Watch The Evidence Of Global Real Estate Travails Mount As Subscribers Short This Stock
Continuing my predictive analysis of a global real estate relapse, I bring you today's headlines followed by updated research of company that we see slated for probable bankruptcy. Professional and institutional subscribers should download the latest deliverable, which illustrates the likelihood of a bankruptcy in our most recent forensic analysis candidate if it were to go the foreclosure route -Foreclosure Scenario Analysis. This is the professional addendum to the general subscriber analysis released in the post I Present To You The First Probable US Commercial Real Estate Insolvency Of Many To Come. The next deliverable will outline distressed sales of properties, and after that I will make available valuation models on 27 properties in the company's portfolio to inequivocably demonstrate that this company has nowhere to go but down. Ain't math something else? Now on to the news of (yester)day, as reported by Bloomberg.
BofA Plaza Goes for $235M in Auction
thumb_Reggie_Middleton_on_Street_Signs_FireReggie Middleton Sets CNBC on F.I.R.E.!!! - Reggie Middleton preaching the travails of commercial real estate in 2012/13 on CNBCBank of America Plaza, the tallest tower in the U.S. Southeast, was sold at a public auction today on the steps of the Fulton County Courthouse after landlord BentleyForbes missed mortgage payments.
The noteholder had a winning bid of $235 million, according to attorney Howard Walker of McGuire Woods LLP, who ran the auction. Holders of commercial mortgage bonds took ownership through a “credit bid” placed by LNR Partners, David Levin said in an e-mailed statement. Levin is vice chairman of Miami Beach, Florida-based LNR Property LLC, the parent company of LNR Partners, the tower’s special servicer.
BentleyForbes, based in Los Angeles, paid $436 million to acquire the 55-story Atlanta skyscraper in 2006 from Bank of America Corp. (BAC) and Cousins Properties Inc. (CUZ) in the city’s biggest property deal. Since the property market peaked a year after the purchase, the 1.25 million-square-foot (116,000-square-meter) building’s value has tumbled with tenants, including namesake Bank of America, reducing space.
Atlanta has the highest rate of late payments for loans on offices bundled into bonds among the largest U.S. metropolitan areas, at 25.3 percent, according to data compiled by Bloomberg. That’s an increase from 10.4 percent a year ago and is more than triple the 7 percent national rate.
The $363 million Bank of America Plaza loan became delinquent in December after BentleyForbes stopped making payments. The loan was partly packaged inside JPMCC 2006-LDP9, which was downgraded by Fitch Ratings in December because of expected losses.
As I've been warning in many of my previous posts, ie. (must reads if you have not already done so):
- I Present To You The First Probable US Commercial Real Estate Insolvency Of Many To Come
- The Real Estate Recession/Depression is Here, Eurocalypse Style
- An Overview of a US REIT Headed Towards Distress
- The Greatest Risk To Retail Commercial Real Estate Is? Sovereign Debt! Macro Headwinds! Popping Bubbles! Busted Banks! No, It's The Internet!
- Prepare For CRE Crash And Burn Marks At A Shopping Mall Near You
The can kicking of the last 3 years will come to a head once those 5 year debt instruments issued in 2007 come due in 2012 and 2013. Do banks roll over what is an obviously losing proposition or do they take the money and run. Here is an excerpt of the professional/institutional subscriber document Foreclosure Scenario Analysis showing what happens when you get to the end of the road in the neighborhood Can-Kick! Click to enlarge...
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We have culled the portfolio of nearly 30 properties which we individually valued and found who was due for mortgage/loan maturity in the next year. It didn't look pretty...
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Of course, this is not just an "American" thing. The CRE crush will be felt word-wide, particularly in the EU, UK, and China.
- We're At Step 2 Of The Global Real Estate
- The Swiss Real Estate Bubble?!
- The First Major Real Estate Collapse In Europe? I've Found The EU Equivalent Of GGP, The Largest Real Estate Failure In US History
What many do not understand is that the real estate crash of the previous decade is far from over, because The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance. This is true for not only the US, but the EU countries as well. Unlike our European and Asian counterparts, many US investors are much too detached to what occurs overseas, quite possibly from a hubristic, apathetic or even ignorant stance that what happens over there has littel effect on us stateside. Unfortunately, that is not the case. What do you think, pray tell, happens when the liquidity starved, capital deprived, overleveraged banks fail to roll over all of that underwater Eu mortgage debt?
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Investors seeking safety in Germany, the UK and France may truly be in for a rude awakening!
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Past May Be Prologue, But I Just Warned Of A Central European Depression 2 Years Ago
cee_risk_map.pngClick the graphic to enlarge...
Austria, Belgium and Sweden, while apparently healthy from a cursory perspective, have between one quarter to one half of their GDPs exposed to central and eastern European countries facing a full blown Depression! These exposed countries are surrounded by much larger (GDP-wise and geo-politically) countries who have severe structural fiscal deficiencies and excessive debt as a proportion to their GDPs, not to mention being highly "OVERBANKED" (a term that I have coined).
So as to quiet those pundits who feel I am being sensationalist, let's take this step by step....
I strongly suggest those interested in this topic to peruse the whole article for it explicitly warns of what is about to happen any minute now, but first lets see what's popping in world news today, as Bloomberg reports the IMF, EU May Need to Give E. Europe More Help:The International Monetary Fund and other lenders, who spent $42 billion to stem an eastern European banking crisis after 2009, may be forced to commit more aid to the region to cushion the effects of banks cutting assets. The IMF, the European Bank for Reconstruction and Development, the World Bank and the European Investment Bank should “stand ready to provide external assistance and financial support to banks” in eastern Europe, the Vienna Initiative group of regulators and policy makers said in a statement after a meeting in the Austrian capital yesterday. “There is a very strong impact of this -- a potentially strong impact,” Erik Berglof, the EBRD’s chief economist, said in an interview today in Vienna. “You have the headquarters making decisions on assets that are very small when you look at the total balance sheet, but when you look at the subsidiaries in eastern Europe they are systemic in the countries where they operate.”
Regulators and policy makers are trying to shield economic growth in eastern Europe as western lenders must meet higher capital requirements to withstand the euro area’s deepening debt crisis.
This makes very little sense since the bulk of growth in the CEE states stems from trade with the EU. If the EU catches a cold, the CEE states contract chronic pneumonia!
About three-quarters of the banking market in eastern Europe is controlled by western European banks including UniCredit SpA (UCG), Erste Group Bank AG (EBS) and Raiffeisen Bank International AG (RBI), the biggest of which are raising capital and shedding assets, causing concerns that credit may become scarce.
As explicitly detailed to my subscribers two years ago, (subscribers, see 
Banks exposed to Central and Eastern Europe)
The Vienna group urged western European regulators and policy makers to work together to recapitalize banks and consider the effects on subsidiaries in other countries. Financial regulators need to step up coordination to reduce the risk of “disorderly deleveraging”...
Otherwise known as reality, a properly functioning market and transparent price discovery!!!
... in eastern Europe, Serbian central bank Vice Governor Bojan Markovic said at a Euromoney conference in Vienna today. By the end of June, European banks must have core capital reserves of 9 percent after writing down their holdings of sovereign debt, European Union leaders decided in October. That may require an additional 106 billion euros ($149 billion) of capital, a according to the European Banking Authority.
The 9 percent requirement “is not a very fortunate” plan given the current economic environment, European Central Bank Governing Council member Ewald Nowotny said at a Vienna conference today. “Regulatory requirements shouldn’t have a restrictive impact on the real economy,” Nowotny said.
Heh, let a banker tell the story and look what comes out! Appropriate regulatory requirements will have a restrictive impact on the economy if the prebious regulations were lax enough to allow abusive practives to juice the economy to unsustainable heights!!!
Deleveraging shouldn’t take place in countries that are growing and making structural changes to their economies, Albanian central bank Governor Ardian Fullani said today at the same conference.
Really? Suppose they aren't growing at the same rate that debt service emanating from piled derivative experiments are growing, and the structural changes being made are inadequate or fail to address the pertinent issues? I'm just saying...
The message to foreign banks is “don’t put everyone in the same pot,” Fullani said. “Give stimulus to the right countries.”
Hey, that's novel and new! I've never heard the cry for stimulus before... Like a junkie creeping for another hit...
Banks may reduce funding by as much as 30 billion euros this year, according to estimates by Raiffeisen, board member Patrick Butler said at the Vienna conference. “Compare that to the growth that we saw in 2006 or 2007 of 200 billion euros a year -- it’s minimal,” Butler said. “It is not a credit crunch.”
...“It is important that home country authorities internalize the cross-border effects on EU and non-EU countries in formulating their measures,” the Vienna Initiative said in its statement. “In particular, the recapitalization plans of international banks submitted to the EBA should be scrutinized” for their “systemic impact on host economies.”
Yeah, BoomBustBlog covered this in detail... Two years ago - Introducing The BoomBustBlog Sovereign Contagion Model: Thus far, it has been right on the money for 5 months straight!
The BoomBustBlog Sovereign Contagion Model
Nearly every MSM analysts roundup attempts to speculate on who may be next in the contagion. We believe we can provide the road map, and to date we have been quite accurate. Most analysis looks at gross claims between countries, which of course can be very illuminating, but also tends to leave out many salient points and important risks/exposures.
foreign claims of PIIGS
In order to derive more meaningful conclusions about the risk emanating from the cross border exposures, it is essential to closely scrutinize the geographical break down of the total exposure as well as the level of risk surrounding each component. We have therefore developed a Sovereign Contagion model which aims to quantify the amount of risk weighted foreign claims and contingent exposure for major developed countries including major European countries, the US, Japan and Asia major.
I. Summary of the methodology
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- We have followed a bottom-up approach wherein we have first identified the countries/regions with high financial risk either owing to rising sovereign risk (ballooning government debt and fiscal deficit) or structural issues including remnants from the asset bubble collapse, declining GDP, rising unemployment, current account deficits, etc. For the purpose of our analysis, we have selected PIIGS, CEE, Middle East (UAE and Kuwait), China and closely related countries (Korea and Malaysia), the US and UK as the trigger points of the financial risk dissemination across the analysed developed countries.
- In order to quantify the financial risk emanating in the selected regions (trigger points), we looked into the probability of the risk event happening due to three factors - a) government default b) private sector default c) social unrest. The probabilities for each factor were arrived on the basis of a number of variables determining the relative weakness of the country. The aggregate risk event probability for each country (trigger point) is the average of the risk event probability due to the three factors.
- Foreign claims of the developed countries against the trigger point countries were taken as the relevant exposure. The exposures of each developed country were expressed as % of its respective GDP in order to build a relative scale for inter-country comparison.
- The risk event probability of the trigger point countries was multiplied by the respective exposure of the developed countries to arrive at the total risk weighted exposure of each developed country.
- Sovereign Contagion Model - Retail- contains introduction, methodology summary, and findings
- Sovereign Contagion Model - Pro & Institutional - contains all of the above as well as a very detailed methodology map that explains what went into the model across dozens of countries.
The American Education System Exposed For What It Truly Is - A Worker Drone Factory For The Socio-Economic Elite!
This is the 3rd installment of my controversial rant against the American education system - this time in video. If you haven't been following me, it is recommended that you read through the first two (admittedly lengthy, yet well worth the time) posts:
- How Inferior American Education Caused The Credit/Real Estate/Sovereign Debt Bubbles and Why It's Preventing True Recovery
- The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You...
I fully expect plenty of comments on this one! I come in at 3:40 in the video, but the first three and a half minutes may be worth viewing as well for those in the education industry.
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Reggie Middleton Sets CNBC on F.I.R.E.!!!
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Last week I offered my susbscribers examples of the 2nd and 3rd sectors of the FIRE (Finance, Insurance & Real Estate) group that we see getting burned. I spent much of last year on the "F"portion of FIRE. Subscribers should reference the last 5 or so documents in the Commercial & Investment Banks section of the subscription content area. I then illustrated a Dutch real estate company facing the FIRE (again subscribers reference the latest submissions in Commercial Real Estate), and I will be offering US REIT entities at risk in the next day or two. Of particular interest was my explicit warning on the insurance industry two weeks ago, both publicly and to subscribers, which included a full forensic analysis of the company we thought would be make the best short candidate as the feces hits the fan blades. See You Can Rest Assured That The Insurance Industry Is In For Guaranteed Losses! and Our Next Forensic Analysis Subject Is In The Insurance Industry for more on my opinion on such. I even appeared on CNBC yesterday, apparently the only investor/analyst/pundit warning on the FIRE sector for 2012. I outlined my summary outlook for 2012 here: Reggie Middleton on CNBC StreetSigns Sees 2012 As Reluctant/Manipulated Continuation of Q1 2009… The actual CNBC appearance is available below...
From this point on, start this YouTube video and let it play in the background as you go through the balance of this post. It''ll help set the mood...
So, the day following the CNBC appearance warning of the risks to the FIRE sector, and specific risks to the insurance industry in the guise of combined ratios bumping heads with massive investment losses on sovereign and financial entity debt, guess what appears in the headlines of those very same media outlets??? Insurers’ 2011 Catastrophe Losses Hit Record:
Japan’s earthquake and U.S. storms helped make 2011 the costliest year on record for insurance companies in terms of natural-disaster losses, according to Munich Re (ARN).
Several “devastating” earthquakes and a large number of weather-related catastrophes cost insurers $105 billion, more than double the natural-disaster figure for 2010 and exceeding the 2005 record of $101 billion, the world’s biggest reinsurer said in an e-mailed statement today. Competitor Swiss Re earlier estimated that the industry’s claims from natural catastrophes reached $103 billion.
Global economic losses jumped to $380 billion last year, surpassing the previous record of $220 billion in 2005, with the quakes in New Zealand in February and Japan in March accounting for almost two-thirds of the losses, Munich Re said.
“We had to contend with events with return periods of once every 1,000 years or even higher at the locations concerned,” Torsten Jeworrek, Munich Re’s board member responsible for global reinsurance, said in the statement. “We are prepared for such extreme situations.”
In Beware Even Those "Safe" Insurer's Portfolios I illustrated to my susbscribers the risks that insurance investors face. Munich Re said 2011 was the costliest year on record, but they failed to state how difficult it would be to handle said record losses with additional and potentially greater losses on bond and FI porfolios. Munich Re's net exposure to sovereign debt of PIIGS as % of tangible equity at the end of 2009 = 41.2%. Damn! Many compmanies are worse than that (and I'll delve into those a little later). Now, by revisiting the insurance primer that I offered in You Can Rest Assured That The Insurance Industry Is In For Guaranteed Losses! you can see that combined ratios may very well break 100 while investment losses spike. Somebody may not get their claims funded, eh?
Professional Subscribers, reference the addendum to the Sovereign Debt Exposure of European Insurers and Reinsurers (439.61 kB 2010-05-19 01:56:52) whcih can be found online here: Insurer and Reinsurer Sovereign Debt Exposure Worksheets - Professional
Why Pick on Greece... and Sell Side Research Analysts As Sales Support Staff
I discuss how Greece became over indebted through banks imprudently making bad loans, and more importantly why practically no one in all of Wall Street warned of the sovereign debt crisis besides BoomBustBlog. This is hard hitting opinion that is too controversial to publish anywhere else.
How did I see this "Eurocalypse" coming while Wall Street remained aloof? Well the same question can be asked as to how I saw the Housing market crash, the fall of Lennar, Voodoo Accounting & the homebuilders, the breaking of the Bear Stearns, wondering whether Lehman really was a lemming in disguise or the fall of commercial real estate, among a plethora of other controversial, contrarian, and direct contravention to the Sell Side calls that I have made.
As explained in the second half of the video above, many still fail to understand the typical Wall Street bank business model, and more importantly fail actually audit the performance of said banks advice, recommendation and trading. I have laid it bare in BoomBustBlog many a time, which is probably the reason why my blog is banned from more than half of the big bank intranets!!! If you need an explicit example of what I a talking about, simply reference "Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!"
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For those who have not heard....
We believe Reggie Middleton and his team at the BoomBust bests ALL of Wall Street's sell side research: Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?
In the video above, the audience's interesting question as to why I clamored on about the Pan-European Sovereign Debt Crisis, warning since January 2010 while the sell side of Wall Street kept selling PIIGS debt to clients was quite telling, indeed. Well... The proof is in the pudding. Click here for the first year of warnings and admonitions, or click here for the latest scoop!
Anecdotal picks from the BoomBustBlog archives nearly two years ago...
- The Coming Pan-European Sovereign Debt Crisis – introduces the crisis and identified it as a pan-European problem, not a localized one.
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What Country is Next in the Coming Pan-European Sovereign Debt Crisis? – illustrates the potential for the domino effect
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The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. – attempts to illustrate the highly interdependent weaknesses in Europe’s sovereign nations can effect even the perceived “stronger” nations.
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The Coming Pan-European Sovereign Debt Crisis, Pt 4: The Spread to Western European Countries
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The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!
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I Think It’s Confirmed, Greece Will Be the First Domino to Fall
The Chickens Have Finally Come Home To Roost At Sears
searsIn January of 2009 (nearly three years ago, which is ironic), I went bearish on Sears due to a variety of reasons, the least of which was less than competent management (hedge fund managers don't necessarily make good department store managers), macro conditions and fundamentals sloped towards hell. Although this was initially a very profitable trade, the rip roaring bear market rally of 2009 shredded the short profits - turning them into losses if uncovered, and simutaneously disguised the many issues that we brought up in our initiail short analysis. Well, you can run but you can't hide, and the truth will ultimately rear its head. On that note...
CNBC Reports In the Wake of Poor Sales, Sears to Close Stores
Sears Holdings plans to close between 100 and 120 Sears and Kmart stores after poor sales during the holidays, the most crucial time of year for retailers.
In an internal memo Tuesday to employees, CEO and President Lou D'Ambrosio said that the retailer had not "generated the results we were seeking during the holiday."The closings are the latest and most visible in a long series of moves to try to fix a retailer that has struggled with falling sales and shabby stores.
Sears Holdings Corp. said it has yet to determine which stores will close but said it will post on the list online when it's compiled. Sears would not discuss how many, if any, jobs would be cut.
The news sent shares of Sears [SHLD 36.50 
-9.35 (-20.39%) 
] to their lowest point in more than three years, and it was posting the biggest percentage decline in the S&P 500 Index.
As does Bloomberg: Sears Plunges on Plans to Close as Many as 120 Stores
As shoppers may realize, the retail store is at a disadvantage this year for sales activity has simply been weak. Thus, U.S. Stores Ramp Up Bargains as Sales Lag. I discussed the effects of this on retail malls last week in The Greatest Risk To Retail Commercial Real Estate Is? Sovereign Debt! Macro Headwinds! Popping Bubbles! Busted Banks! No, It's The Internet! The kicker is the effect on Sears will be most exaggerated since it has real estate, fundamental, macro, industry induced and management issues to deal with as well as the paradigm shift towards internet shopping (which it should have been able to hedge with Sears.com and Kmart.com, alas this brings us back to the management issues, doesn't it?. BoomBustBlog subscribers, please refresh your memories by downloading the following...
Sears Holdings Research Report - Retail 2009-01-27 01:13:07 50.42 Kb
Sears Holdings Research Report - Pro 2009-01-27 01:11:41 313.25 Kb
Those who don't subscriber can view the 4 page preview below.
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Subscribers should also review the Sears Q1 2009 Update 2009-06-01 12:28:26 398.99 Kb
The Little Known, Yet Significant "Domino Effect" Powers Of Small EU Nations: Greece & Iceland
The Little Known, Yet Significant "Domino Effect" Powers Of Small EU Nations: Greece & Iceland - number two in a series of conversation style presentations on a variety of topics covered in BoomBustBlog. See Reggie Middleton Ruminations on the Greek sovereign debt crisis for part one.
The full forensic analysis of the insurance short candidate as well as several US REITs that we are investigating will be released within 24 hours. For those who are not familiar with me, please visit "Who Is Reggie Middleton?"
The latest Reggie Middleton comments, opinion and analysis on this topic...
- The Real Estate Recession/Depression is Here, Eurocalypse Style
- Goldman, et. al. Suffer From The Same Malady That Collapsed
Lehman and MF Global, Worlds 1st and 8th Largest Bankruptcies! - What Is More Valuable, The Opinion Of A Major Rating Agency Or
The Opinion Of A Blog? Go Ahead, I DARE You To Answer! - So, Now The Rating Agencies Want To Acknowledge The Existence Of The FrankenFinance Monster???
- ????10 yr Italian Yields Sitting On Support After Monster Rally
- You Can Rest Assured That The Insurance Industry Is In For Guaranteed Losses!
- Yes, The BoomBustBlog Forecast Pan-European Bank Run Has Breached American Soil!!!
- Watch The Pandemic Bank Flu Spread From Italy To France To Spain: To Big Not To Fail!!!
So, Now The Rating Agencies Want To Acknowledge The Existence Of The FrankenFinance Monster???
In the headlines today: S&P Places EFSF's Long-Term AAA Ratings on Creditwatch Negative, May Lower Ratings by One or Two Notches
Is this truly a surprise? Does anyone truly believe this heavily financially engineered FrankenFinance monster actually deserves a AAA rating? Yes, I do mean Frankenstein assets. I implore you to delve in further - "Welcome to the World of Dr. FrankenFinance!" and Financial Innovation vs Financial Fraud.
As a matter of fact, it actually appears that those few members of S&P that do read my blog have actually found some influence in the company. If you remember, last week I challenged the rating agencies with this taunting post -Where Are The Ratings Agencies Before UK & German Banks Go Boom? How About Those Euro REITs? Agencies Anybody? Now, it's not as if the agencies have went so far as to actually take heed to my warning, but those who follow me know that I have been leading my subscribers through an explicit path of "contagion to come" for two years now. Who is the major conduit of said contagion? Well, the very same nation who is the 50% of the bilateral lynchpin of the EFSF. See:
- When The Duopolistic Owners Of The EU Printing Presses Disagree On The Color Of The Ink!
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France, As Most Susceptible To Contagion, Will See Its Banks Suffer
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Focus on Greece? No! How About Italy? No! It's About Baguettes, Mes Amis! See also, When French bankers gorge on roasting PIIGS - OR - Can You Fool Everybody All Of The Time?
Of course, if France is 50% of the fire power behind the EFSF, and Reggie keeps banging the rating agencies about Frances impending fall from true economic AAA grace (as if it ever deserved such in the first place), then by default if one goes the other must follow. As a matter of fact, I even warned that the smaller, supposedly more staid countries are truly at risk - Are The Ultra Conservative Dutch Immune To Pan-European Pandemic Contagion? Are You Safe During An Earthquake Because You Keep Your Shoes Tied Snugly? And as if by magic, Bloomberg reports: S&P Puts 15 Euro Nations on Watch for Downgrade Amid Sovereign-Debt Crisis
Standard & Poor’s said Germany and France may be stripped of their AAA credit ratings as the debt crisis prompts 15 euro nations to be put on review for possible downgrade.
The euro area’s six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said today in a statement. The euro reversed its gains and U.S. Treasuries rose earlier today after the Financial Times reported that the credit-ranking firm planned to reduce six AAA outlooks.
“Systemic stress in the eurozone has risen in recent weeks and reached such a level that a review of all eurozone sovereign ratings is warranted,” S&P said in a statement.
Back in April of 2011, I told a curious audience of several hundred bankers and institutional investors in Amsterdam exactly how this will turn out. Thus far, I'v been right on point, as has the predictions dating as far back as 2009 in the series.
Reggie Middleton as the Keynote Speaker at the ING Real Estate Valuation Seminar in Amsterdam
Reggie Middleton as the Keynote Speaker at the ING Real Estate Valuation Seminar in Amsterdam
Amsterdam's VPRO Backlight and Reggie Middleton on brutal honesty, destructive derivatives and the "overbanked" status of many European sovereign nations
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Amsterdam's VPRO Backlight and Reggie Middleton on brutal honesty, destructive derivatives and the "overbanked" status of many European sovereign nations
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S&P Puts 15 Euro Nations on Watch for Downgrade Amid Sovereign-Debt Crisis
The Very Structure of Risk Management/Internal Audit Departments of Big Banks Are J-O-K-E-S! Ask MF Global Clients
The WSJ reports Corzine Rebuffed Internal Warnings on Risks:
MF Global Holdings Ltd.'s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.
The board allowed the company's exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.
The disagreement shows that concerns about the big bet grew inside the company months ...
As I have hinted in "The Ironic, Prophetic Nature of the MF Global Bankruptcy Filing and It's Potential Ramifications" I knew the ex-CEO of MF Global, and in particular member(s) of in the internal audit staff - one of which I knew very well and trained. There is one glaring FLAW in the structure of internal risk management and audit in MF Global, and that was that it was WEAK! If internal audit answers to operational executive management, then how can it truly crack the whip on its own boss. Now, granted, this is not endemic to just MF Global, but it is truly a problem. Internal audit/risk management needs to answer to a separate entity, apart from the CEO and possibly apart from the Board itself if the CEO has had a part in selecting the board. This way there is true independence and the nonsense that you just saw with MF Global has a much less likely chance of happening.
Alas, such is life. For instance, why are you reading this through a subscription blog versus PWC's audit report of MF Global? Hmmmmmm.....
Italy’s Woes Spell ‘Nightmare’ for BNP - Just As I Predicted But Everybody Is Missing The Point!!!
picsay-1319726495ZeroHedge reports Barclays Says Italy Is Finished: "Mathematically Beyond Point Of No Return"Summary from Barclays Capital inst sales:
1) At this point, it seems Italy is now mathematically beyond point of no return
2) While reforms are necessary, in and of itself not be enough to prevent crisis
3) Reason? Simple math--growth and austerity not enough to offset cost of debt
4) On our ests, yields above 5.5% is inflection point where game is over
5) The danger:high rates reinforce stability concerns, leading to higher rates
6) and deeper conviction of a self sustaining credit event and eventual default
7) We think decisions at eurozone summit is step forward but EFSF not adequate
8) Time has run out--policy reforms not sufficient to break neg mkt dynamics
9) Investors do not have the patience to wait for austerity, growth to work
10) And rate of change in negatives not enuff to offset slow drip of positives
11) Conclusion: We think ECB needs to step up to the plate, print and buy bonds
12) At the moment ECB remains unwilling to be lender last resort on scale needed
13) But frankly will have hand forced by market given massive systemic risk
All seem to be missing the point! I have been warning since early 2010 Pan-European sovereign debt crisis! I warned of BNP in June, with very accurate reseach reports and models available to subscribers - BNP, the Fastest Running Bank In Europe? Banque BNP Exécuter. Despite all this, I fear the greater picture is being missed by most.
At the risk of sounding overbearing, Italy heard the fat lady acapella last year, it's just that no one was listening. BoomBustBlog Subscribers should reference Italy public finances projection from March of 2010. The killer is that France is inexoriably leveraged into Italy through its banks. If Italy defaults (and it will) it literally breaks the French banking system. All BoomBustBlog followers have read this - Wednesday, 03 August 2011 - France, As Most Susceptble To Contagion, Will See Its Banks Suffer
Now when (and not if, but when) French banks fail, France will both get downgraded and be forced to bail out - once again. They will have to choose between bailing out Greece, Portugal and Ireland - or themselves. I'll leave it up to you which is the most probable path.
Once the inevitable happens, then the Faux Caucus-Franco bailout mechanism that was suppose to support the unsupportable collapses in throught as it had already collapsed in reality. The result? Everybody should then realize that those risk free Bunds are risky as hell because they are backed by a net export nation (Germany) that will have nobody to export to, and spend much of its economic output bailing out the unbailable, or running from said entities.
Things are much, much worse than many are making it out to be.Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding
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Thursday, 28 July 2011 The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.
Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer
In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.
I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!
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- French Bank Run Forensic Thoughts - Retail Valuation Note - For retail subscribers
- Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers
ReggieMiddleton: @DougKass #MSFT #aapl #goog Is it Really worth more than Goog/MSFT combined or does share price just say so. Really, think about it? !!!ReggieMiddleton: @hblodget Do you really think it's worth more than Goog & MSFT combined or does it share price just say so. Really, think about it? !!!ReggieMiddleton: Good thing abt bankruptcy despite silly markets, bankrupt is bankrupt & stock will act accordingly. Ask LEH investors http://t.co/bWiFVo2NTopics
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