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:1364 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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You've heard me bitch and moan about Goldman for over a year. Their preferential treatment and their extreme risk taking at the expense of the taxpayer is now on record, and not just illustrated by my analysis. Courtesy of ZeroHedge.com, who deserves an award for breaking this story!

Lately the topic of Goldman's VaR has taken on significant prominence, not least because as Zero Hedge disclosed yesterday, it hit a record high. The implications for this were large enough that even Bloomberg picked up on this story. Many readers raised questions of how is it even remotely possible for the company to have a VaR in the low-mid $200 MM ballpark, yet to post a record number of $100MM+ trading days in Q1; Zero Hedge is willing to wager that the upcoming 10-Q release will demonstrate another record number of $100MM+ days in the just closed quarter as well. How is that possible?

The clue may come from a February 5 letter by the Federal Reserve to Goldman CAO Sarah Smith. The letter had come in response to GS requests for "temporary exemptions from the application of certain aspects of the Board's Market Risk Rules for state member banks and bank holding companies and the Board's general risk-based capital rules for bank holding companies." Basically through the end of 2009 Goldman is basically using non-traditional. SEC approved VaR models as can be seen here:

GSGI has requested that (1) through December 31, 2009, GSGI and Bank be permitted to use certain Value-at-Risk ("VaR") models approved by the SEC... to determine their capital requirements for specific risk under the Market Risk Rules; (2) through December 31, 2009, GSGI and Bank be permitted to use methods approved by the SEC to determine their capital requirements under the Market Risk Rules for those trading assets, including distressed debt and restricted stock investments that the SEC did not require to be included in the VaR-based models of GSGI and Bank; and (3) GSGI be allowed to use methods approved by the SEC to calculate risk-based capital requirements for its nonfinancial equity investments that are subject to the Board's Credit Risk Capital Rules.

The letter goes into detail explaining why a bank needs to follow a MRR VaR methodology. Yet what is not made clear is i) why does Goldman need almost a full year of alternative VaR calculation and MRR exemption and ii) what is the protocol for the SEC to enforce VaR compliance when Goldman's ultimate regulator is the Federal Reserve. The exemption raises critical questions not only with regard to the validity of the company's indicate VaR, but also downstreaming capital requirement reports. Zero Hedge would be remiss to point out that a very close relationship between the most critical financial company in the world and the most discredited regulator (SEC) does not bode well for confidence in this critical risk indicator, which as many have pointed out, is clearly the main metric by which to measure not only the performance, but the risk capacity of the world's largest government-backstopped hedge fund. Mr. Canaday, Mr. Van Praag - the floor is, again, yours. In your absence, Zero Hedge will, and encourages it readers to, contact Mr. Homer Hill at the Federal Reserve Bank Of New York at (212) 720-2164 to provide additional clarity on the matter.

The actual letter can be downloaded here - GS VaR Request.pdf.

To add to this is my structured products heroin, Janet Takavoli, on the topic. Be sure to view the whole video. She agrees with me that Goldman employees are not necessarily the best and the brightest, just the best connected.

For those who insist that Goldman is still the best thing since sliced bread, let (again, for the 3rd time) illustrate the premium that you are paying for this pool of extreme taxpayer underwritten hedge fund risk, deteriorating assets and potential manipulation through political back door favors.

gs_premium_history.png

If you consider buying on a spike and respect the price of earnings, keep this chart in mind.

As a matter of fact, even with their new SEC-powered exemption from proper risk reporting, this is still the riskiest quarter they have EVER reported. Just think about what would happen if they weren't so connected and had to report the truth.

gs_risk_throuhg_var.png

If and when adjusted for risk (even just a portion of the risk reported through the back door agreements with the SEC), Goldman is the least profitable it has been in many years, if not ever. Think about it! Now, if we were to add the full VaR number into the equation...

If one were to factor in the extreme multiple that GS is trading at into its risk adjusted return and reconcile it with the regulations coming down the pike (see Bair, Bernanke Want Tougher Curbs on Biggest Banks (Update1) July ...

Federal Reserve officials, is pushing for tougher measures to curb the size and
risk-taking of the nation’s largest financial firms. The FDIC will propose ...), one would think this company should get reigned in. If this company doesn't get reigned in, I would recommend that small retail investors seriously consider the US equity markets seriously rigged beyond one's ability to trust it enough to invest on a equitable level. 

 

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