This post, in and of itself, should demonstrate to the entire Sell Side of Wall Street, the MSM/pop media outlets and all who may follow them that BoomBustBlog forensic research and analysis is simply superior to much of what is significantly overpaid for in terms of investment advice and opinion. Even more, what's ironic is that as I type this, the ZeroHedge newsticker flashes "Because The First Amendment Does Not Reach Across The Atlantic..."

The idiocy just hit record highs:

    • BNP PARIBAS SAYS IT ASKED AMF TO INVESTIGATE WSJ OPINION PIECE - BLOOMBERG

What next: the AMF dispatches black choppers to round up all those trop-beaucoup criminal bloggers?

Hmmm... Speaking of bloggers... Well, I don't consider myself to be the average blogger with a wordpress account. I come to the table with a full place setting of analytics. For those who don't embrace this new medium of dynamic, chaos theory embracing, distributed method of knowledge dissemination, all I can say is... Let's dance!

Bloomberg reports: BNP Paribas, SocGen Rebound After Rejecting Money-Market Funding Concerns and Company Bond Risk Falls From Two-Year High as French Banks Reject Concerns

BNP Paribas SA, France’s biggest bank, and Societe Generale (GLE)SA rebounded in Paris trading after rejecting concerns over their access to funding.

BNP Paribas, which plunged as much as 12 percent, closed 7.2 percent higher, the biggest gain in more than a year. Societe Generale, which slid as much 8.1 percent, jumped almost 15 percent after Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds.

“For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money- market fund exposure.”

The two banks dropped more than 10 percent yesterday on a possible ratings cut by Moody’s Investors Service because of their holdings in Greece. French lenders top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Basel, Switzerland-based Bank for International Settlements.

Repeat quote, "Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds.“For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money- market fund exposure.”" 

Note: For clarification, Oudea is the CEO of SocGen, but the the point remains as illustrated by a statement released by Bank of France governor Christophe Noyer, which said that French banks had no liquidity or solvency problems, and were recapitalizing. The three major French banks are in very similar positions.

 Okay, let's dance! Keep in mind as you read the balance of this post and the inevitable attempt at trying to disparage my opinion, I am the very same guy that publcily and quite accurately predicted (in detail) the:

  1. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?
  2. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 
  3. The housing market crash in the spring of 2006 and publicly in September of 2007: Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
  4. Home builders falling and their grossly misleading use of off balance sheet structures to conceal excessive debt in November of 2007 (not a single sell side analyst that we know of made mention of this very material point in the industry): Lennar, Voodoo Accounting & Other Things of Mystery and Myth!
  5. The fall of commercial real estate in general (September of 2007) and the collapse of General Growth Properties [nation's 2nd largest mall owner] in particular (November 2007):BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming…(among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
  6. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
  7. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton,Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
  8. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis

Bear Stearns/Lehman Deja vu?

Yesterday, in my post 'As The French Bank Runs....", I queried of the sell side, "What the hell took you so long to come to these rather astute observations, dude?" Well, in continuing my crusade of truth against the potential insolvency of French banks, I reference the WSJ article titlled "BNP Paribas Denies Funding Problem"

PARIS—BNP Paribas SA on Tuesday denied it is facing a dollar-liquidity problem, as reported in an opinion column in The Wall Street Journal. BNP Paribas said it is fully able to obtain U.S. dollar funding in the "normal course of business," either directly or through swaps. In a column published in The Wall Street Journal Tuesday, Nicolas Lecaussin, director of development at France's Institute for Economic and Fiscal Research, cited an unidentified BNP executive saying the bank "can no longer borrow dollars."

A Wall Street Journal representative wasn't immediately available to comment. BNP Paribas said its has abundant euro short-term funding and has a net dollar short-term funding with maturity shorter than a year worth €60 billion. The bank has €135 billion in "unencumbered assets after haircuts" that are eligible to central banks. The bank also said it is using foreign-exchange swaps to more than offset the recent reduction and "shortening" of funding from U.S. money market funds. French banks, in particular BNP Paribas and Société Générale SA, have been hurt by a perception that they face difficulties in tapping short-term funding in the U.S., as money-market funds cut their exposure to the banks amid fears about potential contagion from the Greek and broader European sovereign debt crisis. Shares of BNP Paribas were down 8.3% at €23.97 recently, the biggest loser on the Paris stock exchange, where the benchmark index was down 1.8%. SocGen was down 3%."

Hey, Big Wall Street Bank Execs Always Tell the Truth When They're in Trouble, RIIIIGHT????

Here's more of Alan Schwartz lying on TV in March of 2008

Like I said above, it's not as if upper management of these Wall Street banks would ever mislead us, RIGHT????

Erin Callan, CFO of Lehman Brothers Lying giving an interview on TV in March andagain in June of 2008.

Even if the big Wall Street banks would lie to us, we have expert analysts at hot shot, white shoe firms such as Goldman Sachs, who of course not only are "Doing God's Work" but also happen to be the smartest of the smart and the "bestest" of the best, RIIIGHT!!!??? Below we have both Erin from Lehman AND Goldman lyingon TV in a single screen shot. Ain't a picture worth a thousand words???

We even had the inscrutable Meredith Whitney say "To suggest that Lehman Brothers is going out of business is a real stretch!" (She OBVIOUSLY DOESN'T READ THE BOOMBUST) as well as Erin Callan, the CFO of this big Wall Street bank on TV lying interviewing again...

But that damn blogger guy Reggie Middleton put his "put parade"short combo on Lehman right about that time, and had all of these additional negative things to say...

Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008

 

So, does BNP have a funding problem, or is it at risk of the same?

BoomBustBlog subscribers know full well the answer to this question. I'm also going to be unusually generous this morning being that our prime French bank run candidate has approached my "crisis" scenario valuation band. So, as to answer the question as to BNP, let's reference File Icon Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers, and otherwise known as BNP Paribas, First Thoughts...

The WSJ article excerpted above quotes BNP management as saying: "The bank has €135 billion in "unencumbered assets after haircuts" that are eligible to central banks."

OK, I'll bite. Excactly how did BNP get to this €135 billion figure? Was it by using Lehman math? Methinks so, as clearly delineated in my resarch report on the very first page:

BNP_Paribus_First_Thoughts_4_Page_01 

The following two pages of this report go on to reveal the games being played to potentially come up with a figure such as the 135 billion quoted above. Boys and girls, I fear those may be Lehman bucks! 

For those not familiar with the banking book vs trading book markdown game, I urge you to review this keynote presentation given in Amsterdam which predicted this very scenario, and reference the blog post and research of the same:

But wait, there's more - much more!

BNP_Paribus_First_Thoughts_4_Page_04

BNP_Paribus_First_Thoughts_4_Page_05

BNP_Paribus_First_Thoughts_4_Page_06

BNP_Paribus_First_Thoughts_4_Page_07

This document is 19 pages full of stuff that BNP management may have forgotten to tell you, as well as valuation for both "crisis" and bailout scenarios. What you have before is an anecdotal 5 pages. To put this in perspective particularly since no on the sell side warned about French bank risk before the fact, let's look at the chart as of the day this research was released and I'll let you tell me if it was worth the subscription...

image004

Roughly 50% and falling as Vol and gamma explode! 

Just to add a sense of chronological depth to this post, let's revisit the timeline from yesterday's piece, "As The French Bank Runs....": 

Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding

image012image012

Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.

Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.

I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

I also provided a very informative document for public consumption which clearly detailed exactly how this French bank collapse thing is likely to go down: File Icon French Bank Run Forensic Thoughts - pubic preview for Blog - A freebie, to illustrate what all of you non-subscribers are missing!

So, What's the Next Shoe To Drop? Read on...

For those who claim I may be Euro bashing, rest assured - I am not. Just a week or two later, I released research on a big US bank that will quite possibly catch Franco-Italiano Ponzi Collapse fever, with the pro document containing all types of juicy details. This is the next big thing, for when (not if, but when) European banks blow up, it WILL affect us stateside! Subscribers, be sure to be prepared. Puts are already quite costly, but there are other methods if you haven't taken your positions when the research was first released. For those who wish to subscribe, click here.

Published in BoomBustBlog
Monday, 12 September 2011 10:10

Eurocalypse Trading Commentary 9-12-2011

The following is a quick trader's opinion from BoomBustBlog trader, Eurocalypse:

The price action was very weak on Friday, and Euro (the currency) broke major supports last week. With the rumours of downgrade of French banks + Stark's demission, one can only be surprised we didnt open -20% or more on banks, and 2 points or more down on the Euro... ! Market already short ? !

The end game is near. Speaking with traders here and there, there is a sentiment of despair and/or inevitability about what is going on.

Regarding France, my bet is for the RBSation of the French banking sector... At some stage, liquidity issues will become too big, and there will also be strong political pressure for the govt to do something, and maybe something bigger than they would like to do. In 2008 it was loans only, this time they'll take preferred or even shares at the market price (big discount to book value). Portends big dilution for current shareholders. Once this happens, assuming Italy isnt trading like Portugal or Greece at that stage, we would have a tremendous rally/repricing in the share price.

My black swan is for Japan to try the Swiss strategy in the FX market...

Published in BoomBustBlog
Monday, 12 September 2011 02:24

As The French Bank Runs....

The BoomBustBlog forensic research combined with illustrative trade setups have literally enabled subscribers to profit, and profit significantly from the carnage going on in Europe - and by extension the carnage quickly heading across the pond to US banks. I would like to take the time to catalog the success of both the research and the trading strategies, but first l want to call attetion to FT Alphaville's most interesting article that basically calls SocGen out on its Lehmanization of its apparent liquidity woes - ingeniously titled, "On SocGen’s pawnshop defence".

Societe Generale has released ‘hard facts’ about its liquidity position on Monday.

Among the points the bank says it has managed to successfully manage a reduction in access to USD funding through a disposal of USD legacy assets, increased use of secured USD funding (repos), EUR/USD swaps and a “reduction  in short-term market positions”.

But as Espirito Santo Investment Bank’s Andrew Lim is quick to point out, the bank never actually states its short-term high quality liquid assets with respect to its short-term wholesale funding reqirements. That is, its coverage ratio.

In other words it’s all very well selling off legacy assets, and depending more on secured USD funding (repos) but that sort of strategy only really works providing you have a large amount of short-term high-quality liquid assets to pawn to begin with.

In other words it’s all very well selling off legacy assets, and depending more on secured USD funding (repos) but that sort of strategy only really works providing you have a large amount of short-term high-quality liquid assets to pawn to begin with.

Just like an individual facing a short-term liquidity crunch, if you happen to own a bunch of valuable gold jewelery, it’s more than likely you’ll be able to raise the short-term cash you need from the pawning industry. If you only own a bunch of already constructed flat-pack furniture, whatever its book value, you’re going to be less likely to raise the cash.

(The point to appreciate  here is that it’s only the ECB which lends cash against the equivalent of flat-pack furniture — possibly why the EUR/USD basis swap is one other option being presented by SocGen as a funding route. You switch your flat-pack furniture for euros, and then swap them for dollars in the currency basis swap market.)

Lim's notes, as quoted by Aphaville...

This is a fairer measure of the robustness of Soc Gen’s liquidity profile and in this respect, Soc Gen fares the worst out of all the French and investment banks (see page 4 of attached note). Soc Gen states that the group’s buffer of unencumbered liquid assets is €105bn - however, this includes lower quality assets (such as risky sovereign bonds which can now only really be repo’d with the ECB, and AAA credit assets like RMBS, which we do not consider high quality and liquid). We think its true high quality liquid asset portfolio is more like €42bn by our calculations.

Lim then states directly:

This model will come under threat if the credit and equity markets lose belief in the robustness of its short-term funding profile, in our view.

It is quite refreshing to see some real and objective analysis come out of the sell side, particularly from one bank regarding another, but I must admit that if I had to pick a bone with Lim's analysis, it wouldn't be the content or quality, but the timeliness. What the hell took you so long to come to these rather astute observations, dude? Let's recap the BoomBustBlog perspective before I offer my opinion for the upcoming week...

Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding

image012

Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.

Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.

I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

I also provided a very informative document for public consumption which clearly detailed exactly how this French bank collapse thing is likely to go down: File Icon French Bank Run Forensic Thoughts - pubic preview for Blog - A freebie, to illustrate what all of you non-subscribers are missing!

For those who claim I may be Euro bashing, rest assured - I am not. Just a week or two later, I released research on a big US bank that will quite possibly catch Franco-Italiano Ponzi Collapse fever, with the pro document contianing all types of juicy details...

This bank is trading down significantly as I type this. Of course, last but not least, Moody's finally chimes in with the obvious as it arrives at a smoldering pile of ashes and cinder where an investment house used to be, squirting its fire hose at full blast - all so after the fact: French Banks Poised for Moody’s Downgrade and Biggest French Banks May Have Ratings Cut by Moody’s on Greek Holdings (Duhhh!)

My next post will reveal my views on European bank liquidity (or more accurately, the lack thereof) and why the Lehmanization of big European banks is basically a forgone conclusion.

Published in BoomBustBlog

CNBC reports: Conflict at Europe Central Bank Over Stimulus Rattles Markets

eu_europe_logoECB Executive Board Member Juergen Stark resigned on Friday, apparently because of opposition over the central bank's bond-buying program. "That makes ECB policymaking more difficult," said one analyst.

The euro extended losses against the dollar [EUR=X  1.3732    -0.0149  (-1.07%)] following the news.

"It's a sign that ECB policymaking is controversial even within the board. Clearly the German representatives have a position that differs from other central bankers. That makes ECB policymaking more difficult," Lothar Hessler, analyst at HSBC Trinkaus told Reuters.

A former finance ministry official and Bundesbank vice-president, Stark, known for his tough, no-frills style, has been a member of the ECB executive board since June 2006. His eight year term was due to run until May 31, 2014.

Manfred Neumann, economics professor at the Bonn University said: "This is remarkable. Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president. It is a position that all the Germans have. This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB."

From Eurocalypse, one of the resident BoomBustBlog traders:

In the trading tips on the 6th [File Icon Eurocalypse Trading Update 9-6-2011 (Global Macro, Trades & Strategy)], I wrote this may be the long awaited drop in EUR following the weekly reversal and worsening technicals.

The ECB is expected to make a UTURN and cut rates, that will add fuel to the fire. At the time of writing EURUSD was 1.41 and oversold, we sold even more to 1.40 then sawbriefly 1.42 on the EURCHF unwinding. That bounce proved the opportunity to sell as the oversold condition was removed... and now were down to 1.38. This move can go much further, EURUSD is headed for 1.20 rather quickly I think.

Only the technicals (which one should always respect) kept it bid, the fundamental story is horrible.

It's a total mess in Europe...beware though of massive govt intervention at some stage which could/will squeeze this markets fiercely...even if in the long (or not so long) run Euro is doomed.

For those of you who have not had the opportunity, register for and download the BoomBustBlog Currency Trend Model, along with the accompanying instructional video.

I have made an FX trend model available for all to download. Its 10 mb, containing a lot of data, but you'll definitely get your money's worth. The model is available here: BoomBustBlog Complimentary FX Index model

And on that note, the French banks who're so at risk due to Italian contagion are dropping like flies - 4% to 7% in a matter of minutes after NY opening. The US banks on the hook for all of that French exposure look set to follow suit as well, with puts starting to fatten on higher IV. For those who just don't know...

Relevant material for capturing maximum alpha duing this European banking meltdown:

File Icon French Bank Run Forensic Thoughts - pubic preview for Blog - A freebie, to illustrate what all of you non-subscribers are missing!

Published in BoomBustBlog

Eurocalypse is back with his trading recap for tbohe past 24 or so hours...

Trading_Opinion_and_Analysis_9-7-2011_Page_1

Trading_Opinion_and_Analysis_9-7-2011_Page_2

Subscribers can continue reading this 6 page summary opinion and analysis hereFile Icon Trading Opinion and Analysis 9-7-2011. For those of you who have not had the opportunity, register for and download the BoomBustBlog Currency Trend Model, along with the accompanying instructional video.

I have made an FX trend model available for all to download. Its 10 mb, containing a lot of data, but you'll definitely get your money's worth. The model is available here: BoomBustBlog Complimentary FX Index model

Published in BoomBustBlog

Trading commentary from BoomBustBlogger resident trader, Eurocalypse...

It's Labor Day in the US, but mkts are already in the move in Asia and Europe. The previous week ended on a quite bearish note, with red ink in all stock markets, especially financials, and moves that exceeded the implied volatilities/breakeven moves, after a period of relatively calm. This is hardly a surprise to us. Really! Any BoomBustBlogger who has put on any of the bearish positions recommended in the subscription material is due to be very, very richly rewarded in the next day or two. I can’t recall any good economic data last week, and one should be foolish to expect anything good anytime soon when all stimulus has been withdrawn, and austerity mode is full ON.

Still I believe the most significant development in the last days is not in the stock market but in the PIIGS crisis again, and on that note my full trading opinion can be downloaded by all subscribers here Eurocalypse Trading Update 9-6-2011.

 italy_10yr

10Y Italian yields have resumed their uptrend, with supply hitting the market through a very poorly received auction last week. As I have said before, no money manager can buy this Italian debt. This statement must be emboldend, for on Tuesday, 19 July 2011 I wrote "Didn't Anyone Notice The Seemingly Irreparable Damage To The Eurozone Last Week? Global Short Ban, Here We Come!":

When last week's Italian 10Y surged from 5% to 6%, it marked something irreparable, which was not indicated in the extent of the move, but its violence.
Six percent, as we know, is unsustainable for Italy (more than its GDP nominal growth which is closer to 2-3% today, and getting worse...)

Whats even more important is that VAR has gone crazy everywhere. Not only banks, even insurers and money managers take volatility of an asset as an input. When you lose 7% in capital in one week, which is 7x the 100bp spread you hoped to make in 1 year, something is very wrong. Even stock market indices failed to sell off as much in a week (and rarely do so)...
Thusly, nobody in their right mind is going to buy Italy (or Spain). The only natural buyers now stem from:

    1. short covering (profit taking) activity,
    2. passive buying from Italian accounts for ALM purposes (they must be "invited" to do so)
    3. and public buying trying to prop up the market, but their pockets aren't deep enough.

As a result, we may have the very few next auctions doing ok (especially if yields go up and short covering continues), but then its chaos Portugal-style.. it could take only a few weeks (or even days!) from here.

The only way I envision it not happening is Euro-bonds gaining traction and actually being implemented (but that doesnt seem likely if you believe the press reports) or financial repression.

Financial Repression???!!!

By financial repression, I mean taking out short sellers,,,, seriously! Not only banking stocks (like was done in 2008):

    1. SEC Extends Ban On Shorting Of Financial Stocks - Forbes.com Oct 1, 2008 – Restrictions will expire Oct. 17, about the time a slew of bank earnings are set to be released.

    2. SEC Halts Short Selling of Financial Stocks to Protect Investors Sep 19, 2008 – SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets. Commission Also Takes Steps to Increase Market Transparency ...

    3. S.E.C. Temporarily Blocks Short Sales of Financial Stocks ... Sep 19, 2008 – The Securities and Exchange Commission issued a temporary ban on short ... Short selling — a bet that a stock price will decline — is the ..

but on govt debt as well, making void all CDS contracts on sovereigns (or saying they will expire or cash settle at a very soon date) and trying to shut out HFs by increasing regulation, disclosure and taxation on them.

Excess volatility is not good for the markets, and it would surely cause huge short covering, but it could buy some time, and if the move is surprisingly large (bringing us to 4% range...!!!) then maybe it's not just buying time, and we are underestimating the extent of the short sellers which currently have the market in hand (and we know all the "good" reasons why).

Now, with the benefit of hindsight, we now know that I was much more prescient observative than many a long would be keen to admit!!! When the 10Y yields shot up from sub 5% to 6.3% in a few weeks’ time, VARs exploded. Traders and Money Managers just can't take any positions anymore (or only a fraction of what they could) and for choice, those who can take positions from a flat book, would prefer to be short, of course !!! Thus the only buying activity has been from tactical short covering and some passive domestic buying, but basically all the non-domestic non-passive demand has vanished, and the ECB just can’t make for all of that.

So it is only a matter of little time when Italy and Spain implode like Greece or Ireland or Portugal, especially with all the auctions hitting the market after the summer vacations. In this light, the post Did You Know That The Upcoming Italian Auction Can Spark Contagion That Touches A BIG US Bank? is s!imply indicitave of the chickens coming home to roost, and the subscription document that highlights the sytemic US bank that is at risk here is a very valuable document indeed! Subscribers, reference File Icon Actionable Note on US Bank/ French Bank Run Contagion, then follow up with the respective retail and pro versions of the subsequent docs on that subject bank.

So it is hardly a surprise to see the indexes down in Europe led by financials. Reggie has been spot on all along on that, and I am 100% with him on the big picture, and actually I may be even more pessimistic than he is. Think USSR 1989, (Crony) Capitalism 2012.

 socgen

I wrote last week to go short again the SP @ 1177, and to increase short positions when we traded 1215 before the payrolls. It was tough given the false double bottom signal, but that proved the correct choice. As I wrote, despite being oversold in the longer term charts, the European markets were vulnerable after the short squeeze, and and we called it over, especially in financials, reference Bank Run Candidate Option Trading Update (referencing native exchange pricing, ADRs are available for US investors.

Cutting gamma may have been a bit of a bad idea, but even with Fridays and todays move, which reminds that shorting vol is NOT a good idea, longs have had difficulties to make for the lost theta. Even though I’m pretty sure were in a bear market, I’m not sure we will see a straight line down from here. I still believe in my targets (see previous trading tips) of 1030 in SP and that if a crash in European markets happen, there will be a consequent bounce to play.

Many of the remaining recommended option strategies on the downside, are spreads which perform better if we don’t go down too fast until the end of the month, though the Armageddon November SP 1100 put is still alive.

Anybody who has followed the western European markets full know that the Reggie Middleton calls on French bank runs have been spot on. The French banks have basically been decimated as the markets start to truly realize what BoomBustBloggers have knew for months by now... Just As Predicted Over The Past Month, The French Bank Run Seems To Have Commenced. The French banks are truly getting slaughtered. For those who haven't been following Reggie and BoomBustBlog on this topic, you have missed out on an amazing call that I have not seen replicated anywhere! Below are a list of public links that detail the call:

  1. France, As Most Susceptble To Contagion,…
  2. The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

  3. What Happens When That Juggler Gets Clumsy?

  4. Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such

  5. Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year

  6. The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!

  7. The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!

  8. Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run

  9. Observations Of French Markets From A Trader's Perspective

  10. On Your Mark, Get Set, (Bank) Run! The D…

 

Relevent Subscriber downloads

Trading setups and illustrations:

Fundamental analysis and forensic research:

Published in BoomBustBlog
Thursday, 01 September 2011 06:13

Trading Analysis and Opinion for August 31st 2011

All paying subscribers are welcomed to download the latest trading opinion from Eurocalypse as of 8/31/11: File Icon Trading Analysis and Opinion 8-31-11

(Global Macro, 

Published in BoomBustBlog

True market volatility is still here with trading ranges that are as wide as some years annual moves. We still maintain our fundamental bearish stances, particularly on US EU banks, both of which have rallied heavily over the last few days. In today's news...

Losses Push Major Banks out of Top Europe Index

 

European banks Societe Generale, UniCredit and Intesa Sanpaolo, which suffered heavy losses in August, will be removed from the region's blue-chip STOXX Europe 50 index, the index complier STOXX said.

Euro Zone, IMF Clash on Estimates of Banks' Damage

International Monetary Fund staff have provoked a fierce dispute with eurozone authorities by circulating estimates showing serious damage to European banks’ balance sheets from their holdings of troubled eurozone sovereign debt.

ecb_logo1The IMF’s work, contained in a draft version of its regular Global Financial Stability Report (GFSR), uses credit default swap prices to estimate the market value of government bonds of the three eurozone countries receiving IMF bailouts – Ireland, Greece and Portugal – together with those of Italy, Spain and Belgium.The analysis, which was discussed by the IMF’s executive board in Washington on Wednesday, has been strongly rebutted by the European Central Bank and eurozone governments, which say it is partial and misleading.

Although the IMF analysis may be revised, two officials said one estimate showed that marking sovereign bonds to market would reduce European banks’ tangible common equity – the core measure of their capital base – by about 200 billion euros ($287 billion), a drop of 10-12 percent. The impact could be increased substantially, perhaps doubled, by the knock-on effects of European banks holding assets in other banks.

The ECB and eurozone governments have rejected such estimates.

Elena Salgado, Spanish finance minister, told the Financial Times on Wednesday that the fund was mistaken in looking only at potential losses without also taking account of holdings of German Bunds, which have risen in price.

“The IMF vision is biased,” she said. “They only see the bad part of the debate.”

Ms Salgado added “this is the second time it has happened”, referring to the fund’s October 2009 GFSR, which estimated that eurozone banks had only written down $347 billion of $814 billion of probable losses from the financial crisis. 

It later revised down that total of probable total losses by a quarter. Ms Salgado said that the European stress tests of banks were a better indication of their vulnerabilities.

Officials involved in the debate say the mark-to-market analysis can explain much of the recent fall in European commercial banks’ share prices, including French and German institutions that have large holdings of eurozone sovereign debt.

“Marking to market is a fairly brutal exercise, but these are the estimates that hedge funds are currently making,” one official said.

Hmmm. The IMF and the EU are disagreeing on how bad the state of European banking really is... Has anyone really wondered what would happen if a truly independent entity would review the books? What would be their findings? Let's take a look at the BoomBustBlog EU archives and pull out Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! while keeping in mind that this article was researched and written well over a year ago!

The IMF and the EU have been consistently and overtly optimistic from the very beginning of this crisis. Their numbers have been dramatically over the top on the super bright, this will end pretty, rosy scenario side - and that is after multiple revisions to the downside!!! We can visit the US concept of regulatory capture (see How Regulatory Capture Turns Doo Doo Deadly and Lehman Brothers Dies While Getting Away with Murder: Regulatory Capture at its Best) for the EU, but due to time constraints we will save that topic for a later date. To make matters even worse, the sovereign states have taken these dramatically optimistic and proven unrealistic projections and have made even more optimistic and dramatically unrealistic projections on top of those in order to create the illusion of a workable "austerity" plan when in reality there is no way in hell the stated and published plans will come anywhere near reducing the debts and deficits as advertised - No Way in Hell (Hades/Tartarus/Anao/Uffern/Peklo/Niffliehem - just to cover some of the Euro states caught fudging the numbers)!

Let's take a visual perusal of what I am talking about, focusing on those sovereign nations that I have covered thus far.

image005.png

Notice how dramatically off the market the IMF has been, skewered HEAVILY to the optimistic side. Now, notice how aggressively the IMF has downwardly revsied their forecasts to still end up widlly optimistic. 

image018.png

Ever since the beginning of this crisis, IMF estimates of government balance have been just as bad...

image013.png

The EU/EC has proven to be no better, and if anything is arguably worse!

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Revisions-R-US!

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and the EU on goverment balance??? Way, way, way off.

image040.png

If the IMF was wrong, what in the world does that make the EC/EU?

The EC forecasts have been just as bad, if not much, much worse in nearly all of the forecasting scenarios we presented. Hey, if you think tha's bad, try taking a look at what the govenment of Greece has done with these fairy tale forecasts, as excerpted from the blog post "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!...

greek_debt_forecast.png

Think about it! With a .5% revisions, the EC was still 3 full points to the optimistic side on GDP, that puts the possibility of Greek government forecasts, which are much more optimistic than both the EU and the slightly more stringent but still mostly erroneous IMF numbers, being anywhere near realistic somewhere between zero and no way in hell (tartarus, hades, purgatory...).

Now, if the Greek government's macroeconomic assumptions are overstated when compared with EU estimates, and the EU estimates are overstated when compared to the IMF estimates, and the IMF estimates are overstated when compared to reality.... Just who the hell can you trust these days??? Never fear, Reggie's here. Download our "unbiased, non-captured, empirically driven" forecast of the REAL Greek economy - (subscribers only, click here to subscribeGreece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb. Related banking research can be downloaded here:

It really is a shame when you have to pay for the truth, isn't it? If you think you've witnessed an example of social unrest in Greece, you ain't seen nuthin' yet. Wait until the reality of these faked numbers start hitting home...
greek_strikes.png

What about the UK?

I'm glad you asked. We just finished our UK analysis (subscribers, see UK Public Finances March 2010 UK Public Finances March 2010 2010-03-24 09:32:01 617.23 Kb), and the Greek theme has continued into the land of the Brits.

uk_economic_estimtes.png

... and in terms of government balance over-optimism???

uk_gaovernment_balance_projections.png

...

And what about Italy???

Again, we're glad you inquired. Subscribers should download Italy public finances projection Italy public finances projection 2010-03-22 10:47:41 588.19 Kb as well as theFile Icon Italian Banking Macro-Fundamental Discussion Note and the

File Icon Spanish Banking Macro Discussion Note in anticipation of our upcoming Spain analysis, which should be a doozy!

This is Italy's presumption of economic growth used in their fiscal projections:

italian_real_gdp_growth.pngitalian_real_gdp_growth.pngitalian_real_gdp_growth.png


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For those of you who still have any interest in the big European Sovereign Debt Scam, I also introduce you to our analysis of European bank asset impairments. Reference (yes, once again) the instructional video, the public blog post and the high end subscription only "UGLY TRUTH". It is absolutely amazing how often I can use, and then reuse these links yet they still remain quite timely, informative and apt given the contextual news for the day at hand. Apparently, there must be some validity to their content.

The Keynote Presentation in Amsterdam

Banks NPAs to total loans

Source: IMF, Boombust research and analytics

Euro banks remain weak as compared to their US counterparts

Health of European banks is weaker when compared to US banks. European banks are highly leveraged compared to their US counterparts (11.1x versus 4.1x) and are undercapitalized with core capital ratio of 6.5x vs. 8.5x. Also, the profitability of European banks is lower with net interest margin of 1.2% compared with 3.3%. However, non-performing loans-to-total loans for European banks are slightly better off when compared to US with NPL/loans at 4.9% vs. 5.6%. Nonetheless, considering the backdrop of high exposure to sovereign debt in Euro peripheral countries, we could see substantial write-downs for Euro banks AFS and HTM portfolio, which would more than offsets the relative strength of loan portfolio.

EURO Stress Test Rebuffed, Again

The OECD working paper “The EU stress test and sovereign debt exposures” by Adrian Blundell-Wignall and Patrick Slovik rebuffs the EU stress test, as we have several times in the past. The argument in the white paper echoes BoomBustBlog view that accounting policies allows banks and financial institutions to mask their true economic health. An asset that has declined in value leads to economic loss irrespective of its classification as held-to-maturity or held-for-trading, but accounting policies allow banks to mark down only their trading portfolio to the current market value while leaving a large chunk of held-to-maturity at book value even if said asset loses 50% in value that would take years to recover, or the bank could be presented with the very distinct possibility that there may be no recovery of said value loss. The former event (of recovering back to book value) would mask the true economic picture at a given snap shot of time while the latter (no recovery) is more of time shifting distortion wherein current profits are inflated for future losses.

Coming back to the EU stress test, the paper contends that by focusing only on the trading book exposures, the EU stress test gave a rosy picture of banks true health.

•     Sovereign bond haircuts were applied only on the trading book holdings with implicit assumption that bonds held to maturity will receive 100 cents in the euro. This assumption severely understates the banks losses as 83% of banks investment portfolio is in banking books in form of held-to-maturity assets while only 17% of assets are held in trading portfolio. In case of sovereign default, the distinction between the banking book and the trading book simply disappears. By considering only a smaller component of banks investment books, EU stress tests have severely undermined the estimated write-downs on banks books and have given rosy picture about banks true health. The logic of said methodology is that with the EU/ECB/ EFSF SPV (basically, a giant new European CDO) backing, no sovereign state will be allowed to default.

•     Second, and more importantly, the market is not prepared to give a zero probability to debt restructurings beyond the period of the stress test and/or the period after which the role of the EFSF SPV comes to an end.

o   The assumption of no default over 2010-2012 appears reasonable given that the EFSF is made up of a €720bn lending facility (€220bn from the IMF; €60bn from the EU; and the SPV can build exposures for 3 years to the limit of €440bn for the 16 Euro area countries) which provides a guarantee of funding for any countries facing financing pressures, certainly for the next 3 years.

o   However, the concerns in the market beyond 2012 are: the longer-run fiscal sustainability problem; and the difficulty of achieving structural adjustments in labor and pension markets and ability to achieve a sustainable growth in a period of budget restraint. The fear is that this will not be resolved by the time the support packages run out, and hence the probability of restructuring may not be put at zero by portfolio managers. Angela Merkel has recently announced her willingness to spearhead several common nation reforms to put the EU block of nations on heterogeneous footing in regards to regulation, debt management etc. This will go a long way to solving the problem at hand, but will also put significant strain on several of the weaker nations, again exacerbating the probability for restructuring to bring said nations in line with their stronger counterparts.

Impact of bank’s banking books on haircuts

EU banking book sovereign exposures are about five times larger than trading book. The table below gives sovereign exposure of major European countries for both trading and banking book. The EU trading book has €335bn of exposure while banking book has €1.7t exposure towards sovereign defaults. EU stress test estimated total write-down’s of €26bn as it only considered banks trading portfolio. This equated to implied haircut of 7.9% on trading portfolio with losses equating to 2.4% of Tier 1 capital. However, if the same haircuts (7.9% weighted average haircut) are applied to banking book then the loss would amount to €153bn equating to 13.8% of Tier 1 capital.

We have also presented an alternative scenario since we believe that EU stress test had failed not only to include banks HTM books but also the loss estimates were highly optimistic, as has much of the economic and financial forecasting that has come from the EU.

If you liked this, then you probably would have great interest in:

Relevant material for capturing maximum alpha duing this European banking meltdown:

File Icon French Bank Run Forensic Thoughts - pubic preview for Blog - A freebie, to illustrate what all of you non-subscribers are missing!

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Thursday, 25 August 2011 09:29

8-24-11 Trading Opinion & Analysis

Trading opinion and analysis is now avialable to paying subscribers, current as of 6:45 this morning.

I'm on the road and trying to us the new Macbook Air (top of the line 1.8Ghz i7) and its just not working out in terms of productivity. I will be swapping out for the new Sony Vaio which is much more expensive, but also much more machine in a lighter, smaller package (I swapped the MBA for the Samsung series 9, whcih wasn't worththe money) and report accordingly as I comment on Steve Jobs' resignation and other news headlines of the day. If I don't get the computer situation solved by late morning, check my twitter feed for commentary (upper right-hand corner of the home page of BoomBustBlog).
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Watch out, Here Comes the The Fiery Sword of Truth! Contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!!

The financial markets are in a sense of déjà vu with widespread panic. Markets are as volatile as ever and Goldman Sachs is yet again challenged to demonstrate its ability to create alpha. The beta gazers (those who charge 2 and 20 to simply lever up on the broad market), or more commonly put, MoMo Chasers (those chasing the most popular stocks or strategies), would normally be seeking asylum given the state of recent financial markets. Unfortunately, despite the entire “God’s Work” syndrome attached to Goldman Sachs, its prop desk is yet to exhibit the ability to generate true alpha in highly volatile market, let alone match the success of BoomBustBlog.

Let's get something out in the open immediately so there is no misunderstanding. Goldman cant' trade! It can manipulate its dominant positoins in the markets. It can take advantage of the ignorance of its customers. It can front run those who don't have the reach or ability to defend themselves. It can (and obviously does) take advantage of privileged status in our political system. Those are the things that Goldman can do and apparently is skilled at, yet contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!! Not only that, but that inability to trade bangs the GS shareholder EVERYTIME volatility roils the markets, and causes many to overvalue GS over the long term.

For a little historical proof of this rather unpopular assertion, let's refer to the BoomBustBlog archives, namely A Few Questions on Goldman Sachs 3rd Quarter 2010 Results That No One Thought to Ask...

Trading revenues under pressure

Goldman Sachs posted Q3 net revenues of $8.9bn, a y-o-y decline of 28%. This is despite strong growth recorded at its investment banking and the asset management division which grew at 24.5% and 7.0%, respectively. The decline was principally led by dismal performance of the trading and principal transaction segment which declined 36% y-o-y as a result of weak market conditions. The decline in overall revenues despite strong growth recorded elsewhere underscores the importance of trading revenues in Goldman Sachs overall performance. Historically, trading and principal transaction segment contributed c60-65% of total revenues underpinning inherent risk in Goldman’s business model which is nothing short of a corporate hedge fund. We have expended considerable ink in demonstrating the overvaluation of Goldman Sachs and the volatility inherent in its revenues, particularly as they have been so dependent on trading - as many hedge funds are. As a matter of fact, I have been issuing this GS warning since 2009 when Goldman had perfect trading quarter and record trading profits. Reference last quarter's quarterly update: The BoomBustBlog Review of Goldman Sach’s 2nd Quarter, 2010 Performance: I Told You So!

About three months ago, Boombustblog forewarned that GS will stand out to be the worst hit in the event of trend reversal in the financial markets and the company will have little means to escape the implications of the same on its profitability and solvency. The company generates 60-70% of the revenues from trading activities which is largely dictated by the unpredictable turn of financial events. While the financial markets were celebrating the US officially coming out of recession in the 1Q10, the subsequent Eurozone crisis (see the Pan-European Sovereign Debt Crisis series) and the slowdown of expectations in 2Q10 has beaten down the irrational exuberance and the markets experienced a spurt in volatility and drop in prices. The consequent softening of trading revenues in 2Q10 vis-à-vis 1Q10 drove 31% drop in revenues and 82% drop in net income.

The chart below demonstrates how the volatility of the revenues from the trading and principal investments trickles down into volatility of the total revenues and profits of Goldman Sachs. I don’t call Goldman the world’s most expensive federally insured hedge fund for nothing!

As you can see above, volatility ramped up in 2008 and Goldman reacted like any other beta-chasing, long only hedge fund (although they aren't long only) - they lost money!

Now, with the benefit of BoomBustBlog hindsight, I'd like to announce to the release of a blockbuster document describing the true nature of Goldman Sachs, a description that you will find no where else. It's chocked full of many interesting tidbits, and for those who found "The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely" to be an iteresting read, you're gonna just love this! Subscribers can access the document here:

As is customary, I am including free samples for those who don't subscribe, so you can get a taste of the forensic flavor. Here are the first 2 pages of the 19

page professional edition, with illustrative option trade setups soon to follow.

 Goldman_Sachs_Q3_Forensic_Review_Page_01

Is Goldman Sachs stock really the front running, Mo-Mo traders wet dream?

Goldman_Sachs_Q3_Forensic_Review_Page_02 

Given the high correlation of Goldman’s prop trading desk to equity markets and taking into consideration the state of equity markets in Q2-Q3, it would be interesting to see how Goldman Sachs share perform in the coming quarters. Those who would have followed the traditional school of thought and bid the price up would have already seen their capital erode by 20% during the last quarter and by 12% over the last one month alone.

Oh, and while we're at it...

I noticed ZeroHedge (one of the few sites that I syndicate BoomBustBlog content through) caused a tiff with the Canadian academia and pop media by calling attention to the abysmally low TEC ratios of Canadian banks, and comparing them to European banks. For those who didn't have the spare time to catch the cross border banking media soap opera, see:

  1. Is The Next Domino To Fall.... Canada? for the first salvoo
  2. Who is Zero Hedge, and why should we care? for the passive aggressve retort
  3. (as put by Tyler himself) "followed by a more coherent attempt to debunk the claim that a painfully low TCE ratio is never a good thing": Is Zero Hedge looking at the wrong numbers?"

I must say that the argument by those up north is wanting and ZH made a valid point, primarily in that the RWA (risk weighted asset) methodologies are simply too open for manipulation. Of course, that is probably why they are favored by the banking institutions. Let's end this morning's post by illuminating the fact that although, Goldman Sachs capital ratios have improved, it has nothing to do with a reduction in risks weighted assets. Risk weighted assets, to the contrary, have increased to $451bn as at end June 2011 from $384bn as at the beginning of 2009. One of the key reasons for increase in capital ratios have been dilutions. As a matter of fact, Goldman Sachs’ diluted shares outstanding have increased by c24% since beginning of 2008!

Goldman_Sachs_RWA

So, if Goldman really has a problem, why haven't we heard about it from the rest of Wall Street?

Because investment performance is not the Street's business model. If it was, they would have easily foreseen thier own demise back in 2008/9. The street's busness model is churning spreads, fees and commisions from clients and customers. I truly believe BoomBustBlog bests ALL of Wall Street's sell side research, reference Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best? After all, who else is currently warning of Goldman's risk on the Street? Answer: No one! Then again, who warned back in the summer of 2008 before the share price got cut by nearly 2/3rds? I can only think of one shop....

Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street: ...t shared by most of the analyst community and those that follow them. This brings me to the issue of Goldman Sachs. I have been bearish on commercial, mortgage and investment banks for over a y... Saturday, 05 July 2008

Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis: Here is my detailed opinion on Goldman Sachs. Be sure to review my precursor to this report: Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street. Anybody who is interested in how I Thursday, 24 July 2008

Even after a clear pattern was formed, who on the sell side warned when the markets got rocky in 2010? Hmmm. I sense a trend here... If I may prompt one to reminesce: In What Do Goldman Sachs and B.B. King Have in Common? The Thrill is Gone…,, I made the following note:

GS’s considerable leverage provides a means (the lever) of high returns to shareholders when asset prices are appreciating but the same becomes a very material economic concern when the asset prices lose value. With low trading revenues, GS has little cushion to absorb write-downs on these assets, leading to erosion of equity. As of March, 2010, the GS’s investments portfolio amounted to $339 billion (nearly 566% of the tangible equity). Referencing my previous posts, “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look” and “When the Patina Fades… The Rise and Fall of Goldman Sachs???“, we can reminisce over the fact that Goldman BARELY earns its cost of capital on an economic basis, and that’s before considering the potential horrors which may (and probably do) lay on the balance sheet (for more on BS horror, referenceReggie Middleton vs Goldman Sachs, Round 2) .


As for the Canadian media's retorts on ZeroHede's credible article, I must dare, no... make that double dare, any one to ask in print or on TV, "Who is Reggie Middleton". As a matter of fact, I'll answer that question right now. He's the guy that called...

  1. The housing market crash in the spring of 2006 and publicly in September of 2007: Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
  2. Home builders falling and their grossly misleading use of off balance sheet structures to conceal excessive debt in November of 2007 (not a single sell side analyst that we know of made mention of this very material point in the industry): Lennar, Voodoo Accounting & Other Things of Mystery and Myth!
  3. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear? | After the collapse, a prudent bullish call as well... Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008: "The problem with the deal is that it is too low, and too favorable for Morgan. It is literally guaranteed to drive angst from the other side. Whenever you do a deal, you always make sure the other side gets to walk away with something.  If you don’t you always risk the deal falling though unnecessarily. $2 is a slap in the face to employees who have lost a life savings and have the power to block the deal. At the very least, by the building at market price and get the company for free!" | BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008 | This is going to be an exciting, and scary morning Monday, March 17th, 2008 | As I anticipated, Bear Stearns is not a done deal Tuesday, March 18th, 2008 [Bear Stearns stock goes from $1 and change to $10, front month calls literally explode from pennies to several dollars]

  4. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now. ) | I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton | Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008 | May 2008
  5. The fall of commercial real estate in general (September of 2007) and the collapse of General Growth Properties [nation's 2nd largest mall owner] in particular (November 2007): BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
  6. The collapse of state and municipal finances, with California in particular (May 2008): Municipal bond market and the securitization crisis – part 2
  7. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
  8. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
  9. The overvaluation of Goldman Sachs from June 2008 to present): “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look”, “When the Patina Fades… The Rise and Fall of Goldman Sachs???“andReggie Middleton vs Goldman Sachs, Round 2)
  10. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis
  11. Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
  12. The mobile computing paradigm shift, May 2010: »
  13. The French bank run of 2011

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For all of those calamari fans.... Remember, I warned about "the Squid" before it was trendy to hate them!

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