HSBC Reports One of the Biggest Misses o…

21-02-2017 Hits:184 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:509 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:979 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:490 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:547 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:573 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:1321 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:672 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:826 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:877 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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Deutsche Bank's Year End Analysis and Re…

08-02-2017 Hits:1065 BoomBustBlog Reggie Middleton

Deutsche Bank's Year End Analysis and Review - BoomBustBlog Style

This is our Q4 analysis of Deutsche Bank. When analyzing and valuing entities such as banks and platform-driven tech companies, perception is always key. You see, what one maverick or...

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Revisiting the Breakdown of the Macro Dr…

07-02-2017 Hits:738 BoomBustBlog Reggie Middleton

Revisiting the Breakdown of the Macro Drivers Behind Bitcoin's Price Spike, Exactly As I Foretold 30 Day Ago

One month ago I walked through the macro influences behind Bitcoin's price pop and drop in "The Macro Truth About The Big Bitcoin Pop and Drop: The Mainstream Media Doesn't...

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Below are our initial observations on Goldman Sachs as compared to its peers. I've had a burning sensation telling me that GS is grossly overvalued, but I haven't had a chance to prove it empirically. I am now diverting the resources necessary to prove or disprove this "feeling". I will keep the blog posted.

 

Bank Level 1 Assets Level 2 Assets Level 3 Assets Shareholder Equity Total Assets Level 1 Assets-to-Total Assets Level 3 Assets-to-Equity Leverage (X)
Citigroup $223 $934 $133 $114 $2,183 10.20% 117% 19.21
Merrill Lynch $122 $768 $41 $32 $1,020 12.00% 130% 31.94
Lehman Brothers $73 $177 $39 $26 $786 9.20% 152% 30.59
Goldman Sachs $135 $621 $96 $43 $1,189 11.40% 226% 27.89
Morgan Stanley $115 $226 $74 $31 $1,045 11.00% 236% 33.43
                 
Based on 1Q2008 reported data          

 

·        At the end of 1Q2008 Goldman Sachs had second highest proportion of level 3 assets to total shareholder’s equity. Goldman Sachs’s level 3 assets as proportion of adjusted shareholder’s equity has increased from 161% in 2Q2007 to 258% at the end of 1Q2008. Although Goldman Sachs has high proportion of level 3 assets it has not reported significant write-downs. On the contrary the bank has reported net gains on its mark-to-market valuation adjustment on its level 3 assets of $2.0 bn in 1Q2008 as losses on securities were more than offset by gain of $5.1 bn on derivatives contracts indicating effectiveness of timeliness of derivative position under current crunch financial market conditions.  In 4Q2007 and 3Q2007 GS reported mark-to-market valuation gain(loss) on its level 3 assets of $(360) mn and $ 620 mn, respectively.

 

·        Goldman Sachs leverage is comparable to its peer group with leverage ratio of 27.89x

 

·        Goldman Sachs adjusted P/B of 1.75x is relatively high compared to its peer group. However, the same can be attributed to relatively better quality of its assets and its ability to better withstand the current problem in the financial and capital markets.

 

·        However, on the other side, Goldman Sachs has highest VaR of $171 mn  ahead of Morgan Stanley’s VaR of $107 mn and Lehman Brothers VaR of $106 mn.

·        Its investment banking and asset management fee based revenues have slowed down significantly over the past few quarters due to slow down in the capital market activities.

 

Based on these initial observations, while the stock does seem to command higher pricing multiples compared to its peers, it is likely it may be over-valued at the current price. We will have to dig deeper to precisely check if the stock is materially overvalued. I will have my team further explore Goldman Sachs’ relative strengths and weakness with respective to its peers regarding exposure of assets, revenues and will I wll post my findings.