Bitcoin Investment Risk vs Reward Calcul…

23-02-2017 Hits:1132 BoomBustBlog Reggie Middleton

Bitcoin Investment Risk vs Reward Calculator to Compare BTC to EUR, GBP, Gold & Stocks

After reading what is essentially Fake News about Bitcoin from Financial Times, London Business School and Credit Suisse, I have created an easy to understand metric that allows anyone to compare the risks...

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It's Time To Beat Up On Credit Suisse an…

22-02-2017 Hits:1264 BoomBustBlog Reggie Middleton

It's Time To Beat Up On Credit Suisse and Their Woefully Misinformed Bitcoin Advice

Credit Suisse has been posting cryptocurrency advisories over the last few weeks. They are quite one-sided, although couched in the appearance of objectivity. To explain why it's couched in the appearance...

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HSBC Reports One of the Biggest Misses o…

21-02-2017 Hits:686 BoomBustBlog Reggie Middleton

HSBC Reports One of the Biggest Misses of the Year, We Warned Quite Thoroughly in September

Our HSBC research report released September of 2016 has proven to be 110% correct. This is the first sentence of our report: HSBC Common Equity Returns: Notwithstanding a possible boost from...

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Censorship, Autonomy and Risk Management…

19-02-2017 Hits:1056 BoomBustBlog Reggie Middleton

Censorship, Autonomy and Risk Management When Dealing With Digital Assets: How to Minimize Risk of Loss

This is a video on the topic of the qualities of Bitcoin blockchain's censorship-proof attributes and how they apply in the world we live in today. It is imperative that you...

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How to Use, Trade, Store and Invest in B…

16-02-2017 Hits:1707 BoomBustBlog Reggie Middleton

How to Use, Trade, Store and Invest in Bitcoin Digital Assets - Step by Step, Part 1

I will teach novices and experts alike how to fit Bitcoin into an investment portfolio safely and with the optimum risk-adjusted potential - along with step-by-step guides, instructions and tutorials. This...

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Italy Approves 1.2% of GDP to Save It's …

16-02-2017 Hits:745 BoomBustBlog Reggie Middleton

Italy Approves 1.2% of GDP to Save It's Troubled Banks... Again! Exactly As We Warned Last Year

I've been warning about Italy's troubled banks since 2010, and last year I pushed two very detailed reports about what was essentially Italy's Bear Stearns and Lehman Brothers. Italy is a...

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T-Mobile Has Eliminated Most of Verizon'…

15-02-2017 Hits:836 BoomBustBlog Reggie Middleton

T-Mobile Has Eliminated Most of Verizon's Network Advantages At A Lower Price Point - Uh Oh!

T-Mobile reported their Q4 2016 results yesterday, and guess what?

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Association with Donald Trump Cost Uber …

13-02-2017 Hits:836 BoomBustBlog Reggie Middleton

Association with Donald Trump Cost Uber $200 Million in 45 Days, Other Companies Feel It Too

Uber's CEO perceived association with Donald Trump (sitting on his tech advisory panel) has caused a viral #DelteUber campaign, resulting in over 200,000 Uber accounts deleted in 45 days. Videos of the...

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Verizon Unlimited, T-Mobile Upgrades, Sp…

13-02-2017 Hits:1587 BoomBustBlog Reggie Middleton

Verizon Unlimited, T-Mobile Upgrades, Sprint Drops Prices Through Floor: The Deadbeat Carriers are Beating Themselves To Death

Update: T-Mobile responds to Sprint & Verizon price cuts but adding additional features to its fixed rate plan. Competition continues to benefit the consumer, but net margins will be/are hovering...

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Fitch Has Effectively Downgraded The Tru…

10-02-2017 Hits:922 BoomBustBlog Reggie Middleton

Fitch Has Effectively Downgraded The Trump Administration, Albeit Too Late As Usual

After my many, many warnings about Donald Trump and his administration (I'll list those a little later)... It's official, Fitch has actually warned that the Trump administration is detrimental to...

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Chinese Bitcoin Exchanges Suspend Client…

09-02-2017 Hits:1107 BoomBustBlog Reggie Middleton

Chinese Bitcoin Exchanges Suspend Client Withdrawals. I Warned You About Heteronomous Wallets!

Bitcoin.com reports "Chinese Exchanges Suspend Withdrawals for One Month": The two largest Chinese Bitcoin exchanges have suspended Bitcoin and Litecoin withdrawals for one month. The news follows China’s central bank...

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Will Japan's Declaration of Bitcoin as L…

09-02-2017 Hits:1182 BoomBustBlog Reggie Middleton

Will Japan's Declaration of Bitcoin as Legal Tender Accelerate Cryptocurrency Mainstream Adoption?

It’s being reported by Sputnik News and other sources that Japan has declared Bitcoin to be legal tender. Unfortunately, I have not been able to quickly confirm this through Japanese...

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Let's see here. The company is the largest MBS underwriter and the smallest bulge bracket bank on the street (the bank that had the #1 spot was just taken under). The company has hit the capital markets twice and the Fed window once to access capital to (Ahem!) "prove to the market that it has liquidity" and for "testing purposes only". They then take this money that they got from the suckers, oops, investors and buy their own stock with it. Is that what those suck.. I mean investors had in mind for that money?

The company alleges short sellers conspired to drive their stock down, so they went on the PR warpath to fight these (us) bad guys. Instead of opening up their books to prove them they (I) am wrong, they try to sick the government on the short sellers. Merrill Lynch issues a buy on Lehman today, after downgrading them a couple of days agoFoot in mouth Lehman stock shoots up after being beat up for a few days, probably incited by David Einhorns choreographed, publicized short selling campaign.

Now, we have these s.. (oh, there I go again) investors buying up Lehman stock, totally disregarding the fact that Lehman took and economic loss last quarter if you strip away non-cash accounting shenanigans, smoke and mirrors. We then find out that the NYS Attorney General (Cuomo) has reached a prospective settlement with the credit wizards (see below, click to enlarge).

mbia_2.png

and then...

mbia2_2.png

 

Coincidentally, not a full 48 hours after the end of the Attorney General's stern talk, ratings agencies get religion and decide to declare what the entire world figured out some time ago - MBIA and Ambac probably don't deserve AAA ratings. Really!!!!????

As I type this, Lehman Brothers, Morgan Stanley are rallying. WHAAAT!!!!??? Don't these guys read my blog? Morgan and Lehman only have two ways to hedge multi-billion dollar assets, and neither are very reliable these days. Short a broad index and risk a lot of slippage and uncertain correlations, or pay a counterparty to accept a risk. You know, a counterparty like MBIA and Ambac. Let's revisit my "Who's holding the $119 billion bag" post from 4 months ago. If you don't want to read through the rest of my rather dated ramblings, it can be summarized in realizing how lucky Lehman is that they just closed the last quarter, for 14% of their gross equity (as calculated in February), is about to get downgraded, give or take.

This is post is primarily to document my assertions of self insurance by the banks in their alleged efforts to prop up the monoline (or should I say multilines?). Below you will find a chart with links that provide, in extreme detail, the insured holdings of a handful of banks and one homebuilder with a large mortgage operation (I do mean extreme detail, including asset name, CUSIP #, ratings by all major agencies, vintage, etc.). Let me add that I don't know how much of this is actually bank inventory versus what was sold off, but my guess is that the banks got stuck with the vast majority of everything from the last year or so. In addition, most of the underwriting banks can get stuck with the stuff that was found to violate the agreed upon underwriting guidelines (which is potentially a lot) for a certain period, even if it was sold off. This is something that can sink the smaller equity base banks such as First Franklin.

This is $120 billion dollars right here, and it is nowhere near comprehensive. These are RMBS, CMBS, and a smattering of consumer finance ABS insured by MBIA and Ambac. I know everybody thinks that we may be coming to the end of the writedowns from real estate related devaluations, but if that is what everybody thinks then everybody is wrong. This bubble took at least 6 years to build, it is not going to dissipate in 1 year. We are about 50% through the subprime crisis, but since this problem was never a subprime issue to begin with, we have lot more to go. There are all of the other classes of mortgages, the commercial real estate market, which I went over in detail , there is the consumer finance markets (recession, anyone?), then the big grand daddy of them all, the leveraged loan, junk bond CDO and CDS market - crashing at a financial institution near you. I am 50% through a forensic analysis that will expose the junk bond CDOs held by monolines that will probably knock your socks off. Alas, I digress...

This credit problem and real asset bubble is a result of combining very cheap money with the lax, "other people's money", moral hazard to be had whenyou don't need to be responsible for your own underwriting - otherwise known as the natural consequence of asset securitization. Why fret over due diligence when we're just going to sell the stuff off. The following are a sampling of whose holding the bag...

image004.gif

The Partial Cost of Monoline ABS Failure    
  Par Equity Exposure Ratio
Bear Stearns $15,673,088,703 $11,793,000,000 132.90% icon BSC ABS inventory
Morgan Stanley $22,956,101,796 $31,269,000,000 73.41% icon MS ABS Inventory
Lehman Brothers $3,151,328,632 $22,490,000,000 14.01% icon LEH ABS Inventory
Citigroup $8,100,028,623 $127,113,000,000 6.37% icon C ABS Inventory
Countrywide $12,639,385,566 $15,252,230,000 82.87% icon CFC ABS Inventory
Wells Fargo $4,700,835,231 $47,738,000,000 9.85% icon Wells Fargo ABS Inventory
Goldman Sachs $18,673,869,328 $42,800,000,000 43.63% icon GS ABS Inventory
WaMu $7,658,982,498 $23,941,000,000 31.99% icon WaMu ABS Inventory
Merrill Lynch $10,224,387,634 $38,626,000,000 26.47% icon ML ABS Inventory
Centex $511,740,636 $3,197,130,000 16.01% icon CTX ABS Inventory
Wachovia $5,328,228,928 $76,872,000,000 6.93% icon Wachovia ABS Inventory
Totals $118,950,151,688 $477,918,010,000 24.89%  

First Frankin appears to have significantly more exposure than equity (a lot more, so much so that it actually through my Excel charts out of whack): icon First Franklin Monoline ABS Inventory

This chart is using gross equity as reported, not tangible equity or foresnically scrubbed equity which is bound to be a lower number. For examples of how we use forensic analysis to reconstruct reported numbers and financial statements, see the Lennar and General Growth Properties (with conference call update ) analyses.

I am short Morgan Stanley and Bear Stearns, for the very same reasons that they are numbers one and two on this list (excluding Countrywide, whose short position was covered a while back, although I still have a bear position on WaMu). To see my take on these two banks, read my overview on the industry: Banks, Brokers, & Bullsh1+ part and Banks, Brokers, & Bullsh1+ part 2 then read or download the full analyses: "The Riskiest Bank on the Street" and "Is this the Breaking of the Bear?".