I must admit that I am quite perturbed by the sheer amount of effort concentrated at not only censoring Wikileaks, but the censoring of media outlets that meerely comment on Wikileaks! It has become truly Orwellian in stature, and the worst part is that the attempts to censor something as distributed and collective in intellectual capital as the Internet is futile. All it has done has created ample bad will for governments worldwide, and those corporations that bowed to the pressure of said governments yet refuse to admit it. The bad will has gotten to the point where even I am pulling my patronage from Amazon (that means colored Nooks from now on, not Kindles, Barnes & Nobles for books and not Amazon.com, and Netflix for streaming content in lieu of Video on Demand). I can understand the need to bow to the pressure of the US government if you need to stay in business, but to cowtow and lie takes it a step to far.

S, now that Amazon, the US government and a host of other entities have bandied together to censor Wikileaks and those media outlets that report on it, they have made Wikileaks more popular than Wikipedia itself! In addition, due to the distributed, collective community intelligence nature of the Internet, they have also (by pulling the plug on its conventional infrastructure) created a nearly unassailable infrastructure in the process. So, Wikileaks is banned in the Library of Congress, corporate intranets, and Amazon, but it lives everywhere else. You see, Censorship is to the Internet as Contagion is to a Host Body. The Internet (eg. the host body) moves to remove censorship as contagion. See below:

Mirror WikiLeaks Anonymously on Your Android Phone! Dec 5, 2010 These instructions are complete with root, server, automirror, and firewall... and there's more:

Go around town to popular open wifi access points, connect to them, and save them.

If you want to be really sneaky, install a remote access app. That way you can leave the phone plugged in at an anonymous indoor location near a public wifi hotspot, such as in the ceiling of a utility closet of a public library. Just remember to set it to reboot regularly in case something locks up.

Conclusion

If even a percentage of users did this, there would be tens of thousands of WikiLeaks mirrors hidden around the globe. Quite simple, really. And it makes the shutting down of WikiLeaks.com seem as utterly foolish as it was.

With millions of Android phones being sold every month, imagine if just .02% of those followed these directions! Your talking roughly two or three thousand additional Wikileak mirror sites, anonymously distributed, every month.

Below is a Twitter dump on the mirroring of the Wikileaks site, and keep in mind that these tweeted instructions are coming in at an AVERGAGE OF 3 PER SECOND!

Published in BoomBustBlog

I realize that many on the Street probably detest Matt Taibbi, but love him or hate him his expose on Goldman Sachs (Taibbi's Takedown of 'Vampire Squid' Goldman Sachs) was not only a phenomenally interesting read, it brought immense amounts of attention to Goldman Sachs - albeit, practically all extremely negative! Long story, short Taibbi has become a contemporary, literary force to reckon with by creating annals of the arcane, yet mundane annals of financial engineering and making it a damn interesting read. His latest piece on Fraudclosure, albeit quite one-sided, is also quite good. You see, he can get away with being one-sided on this topic, for the banks actually have much, much to apologize for. So, round 1 was Goldman Sachs, and round 2 appears to be Citi, Deustche Bank, Wells Fargo and JP Morgan. Here are a few interesting quips from Matt Taibbi: Courts Helping Banks Screw Over Homeowners -

Published in BoomBustBlog

From an astute BoomBustBlogger that reads the fine print buried in the middle of a 250 page servicer agreement...

IF THIS IS A TYPICAL PSA, NO WONDER SO FEW LOAN MODS BECOME PERMANENT.  THE SERVICER GETS 25% OF THE FORECLOSURE PROCEEDS.

http://www.secinfo.com/d1Ax6e.u1u.c.htm

3.12 Realization on defaulted mortgage loans CitiMortgage will use its best efforts, consistent with its customary servicing procedures, to foreclose upon or otherwise comparably convert the ownership of properties securing any mortgage loans that continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to section 3.2. Consistent with the foregoing, CitiMortgage will use reasonable efforts to realize upon defaulted mortgage loans in a manner that will maximize the receipt of principal and interest by the certificate holders, taking into account, among other things, the timing of foreclosure proceedings.

If a deficiency action is available against the mortgagor or any other person, CitiMortgage may proceed for the deficiency. CitiMortgage may retain 25% of the net proceeds received from a mortgagor pursuant to a deficiency action as compensation for proceeding with the deficiency action.

The reader's interpretation was slightly off. The servicer get's to go after the mortgagor in a delinquency action. Please let it be known that this in know way alters the conflicting dynamic that allows for the servicer to push certain mortgagors into foreclosure vs a mod work out. If you are self-employed and judgment proof, you are more likely to get a mod than if you are high income with a steady job with garnishable wages. The profits could very well keep rolling in. Let's engage in some chart porn...

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Zerohedge had posted an article this morning that brought back memories of how lonely it can be to have a contrarian, dissenting opinion - Ambac Does Not Make November 1 Coupon Payment, To File Bankruptcy Within A Month If Unable To Raise Additional Capital . You see, I have alleged Ambac to be insolvent for 3 years now - seriously, Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion in Equity! This post was written in November of 2007. On November 1st, 2010 the chickens are now coming home to roost (again). Of course, the sell side never really agreed with me. After all, there are two sides to every trade (excerpted from the afore-linked article)...

Bank of America Top Picks (June 2007)

Ticker Rating Price Target Price as of 11/29/07 Profit on the BofA Call % Profit
SCA B $23.60 $37.00 $6.69 ($16.91) -71.65%
MBI B $60.33 $85.00 $30.04 ($30.29) -50.21%
Least Favorites
NONE

You really can't get rich listening to these guys. Hopefully, you can see where the use of their default data is a conservative approach (even a bit rosy), albeit tweaked ever so slightly for the sake of reality. As you may have ascertained, I do not put a lot of faith in sell side research. I have even less faith in the big three rating agencies research (although Fitch is trying to be taken seriously). Thus, even if they deem ABK and MBIA not in need of more capital, that is near meaningless in my book. These are the same companies that rated the insured portfolios AAA a year or two ago that are now taking up to 20%+ losses.

Of course, this may not be surprising to some, since the best performing sell side analyst during this time period (save yours truly, of course) only racked up 38% in accurate calls: Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?

We also have to contend with the moral hazard/bailout issue. If you read my earlier missive on MBIA, I detailed the rating agencies' dilemma.




Six Degrees of Separation: Guess who Ambac insures!

Bank of America issued a report on the monoline insurers on July 30th, 2007 that states that ABK’s RMBS exposure to troubled companies is limited to only 4 cos. with vintages primarily in the early years excluding two relatively well performing underwritings. Despite this, they failed to include in this caveat the consumer finance insureds:

    • Countrywide, which probably has one of the worst performing portfolios in the industry;
    • GMAC, who has also suffered significant losses that GM has been forced to cover, hence hampering a clean sale of the company;
    • Indymac, another company that is saddled with mortgage related losses that is on the insured’s list (Indymac and Countrywide have had their shares more than halved in the last few months. I was short these companies. CFC may go bankrupt);
    • Lehman brothers has some losses to contend with as well, but I don’t know to what extent since I don’t follow it – I do know that they are the 2nd largest MBS house on the street, next to Bear Stearns;
    • Greenpoint Mortgage Funding is defunct, wound down due to losses;
    • Then we also have Citimortgage (SIV king whose own mortgage portfolio is a mess);
    • Accredited Mortgage Loan (bankrupt or close to it);
    • Wachovia (just reported a billion plus writedown on mortgage assets);
    • Countrywide Revolving Equity Trust/Alt-A trust (need I say more about undocumented 2nd lien loans from this lender);
    • Option One Mortgage Trust (nearly defunct due to mortgage losse);
    • BofA, mulit-billion dollar mortgage asset writedown;
    • and Newcastle – who I believe is either out of business or close to it. I stopped following it some time ago.
Published in BoomBustBlog

It has come to my attention that several banks have actually blocked rank and file level access to my blog through their intranet. That, my dear friends, is asinine, and does nothing but engender distrust. While I admit I can be rather flamboyant in my writings, I am nonetheless quite fair. In addition, my opinions are analytically driven, by design. Thus, if you have a differing opinion all you really need to do is challenge me with the facts. One of us will be proven to be right, or at the very least it will be shown to all how we came to our conclusions. I have absolutely no problem admitting when I am wrong or have made a mistake. I have been right long enough and often enough that I have plenty of emotional and even egotistical room for error. I know fully that no one is perfect, and while I would much rather catch any error first, before a third party does it (particularly a dissenting third party) I know that things don't always happen that way.

A commenter had a very intelligent dissent against my Goldman Sachs post on Zero Hedge the other day. While cogent, eloquent and very lengthy, it was still wrong but it definitely exemplified what a bank (or any other entity) should do when they feel that I am not in the right. Of course, if you put yourself out there, there is always the risk that you can be proven wrong as well. Believe it or not, and contrary to what you marketing and PR advisers may tell you - it is alright. As a matter of fact, it is actually good sometimes. You see, to many of the people that matter, it is not only acceptable, it is expected that you will not be right all of the time. Anybody who is right all of the time should be held up to a much higher level of scrutiny. Just ask Bernie Madoff. The true test of character and fortitude is to be able to publicly admit when you have made a boo-boo, and be willing to do something about it. That goes a lot farther in my eyes, than abject perfection. This is a lesson that the global and national banking industry in the US has yet to learn.

On that note, let's go over a few emails that I have received recently...

Published in BoomBustBlog

Reggie Middleton with Max Keiser on the Keiser Report and RTT Television

Go to 12:20 in the video to see the portion with Reggie Middleton

[youtube jQwlElVfdHY]

The topics in this interview stem from the post Four Facts That BANG JP Morgan That You Just Won’t Hear From The Sell Side!!!

On the difference between accounting earnings and economic earnings...

... accountants have not been – and currently are not, trained in the economic realities of corporate valuation. They are trained to tabulate business operations data. There is a marked and distinct difference. That difference is as stark as night and day for investors, yet despite this stark difference, Wall Street still reports corporate performance metrics strictly in accounting terms, and the media (both mainstream and the more specialized financial media) simply follow suit. Hence we hear much about easily manipulable and manageable accounting earnings, revenues, operating margins, earnings per share, etc. These measures are highly flawed in a variety of ways, with the primary flaw being that they do not account for the efforts both required and undertaken to achieve them. Basically, they measure JUST HALF (and coincidentally, the positive half may I add) of the risk/reward equation that should be at the root of every investors move. Long story short, they do not account for, nor do they EVEN RESPECT, the cost of capital. This concept ties in closely with Chairman Bernanke’s current course of action as well as the ZIRP discussion later on this missive demonstrates (capital offered at zero cost causes reckless abandonment of risk management principles which eventually causes crashes – yes, more crashes). Acknowledgment of the cost of capital enforces a certain discipline on both corporate management and investors/traders. Without respect for such, it is much too easy to create and portray a scenario that is all too rosy, since we are only looking at rewards but never bother to glance at the risks taken to achieve said rewards. I reviewed this concept in detail as it relates to bonuses and compensation on Wall Street in The Solution to the Goldman (and by Extension, the Securities Industry) Compensation Dilemma.

Published in BoomBustBlog

I have received a lot of feedback concerning my article posted yesterday, A Step by Step Guide to Exactly How Much Derivatives Risk Each of the 5 Big Banks Actually

Pick up your own "Fiery Swords of Truth" and aggressively seek out the facts. Don't be afraid to ask questions under the pretense you don't understand. Chances are, if it is so complex that you can't understand it, it is either wrong or many other people, including the creators and proponents, don't understand it either!!!

Have, and How It Could All Go Boom! (a must read precursor to this piece) in which I picked up the fiery sword of Truth and attacked all misinformation within reach. A decent amount of derivatives traders, salesman and financial engineers chimed in. Of course, being the simpleton that I am, I am at a loss how anybody can argue that the hedging and netting system actually works with the utter failure of the monolines, Lehman (wherein contracts were unwound and rewritten, but why would they have to be if everybody was netted???) and Bear Stearns (where the government had to step in to be the counterparty of last result), all of which allegedly netted out much of their risk - RIIGHHHT??? Nonetheless, I will go through some of the responses I received via email, all of which were cogent, intelligent and polite - but most of which took a swing at my thesis. Okay, I'm swinging back - and I'm swinging back with the "Fiery Sword of Truth" as well!

Here's the first one:

Hi reggie, love the independance of the blog. Couldnt help but wonder though, as to if the big 5 were really cross exposed to that degree. Surely hedge funds, private banks, real world commodity producers etc are other swap counter parties that you fail to include in your calculations. 1.7 trillion of unlevered hedge fund assets arent included anywhere for a start. How about other smaller banks too, that dont show up in the comparison, maybe there is more diversification than you think.

Published in BoomBustBlog

Over the three years since I have been publishing BoomBustBlog, I have amassed what many consider a remarkable track record, having called nearly every major market crash and large financial/real estate/bank collapse over said time period.  Believe it or not, many have even went so far as to call me "intelligent". While I would love to bask in the light of potential admiration, let me assure you, although I am in no way lacking in confidence or ability, I am also quite average in the intelligence arena. While not being any more intelligent than the average man, I do have an uncanny knack for seeking out that rarest of rare concepts these days - the TRUTH! This increasingly uncommon ability (to both speak and seek the truth) has served me quite well in both my investing pursuits as well as in the personal aspects of life. Let's delve into how I translate this personal talent into a product that I distribute from my BoomBustBlog, and then into the facts in regards to the current state of concentrated risk in today's US banking system - to wit, the systemic risk of derivatives concentration.

Published in BoomBustBlog

Here's a little cross pollination to attract bears from all over.  Karl Deninger, the editor of the Market Ticker, invited me over for a half hour chat on his Blog Talk Radio show to discuss things such as foreclosure fraud, banks, derivative risk and the markets. You can access the original airing podcast on Karl's site. I have taken the liberty to append some graphics to the background to add some information to the discussion (see below). Enjoy!

Part One (the impatient may want to skip ahead about 1:32 to get the actual start of the discussion. I highly recommend you choose the 720p HD setting and expand to full screen in order to read the graphics in full fidelity.

Part one

[youtube nSFWrvznCp8]

Part two

[youtube 9noMeVOC-DE]

Published in BoomBustBlog

While chatting with Herb Greenberg before my interview at CNBC on the banks, he asked me why I was short the banks, JPM in particular (JP Morgan’s 3rd Q & Just How  XYZ Bank Can Never Go Out of Business!!!). I told him that I believe they are overly optimistic about the reserve thingy (Big Banks Will Pay for Optimism), the mortgage put back cosequences (JP Morgan’s Analysts Agree with BoomBustBlog Research, Contradict CEO Jamie Dimon’s Conference Call and The Putback Parade Cometh: Pimco, New York Fed Said to Seek Bank of America Repurchase of Mortgages) and real estate in general. I also said that in the scheme of things, Jamie Dimon appears to be, by far, the most effective manager of the big banks, and JPM  seems to be the best run of the big banks. He negotiated a literal coup with Bear Stearns purchase, getting the billion dollar head quarters for free, the company for $10 per share and government backing for the legacy assets. He made a mistake with WaMu by not demanding a deeper discount. I know it seems like 28% or so off seems like a good deal, but it was not  - and I clearly stated it several times (Is JP Morgan Taking Realistic Marks On Its WaMu Portfolio Purchase? Doubtful!). I just want to make this clear. There is nothing personal here, at least in terms of investments and financial analysis. The stream of events are of such grave consequence that this goes beyond mere finance, though. Why? This country has been "Bamboozled by the Banking Industry", but the "Chickens Are Coming Home to Roost". Let me explain...

Throughout most of 2009, while 10%+ of unemployed middle America stopped paying their mortgages, busy standing in line for shiny fat margin iThingies while in rabid debate about how many pieces of tail Tiger Woods may or may have not hit (yes, that story got 2160 tweets and 375 comments on how well endowed "the Tiger" is - would you dare to bet that this article on a potential depression will get even one third of that?) the  greatest mass fraud of this lifetime against said persons was underway.

This should be played 720 HD full screen mode

[youtube IEw25ByILkY]

Mr. and Mrs Middle America, you've been Had, you've been Took, Bamboozled, Hoodwinked, led Astray, run Amok (yes, YOU have, see You’ve Been Bamboozled, Hoodwinked and Lied To! Here’s the Proof. What Are You Going to Do About It? and click your rung in the socio-economic ladder, ex. your "social class"). From rating agency subprime madness to stress tests designed not to apply any stress to robo-signing and beyond (Mortgage Putbacks, the Harbinger of the Collapse that Will Dwarf 2008!) the financial and political elite appear to be running a real time experiment to demonstrate how numb they can prove the mainstream populace to really be? Will the experiment fail this time around? After all, things are different with the Web, and independent thought rocketed around the world in the form of blogs. We shall see what becomes of this real time socio-economic lab session, we shall see!

A few have been emailing me looking for a bio. I believe my track record should speak louder than any paragraph or two about my prior occupation(s). Credibility should come from accomplishment, not pedigree, no?  Click here to find out who I am what I have done. Be sure to scroll all the way down to the bottom of the page.

Next up:

  1. the updated JP Morgan forensic valuation (yes, what I think it is actually worth) for subscribers (there's  a surprise or two in here that I'll reveal to the public)
  2. the Goldman Sachs forensic valuation update
  3. and my proprietary research on the foreclosure backlog this one will be a doozy)!

The Truth goes Viral!

Published in BoomBustBlog