Following up on the post from this morning,"Preparing Resources To Shop For Distress…", I'm releasing the followup t our Distressed Asset Sale Initiative for pro and institutional subscribers (click here to subscribe or upgrade) - File Icon Distressed Sales From EU Sovereigns and Banks V.2.0.

As excerpted:

Update Note - European Bank Deleveraging

In our last report on European Bank Deleveraging in May last year, we had highlighted that the European Banks would be forced to shrink their balance sheet by way of asset-sale, reduction in lending and scale-back of their retail business. We had also mentioned why banks would be required to deleverage, and to what extent European banks have planned their asset sale categorized by:

(1)      Banking Activities (Investment banking, Corporate, Retail)

(2)      Asset Category (Banking, Insurance, Asset Management, etc), and

(3)      Location (Asia, Latin America, EU and North America)

The Global Financial Stability Report (GFSR) released by IMF (International Monetary Fund) in April 2012 had estimated that EU banks (a sample of 58 banks in IMF GFSR April 2012) would reduce assets by $2.6 trillion (under the base policies scenario) over the period from Q3 2011 to Q4 2013 (10 quarter estimate).

Actual data for 5 quarters ending Q2 2012 shows that a number of euro area banks have taken steps in the direction to deleverage although the pace of effort has somewhat slowed down after Q1 2012 due to ECB’s efforts to relieve funding pressure on banks. The assets of the sample banks fell by around $600 million from Q2 2011 to Q2 2012 (source: IMF’s GFSR October 2012 report). The period Q4 2011 accounted for a major share of the above decline.

Which banks actively initiated deleveraging?         

A number of large European banks decreased their exposure during Q4 2011 and Q1 2012. The decline was notably the highest in the peripheral euro area, around 12% in Q4 2011 and Q1 2012 combined, compared to the decline in other regions, namely other advanced regions in Europe, emerging Europe, emerging Asia, Latin America and other parts of the world. The chart below shows the percentage decline in exposure of European banks by regions in Q4 2011 and Q1 2012.

Published in BoomBustBlog

As the equity markets are benefiting from the forced zero rates of central banks world-wide, I remain cognizant that the core problems of the crash five years ago have went absolutely nowhere. As I have demonstrated to all that I am no perma-bear in calling the contrarian pair trade of the decade (short Apple: Deconstructing The Most Accurate Apple Analysis Ever- long Google: Reggie Middleton Goes For 2nd Win On CNBC Stock Challenge & Causes TROUBLE!!!). I'm not pessimistic, I'm realistic! My recent rant on the Irish banks included the post that pretty much laid out the evidence of a potential Irish bank collapse -  "If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... I followed this up with a stern warning to Irishmen - "As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come". Who do you believe, me or your Irish government? Let me give the skeptical readers a little assistance...

Just a month and a half ago, we've had Irish officials proclaiming...

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Hey, ninety days or so later... guess what?

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These banks are likely to need a recap, a recap that will likely get a sloppy and ugly. I visited the UAE this time last year and noticed that would be an excellent source of capital for a shopping spree based upon the EU Bank deleveraging. It prompted me to detail my thoughts to subscribers for I was preparing to raise capital. 

Distressed Sales from European Sovereign Nations and Banks Page 01Distressed Sales from European Sovereign Nations and Banks Page 02Distressed Sales from European Sovereign Nations and Banks Page 03Distressed Sales from European Sovereign Nations and Banks Page 04Distressed Sales from European Sovereign Nations and Banks Page 05

This is just a portion of the report released (subscribers can find the full report in the Global Macro Section of the downloads area). One page in particular was particularly prescient, page 9... Remember what happened two months ago before you read this and be sure to notice the dates on the embedded documents... Bank deleveraging is REAL!!!

Distressed Sales from European Sovereign Nations and Banks Page 09

I have updated versions of this distressed asset acquisistion document which I will post for institutional subscribers later on in the day. Any institutions or high net worth individuals interested in my plans should feel free to contact me. 

Published in BoomBustBlog

Kiss Those Euros GoodbyeAs of today, all of the puzzle pieces for an Irish government cum ECB via Germany confiscation of Irish bank depositor money is in place. The first piece, Irish bank insolvency was clearly identified and articulated in "If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... I drove the point home even further as the Irish PTB start to admit that their banks need to be recapitalized, in "The Beginning Of The Great Irish Unwind?!?!?!". The second piece of the puzzle is the political will to actually sacrifice bank depositors, clearly illustrated in "As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come". Now as of today, we have the final piece, the legal mechanism - which allegedly is just being debated but in reality is already in place. The template has already been established with Cyprus, ala "EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation".

The Irish are about to see their deposits above the 100k euro insured limit hit risk heretofore unseen. You see, weeks after my many warnings of Irishmen and women at financial risk, the Irish presidency of the European Council put forth a proposal to do just what I warned of ahead a key meeting of finance ministers next week. Whats of even more importance is the fact that, as in Cyprus, EU states have NOT ruled out the possibility of confiscating bank deposits below the EU insured limit of 100k euro. This means that there is far from a AAA credit covering your deposits. It almost happened a month or so ago, and nobody wants to rule put the potential of it happening again. Now, on to the news piece that has confirmed my many warnings, the last piece of the puzzle - from the Irish Times: Bank deposits of over €100,000 may be at risk...

Deposits of over €100,000 are likely to be hit in the event of future European bank collapses, according to a proposal put forward by the Irish presidency of the European Council ahead of a key meeting of finance ministers next week.

Discussions on the controversial bank resolution regime, which is likely to see savers with deposits over €100,000 “bailed in” as part of future bank wind-downs, are due to intensify this week in Brussels, ahead of Tuesday’s meeting, which will be chaired by Minister for Finance, Michael Noonan.

Under a compromise text proposed by the Irish presidency, uninsured deposits of over €100,000 would be bailed in in the event that a bank is resolved, but depositors would rank higher than other creditors in the event of a wind-down. In this scenario – known as “deposit preference” – depositors would rank at the very end of the process, with other creditors first absorbing losses.

"In this scenario – known as “deposit preference” – depositors would rank at the very end of the process, with other creditors first absorbing losses." Absolute non-sense. Simply smoke and mirrors for those who don't know any better. The only reason for there to be a wind-down in the first place is that there is no equity left in the bank. With gearing in the European banking model what it is, and the dearth of transparent (non-fraudulent) reporting what it is (see If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...), the chances of there being any recovery is somewhere between zilch and nil, give or take a euro or two - reference LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%? and The Anatomy of a Serial European Banking Collapse to realize that once a counter party driven bank run starts, there may be less than nothing to divy up in the end. Lehman Brothers' US creditors received roughly 10 to 40 cents on the dollar, but after 5 years of wrangling, the European International arm was full repaid. Hey, do you feel lucky with your life savings? Even if you do feel lucky, you'll still need 5 years to spare and a ton of cash for legal fees.

However, some member states have not ruled out the possibility that insured deposits, i.e. deposits under €100,000, would be forced to bear losses in the event of a bank collapse even though these deposits would be likely to be protected by the deposit guarantee scheme.

As stated earlier, this ain't AAA coverage!

This year Jeroen Dijsselbloem, head of the group of 17 euro zone finance ministers, said that losses on bondholders and depositors could form part of future bank bailouts as euro zone officials seek to move the burden of bailouts away from taxpayers – as was the case in the Irish bailout – and on to private investors.

The European Commission argues that this switch from so-called “bailouts” to “bail-ins” would result in an allocation of losses that would not be worse than the losses that shareholders and creditors would have suffered in regular insolvency proceedings that apply to other private companies.

Ahem, that non-sense only works on the uneducated and/or the unassuming. The major difference is that creditors that would be subject to regular dissolution proceedings AND that are unsecured, would demand considerably higher rates of return. A borderline solvent bank whose officers AND regulators admit publicly is in need of additional capital infusions after receiving three thus far, and 96% losses in its publicly traded equity, would have to borrow money at 18%, not 2% - and that's being generous. See the bank deposit rate calculator below.

While the inclusion of large savers in future bank bailouts is now widely accepted, significant differences still remain between member states.

While the new rules governing bank resolution were first intended to come into place in 2018, since the Cypriot bailout there have been calls from senior EU figures such as European Central Bank president Mario Draghi and EU economics affairs commissioner Olli Rehn to introduce the new regime as early as 2015.

The Irish presidency of the European Council is hoping to reach a common position by the end of next month.

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

 Other hard hitting pieces on the resurgent EU banking crisis

 

Published in BoomBustBlog

This short post has more pertinent Apple analysis than a year's worth of Goldman's research. Don't believe me? Get some of the best Goldman research from the year and compare it, or better yet send it to me and I'll post it so we can all compare! In the meantime...  

In February I opined on Apple's attempt to appease institutional investors in the post "Regarding A Potential Stock Split & Cash Dividend For Apple". I am vehemently against Apple paying dividends or splitting its stock. Apple has witnessed a significant operating obstacle in front of it, and instead of attempting to navigate deftly around that obstacle, it is allowing itself to be distracted by non-operators (large investors, primarily hedge funds, who are eyeing its cash horde). Worry less about fancy cash repatriation schemes via debt issuance, cash dividends and stock splits and worry more on how to stem the tide of market share, technological capability and innovation loss relative to the extremely aggressive and capable Android powered competition. More importantly, focus on how to defeat the progenitor of Android, Google. 

As excerpted from the afore-linked article:

Only short term thinking traders really want Apple to return cash, reference Apple, Big Hedge Fund Stars & The Sell Side/Vaudeville Act To Burn Your Hard Earned Money As A Punchline That's Just Not Funny. Apple needs to put that cash horde to work aggressively, and quite quickly to build up its expertise and assets in the cloud, where it's sorely behind and in danger of never catching up. Apple also needs to significantly beef up its hardware and software in the portable device field. All three of these aspirations will hit margins, and Apple is seriously behind in all three aspects as well. For more on this, reference In Case The Mainstream Media Didn't Get The Memo, I Crush The Apple Reality Distortion Field On CNBC.

Giving cash to shareholders when you should be investing it yourself is an awful idea for the long term prominence of this company, whose days already appear to be quite numbered as a leading tech titan.

Now, to be honest, all tech titan's days are numbered, at least as a tech titan. Apple is currently and sorely outclassed in the tech features and capability race at the same time it has lost its iconic leader and competition has more than quintupled.

I rehash these points because as I fine tune our most recent Apple valuation model, incorporating the most recent quarterly results along with the bond offering details, I see some alarming developments that further my belief that Apple is no longer a growth company in spirit, in practice, and soon in growth rate, but has matured and is taking on the characteristics of a company who market has matured. The major problem with this is that Apple's market has NOT matured, and as a matter of fact, is still in the high growth stage. It is Apple management which has dropped the ball here, foregoing longer term opportunity to appease financial investors' shorter term desires. A very bad idea, and a devaluing event for longer term equity investors of Apple stock.

Apple cash reinvestment

It is no surprise that Apple's margins are dropping uncontrollably for they can no longer differentiate their product enough to justify a premium. Notice hos the drop in margins track the drop of R&D/marketing, albeit with the requisite time lag.

Apples margin free fall by Reggie Middleton on CNBC

This 15 minute video features all of the ins and outs of how Apple fell, why it fell, and how it can rise again.

Apple's management is in desperate need of a cloud infrastructure build-up and build-out. They also need a significant hardware and OS refresh. Without such, they will become RIMM'd, or shall I say Blackberry'd. As you can in the app below, Apple's mobile product margins are all trending down, at the same time their market share and ASPs are downward trending as well.  This sample is one page out of our ten section Apple valuation model, a model which I will make available to all professional and institutional subscribers next week, one updated with the latest quarterly results and the recent bond offering. You can subscribe here to access this model, as well as Google's and Facebook's next week. 

The app below is also what was used to create the charts above...

Related articles:

What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

Following up on Deconstructing The Most Accurate Apple Analysis Ever, I am offering subscribers an updated valuation of Apple now that it has fallen to EXACTLY where I warned subscribers in October (the week of its all-time high of about $707 it would fall) to. After playing with the iPhone 5 for about a week, I told subscribers to expect the stock to bounce up against the pessimistic band of our valuation analysis. Apple last traded at $420, this is how I put it 5 months ago...

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This report is still available for download to paying subscribers:

 

Published in BoomBustBlog

Apple's most recent quarter was about as close to my analytical forecast and predictions as it can get. Amazingly enough, media and analysts STILL are refusing to face the facts that this company's heyday is well done. Stick a fork in it. A picture's worth a thousand words, so let's make this a short post.

Apples margin free fall by Reggie Middleton on CNBC

I will be  releasing updated Apple research, including analysis that includes their recent bond offereing, within 48 hours to my paying subscribers. Pro and institutional subscribers will get granular access to the model and/or the model output. In the meantime, let's review the work from the recent past....

Most Accurate Apple Analysis Ever Pt 2, The Only Investor Accurately Calling To Short Apple Tells What's Next Tuesday, 05 March 2013 13:35

Following up on Deconstructing The Most Accurate Apple Analysis Ever, I am offering subscribers an updated valuation of Apple now that it has fallen to EXACTLY where I warned subscribers in October (the week of its all-time high of about $707 it would fall) to. After playing with the iPhone 5 for about a week, I told subscribers to expect the stock to bounce up against the pessimistic band of our valuation analysis. Apple last traded at $420, this is how I put it 5 months ago...

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This report is still available for download to paying subscribers:

With this report and Apple's subsequent ~40% or so drop, we have profited from Apple on both the long and short sides (After My Contrarian Calling Apple's 3rd Miss Accurately, I Release My Apple Research Track Record For 2 1/2 Years)

Related reading:

In Case The Mainstream Media Didn't Get The Memo, I Crush The Apple Reality Distortion Field On CNBC

What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

 The short call - October 2012, the month of Apple's all-time high and my call to subscribers to short the stock:  Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All

This crux of that article was to debunk the widely assumed notion that I was bearish on Apple's share price for 2 years. The reality of the matter was that the paid research and opinion clearly supported much of Apple's share price until right about the last earnings report and release of the iPhone 5, until I notably went bearish and Apple promptly lost 35%, or about 4 Dells with a LinkedIn thrown in to boot...

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Notice how this chart shows subscription research would have provided ample profits LONG and short, with the long presumed to be unleverred as a straight stock purchase. This is to put to bed any naysayers. Now, as to whether my many proclamations over the last two years regarding Apple were able to hold water, we let the facts speak on the reasoning behind the call and the accuracy of my call in the deterioration of Apple's margins, market share and status.

Now, if you recall, there were many sell side analysts calling for Apple to break $1,000 per share just a few months ago. On Friday, 25 January 2013 I penned "What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!", and is excerpted as follows:

I was going to name this piece "Why Sell Side Wall Street and the Mainstream Media Can't Touch Me", but I decided to go the humble route :-) Do you guys remember those highly paid Wall Street analysts and popular MSM guys who had $1,000+ price targets on Apple just a few months ago? Let's reminisce, shall we...

Let's contrast this to what I have espoused over a similar time frame...
    1.  - This pretty much says it all, right Mr. Munster of Piper Jaffrey??? Yeah, I called you out on this one! Here is an excerpt for good measure, but before you read it remember that Apple's thrashing at the exchange has forced it to renounce its earnigns manipulating ways - just as I anticipated!!!

Well, let's see what's in today's news... Oh yeah!!! Apple cuts MacBook Pro Retina and Air prices, boosts specs 

Apple has slashed the price of its MacBook Pro with Retina display notebooks, throwing in some updated specifications along the way.

Hey, wait a minute! Didn't I say that in the CNBC segment yesterday, and all through last year? Subscribers can access my full Apple report and valuation here Apple 4Q2012 update professional & institutional and Apple 4Q2012 update - retail). Those of you who don't subscribe can review the dated, redacted version below...

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If after reading the articles and viewing the videos above and you believe that I'm the best thing since Wall Street brokerages were private partnerships that couldn't squander other peoples capital at insanely levered levels while misleading muppets with inanely bullshit analysis and sales pitches to 89% losses on their recommendations (reference Multiple Muppet Mashing Leaves Groupon Shareholders Holding The Bag After 89% Off IPO Coupon) just to get paid multi-million dollar bonuses instead of jail time, then feel free to subscribe here.
Published in BoomBustBlog

Who Do Your Believe Reggie Middleton or Central Bank of Ireland

I have spent two week warning Ireland and the world about the Irish banking system, with a summation available in the aptly titled post, If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...Yesterday, the Irish media STARTS to come clean, although they are still not as explicit as the Irish Sun article which put my researched facts front and center...

 Click to enlarge...

 

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From the Irish Times

Yesterday, at the press briefing to discuss the Central Bank’s 2012 annual report, Honohan matter-of-factly told us that the Irish banks would need more funding before 2019 due to changes in capital reporting requirements imposed by the new Basel III accord.

The transition period for these changes to be implemented by banks in the EU is January 2019.

There were more than a few eyebrows raised at this frank admission.

Honohan’s statement is in stark contrast to those of the various Irish-owned banks –AIB, Bank of Ireland and Permanent TSB. In public at least, the banks have maintained that they are adequately capitalised and that they do not envisage having to raise additional capital to bolster their ratios.

From the Independent:

Mr Honohan said the Central Bank was still working towards carrying out stress tests on the banks at the latter part of the year. By 2019, the banks will need more capital under international regulations.

"In an ideal situation, that capital will come from private investors, as is happening all over Europe, all over the world, where bank capital is being pushed up through the market system," he said.

From private investors? Yeah, right! As said private investors are hoodwinked, just like those poor muppets in the US - reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland

In the 2008 Annual Accounts (Irish version of Annual Report) of Bank of Ireland (see attached, page 178) it states the bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland over the Banks ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an Eligible Securities schedule.’

Fact: The BoI 2008 Irish accounts (~annual report) refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities.’

Of paramount importance for US investors and regulators, there is an absolute omission of this information in the Bank of Ireland SEC 20F returns for 2008.

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From the Irish Examiner:

However, banks would need capital over the medium term to comply with Basel III capital requirements by 2019. It is hoped the banks will be able to raise this from private investors, he added. He hoped Ireland would not need the help of the ECB’s outright monetary transaction programme when it exits the bailout programme. However, if it met certain criteria, then it would be able to use the facility. 

But private investors have done so well in the Irish banks, particularly considering their pristine disclosure policies, right??? Again, reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland 2008 Irish Annual Accounts refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities,’ but no mention of ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an EligibleSecurities schedule.’

There is also no mention of any information related to this floating charge in the Bank of Ireland SEC 20F returns for 2008.

It appears that this floating charge was not disclosed at the time of the stress testing of the bank conducted by the European Banking Authority.

It is possible that I may have overlooked such, and because of that possibility I have made the SEC 20F available for all who want to check over my work. Here is the UBI 2008 accounts and here is the SEC 20f-2008 for the Bank of Ireland.

Now of course, to constitute fraud there has to be a loss on the part of the one being defrauded or a gain on the part of the one being defrauded - at least according to Wikipedia. Otherwise, it would be a hoax. That's the Irish banking system, and not this bank in particular. So...

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If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

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CNBC Stock Draft 2013

I appeared on CNBC Friday to go for my 2nd win in their Stock Draft Challenge. Of course, I started trouble. I took the liberty of compiling  snippets from the last contest, the results and the most recent airing last Friday - along with some interesting notes. Pay attention to the argument that ensued when discussing Google's business model towards the middle of the video.

I will release fresh, updated Google research that incorporates projections for Google Glass and Google X Phone, as well as this quarter's most recent earnings update. In the meantime, refresh your collective memories with the last Google update published, see Google's Q4, 2012: This Looks To Be The Leader Of The New Distributed Information Paradigm.

Subscription research (click here to subscribe):

 

Published in BoomBustBlog

Last week I shocked many with several revelations in the post What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors? Well, there's more to the Bank of Ireland story than evades the eye.

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 In relation to BoI; the CEO Richie Boucher in the Irish High Court on 5th of October 2012 swore on affidavit that BoI had assets of €155 billion. 

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His statement appears to ignore the existence of the charges that were clearly delineated and illustrated in my previous post - What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?
Below is a sworn copy of the affidavit for Richie Boucher, the CEO of Bank of Ireland. This relates to reducing the Banks Regulatory capital by almost 4 Billion Euro which was shared amongst its preferential shareholders – at the expense of the common shareholders.

You will see he states that the bank has assets of almost 155 Billion Euro. The bank reported losses of 2.1 Billion euro last week.

BoI Boucher2

Although he states that the bank has assets of almost 155 Billion Euro, it recently reported losses of 2.1 Billion euro, which of course materially reduces capital. This loss had to be visible from within the bank for Citibank (amongst other analysts) had bearish views on the company. I doubt Citi knew something that the bank management didn't!

This bid to raise capital for dividend distribution in the face of apparent and expected losses (Citibank had a bearish outlook on the bank’s operations, as did the CEO himself) appears to fly in the face of prudent operation designed to keep the bank as an ongoing concern. Further investigation supports reason to question this action.

Citi analyst on BoI-144

The institutional bank investor Wilbur Ross bought preferred shares of BoI, and benefitted from a windfall payout as BoI successfully petitioned to reduce its regulatory share capital amongst current and impending losses that it was confident it would be taking.

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Wilbur Ross, et. al. made off like bandits, with the Bank of Ireland common people shareholders left holding the bag with millions in losses. We calculate Mr. Ross pocketed over $600 million dollars for this 5 month or so trade - and with relatively very little out of pocket expense or risk. He still owns the preference shares, after all - and still got the cash as well! Touche' mister Ross, Touche'. As for the common shareholders nursing that 2.1 billion euro (roughly 4.5B dollar) losse, I say the same to you that the big US bankers said to their clients during the 2008 debacle - Muppets! See Goldman's take on Muppetology to get a firmer grasp on what I mean and how the US banks consider nearly all taxpayers muppets.

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I calculate the Bank of Ireland taking even more aggressive losses in the future. Why? Failure to mark to market means Irish banks are carrying loans whose true saleable value are roughly 27% of book value. This literally means insolvency for many – and that’s without the recognition of the various charge issues illustrated within. I have documentation to back this up as well and will delve into it in a future post. In the meantime, review my previous posts on the topic or subscribe to download some of the speficic charge documents contained in the posts herein.

 Other hard hitting pieces on the resurgent EU banking crisis

 

Published in BoomBustBlog

This is likely to be the biggest financial story of the month, a story that's bigger than Cyprus, and a story that you're not going to see in American mainstream media - not by a long shot. Let's take this from the top, for BoomBustBloggers were warned weeks in advanced. On Wednesday, 27 March 2013 I published EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation wherein I explained that the situation of extreme loss faced by Cyprus bank depositors, savers and bondholders will not be a unique story - as excerpted:

The deposit accounts that you were getting just a few hundred basis points for have developed:

    1. Liquidity risks: The capital controls that weren't supposed to happen (see No Capital Controls In The EMU? Liar Liar Pants On Fire), happened! See Cyprus Banks Set To Reopen, To Serve As Glorified ATMs With A €300 Cash Withdrawal Limit
    2. Credit risks: Your so-called safe investments will suffer up to a 40% haircut! Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into Depression
    3. and Market risks: Demand depositors have forcibly purchased highly speculative synthetic call options with their haircuts that are unlikely to compensate anyone for anything!

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

It's not just Cyprus either. The problems that plagued Cyprus banks plague banks in much larger nations within, and around the EU. From Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe you see institutions that are literally too big to be handled safely...

The Banks Are Bigger Than Many of the Sovereigns

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 Now, the "Overbanked" article was posted back in 2010. That's right, I warned about the two Irish banks listed in the chart above THREE YEARS ago, You've had plenty of time to mover your money out! Speaking of those Irish banks, I warned the Irish again a few weeks ago as well - with specificity - in Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!! Here, I focused on Anglo Irish, already nationalized and being wound down. I warned that there will be unhappy returns, if there would be any, just like Cyprus - as excerpted:

First Off Let's Make Bank Collapse Real...

To begin with, let's make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:

Later that weekend in the Irish media... As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland

Anglo Irish Bank/IBRC bondholders will actually get some of their money back!

April Fools!!!

As if on cue, a day after my expose on Anglo Irish Bank and its shenanigans (see Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!), The Irish Business Post announces senior bondholders will get wiped out. That's right, a 100% loss! Zilch! Zero! Nada! Now, that's investing. That's getting "Cyprus'd", plus some!!! From Businesspost.ie: IBRC senior bondholders to be burned

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Of course, the story doesn't end with the bondholders. Exactly as anticipated in the articles mentioned above, and as published in the Irish mainstream media over the weekend...

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As you can see, this is actually MUCH WORSE than the deal the Cypriots got. These Irish pensioners are facing a total wipeout - 100% LOSS!!!

If you're not disenfranchised, yet, hold on... It get's worse, much worse. The Irish Examiner published this today... 

ECB gags State on IBRC liquidation

The ECB has gagged the Government from releasing any information in relation to the liquidation of the former Anglo Irish bank, IBRC. A senior official in the Department of Finance told the Irish Examiner they were under strict instructions from the ECB not to release any details to the public. “What they [ECB] have said from an early stage is that if there is any release, at all, then all negotiations are off. They do not want to discuss this in any forum, other than that of a member state and the ECB council,” he said.  The department has received about 16 freedom of information requests in relation to the IBRC liquidation and is now considering adopting a policy position that would allow it to refuse all applications for the release of information. 

Sinn Féin finance spokesman Pearse Doherty said the decision to liquidate IBRC was one of the biggest ever made by the State and he was concerned certain firms may have used insider information to secure payments. “The minister has refused several requests from me for information pertaining to the weeks and months before the event, specifically concerning whether certain sources in the know used confidential information to fast-track invoices in anticipation of liquidation.

So there you have it. Unless you've been hearing a lot about Irish bank collapse lately, it seems if you don't hear it from Reggie Middleton and BoomBustBlog, you're probably not going to hear it at all - so says the powers that be.  

It's not just Anglo Irish Bank, either. I've warned about several other Irish banks. Here's another one I feel likely to give Irish savers a nasty surprise...

You see, the banks can get away with this fleecing because the common person doesn't get a hold of my information and analysis very often, at least not until it's too late. But...... Guess what happened in the Irish mainstream media over the weekend, in the Irish Sun, the most popular rag on the most popular day....

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Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

For my US readers who feel this has very little to do with them, I query...

What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?

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For my UK readers who may be a little on the apathetic side...

I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!

The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS.

I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!

Other hard hitting pieces on the resurgent EU banking crisis

Published in BoomBustBlog

fraudSince I'm not a securities attorney, let's get a basic understanding of where I'm basing my allegation - after all, I could definitely be wrong as a layman. From Wikipedia:

Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.[1] Offers of risky investment opportunities to unsophisticated investors who are unable to evaluate risk adequately and cannot afford loss of capital is a central problem.[2][3]

Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors.

Characteristics of victims and perpetrators

Any investor can become a victim, but persons aged fifty years or older are most often victimized, whether as direct purchasers in securities or indirect purchasers through pension funds. Not only do investors lose but so can creditors, taxing authorities, and employees.

Potential perpetrators of securities fraud within a publicly traded firm include any dishonest official within the company who has access to the payroll or financial reports that can be manipulated to:

    1. overstate assets
    2. overstate revenues
    3. understate costs
    4. understate liabilities

Enron Corporation[27] exemplifies all four tendencies, and its failure demonstrates the extreme dangers of a culture of corruption within a publicly traded corporation. The rarity of such spectacular failures of a corporation from securities fraud attests to the general reliability of most executives and boards of large corporations.

So, with that layman's understanding of what securities fraud is (along with my emphasis added), let's move on. 

The Bank of Ireland

In the 2008 Annual Accounts (Irish version of Annual Report) of Bank of Ireland (see attached, page 178) it states the bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland over the Banks ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an Eligible Securities schedule.’

Fact: The BoI 2008 Irish accounts (~annual report) refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities.’

Of paramount importance for US investors and regulators, there is an absolute omission of this information in the Bank of Ireland SEC 20F returns for 2008.

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Other Discrepancies In Disclosure

The Bank of Ireland 2008 Irish Annual Accounts refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities,’ but no mention of ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an EligibleSecurities schedule.’

There is also no mention of any information related to this floating charge in the Bank of Ireland SEC 20F returns for 2008.

It appears that this floating charge was not disclosed at the time of the stress testing of the bank conducted by the European Banking Authority.

It is possible that I may have overlooked such, and because of that possibility I have made the SEC 20F available for all who want to check over my work. Here is the UBI 2008 accounts and here is the SEC 20f-2008 for the Bank of Ireland.

Now of course, to constitute fraud there has to be a loss on the part of the one being defrauded or a gain on the part of the one being defrauded - at least according to Wikipedia. Otherwise, it would be a hoax. That's the Irish banking system, and not this bank in particular. So...

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If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

Other hard hitting pieces on the resurgent EU banking crisis

 

Published in BoomBustBlog