Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:1084 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

Read more

The Transformation of Television in Amer…

21-03-2017 Hits:1294 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

Read more

It's the Real Estate Crash That I Warned…

20-03-2017 Hits:1770 BoomBustBlog Reggie Middleton

It's the Real Estate Crash That I Warned You About (again)

I've issued several warnings late last year warning of the real estate bubble peaking and popping. I feel I'm especially qualified to do such since I quite accurately called the...

Read more

When It Comes Time To Show and Prove, Eq…

20-03-2017 Hits:1521 BoomBustBlog Reggie Middleton

When It Comes Time To Show and Prove, Equity Markets May Drop Hard

The markets have gotten euphoric since the Trump election, apparently because someone believed what he was selling. Take a look at the broad market jump (powered greatly by the bank...

Read more

So, Brexit Is Now Almost Official. Is Th…

20-03-2017 Hits:737 BoomBustBlog Reggie Middleton

Note: All downloadable legacy content is for subscribers only. We currently have a sale for $11 per month for basic access. Professional subscribers are now evevated to have direct access...

Read more

In Less Than Two Weeks, Another Bitcoin …

17-03-2017 Hits:2305 BoomBustBlog Reggie Middleton

In Less Than Two Weeks, Another Bitcoin ETF Faces SEC Deadline - It's Denial Is NOT A Bearish Event

LedgerX's "SOLIDX BITCOIN TRUST" has an approval deadline this March 30th, 2017.If it is approved, Bitcoin is due for one hell of a bump, but...  

Read more

The Fed Raises Rates While Still Baby Fe…

17-03-2017 Hits:2130 BoomBustBlog Reggie Middleton

The Fed Raises Rates While Still Baby Feeding the MBS Market With Billions in Monthly Purchases

The Fed has raised rates, officially making real what was mere signaling of the end of its expansionary era... Or is it? You see, from a practical perspective, QE is...

Read more

A Bitcoin ETF or Similar Regulated Insti…

16-03-2017 Hits:2688 BoomBustBlog Reggie Middleton

A Bitcoin ETF or Similar Regulated Institutional Vehicle is a Forgone Conclusion - What Happens Next?

Someone with over 53 years on Wall Street sent me this article from Lex of the Financial Times...

Read more

Why the Winelvoss Bitcoin ETF Was Reject…

13-03-2017 Hits:3498 BoomBustBlog Reggie Middleton

Why the Winelvoss Bitcoin ETF Was Rejected and How to Create a Regulated Vehicle That Passes Muster

 The Winkelvoss ETF application was rejected by the SEC, and bitcoin dropped about 20% in price. I repetitively warned those that followed me that a very low risk buying opportunity...

Read more

Trump Calls Obama's Policies On Russia W…

10-03-2017 Hits:3164 BoomBustBlog Reggie Middleton

 Donald Trump's recent Tweet discusses how Russia has gotten stronger at the behest of President Obama.   For eight years Russia "ran over" President Obama, got stronger and stronger, picked-off Crimea and...

Read more

SNAP's Greed Derived Self-Inflicted Woun…

08-03-2017 Hits:4227 BoomBustBlog Reggie Middleton

SNAP's Greed Derived Self-Inflicted Wounds Continue to Manifest

The day before the SNAP IPO, I penned "Goldman Sachs & Morgan Stanley Pull Off the Heist of the Decade, Bends Over Those Who Don't Read BoomBustBlog". Despite being rather...

Read more

Bitcoin Is Reaching the Point of No Retu…

08-03-2017 Hits:3960 BoomBustBlog Reggie Middleton

Bitcoin Is Reaching the Point of No Return - Buy Side Should Take Note

Many bitcoin aficionados are waiting with baited breath as the SEC is to announce by this Friday whether they will approve the first registered bitcoin ETF. This is not the...

Read more

I am predicting and betting heavily on another large bank failure in the US and the Eurozone. Many on the site have probably already guessed what it is that I do. Well, I may be significantly epanding my job description if the financial system takes the hits that I expect it to.

A Black Swan Swims Across the Pond

European Central Bank’s (ECB) measures to inject necessary liquidity in the financial system had negligible on the interbank liquidity hoarding which led to sharp rise in inter-bank lending rates. Although the liquidity injections by ECB helped restore the expected overnight lending rates (EONIA) to near target level of 4%, there was little impact on the inter-bank borrowing rates for deposits over 3 months (EURIBOR), which stood at 70 basis points against the usual rate of 5-10 basis points over the target rate since banks were unwilling to lend each other. Similar phenomena were observed in US where steps taken by Fed like the Term Auction Facility were proven ineffective in reducing LIBOR-OAS spreads which were more dependent on counterparty risk factors such as asset-backed commercial paper spreads, and credit default swaps. Since term lending does not affect counter party risk Fed should consider other measures that affect LIBOR-OAS spreads. For example, some feel that the ECB’s policy framework for direct open market purchases of marketable assets including high-grade mortgage-backed securities could address the ongoing stress in the market. I personally believe that these securities must be allowed to bottom out. If there is any value in them, speculators such as I will swoop in to purchase them at the right price. The point of consternation is that the right price results in explicit insolvency. The banks are implicitly insolvent now, though, and everyone knows it. I am referring to both commercial banks and the non-bank entitiies that include the investment banks and brokerages - whose fates are heavily intertwined.

Fed rate cutting has also failed to improve margins in many of this nation’s regional banks, as was clearly illustrated in “The Anatomy of a Sick Bank!”. This shows that the problem is getting worse despite rampant rate cuts and the wholesale swallowing of infected assets as collateral. I believe that the banks must be allowed to fail, and it appears as if the Fed and Treasury are coming to that conclusion as well.  Today’s headline on CNBC.com:

Paulson Wants Bank Failure without Fallout – “"In my view, looking beyond the immediate market challenges of today, we need to create a resolution process that ensures the financial system can withstand the failure of a large, complex financial firm," Paulson said in remarks prepared for delivery to the Chatham House think tank in London. "To do this, we will need to give our regulators emergency authority to limit temporary disruptions. These authorities should be flexible and -- to reinforce market discipline -- the trigger for invoking such authority should be very high, such as a bankruptcy filing," he added.

He said the perception should be avoided that an institution is "too interconnected to fail or too big to fail" and added that "we must improve the tools at our disposal for facilitating the orderly failure of a large, complex, financial institution." The United States has procedures for the orderly unwinding of insolvent commercial banks with insured deposits, in which their regulators, including the Fed for smaller state-chartered banks, administer claims and control insolvency proceedings. Paulson on Tuesday said using these procedures for larger, complex institutions such as investment banks could mitigate market disruption but would not impose enough market discipline on the private sector.

And simply subjecting investment banks to normal bankruptcy proceedings "imposes market discipline on creditors, but in a time of crisis could involve undue market disruption," he said.

Knowing that Fed support is readily available could cause institutions to willingly take on too much risk, as they did in the run-up to the subprime mortgage crisis, he said. "For market discipline to constrain risk effectively, financial institutions must be allowed to fail. Under optimal financial regulatory and financial system infrastructures, such a failure would not threaten the overall system."