Using Veritas to Construct the "Per…

29-04-2017 Hits:38946 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:39737 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:39160 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:40915 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:40491 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:43048 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:27953 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:41676 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:41619 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:41857 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:43927 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.

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The Transformation of Television in Amer…

21-03-2017 Hits:43317 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...

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By now, you probably realize that I think the homebuilders are in worse trouble than the mortgage lenders. Their collateral is not as ephemeral, since it is a real asset, but it is also much less liquid. Don't get me wrong, I think the mortgage lenders are in very big trouble as well, but the big lenders cannot be allowed to go out of business due to the damage to the economy. Nobody is going to miss a homebuilder going belly up.

The only way out of the mess is the way we got into it, the hard way.

I live in NY, where, due to gentrification, low interest rates, super lenient credit terms, a weak dollar, and up until '03 or so a weak equity market that couldn't compete with real property returns, the residential real estate market was literally on fire. I mean quite a few areas of Brooklyn saw (up to) a 300% to 450% increase in transaction price (notice how I did not say value). This was, in part, due to gentrification, and as a socio-economic phenomenon I don't believe will be easily reversible and will have some staying power. The balance was due to a housing bubble, which is very different from most bubbles due to the fact that the assets are very illiquid and require significant investment and more importantly often involve significant leverage which tends to exacerbate gains and losses considerably.

So... The end result is that you have houses that went for $180k in 2000, selling for $700k now. Your average middle class public school teacher makes about $35 - 50,000 per year, and can count on about a 2-4% increase annually (I'm just guessing at this). During the boom period, housing prices went up a max of 450% and a minimum of at least 100% while wages went up around 15% (again, just taking a guess, but you get the point). They were able to buy this house in 2003 for $300k, not because they could afford it (10 years ago they need 120% of their gross, b4 tax income for down payment and closing costs, while the debt service would be more the 50% of their disposable after tax income as a off the cuff calculation), but because you had engineered mortgages that allowed flexibility in debt service, and very low rates which made it more affordable.

Now, the esoteric loan is out, and rate are shooting up, independently of LIBOR, treasuries, and other traditionally correlated rates. The obvious result of defaults, and reduction of both transaction volume and pricing is starting to soak in, but developers are still churning out product at a ridiculous rate because they to have binged on easy credit and must sell all of the land that they have bought (this is cheaper than holding depreciating land while paying debt service on it), and take a loss on underwater option contracts. The additional supply added to a market that is swimming in inventory is serving to further depress pricing which causes lower MBS true value due to diminished collateral value. Further depressed pricing puts more mortgages under water, causing more people to walk away from their homes, causing more foreclosures and REOs (bank owned real estate for sale), which causes lower MBS values due to higher defaults and which causes more supply on the market at fire sale prices, which causes more people to walk away from their underwater mortgages which causes more foreclosures which causes lower MBS values due to defaults and lower collateral, which.... Hopefully you get the picture.

This scenario has to play itself out until that teacher on a $50k salary in Brooklyn can again afford to buy a house under conventional terms currently offered by a bank (my bet would be 20% down, full doc, at rates about 150 basis points from where we are now). Until then, home prices will continue to drop, for they are out of reach of the main fundamental driver of lasting home value, the everyday buyer.

Now, factor in a 25% drop in home value nationwide, and I think it spells recession, but I am not an economist, just an arm chair investor. Also, keep in mind that real estate is very localized. Nobody lives in a median home, so you cannot use aggregate arithmetical measures to quantify home value across the US, not even across a single city. The example above applies to one small section of Brooklyn (bed stuy). Less than a mile over, the fundamentals are different (downtown Brooklyn), and 2 miles over in Manhattan, the average cost of a home is over 1 million dollars (hence the dearth of public school teachers)...