The insurance industry is next up for BoomBustBlog subscriber scrutiny. Quite frankly, it’s amazing this industry has gone this long without getting the bank treatment, ex. Shorted into oblivion. Just imagine, and industry that is:
1. extremely cyclical,
2. prone to booms and busts (the fodder of BoomBustBlog),
3. and relies as much, if not more, on investment income borne from bonds (primarily sovereign debt [whaaaat?] and bank/financial institution debt [whoa!!!??] for earnings as much as their core business of underwriting risk.
If this is not a group of shorts made in investor heaven, I truly don’t know what is! This article is the first in several to help my subscribers make sense of the list of insurers that I posted for download earlier this week (Addressing Risks In The Insurance Industry)
Since some of the lexicon in the insurance/risk management industry may be a little jargon-ish, let’s take it from the top and work our way down – courtesy of heavy excerpting from the web’s most useful collaborative, groupthink knowledge utility, Wikipedia.
How Do Insurance Companies Make Money?
Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.
The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
The insurance industry has it own lexicon of performance and risk, with the most pertinent being the following three measures:
Relatively easily calculated as the underwriting expenses divided by net premiums earned. Since many insurers bill periodically (i.e. annually), they collect monies that they haven’t performed for. As they perform for said monies, they earn them. So, P/C insurer accepts a $10,000 premium payment on January 1. By February 1 it has only “Earned” 1/12th of that premium although it has had physical possession of the (investable, very important concept here that we will review in a moment) full amount of the funds. The expense ratio measures an insurer's efficiency in conducting its business. The lower the expense ratio the better the insurance operation is run. Expenses include typical business outlays, ex:
2. commissions to sales force whether in-house (insurance agents) or external (brokers)
4. taxes and other operational expenses.
Keep in mind that every single penny sucked in in the expense ratio through underwriting expense is a penny that doesn’t get to stay in the insurer's pocket, thus tight expense ratios are a must.
The loss ratio is simple enough – the monies lost divided by the net monies acquired through underwriting (not investment, which we will get to in a minute). It is calculated as loss and loss adjustment expense (the expense of minimizing loss) divided by the net premium earned (as explained up top). The loss ratio measures the proportion of acquired premium paid out in claims and claims related expenses. The loss ratio, over the longer term (shorter term are really just a matter of happenstance and luck) is an indicator of an insurer's risk management skills combined with its underwriting discipline.
The combined ratio is, simply enough, the combination of the loss ratio and the expense ratio. It is a simple, yet effective measure that reflects the operational excellence (or lack thereof) of an insurer. It measures what an insurer has to pay out in claims and expenses. Of course, even this metric has flaws, primarily in that it doesn't reflect the investment expertise of the insurer, which (particularly in the longer tail risks) can have a very significant effect on the bottom line.
A combined ratio of 104% means that an insurer is underwriting at a loss -- for every $1 in premiums taken in, $1.04 in claims and expenses are paid out. Fortunately, insurers also earn investment income from their float, so an insurer can still earn a profit even with a combined ratio in excess of 100%.
In general, those who invest in the low long-term combined ratio companies have been handsomely rewarded with above market returns. One of the most famous combined ratio consumers is the venerable Warren Buffett. Now, the riskier forms of insurance that entail insuring risks with very long tails (basically, insurable events that can take many years in the making, as opposed to car insurance which has a 1 year or so maximum [short] tail) are also some of the potentially most rewarding. Medical malpractice is a good example. The field is treacherous, and the risks are murky and hard to see. But the possibility arises for claim to be made 3 or 4 years after the insured incident, and even after the claim is made payout may not occur for another 4 or 5 years due to litigation. Even after litigation is settled, the claim can be paid out as an annuity (if the plaintiff is foolish enough to accept such), which extends even further the amount of time the insurer has access to the investable premiums. Add all of this time up, and you have insurers that can invest monies for 12 to 20 years and rake investment income off of said funds for all of that time. This is why asset/liability management is so important in the insurance industry. A medical malpractice insurer that manages to earn 10% after taxes and expenses on its investments on premiums earned on long-tail risk business written with even a 104 combined ratio can do very well if payouts don't start until 8 years after the claim and don't end until 26 years after the claim (due to annuitized payouts). How many businesses do you know of that can do so well while making an operating loss?
Think about it. This is one of the few industries where you can take a distinct and material operating loss and still post a material accounting AND economic profit! Of course this works both ways. If the insurer with a high combined ration takes significant losses, then you (as an investor) had best grab your ass cheeks with both hands and hold on tight. It's going to be a sickening ride.
Let's use the data from the BoomBustBlog post How Greece Killed Its Own Banks! to further illustrate this point. Assume we had Insurer EuroX, who wrote long tale risks and invested heavily in European sovereign debt, including the sterling credit (at least as asserted by the big rating agencies) of Greece, Portugal and Ireland...
... imagine what happens when a very significant portion of your bond portfolio performs as follows (please note that these numbers were drawn before the bond market route of the 27th)...
Of course, insurers don't use the leverage that banks do - or at least they don't use it explicitly. AIG did, and my analysts and I busted other US insurers packing the leverage in through the use of exotic derivatives, sold to them by.... Who the hell else? Banks! Subscribers, see the reports dated between 11/08 to 1/09 in the Life and Health Insurance subcategory for examples. Even without the use of leverage, significant losses are being taken in insurance company portfolios. The Greek bonds are being bid at 18 cents on the dollar. Try paying claims with that investment portfolio, purchased at par! Now, imagine you have a near 100 combined ratio - with no margin for error, god forbid the 82% margin that is needed just to break even. Wait, it gets worse...
The underwriting cycle (excerpted from Wikipedia)
Because most insurance policies are commodities, insurers generally lack pricing power. In other words, most people don't care who writes their insurance policy as long as the price is cheap. Thus, insurance prices are a function of supply and demand. When times are good, insurers make underwriting profits, and loss ratios decrease. As a result of the smaller losses, some insurers, driven by short-term greed, increase capacity by writing more policies. This increase in supply results in decreasing prices. Eventually, the cycle turns, losses increase, and insurers who wrote a lot of policies at low prices are left holding the bag. This situation is extremely similar to the boom-bust cycle of the stock market.
Have experienced a boom in the stock, credit and real estate markets? Are we know in a boom? 'Nuff said? No, not this time. Next to banks, insurance companies are the largest sources of cash for mortgages and private equity/mezzanine financiing for real estate deals. Despite massive bubble blowing by .govs, you know where we stand with real estate, right?
- Reggie Middleton's Real Estate Recap: As I Have Clearly Illustrated, It's a Real Estate Depression!!!
... It is the reporting company’s responsibility to report, not to obfuscate. The big problem with this “hide the market marks” thing is that markets tend to revert to mean. Unless said market values fundamentally catch up with said market prices, you will get a snapback. That is what is happening in residential real estate now. That is what happened in Japan over the last 21 years!!! That’s right, it wasn't a lost decade in Japan, it was a lost 2.1 decades!
And here we are full circle, back to the list that I asked my subscribers to study earlier this week (Addressing Risks In The Insurance Industry). My next post on this topic this weekend will go over the number one pick from that list, along with the reasons for such pick using the logic outlined in this post. This will be quickly followed up by a forensic summary. Shortly after that will be either a full forensic report on said company or another shortlist of companies from another industry at risk from the impending debt crisis.
Last week I illustrated the interconnected EU master duo with the most ironic of divergent agendas: When The Duopolistic Owners Of The EU Printing Presses Disagree On The Color Of The Ink! Basically, Germany and France are pulling in two different directions trying to get off of a boat that will drown them both, regardless. Then I posed the taboo question: Are The Ultra Conservative Dutch Immune To Pan-European Pandemic Contagion? Are You Safe During An Earthquake Because You Keep Your Shoes Tied Snugly?
The Dutch are probably in for a banging that the vast majority of the populace are not expecting. The presentation below is a subset of the keynote speech that I gave at the ING CRE Valuation Conference in Amsterdam last April. Some may say it was quite prescient. I'd say it was a matter of paying attention.
Before you peruse through the Power Points and related videos, glance over Interbank_Contagion_in_the_Dutch_Banking - 2006 (pdf) and then review Cross_Border_Bank_Contagion_in_Europe_- 2006 (pdf). It is apparent that I wasn't the only one who used calculators and common sense before it was too late. To wit:
We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including survey data, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the
other banks but will not lead to a complete collapse of the interbank market. The exposures to foreign counterparties are large and warrant further research.
Tomorrow I will start addressing the insurance industry. Professional and Institutional subsribers have access to three Excel files in the Insurers, Insurance & Risk Management section: Exposure of European insurers to PIIGS_051210 and Insurance cos. EU exposure 11-2011
Retail subscribers have access to Insurance Cos. Operational Stress in the same section. Please peruse the companies in these documents and the related data, for it will be the basis for discussion in several upcoming posts.
I am now more convinced than ever (and I was quiet convinced before) that the European debacle in motion is now unstoppable in the near to medium term. I will personally use the alleged "oversold" rallies and bear market rallies to obtain longer term OTM puts with some of the IV froth wiped off the top. I will be using the valuation guidelines outlined in the various subscriber reports for the companies and opportunities outlined. I am available for discussion in all of the subscriber forums, and as is customary the professional and insitutional forums can bend my ear. I will be willing to go into extreme depth in the Institutional forums, since that is what is paid for.
Italy sold 3 billion euros ($4 billion) of five-year bonds, the maximum target, at the highest yield in more than 14 years as Mario Monti seeks to form a new government to restore investor confidence in public finances.
The Rome-based Treasury sold the bonds to yield 6.29 percent, the highest since June 1997 and up from 5.32 percent at the last auction on Oct. 13. Demand was 1.47 times the amount on offer, compared with 1.34 times last month.
... Monti, 68, accepted a mandate from President Giorgio Napolitano yesterday to succeed Silvio Berlusconi, who resigned as premier on Nov. 12 after defections eroded his parliamentary majority and the country’s 10-year bond yield surged over the 7 percent threshold that prompted Greece, Ireland and Portugal to seek bailouts. The yield on Italy’s benchmark 10-year bond was 6.4 percent at 11:15 a.m. in Rome after the auction, down from a euro-era record of 7.48 percent on Nov. 9.
Italy was forced to pay 6.087 percent on one-year bills at an auction on Nov. 10, the most in more than 14 years, amid the worsening European debt crisis. Monti, an economist and former adviser to Goldman Sachs Group Inc., will try to reassure investors that Italy can cut a 1.9 trillion-euro debt and spur economic growth that has lagged behind the euro-region average for more than a decade.
The country faces about 200 billion euros in bond maturities next year, more than twice as much as Spain, which has also seen yields surge on fallout from the debt crisis. The first bond redemption comes on Feb. 1, when Italy must pay back 26 billion euros for debt sold 10 years ago.Whoa.. This was hard to see coming, wasn't it? Yeah, right. BoomBustBlog subscribers reference the explicit warning from early 2010 -
These severe devaluation in bonds definitely do take their toll, and not just on those who gorged on Grecian debt, as Bloomberg also reports UniCredit Posts a Record $14.5 Billion Loss on Impairments; Shares Tumble:
UniCredit SpA (UCG), Italy’s biggest bank, posted a record loss of 10.6 billion euros ($14.5 billion) in the third quarter after writing down goodwill on acquisitions and investments.
The stock fell as much as 9.6 percent as UniCredit unveiled a plan to raise as much as 7.5 billion euros by selling shares. The company took an impairment of 8.7 billion euros as it wrote off goodwill on purchases in Ukraine and Kazakhstan, UniCredit said in a statement today. The bank said it will exit non- strategic units, without elaborating.
Wider spreads on government bonds contributed to a 285 million-euro trading loss, the company said. The lender also scrapped its dividend for this year and plans 5,200 job cuts through 2015. UniCredit is raising money as it faces the biggest capital shortfall among Italy’s lenders, as ranked by the European Banking Authority last month.
“Our decision to write down the goodwill of several brands and to raise capital will reinforce the bank from both a balance-sheet and capital point of view,” Chief Executive Officer Federico Ghizzoni told reporters in Milan.
UniCredit shares were 6.3 percent lower at 77.3 cents as of 3:34 p.m. Milan time.
The lender said the goodwill charges won’t affect UniCredit’s cash and capital positions. UniCredit’s loan-loss provisions rose to 1.85 billion euros in the quarter from 1.63 billion euros a year earlier. Revenue declined 11 percent to 5.7 billion euros in the quarter.
The stock sale is part of UniCredit’s new business plan, which targets net income of 6.5 billion euros by 2015.
Wow! What a surprise... Oh, my mistake... From Subscriber download dated February 2010, Italian Banking Macro-Fundamental Discussion Note, page 7 - Italian banks at risk!
You see, this is the problem. This Pan-European debacle has been moving in relatively slow motion and was very, very easily foreseeable. As a matter of fact, I have called it with nigh unerring precision from the first quarter of 2010. Reference the series of 40 or so articles starting in January of 2010, together known as Pan-European Sovereign Debt Crisis.
In The Coming Pan-European Sovereign Debt Crisis, dated Sunday, 07 February 2010 (please take notice of the date), I introduced the crisis and identified it as a pan-European problem, not a localized one. You see, the media and the sell side attempted to make this all about Greece when the reality of the matter was that it was anything but. This is a Pan-European Sovereign Debt Crisis, not a Greek, Irish or even Italian debt crisis. As excerpted:
Much of the analysis that I have seen fails to put enough weight on the bad loan/NPA issue in each country's respective banking system, which essentially is the cause of most of the countries' particular malaise to begin with. I have thrown together a crude, rudimentary chart to put this into perspective...
When comparing these sovereigns using metrics that encompass more than the usual suspects, you get a clearer picture. The bank bailouts were expensive, arguably too expensive. It may have been better to let them fail in the market and nationalize them. Notice how the nations with the highest NPAs are doing the worst. In addition, one should remain cognizant that the "extend and pretend" game has allowed hundreds of billions of "phantom" NPAs to roam free in each of these countries' GDPs unrecorded. I believe there may be some surprises left in quite a few of the German banks. We will probably see if I'm right over the next few quarters. See German Recovery Stalls Unexpectedly in Fourth Quarter:German gross domestic product showed no growth in the final quarter of last year, official data showed on Friday, leaving Europe's largest economy on a weak footing going into 2010.
And you wonder what happend to Unicredit???
In the piece What Country is Next in the Coming Pan-European Sovereign Debt Crisis?, dated Tuesday, 09 February 2010 (please take notice of the date) – I illustrated the potential for the domino effect, as excerpted:
It is beyond a hallucinogenic-induced pipe dream to even consider that the Eurozone will come out of this attempt at replicating the US "extend and pretend" policy intact and unscathed. The mere concept of global equity rallies should have macro traders and fundamental investors chomping at the bit. The US won't even get away with it, and we have the world's reserve currency printing press in our basement running with an ink-based, inter-cooled, twin-turbo supercharger strapped on that will make those German engineers green with envy, not to mention green with splattered printer ink as the presses go berserk!
In part 2 of my series on the Pan-European Sovereign Debt Crisis, we will review Italy and Ireland in comparison to the whipping child of the media - Greece (see "The Coming Pan-European Sovereign Debt Crisis" for part one covering Greece and Spain along with tear sheets for the Spanish banks at risk for subscribers).
Click to enlarge...
As seen above, Italy's gross debt as a % of GDP is worse than that of Greeces. Spain's stuctural balance is nearly as bad as Greece's and their GDP is heading backwards at a faster rate than Greece. Spain's high unemployment trumps all in the comparison, with Ireland coming a close second. Despite all of this, Greece has two to three times the CDS spread. Greece is a dress rehearsal for sovereign debt failure in several larger countries. Ireland is in very bad shape, and the UK is heavily levered into Ireland through the banking system and bonds (to the tune of $190 billion+) which exacerbates the issues that the UK already has (we will get to this in a future post). Spain and Italy combined are a sizeable chunk of the entire EU, and they are at risk. I say this just to keep things in perspective. We still have at least 9 or 10 more nations to review, and it doesn't necessarily get any better from here.
The worst has yet to come. With nearly all of Europe's banking system in the toilet, and roughly half a trillion Euros of mortgage loans coming due for rollover on a property market that is currently underwater with increasing vacancies, softening rents and a fukked macro outlook, pray tell what do you think will come of it?
Reggie Middleton Featured in Property EU, one of Europes leading real estate publicatios
Those who wish to download the full article in PDF format can do so here: Reggie Middleton on Stagflation, Sovereign Debt and the Potential for bank Failure at the ING ACADEMY-v2.
Of course, you can bet the farm on the industry group that will be hit second hardest by all of this, and yet somehow has not recieved nearly enough attention. Stay tuned, collapses commencing shortly. BoomBustBlog subscribers should hit the professional (professional only) addendum to the (all paying subscribers) Sovereign Debt Exposure of European Debt Exposed Industry (439.61 kB 2010-05-19 01:56:52) which can be found online here: Sovereign Debt Exposure Worksheets - Professional. I will be updating this list within a week.
We have an updated view of Ambac's bankruptcy effects on the investment banking industry- actually, two banks in particular. All paying subscribers are urged to download the summary - Investment Bank Exposure to monolines. Professional and institutional subscribers should download the accompanying addendum which actually illustrates the hundreds of insured securities in inventory of the banks in question, complete with CUSIP numbers: Ambac-MBIA Insured Model
I have taken the liberty to summarize parts of the subscription report for BoomBustBlog readers who don't subscribe. While I will not reveal the most exposed banks, I will show how this is far from a non-event for the investment banking industry, and more to the point - how the post "The Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008!" will be even more prophetic than Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billionn in Equity. After all, the smart money should view Banks, Monolines, and Ratings Agencies As The Three Card Monte (Wall)Street Hustlers, particularly since the Shadow Inventory System in the US is Disguising the Equivalent of a Dozen Ambac Bankruptcies!
The Fallout of the Ambac Bankruptcy and Its Likely Effects On the US Investment Banking and Broker/Dealer Industry
The majority of the exposure at risk is that of AMBAC towards the investment banks, which is significantly (as of 2008) the US taxpayer through the government’s backing of the Maiden Lane assets as part of sterilized sale of Bear Stearns to JP Morgan. That is, the securities referenced in the accompanying subscription model and $31bn exposure referred to therein are the securities that were issued by investment banks, sold to other investors and backed by AMBAC and MBIA. If the investment banks offerings were to default (and given that there is no protection due to AMBAC bankruptcy), there would be loss to the holders of these securities that relied on AMBAC’s protection. This is not direct exposure to the investment bankss, but I do believe there is material indirect exposure due the very distinct possibility that the banks are now open to greater warranties and representations clause risks, as well as the impetus for investors to go after the banks directly as a result of (now uninsured) losses as a result of the purchase of these securities – many of which would most assuredly fail to pass the sniff test!
Summary: Banks, Insurers and ratings agencies conspired to move junk assets that were guaranteed to implode. They were (Wall)Street hustling, 3 Card Monte style.
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|
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.
Relevant commentary from BoomBustBlog and sources throughout the Web on the accounting change that added 80% to the S&P since March 2009!!!
Warning Shots from the IASB: FT
- The IASB came under fire in the fall/winter of 2009 in regards to mark to market rules
- Banks wanted continued relaxation of valuing models in order to “smooth out volatility swings in asset prices”
- IASB and FASB plan to converge on mark to market ruling by 2011, both have stated a desire for more transparent financial statements, but have been politically compromised by bankers and commercial lenders
FASB Plan Would Force Banks to Report Loan Fair Value: BusinessWeek
- FASB is seeking to approve a proposal that would force banks to mark loans at market value by 2013, potentially having billions of dollars at risk for writedowns
- In April 2009, FASB gave significant leeway to banks in regards to pricing and modeling loan values, banking consultants are very opposed to a reversal of the measures
- Pension obligations and leases will be exempt from new measures
Taking into consideration Merkel's ill-conceived ban on financial company shorts, I feel this is a good time to review alternate exposures to concentrations of European sovereign debt exposure. Before we go, please reference the effects of this ban announcement as expressed in the mainstream media:
- •Stocks, Commodities Fall as Euro Hits Four-Year Low on German Trading Ban
- •Default Swaps Soar Following Merkel's `Act of Desperation': Credit Markets
- •Germany Bans Naked Short Selling, Some European Bond Swaps to Calm Markets
Keep in mind that all investors are speculators since no return is a "sure thing" and furthermore prudent speculators don't short healthy nor strong prospects. The ban on financial company shorts is akin to a ban on calling a horrible smelling person stinky, it really doesn't make them smell any better. As a matter of fact, it very well may draw additional and more detrimental attention to the odor. The best way to deal with both legal (at least what used to be) shorting and being called stinky is to address to address the root causes of the problem. Personal hygiene in the case of "stinky" and fiscal hygiene (ex. fixing those balance sheet and transparency issues) in the case of financial companies.
With that being said, I would like to offer an excerpt of a recently released subscriber report that may be of interest to those following the European crisis. Subscribers may access this document here Sovereign Debt Exposure of European Insurers and Reinsurers and professional and institutional subscribers may access the live spreadsheet behind the document by clicking here.
Some of the top secret AIG bailout info is out. Guess who's at the heart of it, making money by creating straight trash, selling it to its clients then buying insurance to benefit from its inevitable crash?
I have been warning about Goldman's ability to sell trash to its clients
for some time now.
This is not a short post, for it is packed with a lot of supporting information, analysis and data. If you are looking for quippy paragraph, soundbyte or quick headline to get an overview of,,, well whatever, click here, or better yet, click here. For everyone else who may be looking for deeper investigative analysis and the unbridled TRUTH for a change, please continue on.
First a little background info. Goldman is supremely overvalued in my opinion. It is even more so considering much of its profit is generated solely from the raping of its clients. I say this holding absolutely no ill will towards Goldman. This is strictly factual. Let's walk through the evidence, of profit potential, valuation, and the stuff behind some of the value drivers in their business model, like brokerage and investment banking...