Financial, Real Estate, Stock Markets Trends and Current Affairs

In continuing my proclamation of truth, my rant in favor of that long lost art of investment valuation known as old fashioned fundamental analysis, I bring to the BoomBustBlog reading public my 3rd installment of PEI - Dead REIT Walking (or, the short candidate from hell). If you haven't yet read parts one and two, they are necessary in order for you to get the full picture. I'm releasing this proprietary blog research for two reasons:

1. the share price has risen materially since the research was released, primarily due to the fact that so very little has been done to shed light on this company's true financial situation, and
2. this gives us a prime opportunity to once again demonstrate the thoroughness and rigor of BoomBustBlog forensic analysis.

In Excellent Short Candidate Also Known As Dead REIT Standing! I left off posing the question of PEI breaking covenants. While it hasn't happened yet, methinks it's simply a matter of time. OF course, since the banks involved are engaged in their own incessant can kicking exercises, this may very well be a moot point - at least for now, but more on that later when I not only list the banks that have lent to PEI but show how far underwater their loans are and exactly how, why and where those properties have tanked.

PEI OBservations page 5

There are only three options of PEI:

Scenario I : Refinancing through debt based on recapitalization of properties

Scenario II: Foreclosure of select properties

Scenario III: Firesale of select properties

Of course, there's always the possibility of the company mixing and matching these three scenarios. 

Scenario I : Refinancing through debt based on recapitalization of properties

Refinancing requirement for 2012...

PEI has a total shortfall of around USD 295 million which it needs to finance. We have projected its operating results and have looked at available resources (cash balance, unused credit lines, etc). The following table shows the summary of the Company’s finances for 2012.

Under the current scenario, we have assumed that the Company would try to avail itself of an increased loan on its properties, particularly on those which have (relatively) reasonable cap rates and debt-to-market value (LTV) ratios. Consequently, we looked at the company’s portfolio of 27 properties, each of which were valued independently by our team.

The table below shows that while there are quite a few properties with Debt-to-Net WDV (written down value) ratio of less than 100%, those with Debt-to-Market Value ratio are only three in number (where market values is defined as teh value derived by our proprietary analysis based upon market-based inputs and actual cashflows). Put another way, out of 27 properties analyzed, only three of them actually had any value to shareholders from a sale perspective. That's right, 88% of the properties of examined by us were underwater!!! Of the three that weren't underwater, all had reasonably good cap rates (more than 6% in all cases) and would therefore, in our opinion, enable the company to avail itself of incremental loans from its existing lenders on the properties. We (over)optimistically assume that the Company would be able to raise up to 100% of market value on these loans. From a realistic perspective, this is probably unlikely - highly unlikely actually. Remember, we are being optimistic here.

Portfolio of 27 properties valued – Table showing incremental finance that can be availed.thumb PEI Assets Eligible for Cash Out Refinancing

Despite all of this, the stock is actually close to its highs! 

I will continue this analysis in several other separate posts - there's a lot more material to cover, nearly all of it drastically negative!!! In the meantime and in between time I'm available to discuss the finer aspects of the analysis in the subscriber retail investor's discussion forum and individual property valuation discussions and higher end questions will be answered in the professional/institutional discussion forums. I will also be available to chat there as well.

The complete REIT analysis referred to in the chart can be found here for subscribers (the property by property valuations are for Professional/Institutional subscribers only):

•  Fire Sale Scenario Analysis
  (Commercial Real Estate)
•  Foreclosure Scenario Analysis
  (Commercial Real Estate)
•  Sample Property Valuation
  (Commercial Real Estate)
•  Cashflows and Debt Preliminary Analysis

Our valuation is based upon the independent analysis of the key properties of the company, which together accounted 78% of the total portfolio in value terms. The actual valuation models are available (on an individual basis) upon request by institutional and pro subscribers.

In continuing with yesterday's empirical rant Lazy Analysis Allows For Outright Silly Pricing Of Near Insolvent REITS: A Forensic Analysis Of A Prime Example (a must read for anyone with exposure to - or interest in - this company, whether short or long), I continue with the piece meal release of Q4's BoomBustBlog primary CRE short candidate...

PEI OBservations page 3

From a balance sheet solvency perspective, one of PEI's primary problems is the average cost of its portfolio and points of acquisition. Net-net, the overpaid for many properties during the peak of the bubble. Now that prices are normalizing (facing reality), PEI faces a dramatic portion of its portfolio underwater. Let's take a look at the mall CRE picture during the bubble...

As you can see, Q4 2005 marks the absolute tippy top of the bubble in terms of rents (which drive prices). Now, let's take a look at when PEI acquired the bulk of its portfolio...

PEI OBservations page 4

My subscribers and team actually know precisely what properties are underwater and what properties aren't since we actually valued roughly 78% of the properties by hand using discrete, individual and independently derived inputs. I will be releasing both the summary of that exercise as well as some individual property analysis throughout this week.

Of course, if the company acquired the bulk of its portfolio at the peak of the CRE bubble, and rents have basically trended nearly straight down from that point, one need not wonder which direction cashflows are headed, no? As European banks choke on sovereign debt issues and they face a historically high CRE debt rollover period (now that should be fun), and American banks choking from 360 degree fraud (LIeBORgate, Fraudclosuregate and mortgage putbacks) and litigation contingent liabilities on top of having balance sheets full of the stuff that funded companies's CRE acquisitions such as PEI's in the first place, I really don't see who is going to give PEI the cash to dig itself out of the hole. Of course you can always rely on the foolish equity investors, after all, just look at the share price. It's not as if some smart ass blogger or independent investor is going to snatch the covers off to show these guys naked and completely under-endowed, is it????

Despite all of this, the stock is actually close to its highs!

I'm available to discuss the finer aspects of the analysis in the subscriber retail investor's discussion forum and individual property valuation discussions and higher end questions will be answered in the professional/institutional discussion forums. I will also be available to chat there as well.

The complete REIT analysis referred to in the chart can be found here for subscribers (the property by property valuations are for Professional/Institutional subscribers only):

•  Fire Sale Scenario Analysis
  (Commercial Real Estate)
•  Foreclosure Scenario Analysis
  (Commercial Real Estate)
•  Sample Property Valuation
  (Commercial Real Estate)
•  Cashflows and Debt Preliminary Analysis

Our valuation is based upon the independent analysis of the key properties of the company, which together accounted 78% of the total portfolio in value terms. The actual valuation models are available (on an individual basis) upon request by institutional and pro subscribers.

The next installment of the PEI saga (24 hours from now on BoomBustBlog) will go into intricate detail as to the reasons this REIT has close to no way out besides bankruptcy or a foreclosure/fire sale routes. As a precursor to that, we will go over covenant issues, though.

Follow me:

There's an awful lot of chatter in the blogoshpere over the last 48 hours discussing the remote possibility that Morgan Stanley would be able to defend the Facebook offering as properly priced. PUHLEASE! In case my readers and subscribers don't recall my many warnings on this company and the hype job put on it by Goldman and Morgan - reference As I Promised Last Year, Facebook Is Being Proven To Be Overhyped and Overpriced!, let's run through a quick refresher course.

As is often said, a picture is worth more than 982 words...

fb 6-26

Keep in mind that a deluge of supply (in terms of common shares) is about to hit the market which should do wonders for this extremely richly valued price. So, the question remains, "Is Facebook Yet a 'Buy' (in Sell Side Wall Street huckster parlance)?" Well, the sell side seems to believe so. Check this out...

6 Buys, 3 Neutrals
Average Price Target = $39

BofA/Merrill – Neutral - $38 PT
Goldman Sachs – Buy - $42 PT
Oppenheimer – Outperform - $41 PT
JPMorgan – Overweight - $45 PT
Piper Jaffray – Overweight - $41 PT
Wells Fargo – Outperform - $37-$40 Range 
Credit Suisse – Neutral - $34 PT
Citigroup – Neutral - $35 PT
Morgan Stanley – Overweight - $38

The specific, numerical, actionable answer from my team is the purview of paying subscribes only, but we can always throw some common sense on the topic for free - as per pages 6 and 7 of our March Facebook valuation report - FB IPO Analysis & Valuation Note - update with per share valuation (317.36 kB 2012-05-21 09:43:30), pages 6, 7 and 10.

FB IPO Analysis Valuation Note Page 06

FB IPO Analysis Valuation Note Page 07

FB IPO Analysis Valuation Note Page 10

Of course Facebook enthusiasm was burning hot. The coals in the "investor" (and I put this lightly) fire are being stoked by none other than the sell side agents doing God's work, among others. It appears as if those who stoked said coals may be making another run at it. Well, it's just a simple as this. Who are you going to believe, the sell side hype machine or your lyin' eyes (AKA, BoomBustBlog performance and accuracy)? Reference Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?

Professional and institutional BoomBustBlog subscribers have access to a simplified unlocked version of the valuation model used for our Facebook analysis, available for immediate download - Facebook Valuation Model 08Feb2012. 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 (FB note final 01/11/2011) as well as the following free blog posts on the topic:

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

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:

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!!!

Listen Carefully and You Can Hear the Crumbling Of The Sovereign Nation Formerly Known As JP Morgan

In the meantime and in between time, here's a subscription dump of our archives for JPM to placate the insatiable thirst of the BoomBustBlog paid subscriber:

JPM Q1 2011 Review & Analysis

 

JPM 3Q 2010 Forensic Update 

JPM Public Excerpt of Forensic Analysis Subscription

JPM Restricted Stock scheme

JPM 2Q10 review

 JPM 1Q 2010 Valuation Review 

 JPM 4Q09 review

 JPM Report (092209) Final - Professional09/24/2009

JPM Forensic Report (092209) Final- Retail

JPM Option Analysis

CNBC asks So Why Are Spanish Bond Yields Falling? Well, that's a good question. Short answer: Well rates spiked dramatically, and we are seeing some retracement from the psychological balm of even more liquidity thrown from the global central planning cartel, otherwise known as the central banks. Of course, this begs the question, "Should the rates go down since the 'Global Central Planning Cartel' has failed for 5 years and running to put this monster to bed with liquidity injections?" Alas, I'm already ahead of myself. Let's peruse said CNBC/Reuters article, shall we?

Spanish and Italian bond yields fell on Friday as sentiment toward riskier asset improved thanks to plans for coordinated central bank liquidity injections to help stabilize markets if Sunday's Greek elections cause turmoil.

The prospect of easy access to central bank cash helped settle nerves ahead of Sunday's Greek vote which could put Athens on a path to exit the euro zone if parties opposed to the conditions of Greece's international bailout come to power.

"It's having a good impact... on the bond side we see Spanish yields turning lower. It tells us that central banks at least won't let markets collapse on Monday," said Emile Cardon, market economist at Rabobank in Utrecht.

After reaching a euro-era high above 7 percent on Thursday, Spain's 10-year bond yield eased 12 basis points from its closing level to 6.84 percent, while Italian yields fell 10 bps to 6.06 percent.

What???!!! Isn't this still quite close to a record? Sovereign bonds spike to record yields, after being forced upon private banks, causing insolvency, then said banks request bailouts from said sovereigns who do bail them out, thus bankrupting the country and forcing said bailed out banks to lend the bankrupt countries money again. Wash, Rinse, Repeat! Remember in Dead Bank Deja Vu? How The Sovereigns Killed Their Own Banks & Why Nobody Realizes They're Dead… I have explained this nonsensical methodology in detail. I also showed how well it worked out for:

1. Greece How Greece Killed Its Own Banks!
2. the ECB Over A Year After Being Dismissed As Sensationalist For Questioning the ECB’s Continued Solvency After Sovereign Debt Buying Binge, Guess What.
3. Italy Bank Run! Italiano Style?
4. and now for Spain, as I will demonstrate a little further on in this post.

Bund futures were flat at 141.83, recovering after a fall in after-hours trading on Thursday when Reuters reported that major central banks were ready to pump in liquidity, if needed, to prevent a credit squeeze.

Of course, as more and more investors ever so slowly start to realize that The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You.

Some of the relief in Italian and Spanish debt was due to speculative traders buying back bonds to close out short positions that profit when prices fall, traders said.

"People had probably gone quite short (on Italy) after the moves this week on Spain, so I'd expect, with the weekend coming up, people don't want to be short risk and are squaring up," the trader said.

In the medium term, Spanish debt was expected to stay under pressure despite the liquidity contingency plans, analysts said.

The agreement of a 100 billion euro ($125 billion) rescue for Spain's banks has sparked concerns about whether existing bondholders would be pushed further down the queue for repayment, denting appetite for new debt and driving borrowing costs toward unsustainable levels.

"Spain is still in deep trouble, let's not forget that. It has fundamental problems so liquidity to help hold things together doesn't really solve that," a second trader said.

On Thursday, 10-year Spanish bond yields hit 7 percent for the first time since the launch of the euro. The breach of this level raised expectations that the country would be cut off from funding markets and forced to seek a bailout for public finances on top of the agreed banking rescue.

So, as clearly articulated in Dead Bank Deja Vu? the sovereign debt shell game cum financing Ponzi of creating artificial demand through private banks simply assist in destroying both banks and sovereigns when initially you just had to worry about the banks. But in the case of Spain, there's a lot more to worry about - A lot more. Our current subsccriber update (click here to subscribe): Spanish Target Bank Update 6-2012 outlines the problems of a Spanish bank we have covered that is poised to suffer from a gargantuan issue that it simply cannot wiggle away from any longer. As a matter of fact, this issue, when coupled with its state imposed sovereign debt problem means "here comes the next big bailout!". As excerpted from the subscriber report....

KEY OBSERVATIONS

Asset / loan Portfolio deterioration off weakened macroeconomic environment

The Subject Bank, like other major Spanish banks, is being forced to buy sovereign debts as the country finds fewer international buyers for its bonds. The Bank therefore continues to struggle from an asset quality perspective, weighed down by its sovereign & toxic property loans and assets. This has been a major cause for the deterioration of Subject Bank's portfolio over the past couple of years.

The Bank derives ~70% and over 20% of its total gross revenues from net interest income and fees & commission, respectively. The quality of its asset portfolio is therefore extremely important in determining the health of the Bank.

The Bank’s value of financial assets in Spain as of Dec 31, 2011 is over quarter trillion EURO, comprising nearly 50% of the total financial assets in its balance sheet or more than 600% of its total equity (think the negative effects of leverage and gearing as you witness asset value depreciation). In addition, of the bank’s total loans and receivables, over 50% are in Spain. 

With that being said, a picture (or a chart) can be worth a thousand words (or even more Euros considering the rate of depreciation that I see ahead)! When viewing the chart below, keep in mind that the asset values used to calculate this chart are most assuredly overstated, and even then the numbers really look pretty bad. Simply imagine what happens when truth (margin/collateral call, haircut, resumptions, etc.) start calling...

Spains_Ugly_Real_Estate_Crash_Will_Wreck_Banks_and_Force_One_of_Europes_Biggest_Banking_BailoutsSpain's Ugly Real Estate Crash Will Wreck Banks and Force One of Europe's Biggest Banking Bailouts. Remember a run on one big bank causes counterparties to panic. Counterparty induced bank runs do the most damage.

 Archived subscriber reports:

Addendum - Pro

 

Professional Forensic Analysis

 Related subscriber downloads

•  Sovereign Contagion Model - Retail (961.43 kB 2010-05-04 12:32:46)
•  Sovereign Contagion Model - Pro & Institutional

Online Spreadsheets (professional and institutional subscribers only)

• The Spain Sovereign Debt Haircut Analysis for Professional/Institutional Subscribers

In March of 2010, or roughly 2 and quarter years ago, I ridiculed Italy's public proclamations of austerity and fiscal responsibility. I put out a report to my paid subscribers detailing my thoughts therein... 

Italy_public_finances_projections_Page_01

Well, fast forward to today and Bloomberg reports Italy Moves Into Debt-Crisis Crosshairs After Spain (you know, the same Spain that we also warned about in March of 2010): 

Italy’s 10-year bonds reversed early gains today in the first trading after the Spanish bailout. Their yield rose by the most in a day since Dec. 8, adding 27 basis points to 6.04 percent. Shares of UniCredit SpA (UCG), the country’s largest bank, had their steepest decline in five months.
“The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said in an interview. “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.”

Investors don't need to focus on Spain's bailout (although there are many common threads). All you need to do is look at Italy's actual numbers and the credibility of thier reporting, as excerpted from BoomBustBlog subscriber document  Italy public finances projection:

Italy_public_finances_projections_Page_02

Italy_public_finances_projections_Page_03

Back to Bloomberg...

Italy has 2 trillion euros of debt, more as a share of its economy than any developed nation other than Greece and Japan. The Treasury has to sell more than 35 billion euros of bonds and bills per month -- more than the annual output of each of the three smallest euro members, Cyprus, Estonia and Malta.
Spanish Economy Minister Luis de Guindos said on June 9 that he would request as much as 100 billion euros in emergency loans from the euro area to shore up a banking system hobbled by more than 180 billion euros of bad assets. Mounting concern about the state of Spain’s banks and public finances drove the country’s borrowing costs to near euro-era records last month, pushing up Italian rates in the process.
Reversing Gains.

Economy Contracting
Italy’s total debt of more than twice Spain’s has given investors pause, especially in a country where economic growth has lagged the EU average for more than a decade. The euro region’s third-biggest economy, Italy is set to contract 1.7 percent this year, more than the 1.6 percent in Spain, the Organization for Economic Cooperation and Development estimates.
Italy’s debt load had traditionally led the country to be perceived as a bigger credit risk than Spain. At the start of this year, Italy’s 10-year bond yielded 202 basis points more than that of Spain. As the extent of Spain’s banking woes became more evident and the country was forced to raise its deficit target, that spread reversed and now Spain’s 10-year yields 48 points more than Italy’s.

Foreign Exodus
Debt agency head Maria Cannata last week said that fewer foreign investors were turning up at Italian auctions in recent months and that the country could still finance at yields as high as 8 percent.

Yeah, but for how long? 4 weeks????

The exodus of foreign buyers has left the Treasury more dependent on Italian banks, which in turn have been among the biggest borrowers in the European Central Bank’s three-year lending operations.

And this is the crux of the whole problem.

This why Italy is, for all intents and purposes, simply a gigantic Greece at the end of the day.

I have written about this extensively, and in plenty of time for subscribers and investors to take advantage of said advice. Simply read How Greece Killed Its Own Banks! and remember that this article was written in the beginning of 2010, when the Greek bonds were trading for much more then they were right before they defaulted! Then reference Greece Reports: "Circular Reasoning Works Because Circular Reasoning Works" - Or - Here Comes That Default!!!

Sovereign entities cannot fund themselves by borrowing from the insolvent entities that they actually need to bailout, but somehow they have convinced enough holders of capital that they can. To quote from "Sophisticated Ignorance"...

Again, public states bailing out insolvent private banking institutions simply does not work. The result is simply insolvent states and insolvent banks versus simply having insolvent banks. We have 800 years of experience from which to judge from...

image022

In Dead Bank Deja Vu? How The Sovereigns Killed Their Own Banks & Why Nobody Realizes They're Dead… I have explained this nonsensical methodology in detail. I also warned on the Italian banks back in 2010, for there is truly no new economic profits being produced in bulk - simply a continuation of the Pan-European Ponzi scheme. Subscribers see  Italian Banking Macro-Fundamental Discussion Note 

Italy returns to markets before Spain does, selling as much 6.5 billion euros of treasury bills on June 13, followed by a bond auction the next day.
“If Italy has a problem with accessing the markets because investors lose confidence in the Italian ability to do the right thing, the ECB will be drawn into the fire,” Thomas Mayer, an economic adviser to Deutsche Bank AG, said in a telephone interview. “That could pose a potentially lethal threat to European monetary union.”

At this point, the ECB must be stuffed with more shit than a broken toilet, reference Over A Year After Being Dismissed As Sensationalist For Questioning the ECB’s Continued Solvency After Sovereign Debt Buying Binge, Guess What. We have been through this with Greece, Portugal, Ireland, Spain and now Italy.

ECB Firepower
Given the size of Italy’s debt, only the ECB has the firepower to rescue the country and yet deploying that ammunition -- through buying back bonds or making more long-term loans -- may prove unacceptable to Germany and its allies in northern Europe, Mayer said.
“The ECB will probably have to restart buying bonds but there will be a lot of sellers into that of people who are worried that Spain is the next Greece and Italy the next Spain,” said Lex Van Dam, who manages $500 million at Hampstead Capital LLC in London.

Go figure!

Today's lead story on Bloomberg and the primary theme throughout the financial MSM is Merkel’s Isolation Deepens As Draghi Criticizes Strategy. This is general pressure to force Merkel to succumb to extreme short term thinking that will most assuredely bring the EU to its knees and potentially end the hegemony of what use to be the European empire - that is unless... You know.... This time is different! Yes, these are strong words, strong words are necessry for a dire situation. Let's consder this a massive economic changing of the guard, shall we. And as such, these occurrences portend the potential for MASSIVE speculative investment gains as those financial bastions of faux capitalism come toppling down amidst massive short positiions that the majority simply didn't have the foresight, temerity (or balls) to impliement and hold on to. At the end of this article, I will review FIRE sector (see Reggie Middleton Sets CNBC on FIRE!!! and First I set CNBC on F.I.R.E., Now It Appears I've Set and Greece Is Trying To Convince Portugal To Make F.I.R.E. Hot!!!) entities that I feel are primed to pop as this plays out, yet are not priced accordingly.

On Thursday, 29 September 2011 I penned Sophisticated Ignorance Or Just A Very, Very Short Term Memory? Foolish Talk of German Bailouts Once Again, wherein I queried:

"If I were able to show in this article that it really ISN'T different this time, would it change any decision maker's path or actions? We all know the answer to that question. Time to get those outlier event short positions ready, it's going to be a rough ride!!! A complete recap of recent events..."

This is a very important post, for it will lay out the outline of the impetus behind the 450+% gains I achieced in 2008/9. As queried in the afore-linked article, "So, at what point do we ever learn the basic lesson that "You can't solve an indebted nation's debt problems with more debt"?" 

The original "Sophisticated Ignorance" post was made in response to Germany being lauded for voting to nearly double the size of the then largest EU bailout fund ever...  

German lawmakers approved by a wide margin legislation to boost the scope and size of the euro zone's rescue fund, in a major step toward tackling the bloc's sovereign-debt crisis.

Lawmakers passed the reform of the European Financial Stability Facility with 523 'yes' votes, while 85 lawmakers voted 'no' and three abstained. The vote was seen as a test of Chancellor Angela Merkel's center-right coalition.

All 17 euro-zone governments have to approve the expansion, which will boost the fund’s lending capacity to €440 billion ($595.94 billion) from €250 billion and expand its powers to allow it to extend credit lines to banks and buy bonds on the secondary market.

To conitnue to quote from "Sophisticated Ignorance"...

This was the problem that I had with Paulson's original TARP idea. It just won't work because it doesn't solve the problem. Instead, it attempts to conceal the problem in fashion that pretends it never existed. Let's walk through this so a 5 year old can understand it.

Of course EU governments will try to bail out their banks again. The issue is that the bailout is not the question, neither is the success of said bailouts (this is rather a trick question, since the soveriegn states simply cannot afford to bailout their banks any more than a 100 lbs man can lift a 400lbs man). The fact of the matter at hand is that they simply can't afford to bail them out. The banking system is just too big. 

image015.png

As BoomBustBlog's above average prescience (see Pan-European sovereign debt crisis) and Reinhart and Rogoff, of This Time Is Different: Eight Centuries of Financial Folly have clearly demonstrated, the source of the sovereigns debt problems is related DIRECTLY to the attempt to bailout insolvent banks, taking private sector losses upon public balance sheets, and eventually bankrupting the public state while doing nothing to fix the problems of the private banks, and ulitimately witnessing the private banks fail anyway.

I have predicted FIRE sector (including banks) failure at a commendable rate (see Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall

Streets Best of the Best?). It's not rocket science, though. It's simply (and actually quite simple, since my 10 year old can do it) math, coupled with a pliable understanding of human nature couped in grasp of history. Listen, it was the (attempted) bailing out of the banking system that got these countries in this situation to begin with. Bailing out the banks just two years later??? Do you really thing that will help the sovereign debt situation or hurt it? If the bailout goes through, you eat the small losses (relative to the big gains that BoomBustBlog delivered subscribers) and roll your gains directly into bearish positions on the bailing sovereigns. It's really just that simple. Don't believe me, let's look at history, and remember that that is Germany being referenced in the graphic below, G-E-R-M-A-N-Y!!!

image022

On that note and after a quick education on how this time is no diffeent than any other time in the past 800 years, let's revisist today's MSM headline, ala Bloomberg... 

picsay-1338542900

Merkel’s Isolation Deepens As Draghi Criticizes Strategy 

German Chancellor Angela Merkel was besieged by critics for letting the euro crisis smolder, with the leaders of Italy and the European Central Bank demanding bolder steps to stabilize the 17-nation economy.

Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro- area aid for struggling banks. Monti further antagonized Germany by urging a roadmap to common borrowing.

Calling himself a devotee of German-style budgetary rigor, Monti told a Brussels conference yesterday that Merkel’s vision of a stable economy “risks being undermined because of lack of promptness in setting up the necessary instruments to limit the contagion.”

And therein lies the rub. You see, creating a direct conduit to zombie banks from teh ECB and bailout mechanisms will not limit contagion, it will materially exacerbate it by allowing the financial pathogens direct access to the mothership - the ECB! Look at the history of the western world for over 800 years. THE BAD BANK BAILOUT IDEALOGY SIMPLY HAS NOT WORKED, EVER!!!

Financial markets offered a snapshot of Europe’s stresses after more than two years of crisis, with the euro close to its weakest in two years against the dollar. German two-year note yields fell below zero today as investors paid for shelter from the market mayhem afflicting Italy and Spain.

“Countries that are at the core of the system and which have had the huge merit of instilling the culture of stability to the European Union in the first place, most notably Germany, should really reflect deeply but quickly,” Monti said via video link to the Brussels conference. “Europe should really accelerate the efforts, as the European Commission is doing, in order to limit the contagion.”

Oh yeah, I've commented on this in the past as well. What happens to a net export nation's economy when all of its export partners are in recession, depression, war and socio-political unrest while the banking system unfolds around them? The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You...

As Germany goes, so does the insurance industry's magically levitating FI porfolio. You see, German gains offset periphery losses. What happens when everyone realizes Gemany may be in the penthouse suite, but still resides in the same overindebted roach motel?

European banks are (in addition to borrowing on a secured basis from those customers they usually lend to) also paying insurers and pension funds to take their illiquid bonds in exchange for better quality ones, in a desperate bid to secure much-needed cash from the ECB, which only provides cash against collateral. This may not be as safe a measure as it sounds. Below is a sensitivity analysis of Generali's (a highly leveraged Italian insurer, subscribers see  Exposure of European insurers to PIIGS) sovereign debt holdings.

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As you can see, Generali is highly leveraged into PIIGS debt, with 400% of its tangible equity exposed. Despite such leveraged exposure, I calculate (off the cuff, not an in depth analysis) that it took a 10% hit to Tangible Equity. Now, that's a lot, but one would assume that it would have been much worse. What saved it? Diversification into Geman bunds, whose yield went negative, thus throwing off a 14% return. Not bad for alleged AAA fixed income. But let's face it, Germany lives in the same roach motel as the rest of the profligate EU, they just rent the penthouse suite! Remember, Germany is not in recession after a rip roaring bull run in its bonds, and I presume the recession should get much deeper since as a net exporter it has to faces its trading partners going broke. Below you see what happens if the bund returns were simply run along the historical trend line (with not extreme bullishness of the last year).

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Companies such as Generali would instantly lose a third of their tangible equity. This is quite conservative, since the profligate states bonds would probably collapse unless the spreads shrink, which is highly doubtful. Below you see what would happen if bunds were to take a 10% loss.

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That's right, a 10% loss in bunds translates into a near 50% loss in tangible equity to this insurer, which would realistically be 60% plus as the rest of the EU portfolio will compress in solidarity. Combine this with the fact that insurers operating results are facing historically unprecedented stress (see You Can Rest Assured That The Insurance Industry Is In For Guaranteed Losses!) and it's not hard to imagine marginal insurers seeing equity totally wiped out. The same situation is evident in banks and pension funds as well as real estate entities dependent on financing in the near to medium term - basically, the entire FIRE sector in both European and US markets (that's right, don't believe those who say the US banks have decoupled from Europe).

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If you ddin't put your short on Generali back in 2010 when I first brought it to subscriber's attention, then it's too late now. It's not too late to jump on our latest insurance industry subject, though. The last forensic report was centered around an insurer - see You Can Rest Assured That The Insurance Industry Is In For Guaranteed Losses! and Our Next Forensic Analysis Subject Is In The Insurance Industry. The actual report is available here:

•  Insurance short candidate report_122511 - Professional/Institutional edition
•  Insurance short candidate report_122511 -Retail edition

Bank runs are invevitable! 

As excerpted from our professional series  Bank Run Liquidity Candidate Forensic Opinion:

BNP_Paribus_First_Thoughts_4_Page_01BNP_Paribus_First_Thoughts_4_Page_01

This is how that document started off. Even if we were to disregard BNP's most serious liquidity and ALM mismatch issues, we still need to address the topic above. Now, if you were to employ the free BNP bank run models that I made available in the post "The BoomBustBlog BNP Paribas "Run On The Bank" Model Available for Download"" (click the link to download your own copy of the bank run model, whether your a simple BoomBustBlog follower or a paid subscriber) you would know that the odds are that BNP's bond portfolio would probably take a much bigger hit than that conservatively quoted above.  Here I demonstrated what more realistic numbers would look like in said model... image008image008

Yes, European bank runs are inevitable, but the causes of the bank runs are not. That's the problem. Instead of addressing the root causes of the bank runs, EU decision makers opt to throw more paper money into a gaping furnace to be burned as fast as it can be shoveled. 

Since the problems have not been cured, they're literally guaranteed to come back and bite ass. Guaranteed! So, as suggested earlier on, download your appropriate BoomBustBlog BNP Paribas "Run On The Bank" Models (they range from free up to institutional), read the balance of this article for perspective, then populate the assumptions and inputs with what you feel is realistic. I'm sure you will come up with conclusions similar to ours. Below is sample output from the professional level model (BNP Exposures - Professional Subscriber Download Version) that simulates the bank run that the news clippings below appear to be describing in detail...(Click to enlarge to printer quality)

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A detailed and accurate picture of what is happening...

1. Now That European Bank Run Contagion Has Started Skipping Across That Big Pond... US Bank Risk Stands Woefully Underappreciated!!!
2. The BoomBustBlog BNP Paribas "Run On The Bank" Model Available for Download
3. BNP Bust Up: Yet Another Reason Why BNP Paribas Is Still Ripe For Implosion!
4. Most Headlines Now Show French Bank Run Has Started, And It's Happening Just As Our Research Anticipated
5. I Will Fly In The Face Of Common Wisdom & Walk Through A Run On BNP On International Television
6. And The European Bank Run Continues...

A step by step tutorial on exactly how it will happen....

• The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
• What Happens When That Juggler Gets Clumsy?
• Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
• The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
• The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
• Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run 
• France, As Most Susceptible To Contagion, Will See Its Banks Suffer
• Observations Of French Markets From A Trader's Perspective
• On Your Mark, Get Set, (Bank) Run! The D…
• ECB As European Lender Of Last Resort = Institutional Purveyor Of A Pan-European Ponzi Scheme

Stacy Summary: We interview Reggie Middleton about a run on French banks. I notice today that Pimco’s El-Erian is also talking about a run on French banks. He must have watched the Keiser Report when it aired from late last night PDT. We know you’re taking our shtick Mr. El-Erian, we’ve got our eye on you!

Go to 13:07 marker in the video, contrast and compare and consider watching the smaller more independent shows for the real scoop every now and then.

For some back ground on the "Kick the Can Triumvirate Three" [BBB Trademark], go to 20:50 in the video and dedicate 5 minutes to it...

My April presentation in Amsterdam as Keynote detailing the inevitable...

Again, I believe the next big thing, for when (not if, but when) European banks blow up, is the reverberation through American banks and how it WILL affect us stateside! Subscribers, be sure to be prepared. Puts are already quite costly, but there are other methods if you haven't taken your positions when the research was first released. For those who wish to subscribe, click here.

Note: This bank has members of its peer group who have been identified as at risk, but no one has pulled the covers off of this one as of yet. I think I may blow the whistle. It will be a doozy, and a potentially very profitable one at that since nearly 3/4 of it tangible equity is embroiled in a region that looks like it is about to blow up. As I type this, some of the puts have already doubled in price. I will be releasing additional analysis on this bank this weekend for paying subscribers.

•  Contagion Forensic Review - Retail
•  Contagion Forensic Review - Professional

Here is the most recent Capital Account interview on the Facebook fiasco wherein I called the investment banking industry out for what it actually is, presented in the raw - no additional commentary necessary, except for the fact that you will probably never hear this level of rhetoric and analytical fact anywhere else!!!

Recent and related opinion and analysis:

Facebooking The Chinese Wall: How A Blog Has Outperformed Wall Street For 5 Yrs 

Why Shouldn't Practitioners Of Muppetology Get Swallowed In A Facebook IPO Class Action Suit?

Shorting Federal Facebook Notes Are Not Allowed Today 

As I Promised Last Year, Facebook Is Being Overpriced and Overhyped… 

All paying subscribers (click here to subscribe) have access to the FaceBook IPO & Valuation Note Update February 2012. You may review the original analyses here FB note final 01/11/2011. Again, as Facebook continues to fall in price, sooner or later it will be fairly valued and most assuredly after that undervalued. Speculators and value investors should be prepared for such an event. 

Professional and institutional BoomBustBlog subscribers have access to a simplified unlocked version of the valuation model used for our reports, available for immediate download - Facebook Valuation Model 08Feb2012. It is strongly recommended that subscribers download the file and input their own assumptions into said model.

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I will be taking the gloves off and going over this gangster style on Lauren Lyster's Capital Account Show on RT, tomorrow at 4:40pm. In the meantime, let's lay some groundwork.

As those who follow me reguarly probably already know, BoomBust bests ALL of Wall Street's sell side research. For evidence of such, reference "Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?". For the quick story behind how we are able to do what the lay muppet may consider nigh impossible, reference my piece on the Practitioners Of Muppetology…

For those of you who may have not heard as of yet, Reuters Alistair Barr reported Facebook's lead underwriters Morgan Stanley, JP Morgan, and Goldman Sachs, all cut their earnings forecasts – and did so in the middle of the IPO roadshow. This is a rarity and quite frankly an event that I don’t ever recall happening in the past. Adding fuel to the fire, this downgrade was disseminated only to a select few institutional clients, basically leaving the mom and pop crew (aka, MUPPETS) out to dry.

What makes this such class action fodder (see Why Shouldn't Practitioners Of Muppetology Get Swallowed In A Facebook IPO Class Action Suit?) is that sell side analysts tend to have greater access to corporate management than regular investors or even the better equipped, more experienced guys such as myself. That being the case, the analysts of the actual underwriting companies have an even better position in regards to corporate management - arguably more so than any other financial entity. So, what happens when all of the underwriting companies suddenly downgrade their forecasts simultaneously?

As per Reuters:

The change in Morgan Stanley's estimates came on the heels of a May 9 Facebook filing of an amended prospectus with the U.S. Securities and Exchange Commission, in which the company expressed caution about revenue growth due to a rapid shift by users to mobile devices. Mobile advertising to date has been less lucrative than advertising on desktops.

"This was done during the road show - I've never seen that before in 10 years," said a source at a mutual fund firm who was among those called by Morgan Stanley.

JPMorgan Chase and Goldman Sachs, which were also major underwriters on the IPO but had lesser roles than Morgan Stanley, also revised their estimates in response to Facebook's SEC filing, according to sources familiar with the situation.

Morgan Stanley said in a statement that a "significant number" of analysts in the IPO syndicate reduced estimates after Facebook's May 9 disclosure. The investment bank said its procedures complied with all "applicable regulations."

Where's a damn lawyer when you need one?  Although this has been covered rather heavily in the media, I felt I had to do it again. Why? Because the media didn't cover it properly. As a matter of fact, they missed an entire forest of fraud because of a funny looking piece of tree bark in the way. Let's look at this from the BoomBustBlog perspective, shall we.

Facebook's warning to its analysts came in the form of a revenue slowdown as more and more user move to mobile device interfaces to access Facebook, and mobile revenue has historically lagged desktop revenue in terms of volume. Okay, I get that. Yet, even without that choice bit of news, Facebook's total subscriber growth had slowed substantially! This was made clear to BoomBustBlog subscribers several times, with the first time being about a year ago!

Even if we don't consider the slowing subscriber growth (which we must) there's still the blatant and obvious risks to the weak advertising model, as clearly articulated in our subscriber forensic analysis of way over a year ago -FB note final 01/11/2011, to wit from page 3:

FB_note_final_Page_03

Did I have a valid point 14 months ago that ALL of the underwriters and top Wall Street analysts somehow miss - again? Don't ask my conceited ass, ask General Motors nearly a year and a half later...  

Fri, May 11 2012 WSJ.com and Reuters report GM plans to stop advertising on Facebook:

General Motors Co will stop advertising on Facebook, a move that comes during the same week the social networking website is due to go public.

The U.S. automaker confirmed a report by the Wall Street Journal. A source familiar with the automaker's plans said GM's marketing executives decided Facebook's ads had little impact on consumers.

GM said it will still have Facebook pages marketing its vehicles, but it will drop use of paid ads. Anyone can create a Facebook page at no cost. GM pays no fee to Facebook for its pages, which allow the automaker to reach consumers directly.

... "In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers," GM said.

GM spends about $40 million on its Facebook presence, but only about $10 million of that is paid to Facebook for advertising. The rest covers the creation of content and the agencies involved, The Journal said.

GM, the country's third largest advertiser behind Procter & Gamble Co and AT&T Inc, spent $1.11 billion on U.S. ads last year, according to Kantar Media, an ad-tracking firm owned by WPP PLC. About $271 million of GM's total ad spend last year was for online display and search ads excluding Facebook advertising.

And back to that topic of growth in February of 2012, via the full forensic opinion available to all subscribers here FaceBook IPO & Valuation Note Update, reference page 10 as excerpted...

FB_IPO_Analysis__Valuation_Note_Page_10

This all leads to the topic of valuation. A topic that no legal defense team for banks should want me to broach. As I stated in January of 2011, 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! 

Reference these two pages from our February FaceBook IPO & Valuation Note Update...

 FB_IPO_Analysis__Valuation_Note_Page_06

FB_IPO_Analysis__Valuation_Note_Page_07

It would seem that Facebook Finally Faces The Fact Of BoomBustBlog Analsysis. The burning question is how did I get this so right yet ALL of those ubersmart analysts get it so wrong? Seriously, ALL of the underwriting analysts had a buy on this obviously and grossly overpriced stock - and that was before the price was increased, BEFORE the supply of stock offered from management and insiders was increased, and BEFORE Goldman decided to increase their cashout - all very negative indications that increase both stocks floated and the distance between price and fundamental valuation.

Well, here's a couple of hints... Is It Now Common Knowledge That Goldman's Investment Advice Sucks?, I've Told You Before, And I'll Tell You Again - Goldman Sachs Investment Advice Sucks, and Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients. Of course, this isn't just about Goldman. I mean, we're talking a lot of over well paid analysts! As per Reuters:

The new estimates highlighted a continued slowdown in Facebook's growth, with the banks forecasting 30.4 percent year-on-year 2012 revenue growth on average, instead of the 36.7 percent growth previously expected. In 2011, Facebook's revenue grew 87.9 percent year-on-year to $3.71 billion.

The new numbers were relayed to big investors through phone calls and conference calls, according to investors. Bank of America held a conference call on May 10 with analyst Justin Post, where the underwriter revealed the lowered estimates.

Here are the detailed figures from the four banks, according to one of the investors who received the new numbers.

Lowered full year revenue estimate for 2012

Morgan Stanley -- $4.854 bln (new)from $5.036 bln (old)

Bank of America -- $4.815 bln (new) from $5.040 bln (old)

JPMorgan -- $4.839 bln (new) from $5.044 bln (old)

Goldman Sachs -- $4.852 bln (new) from $5.169 bln (old)

Lowered estimates for second-quarter 2012

Morgan Stanley -- $1.111 bln (new) from $1.175 bln (old)

Bank of America -- $1.100 bln (new) from $1.166 bln (old)

JPMorgan -- $1.096 bln (new) from $1.182 bln (old)

Goldman Sachs -- $1.125 bln (new) from $ 1.207 bln (old)

Lowered 2013 Earnings per share estimate

Morgan Stanley -- 83 cents (new) from 88 cents

Bank of America -- 64 cents (new) from 66 cents

JPMorgan -- 66 cents (new) from 70 cents

Goldman Sachs -- 63 cents (new) from 68 cents

Hey, I'm sure it's just my imagination. After all, there's always that famed Chinese Wall Thingy, right???!!

Wall_Streets_Chinese_Wall_copy_copy

For more on how bankers climb walls, see Why Shouldn't Practitioners Of Muppetology Get Swallowed In A Facebook IPO Class Action Suit?

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! 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 (FB note final 01/11/2011).

Here are the free blog posts on the topic:

1. Shorting Federal Facebook Notes Are Not Allowed Today
2. 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!
3. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
4. 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
5. 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
6. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
7. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
8. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly

Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients

For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

Apple's iPad Is Losing Market Share And Profit Margin As Apple Hits All Time High 

The Conundrum of Commercial Real Estate Stocks: In a CRE "Near Depression", Why Are REIT Shares Still So High and Which Ones to Short?

Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!

Wall Street is Back to Paying Big Bonuses. Are You Sharing in this New Found Prosperity?

Reggie Middleton vs Goldman Sachs, part 1, For Those Who Chose Not To Heed My Warning About Buying Products From Name Brand Wall Street Banks

Blog vs. Broker, whom do you trust!

Reggie Middleton Personally Congratulates Goldman, but Questions How Much More Can Be Pulled Off

No One Can Say I Didn’t Warn Them About Goldman Sachs, Several Times…

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Reuters reports on Facebook:

"Morgan Stanley unexpectedly delivered some negative news to major clients: The bank's consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company. The sudden caution very close to the huge initial public offering, and while an investor roadshow was underway, was a big shock to some, said two investors who were advised of the revised forecast."

I query, exactly why shouldn't there be class action lawsuits? Seriously! I run a very small operation with a budget smaller than Morgan Stanley’s or Goldman's postage expense. Despite such I have been able to clearly and granularly articulate that Facebook was grossly overvalued a year ago while it was a private company being hawked by Goldman Sachs as a private placement - 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!

As the IPO approached and more specific info available, the overvaluation simply became stronger and more apparent; reference Shorting Federal Facebook Notes Are Not Allowed Today. So is that I and my team are really that smart (and handsome) or are there other factors at play? A little more than a year ago Bloomberg created a list of who they considered the top performing analysts and brokers from the sell side. I was literally offended by how bad the performance actually was, especially when compared to an independent investor/analyst, reference Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Street’s Best of the Best?

Again, miraculously, Reggie Middleton and BoomBustBlog somehow managed to out run ALL of the big boys. As much as I would love to say  I’m simply better than ALL of those big boys, the reality of the matter is that I’m simply significantly less conflicted. The big banks have the resources and intellectual capital to run circles around me if they really wanted to. The problem is that really don’t want to. It is much more profitable to take agency commissions and principal transaction profits (as ZH often identifies as front running) from your clients than it is to wisely counsel them in investments. This is particularly true if they will keep coming back to you after getting raped, again and again.

I have written extensively on this, forming a quasi-scientific discipline of study, colloquially known as Muppetology:-) See the links below for more on this new branch of psychology/social science as it applies to finance and investments...

Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients

For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

Apple's iPad Is Losing Market Share And Profit Margin As Apple Hits All Time High 

The Conundrum of Commercial Real Estate Stocks: In a CRE "Near Depression", Why Are REIT Shares Still So High and Which Ones to Short?

Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!

Wall Street is Back to Paying Big Bonuses. Are You Sharing in this New Found Prosperity?

Reggie Middleton vs Goldman Sachs, part 1, For Those Who Chose Not To Heed My Warning About Buying Products From Name Brand Wall Street Banks

Blog vs. Broker, whom do you trust!

Reggie Middleton Personally Congratulates Goldman, but Questions How Much More Can Be Pulled Off

No One Can Say I Didn’t Warn Them About Goldman Sachs, Several Times…