This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:382 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:647 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:800 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:1148 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:2018 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:2265 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:2789 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:2351 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:1363 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:3250 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:2946 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:3522 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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Really, I have nothing against bankers. Hey, I'm a born and raised New Yorker, many of my friends are bankers. The problem is that so many people tend to believe the bullshit that bankers say. Now, I can't blame the bankers. After all, its every man (and woman) for themselves. Still, it wouldn't hurt to use a little common sense once in a while. From the FT.com:

Treasury plans strict rules for securitisation

The US Treasury is planning a sweeping overhaul of securitisation markets with tough new rules designed to restore confidence by reducing the incentive for lenders to originate bad loans and flip them on to investors.

The authorities plan to force lenders to retain part of the credit risk of the loans that are bundled into securities and to end the gain-on-sale accounting rules that helped spur the boom of the markets at the heart of the financial crisis.

The aim is to revitalise the markets for securities backed by mortgages and other assets without re-creating the systemic risks that turned boom to bust in 2007. The plan is part of a wider overhaul of regulation to be unveiled on Tuesday.

A Treasury spokesman said that while securitisation had made credit more widely available, breaking the direct link between borrower and lender had "led to a general erosion of lending standards, resulting in a serious market failure that fed the housing boom and deepened the housing bust".

Securitised markets - which financed more than half of all credit in the US in the years immediately preceeding the crisis - are essential for the US economy. Without a recovery in these markets, the flow of credit will not return to more normal levels [Actually, I think the more appropriate term is "return to levels that have occurred in very recent history". After all, asset securitization has only been prominent for a couple of decades. The world was able to create loans for the past 5,000 yeaers or so, I don't see out the last 20 or 30 years necessarily defines normal, but I get their point.], even if US banks overcome their problems.

The Treasury hopes its plan will help bring these markets back to a more stable form by improving information and changing incentives. However, bankers warned that the new rules would reduce incentives to package assets into securities, raising financing costs. [Translation: "However, bankers warn that increased transparency, accountability and responsibility will significantly draw down the availablity of bonuses and outsized profitability and cause us to direct our efforts elsewhere in an attempt to increase opacity and decrease accountabiilty in order to charge more for our services"]

"It is the beginning of the unwinding of the securitisation-for-sale model," a senior Wall Street banker said. "By forcing lenders to keep part of the loans and scrapping ‘gain-for-sale', the government will raise the cost of capital and put a damper on the reopening of credit markets." [Well, Reggie posits "It may not necessarily be a bad thing to raise the cost of capital if said cost of capital is too low to begin with. An imprudently low cost of capital is what brought upon the bubble to begin with, and the consequent melee that was the bubble's bursting. Do you really think that just because the cost of capital is low, it is a good thing. The cost was low because the risk of loss was never properly priced into the securities. By forcing the originators to accept just SOME of the potential losses, prudence will now be "PARITALLY" priced into said securities. Now that I think about it, the cost of captial doesn't necessarily have to go up. You, Mr. Banker, can still sell the securities at their historcial prices as you retain the risk of loss, after all many of them are rated AAA, right???? Why in the world would you raise the cost of capital now, that you have skin in the game, unless you somehow value your skin more than the skin of the suckers, ahem, clients that you sell too?"]

Some experts also question the wisdom of forcing banks to retain exposure to loans sold as securities, saying that it might be better to encourage banks to properly rid themselves of all exposure to such credits. [And why is that???]

The Treasury plans to force lenders to retain at least 5 per cent of the credit risk of loans that are securitised, ensuring that they have what investors call "skin in the game". The 5 per cent rule - which looks set to be applied in Europe as well - is less draconian than some bankers feared. The proposed elimination of "gain on sale accounting" is to prevent financial companies from booking paper profits on loans - packaged into securities - as soon as they were sold to investors.

Banks would only be able to record income from securitisation over time as payments are received. Brokers' fees and commissions would also be disbursed over time rather than up front, and would be reduced if an asset performed badly due to bad underwriting. [Now, that is what I consider Draconian! Do you acually mean to tell me that you now cannot book a profit until you actually make some money! The F#%$ing nerve of these people!]

The US authorities also plan to stop credit rating agencies from assigning the same types of ratings to structured credit products that are assigned to corporate and sovereign bonds, meaning there would be no more AAA-rated subprime securities. [Why! I have a better idea. Why don't we just make them stand behind their ratings? If they can be found to have materially misrepresented or ommitted a fact or somehow have been negligent they should bear the legal liabilities and consequences of such. The agencies should be allowed to pack in the cost of liability coverage into the ratings fee itself, thus the agencies can rate said securities any way they want. If they play games it is their asses on the line, and not the sheepish, ignorant investor. Somehow, I feel ratings quality will increase substantially, and increase literally overnight!]

Contracts would be standardised to ease comparability and trades included in an electronic database currently used for corporate bonds. [Why wasn't this the case from the beginning?]

Sponsors would be required to stand behind their securities by providing warranties as to the origination and the underwriting standards on the loans. [Why wasn't this the case from the beginning?]

Credit ratings agencies - most of which are paid by the issuers to rate securities - would have to strengthen their policies for handling conflicts of interest. [This is a game! Strengthen policies for handling conflicts of interest???!!! If there is a conflict, it is just that - a conflict and will eventually rear its head to the detriment of the wearker party. If one were to take my advice stated above, the conflict will be removed and we will not have to play the game of "policies for xyz". Once the agencies asses are on the line in terms of liability, they will remove conflicts of their own accord and will not have to be prompted by any governement body, nor wil they have to be watched by some overdog agency either!]

They would have to develop a new vocabulary to rate structured credit - a move intended to underscore the fact that a triple A rating on a corporate bond and on a mortgage-backed security mean very different things.