return Had Off Of BoomBustBlog Facebook Research, Our Models Show How Much More Is Available...
  9. Is Time For Facebook Investors To Literally Face the Book (Value)?
  10. Facebook Bubble Blowing Justification Exercises Commence Today
  11. Facebook Options Are Now Trading, Or At Least The PUTS Are!
  12. Reggie Middleton breaks down "Muppetology," Face Ripping IPO's, and the Chinese Wall!
  13. Facebooking The Chinese Wall: How A Blog Has Outperformed Wall Street For 5 Yrs
  14. Why Shouldn't Practitioners Of Muppetology Get Swallowed In A Facebook IPO Class Action Suit?
  15. Shorting Federal Facebook Notes Are Not Allowed Today ?
  16. As I Promised Last Year, Facebook Is Being Proven To Be Overhyped and Overpriced!

It would seem that Facebook Finally Faces The Fact Of BoomBustBlog Analsysis. Professional and institutional BoomBustBlog subscribers have access to a simplified unlocked version of the valuation model used for this report, available for immediate download - Facebook Valuation Model 08Feb2012. It is strongly recommended that said subscribers download and input their own assumptions into said model in order for confident preparation before the IPO launch! I just nominally input some very generous numbers and the best case scenario chart (see the chart tab after your own individual inputs) is quite revealing, indeed! The full forensic opinion is available to all subscribers here FaceBook IPO & Valuation Note Update. It is recommended that subscribers (click here to subscribe) also review the original analyses (file iconFB note final 01/11/2011).

Published in BoomBustBlog

Last weak I posted a mail from a reader's rant on FICO (see Fair  Isaac May Get Treated Unfairly When…), along with our own take on the on the situation (subscribers see FICO Note). Well, said BoomBustBlogger is back with some more "unfair" treatment of Fair Isaac!

Dear Reggie,

Did you know it was Fannie who advised other banks to use FICO (back in 1995 I think)? That did not work too well.

I think that the FICO score is actually hollow somewhat, given that in 2006 the Median FICO score was 723 and deteriorating much since 2000 and not signaling an impeding crisis.

According to a Fitch study, the accuracy of FICO in predicting delinquency has diminished in recent years. In 2001 there was an average 31-point difference in the FICO score between borrowers who had defaulted and those who paid on time. By 2006 the difference was only 10 points. The bigger picture is that a massive collapse of lending can occur while all the lenders have used FICO, so what is the value proposition of using the scoring? I am known to ask annoying stupid question in my firm…

I think that FICO wasted cash on the stock buy back, it borrows at 6.1% and bought the stock at around 6 Free Cash Flow yield. Granted the cost of debt is pre-tax, but the arbitrage is poor, I think clearly it was a pump-so-the-management-can-dump scheme. This is the consumer picture in context, FICO was riding the consumer leverage bubble.

credit bubble 07

This is the revenue picture skewed since 2002 because of housing bubble. You can clearly see the take-off in revenues due to the housing bubble starting in 2002.

revenues pumped by real estate bubble

The recent beat of earnings is due the last calendar quarter of 2011 (when the stock buy-back was announced), 7 million of operating profit were due to slashing R&D, so earnings are up but if you slash R&D how do you grow? That should shield a compression of multiple not an expansion of those. Further the tools is more lumpy and not recurring, while the score business (recurring is flat).

So the latest quarter was actually showing EBIT down slightly in nominal dollars (down adjusted to inflation) YoY and EBIT margin down too YoY for same quarter, so the slashing of R&D did not result in higher margins YoY on the quarter. So you have probably 150 EBIT normalized excluding the one time R&D slashing. But the tools sales will bring volatility on teh downside in the downturn, those have been the reason for growing sales a bit, yet lower earnings, in the downturn those lumpy components should shrink. While the last 30 years was consumer leverage. Unlike 1929 where the leverage was on corporation this levered cycled falls squarely on the consumer and the Gov. The company trades at 13 Times EV/ Normalized EBIT which given the headwinds of necessary deleveraging, you might not want to pay more than 6-7 times, and the insiders know it and have sold into the share buyback giving 0 credibility to this buyback.

Now if you do not listen to the Fed which says that credit card conditions are easing (Fed is full of hot air and check from here is what they have to say. First the rate has been increasing in the last 2 years, so there is no easier credit for consumers. But then credit card companies are retrenching their offers.

If you read August 1st weekly report, here what they say:  (Would you send me your screen on consumer discretionary as a barter of idea?, even the abbreviate version without analysis that would be a fair trade of idea.)

Issuers also cut back on credit card mailings. The lack of movement comes at a time when issuers have also been pulling back on mailing new credit card offers to consumers. Prior to the recession, issuers flooded consumers' mailboxes with card offers and aggressively sought out new customers with a wide variety of credit scores. However, in 2009, issuers slashed the number of card offers they mailed by nearly two-thirds and primarily concentrated the offers they did send on consumers with excellent credit, say industry analysts. Since then, credit card mailings have yet to bounce back to pre-recession levels, according to data from the market research firm Mintel Comperemedia. Issuers did ramp up the number of card offers they sent in 2010 and 2011 and even began to send more offers to consumers with lower credit scores. However, issuers have since cut back significantly, say analysts at the international financial services firm Credit Suisse.
Citing research from Mintel Comperemedia, Credit Suisse analysts say that the number of credit card offers that consumers received in June is down by 43 percent, compared to the same time last year. June also marks the fourth month since January that the number of credit card mailings sent to consumers has declined.
The lower level of credit card mailings in 2012 contrasts significantly with 2011. Then, issuers sought out new customers aggressively, mailing out a total of 4.8 billion credit card offers throughout the year. By contrast, issuers have sent out just 1.5 billion offers in 2012, and analysts at Credit Suisse estimate that the total number of offers sent out by the end of the year will total just 3.5 billion.
If analysts' estimates hold out, then the number of credit card offers mailed in 2012 will be just slightly more than the number of credit card offers that were mailed in 2010. During that time, issuers were still just shaking off the effects of the recession and contending with new financial regulation, including the Credit CARD Act of 2009. Now, issuers are contending with a series of banking scandals, a financial crisis in Europe and a painfully slow U.S. economic recovery.


Hope to exchange some more interesting ideas,


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Published in BoomBustBlog

CNBC reports that Groupon [GRPN  5.815 -1.735  (-22.98%)] plunged more than 20 percent after the daily-deals site missed sales expectations and handed in a cautious earnings outlook, due to Europe's weak economy and currency fluctuations. Shares have already plunged nearly 70 percent since the company's IPO last November. At least eight brokerages slashed their price targets on the firm.

You know that you really don't have to follow eight brokerages to make money on Groupon. All you really had to do was subscribe to BoomBustBlog, reference For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

I have commented ad nauseum on the percieved need to do business with name brands, those who do God's work, and those who simply cannot trade - muppet masters and all - as I clearly articulated on the Max Keiser show last week.
... and on previous shows. 

Now, all of you Goldman, Morgan Stanley, et. al. lovers, don't get your muppetware in a bunch, you know that I know that you know that It Is Now Common Knowledge That Goldman’s Investment Advice Sucks???, as excerpted:

It's official, the mainstream media has turned on those "doing God's work" and come to the side of BoomBustBlog.


Okay, enough the Muppet Manipulating, Money Marauding, Doing Work in God's Name Brand Bank Bashing... Let's get down to the nitty gritty of the report that I said I will give away for free. I am offering the report, earnings advisory addendum and accompanying simplified model to show what we're made of. Of course paying subscribers, and even casual blog readers, cannot say that I didn't thoroughly warn you! Early shorts on this stock as per our research notes valuation matrices would have given pleasant Christmas presents and would have also stuffed one hell of an Easter basket as well!!!

In case you still don't get it, the sell side research departments of these banks did not offer BoomBustBlog research to their clients. Oh no, then how in the hell can they dump their stock??? They issued glowing reports from their own analytical cum soft sales staff.

On that note, let's reminisce.... In June of 2011 I release proprietary research to BoomBustBlog Subscribers. You can now download said report absolutely free, here icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36). After reading said report, prepare for some real comedy, as reported by

Groupon (NASDAQ: GRPN) was downgraded by equities research analysts at Stifel Nicolaus from a “hold” rating to a “sell” rating in a research note issued to investors on Monday.

Other equities research analysts have also recently issued reports about the stock. Analysts at Bank of America (NYSE: BAC) downgraded shares of Groupon from a “buy” rating to a “neutral” rating in a research note to investors on Monday. They now have a $20.00 price target on the stock, down previously from $30.00. Separately, analysts at Benchmark Co. cut their price target on shares of Groupon from $32.00 to $28.00 in a research note to investors on Monday. They now have a “buy” rating on the stock. Finally, analysts at Goldman Sachs (NYSE: GS) reiterated a “buy” rating on shares of Groupon in a research note to investors on Thursday, February 9th.

Groupon traded down 3.20% on Monday, hitting $14.54. Groupon has a 52-week low of $14.85 and a 52-week high of $31.14. The company’s market cap is $9.376 billion.

Whoa!!! Goldman Sachs reiterated their "buy" recommendation just in time for their damn Muppet Clients to lose ~40% by the close of the market today. Go ahead, stuff those damn Muppets, fellas!


For the record, in June of 2011, a full ten months ago, I made clear to my subscribers the following (as excerpted from the now free download)...

We value Groupon at $6.6bn using DCF. The current valuation is based on 10 years of revenue projections which are overly optimistic in our view.  We have forecasted revenues of $4.0bn in 2011 and expect revenues to nearly double to $7.5bn in 2012 and reach $35bn by 2020. We have assumed cost of equity of 12% and terminal growth of 3% from 2021 onwards. We have kept gross profit at stable levels and assumed operational gearing to (∆ Operating Profit / ∆ Revenue) to improve considerably. Despite these optimistic projections we were still not able to justify a valuation close to $10bn let alone $20-25bn. We only see downside risks to valuation of $6.6bn and believe that Groupon’s rejection of Google offer of $6.0bn was a mistake in first place. Google’s valuation of $6.0bn most assuredly included a premium for synergies that Google could have achieved with Groupon which would be clearly absent in the standalone entity. We see the fair value of Groupon close to $3.0-4.0bn if we assume a more realistic picture. Given all kinds of questions surrounding Groupon’s business regarding the sustainability of revenue growth, costs control and even the business model itself (i.e., the relationship with merchants) and external competition, we remain deeply concerned even on the sustainability of a successful IPO for Groupon. 

For the record, at about $14 per share, Groupon is market-valued at about $9.1 billion dollars!!!! Here are some key highlights: Groupon restates revenue, EXACTLY as I warned just three months earlier.

  1. Monday, 26 September 2011 What's The Best Way To Profit From Groupon's IPO?
  2. file iconGroupon Revenue Restated 09/26/2011
Groupon starts trading on the Nasdaq via IPO...
  1. Sunday, 13 November 2011 I Hope You Groupon IPO Investors Got Coupons At The IPO!!! Yeah, That's Right I Was The First To Say It
Favorite hits from said documents...
There's a WHOLE LOT MORE, but this post is long enough as it is. Simply download the links above, and don't forget to reference the valuation section of original forensic report. There's an early Christmas present in there for the stingy muppets!


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I got this in my mailbox the other day:

How did PEI just refinance the Christiana Center with a $50 million loan when they are carrying the asset at a value of $30 million on its balance sheet?


Asset Value: 2011 10-K

 Well, that's a damn good question. If you recall, I went over PEI's portfolio with fine toothed, valuation comb in Q4 - reference When A REIT Trading Over $15 A Share Is Shown To Have Nearly All Of Its Properties UNDERWATER!!!

Paid subscribers are welcome to download the corporate level valuation of PEI as well as all of the summary stats of our findings on its various properties. The spreadsheet can be found here -  Results of Properties Analysis, Valuation of PEI with Lenders' Names. In putting a realistic valuation on PEI, we independently valued a sampling of 27 of its properties. We found that many if not most of those properties were actually underwater. Most of those that weren't underwater were mortgaged under a separate credit facility.   

PEI Underwater  Overly Encumbered Properties

If you haven't yet read parts one or two or three or four or five or six or seven in this series, its some engaging reading. Trust me! On that note, let's review my observations of the most recent quarter. Subscribers can download File Icon PEI Q2 Earnings Review _July 2012 to view the document in full.

Overall, the quarter has seen better performance compared to the previous ones. However, the negatives are:

  • The higher base rent achieved this quarter was due to a higher occupancy rate while the per square foot rental metrics continued to slide. I don’t foresee this trend reversing in the near future.  As a matter of fact, the likely course of the US, EU and Chino-Japan is that of recession. Reference RGE Monitor’s Christian Menegatti on US: No more risks of stall speed…stall speed is here, recession next?
  1. The US is witnessing 1.5% real growth through Q2 GDP - Sad.
    July ISM manufacturing data (with a headline still in contraction territory at 49.8) confirms last month’s weak reading. Most components moved roughly sideways- the exceptions included a jump up in inventories from 44 to 49 (which should be viewed as a negative development, amid falling new orders and exports) and a step down in employment (from 56.6 to 52).
    Employment is still positive, but note that it is a lagging indicator—the contraction territory reading of new orders and a worsening of export orders lead us to expect continued pressure on the labor market going forward.
  2. The drop economic outlook is most important when viewing PEI’s quarterly results. Despite the fact that PEI pulled some impressive base rent growth, a closer look at said growth is illuminating…

PEI rents

  1. Average base rent (per square feet basis) has decreased

(US$ per square feet)              

June 2011

June 2012

% Change

Malls Weighted Average




Consolidated Properties




Unconsolidated Properties




Same Properties




Pertinent observations:

Base rent (on a total rented basis) is growing in 93% of PEI’s properties (@1.17%) considerably slower than average base rent is decreasing (@-2.0%). Moving up 1.17 inches for every 2.0 inches you have moved down results in a lower position – period!

This means that if we revalue the Company’s property portfolio, it should be negatively impacted by lower average base rent, with that negative impact offset roughly 59% by the higher occupancy rate - which has increased. Of course, that still leaves us 41% underwater, doesn't it?

  1. The company has about 10% of its leases due for renewal in 2013, which if impacted by worsening economic condition described above, could negatively and materially impact the Company’s rental income.
  1. We see the Company as marginally being able to meet its debt obligations for 2012, and that’s assuming nothing else goes wrong in a macro environment that has new things going wrong nearly every weak!!! 

I will most likely launch my TV show sometime next week via YouTube as I shop it around to various networks, and I will included significant PEI analysis in the pilots. I welcome one and all to view and participate. Feel free to tell all of your friends, colleagues and associates about the guy kicking Wall Street in the balls...

PEI analysts

Compare everyone above to my analysis of PEI, then feel free to look at our track record throughout this malaise, starting from 2007. As a matter of fact, don't compare analysis, compare me against the entire banking establishment!!! 

We believe Reggie Middleton and his team at the BoomBust bests ALL of Wall Street's sell side research: Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?

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Published in BoomBustBlog

The following is a submission from an astute BoomBustBlogger known as "LongShortTrader (LST)". His opinion is his own, and not that of BoomBustBlog or Reggie Middleton. If you like what you have read, let me know - there's plenty more where this came from - and remember, GMCR reports at 4pm today. Herb Greenberg and Greenlight Capital have noticed funny dealings with this company as well...

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