Latest Analysis

Latest Analysis (36)

Monday, 17 March 2008 11:36

This is going to be an exciting, and scary morning

Ken Karachi

JP Morgan bought Bear Stearns for $230 something million, about 7%
of its closing price Friday, and about 2% of what it was trading for 2
weeks ago. On top of it, this was an all stock deal with the government
funding more tha 100% of it (the Fed will be financing $30 billion of
non-liquid BSC securities, the back stop that I said would happen).

To
put this into perspective (I'm a NYer, so I am quite familiar with the
landscape), the BSC headquarters is worth at LEAST $1 to $2 billion.
Between the clearing infrastructure, asset management, structured
product assets and real estate, there is at least a $1.5 billion
immediate gain here. How much that will be offset by litigation risk is
an unknown. The CEO got up on CNBC and clearly told the world that BSC
had no problems. Lawyers must be getting a boners in real time.

I
will admit to a big mistake that I made. I hedged my gains at $35
Friday to lock in the profts. Those calls are literally worthless now.
I shouldn't be complaining since my gains as of this post are averaging
over 800% on this trade, it was the largest position in my portfolio,
and that was after taking profits last week. Just thought I would be
honest and let everyone know that I am far from perfect, thus as I have
said so often, no one should be taking anything I say as investment
advice.

Now, as for Monday's trading.... I am not a trader, and
I believe in medium to long term investment horizons, but there is a
LOT of opportunity to be had here. Lehman is probably going to get a
drubbing. Morgan Stanley is being overlooked by the Street. Citibank
will get no love. I already covered on WaMu, with all of the
opportunities abound, I don't believe that I should be trying to dabble
below $10 when I have ridden shares down from last year in the $30's.

I
fear Goldman will be seeing a lot of devaluation. Don't forget the
companies that we have covered earlier in the blog. There financing is
damn near gone. GGP, the builders, etc.

The Fed is working hard
to help the country. That is undeniable. They have cut rates, extended
financing directly to non-banks, cut more rates - but, and as I
thought, the markets are ignoring these actions and driving financials
down and commodities up.

Lehmans asset make up will make it a
target in US trading. I will probably attempt to expand my position and
will be willing to pay premiums. My small position is quite profitable
already. I will attempt to expand the financials on my list in
aggregate, and MS (who is my 2nd largest position in the financials)
will be expanded as well.

Published in Latest Analysis

Tagged under

Monday, 17 March 2008 11:35

BSC calls are almost free and the JP Morgan Deal is not signed in stone

Ken Karachi

The BSC employess own 1/3 of the shares outstanding, and most of them
have lost at least 98% of thier company stock wealth. Would you approve
the deal if you were an employee or try and shop it around? Just a
question to ponder.

Published in Latest Analysis

Tagged under

Thursday, 19 March 2020 10:28

The Great Global Financial System Unwind, 2.0

Ken Karachi

The US consumer is indebted! Truly indebted, to the point that most of the income derived from their labor goes to pay lender fees and interest, not support their families (a version of this deck is freely available at Veritaseum Research. We need to go through this exercise to dispel and debunk he malarkey I’ve heard in the financial press that once the COVID-19 infections tamp down we will be back to bubble’s as usual. That will NOT happen. We (in the US, EU and China and greater Asia) were running on borrowed time. COVID-19 was simply the pin prick that popped the bubble that no one wanted to admit central banks were blowing.

Let’s take this by the numbers, shall we?

As can be seen above, a single head of a 4 member household earning the US median wage has no chance of meeting his/her family’s needs, and often resorts to high priced debt (i.e. credit cards) to fill the deficit, which simple exacerbates the problem over time.

When considering a two-wage earner family (i.e. husband and wife), the situation is really not much better.

True inflation (that is the inflation in the prices that real people pay for the real things that they really consume – energy, food, clothing, housing, etc.) has actually been rampant. It easily outpaces earnings growth. When the cost of living life surpasses your earnings, what do you do to fill the deficit? You borrow! As should be obvious, this is not sustainable!

What does that borrowing look like?

For those of you who thought that 2007 represented the biggest bubble in the US since the Great Depression, you haven’t been paying attention.

That bubble is still being blown and is getting bigger as well.

Meanwhile, even when things looked like they were doing well and the stock market was reaching all-time highs, delinquencies were increasing – and this was during so-called good times…

Now, there’s a lot more to this debt story than meets the eye, but we have limited time and space, so let’s get straight to the point…

These numbers were put together last month, before the global economic shutdown, thus you can consider them all highly optimistic!

Yes, the Ye

Yes, the economy started slumping, debt per capita started increasing, and defaults started increasing -BEFORE the border closings, store closings and quarantines. Don’t drink the Kool-Aid!

Despite this squeeze, rates for credit card users have been increasing (putting more pressure on borrowers) despite the fact that US interest rates have been on a steady decline (more profit for lenders).

Okay, now…. Tell me if you have seen this movie before.

And it is steadily getting worse…

There is a structural deficiency in the way the financial systems are being run today, and methinks it will be corrected in the not too distant future…. The hard way.

Let me show you why…

All of that doom and gloom that I walked you through above was BEFORE this (the home page of the CNBC website clipped at the time of my penning this piece).

The COVID-19 induced global lockdown simply exacerbated what was already a real problem. Its not like couldn’t see this coming. Last month, I made it clear that the economic contagion would be real. Very real. See how ">I broke it down well before all of this became media fodder.

Thus far, that’s a 85% P/L in less than a week. Why? Because banks are heavily leveraged into the economy, and when the economy goes bad, banks go bust.

We will be releasing much more like this through ">Veritaseum's Research page. We are EXTREMELY bearish on the US financial system, US real estate, US retail, nearly all of Europe, much of Asia. This time around will make the 2008 crisis and the European sovereign debt crisis look like a walk in the park. We should know, we called those debacles way ahead of time as well.

Published in Latest Analysis

Monday, 18 May 2020 10:20

Stagflation is Here Right Now! As Is A Depression

Ken Karachi

US Price inflation is dead near term (except for food). M2 spiked higher than ever before (this is extreme monetary inflation, boosting gold), but that money never circulated to main street as shown by the drop in velocity. All of this, while consumption absolutely collapsed - by a record. This is STAGFLATION!

[if IE 9]> <![endif]-->

Meanwhile... CNBC reportsPowell says GDP could shrink more than 30%, but he doesn’t see another Depression. But, the Fed's own website says that if we exhibit a drop of GDP of more than 10%, we're already in a depression. Powell is expecting up to more than three times that. We all know the Fed will pull out all stops to reverse the GDP drop and deflationary pressures. If you don't know that, Powell reminded us all of it today: Powell to tell Congress the Fed will use all tools to fight the downturn.

Ladies and gentlemen, "the downturn" is the most significant the vast majority of people have seen in their lifetimes - if not everyone. The Fed's reaction is to print much, much more money than has ever been printed in the history of this country. Consider the dollar debased - but few can see the results because the world needs to buy dollars to pay their global bills... For now!

The Fed will do whatever it can to make that little red line turn higher, including spiking the money supply past anything this country has ever seen, as well as...

[if IE 9]> <![endif]-->

Buying everything that is not nailed down, and then start pulling nails. Take note that the we've had the biggest deficit (as % of GDP) this country's ever seen. Also note that we've borrowed more money than we've every borrowed. And coincidentally, the Fed's balance sheet has spiked more than this nation has ever seen. What a coincidence! I forgot to add, all of this has occurred in the last 2 to 3 months!

Imagine what the absolute decimation of the $USD will do to the most steady asset priced in USD... Well, the same thing that will happen when priced in the euro and the pound (and the yuan and the yen, and...)

<![endif]-->

Published in Latest Analysis

Thursday, 21 May 2020 10:19

Panic-Driven Monetary Inflation and It's Effect on Tokenized Gold

Ken Karachi

Published in Latest Analysis

Sunday, 26 March 2017 10:18

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

Ken Karachi

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 Massive Giveaways to Their Retail Clients

Manhattan landlords, who have seen retail occupancy plummet after boosting rents to record levels, are trying to avoid big price cuts. Instead, they’re writing checks for things like interior redesigns and moving expenses to keep storefronts from going empty.

Tenant-improvement allowances haven’t been typical in the Manhattan retail market. But now the concessions, which can pay for anything from lighting and displays to a complete overhaul, are becoming a key component in some new leases, particularly for large, flagship stores in high-profile areas, such as Madison Avenue and Fifth Avenue, according to Steve Soutendijk, an executive director at brokerage Cushman & Wakefield Inc.

“We’re seeing tenant-improvement and concession packages that retail landlords never, ever contemplated before,” he said.

The sweeteners signal that the balance of power is tilting toward merchants in Manhattan after a relentless surge in rents during the past five years. Landlords facing rising vacancies are more willing to negotiate with retailers, who have gotten battered by the rapid rise of e-commerce and have shied away from committing to costly, long-term leases.

Here's a sampling of my recent warnings on this subject:

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"
Paid Subscribers: Insight Into Expected Q4 2016 Results
Ten Years Since BoomBustBlog Was 1st Published & That Initial Research Still Relevant Today

It's not as if this pattern is not both obvious or repetitive. Any of our long time followers should know that we tore GGP apart in 2007 and 2008, they filed for bankruptcy shortly thereafter. There are literally thousands of pages of research on this and many other companies in our paid archives from back then Paying subscribers, see Home > Research Reports > Real Estate > Commercial Real Estate. Here are some direct links: Our Commercial Real Estate Research sub-Category - Commercial Real Estate and Reggie Middleton says GGP will collapse & the type of investigative analysis you won't get from your brokerage house (554 KB) . This was a masterpiece (about 700 pages, all told. These historical pieces will be coming in handy, because we're back where we started from.

. For $11 per month you get to pick my brain in groud discussion through this site. Our higher tiers allow you to direct research and get access to me and my staff over the phone.

Published in Latest Analysis

Wednesday, 11 April 2007 10:17

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

Ken Karachi

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 "professional" investors and analysts seem to miss the point. You often hear, those who only see rewards (or lack thereof, ie. "Hey, Ether went up 150% last year!") or those who only see risks (or lack thereof, ie. "Bitcoin is too volatile to make a good investment"). This last point has been espoused not only be novice retail investors, but by global investment banks, the Financial Times, CNN/Money and even the London Business School. I'm actually quite serious about this Financial Times, London Business School and Credit Suisse) - all entities that really should know better.

The Veritaseum Digital Asset Valuation Framework

We've given a lot of thought to the topic of valuation with regards to investment. We have an excellent public track record over the last 10 years, and even more of a record in private performance. We have decided to focus our expertise and experience on the burgeoning digital token ecosystem by creating a Digital Asset Valuation Framework and issuing tokens to support it. The framework encapsulates two aspects:

The economic performance of the entity's underlying token (risk-adjusted historical reward), and;
The forensic valuation of the token's issuing entity and its potential and prospects

The balance of this article will focus on number one. The next missive will focus on number two and will be delivered live and in person at my office at 350 Park Avenue, NY, NY. Holders of Veritas (our own token) can purchase custom and bespoke analysis focusing on either. Before we discuss risk-adjusted return, we must first agree on terms. Reward is the total return on the investment. Risk is the actual downside movement of the underlying. This is quite different from the typical academic definition of risk which is generally volatility or deviation from average pricing. The problem with this is long-only holders of assets are actually quite happy to receive upside movement, hence risk defined as bilateral movement of the asset makes very little practical sense.

Now, taking that into consideration, a truly realistic risk-adjusted reward analysis shows three out of four of the most popular digital assets handily outperforming most of the global asset classes. If you take the top two risk-adjust reward performers, they handily outrun all popular asset classes and investments from around the world.

Now, many of you may be wondering, "How can assets that are as volatile as Bitcoin and Dash have a better risk-adjusted return than the stock markets?" It's because there are two sides to the risk/reward equation (as stated above) and just focusing on one side can be DANGEROUS! Now matter how risky bitcoin may be, it could still be the investment champion of the world if it throws off enough return to justify the risk. The relationship is actually very simple - Risk is the price one pays for reward. As long as the ratio of risk paid for reward is less than 1:1, your good. In other words, you want to pay $1 of risk for every $2 of reward. You don't want to pay $2 of risk for every $1 of reward, through.

On that note, look at the amount of excess (above your benchmark rate, the minimum required for you to be in the market) returns that bitcoin has thrown off relative to the S&P.; It's not even close!

Now, when you put your investment portfolio together, you don't only have to worry about the risk of your individual investments, but the risk of the entire portfolio. For instance, you can have a portfolio of only euros. You say to yourself, euros are the default currency of the EMU, and it can't be but so risky since its volatility is limited (at least historically, and even that can be called into question). So, you sit with a $500,000 portfolio of euro (with the requisite EUR/USD exchange rate risk) and Mario Draghi does his QE/Currency Debasement/NIRP thingy. You're entire portfolio tanks! Why? Because you not only put all of your eggs in one basket, but you got those eggs from the same bird!

So, as has been made painfully obvious, economic diversification in your portfolio is key. But don't most of real strong performing assets tend to move in unison, like equity markets? Nope! At least if you are dealing in digital assets...

Not only has Bitcoin, Ether and Dash totally trounced the reward (not adjusted for risk, see the first chart) of the S&P; 500. They not only mostly non-correlated, some actually have a negative correlation. The portfolio that you see above, not only trounces holding currencies and/or stocks in terms of raw performance and excess returns, it also blows out a forex portfolio, stocks, bonds, and oil in terms of risk-adjusted return as well. As a matter of fact, if I were actively managing this, it would have had a higher return, for we would have known to stay away from Litecoin - alas a topic for a different (and upcoming) discussion.

Now, how about companies and entities that are launching their own tokens??? News item: Fastest-Ever ICO: Ethereum-Based Gnosis Creates $300 Mln in Minutes, Raising $12 Mln. Well, no... Note Really!

Here's what the Gnosis futures are saying about that $29.85 token price

Update: The day after exchange trading of GNO started, they have nearly tripled their ICO price. Fundamental and forensic analysis is much needed in this space. There are solutions that are on the way.

Much has been said about the Gnosis offering, particularly the prices and apparent fervor. There is one thing that I can say about the chatter that I've heard and seen from around the web - It appears that very few have any clue as to how to properly value or financially evaluate an entity such as Gnosis or its token offering. Here's a clue, taking what the tokens sold for and multiplying that by the total Tokens available is nonsense and simply just wrong - and unrealistic.

So, what gives? I'll be doing part two of this series live at my office space at 350 Park Avenue in NYC on May 11th at 6pm. Email me at Reggie AT Veritaseum DOT com to RSVP if you are an investor or represent an entity in the buy side industry. We'll discuss token performance analysis and how it fits in the buy side portfolio (the stuff above) as well as token issuing entity valuation - the real interesting stuff. In attendance will be:

a billion dollar family office;
several hedge funds;
one of the world's largest fund administrators;
finance partner at Sullivan & Worcester;
partners in one of the most prolific derivative liquidity providers to hedge funds

and your buyside firm or institution if you RSVP fast enough.

Our token offering is actually ongoing now, and our tokens can be redeemed directly back to us for custom and bespoke analysis and valuations, like this 63 page report we did on Google Our tokens are also the only method of accessing our selective Digital Asset Exposure DAOs - basically a robot hedge fund that lives totally on the blockchain - with no asset manager or aset management fees. This makes it up to 90% cheaper than a traditional hedge fund. For more information, see 2. Look What Happens When the Hedge Fund Fee Fight Hits the Blockchain - Redisruption. To purchase our Veritas tokens and learn more about Veritaseum, download our Veritas Informational Tear Sheet with live links to a plethora of information. or proceed directly to the Veritas 2017 Token Purchase: Step-by-Step Tutorial. .

Published in Latest Analysis

Saturday, 03 March 2007 10:16

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

Ken Karachi

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 find a cornucopia of informational videos and presentations to bring you up t speed on Veritas, Veritaseum and our future prospects and plans. This is a very.... unique offering.

This is the Veritas digital road show - a slide presentation that goes through what Veritas is, what Veritaseum does, and why you should get involved. This presentation is interactive and chocked full of content. Please click through all of the videos, click the links to download the various documents and take your time to read.

Come back here on the 11th of April for more information and the links necessary to access our crowdsale and initial coin offering smart contracts, be ready to get started! In the meantime, come and find out why we're so excited about this... transformation of capital markets...