Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:943 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:1156 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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It's the Real Estate Crash That I Warned…

20-03-2017 Hits:1632 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...

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When It Comes Time To Show and Prove, Eq…

20-03-2017 Hits:1392 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...

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So, Brexit Is Now Almost Official. Is Th…

20-03-2017 Hits:658 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...

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In Less Than Two Weeks, Another Bitcoin …

17-03-2017 Hits:2178 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...  

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The Fed Raises Rates While Still Baby Fe…

17-03-2017 Hits:2008 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...

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A Bitcoin ETF or Similar Regulated Insti…

16-03-2017 Hits:2561 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...

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Why the Winelvoss Bitcoin ETF Was Reject…

13-03-2017 Hits:3371 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...

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Trump Calls Obama's Policies On Russia W…

10-03-2017 Hits:3042 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...

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SNAP's Greed Derived Self-Inflicted Woun…

08-03-2017 Hits:4107 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...

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Bitcoin Is Reaching the Point of No Retu…

08-03-2017 Hits:3834 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...

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This is an email I got from one of the individual investors of who frequent the blog before Lehman announced its record writedown. It appears as if he was onto something!

"I think Lehman may be an interesting bank to look into (even though I believe Bear Stearns is in the absolute worst position, Lehman is not much better off I think, while at the same time being perceived as having dodged excessive write-downs a-la Goldman Sachs). It starts with FAS 159 which you may be aware of. You can read how this has helped out the investment banks in the link below.
http://blogs.wsj.com/marketbeat/2007/09/21/great-moments-in-accounting/

Lehman has benefited the most on a relative and absolute basis thus far from FAS 159 accounting. Since they've filed their 10K recently we can update the total benefit they've booked as a result of a decline in their own credit worthiness for the liabilities they've elected to measure at fair value (FAS 159 allows companies to apply fair value to both their assets and LIABILITIES). From the 10K, on page 109 it states that "The estimated changes in the fair value of these liabilities were gains of approximately $1.3 billion, attributable to the widening of our credit spreads during fiscal year 2007." Lehman appears to have used $900 million of this gain to decrease the impact of write-downs (see table on page 49 of the LEH 10K, under "Valuation of debt liabilities"). For the year, Lehman booked write-downs of $1.9 billion total, however backing out FAS 159 gains would have substantially increased this amount. Again, looking at the write-down table on page 49 Lehman describes their gross and net write-down totals. From this we can back into how hedged Lehman is in each category of investment. The two primary categories to look at are there Residential mortgage-related and Commercial mortgage related positions. Looking at Residential, they booked a $4.7 billion gross write-down but only a $1.3 billion net write-down, implying that they are 72% hedged on their exposure to Residential Mortgage positions. Their commercial positions saw a $1.2 billion gross write-down, and a $900 million net write-down, suggesting they are only 25% hedged to their commercial positions.

I believe that the commercial mortgage/real-estate market still has a ways to go on the downside, and is much earlier in its trajectory than the residential market (as I'm sure you'll agree judging by some of your posts on the subject). Lehman's residential and commercial mortgage exposures are roughly equivalent ($37.3 vs $38.9 billion as of 11/30/07).

I also believe that even on a gross basis, Lehman has not taken large enough write-down in comparison to other companies. I believe they have accomplished this by moving mortgage assets to Level 3. I've loved reading your blog and truly appreciate the unique and in-depth analysis performed on target companies thus far."