Wednesday, 07 December 2022

A Analysis

Reggie Middleton

Reggie Middleton

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Veritaseum Valuation Course

The Veritaseum Introduction to Stock Valuation course has hit a homerun in walking novices investing through building an investment valuation model for althletic apparel companies, from scratch. The course compared the fundamentals of Adidas, Nike, Puma, etc. and found Adidas to be materially overvalued. This was a snapshot of the stocks at the launch of the education module.

adidas v nke

This is a snapshot of the same set of comparables today, compared to the date of the course availability...

Veritaseum Valuation Course stock results

Yes, fundamentals still matter - even in a world of centrally planned market manipulation. A short position on this stock would have grossed nearly 10% in that short period of time. Those interested in taking the course and/or tweaking their own version of the model should click here to join. It was purposely priced at a mere $50 to eliminate any barriers to anyone interested in learning real world stock valuation. 

Conversations in our novice discussion group (Veritaseum University: Using Comparative Analysis to Value Apparel Stocksand below will ensue as to how far Adidas has to drop before being realistically valued.

Bloomberg reports:

German Chancellor Angela Merkel lauded Italian Premier Matteo Renzi’s economic policy as “courageous,” while signaling that European Union budget rules can’t be bent to help Italy boost growth. Merkel’s comments alongside Renzi and French President Francois Hollande hinted at one of the divisions between the leaders of the euro area’s three biggest economies as they met on Monday to plan the European Union’s way forward after Britons voted to leave the bloc. Italy’s economy stagnated in the second quarter, pushing off budget forecasts, and Renzi is pressing for greater flexibility by the European Commission.

“The stability pact has a lot of flexibility, which we have to apply in a smart way,” Merkel told reporters aboard the Italian aircraft carrier Giuseppe Garibaldi, where the leaders discussed topics from refugees, border controls and terrorism to jobs and investment. “Europe isn’t the most competitive place in the world in all sectors yet.”

 That's for sure. Brexit has not only increased uncertainty, it has promised to remove the EU's 2nd largest economy and its premier (and essentially only true) financial center. Worse yet, the sudden and extreme drop in the pound didn't make the action look nearly as apocalyptic as naysayers had promised, with retail actiivty, tourism and stocks literally jumping. This likely leads to other nations wlling to push their own individual agendas. The EC and IMF have a horrible track record of forcasting these things, reference So, Brexit. And... Czexit, Pexit, Frexit as EU referendum CONTAGION sweeps Europe amid political quake.

Making matters worse, fast forward 6 years or so and the IMF/EC are not more accurate (still overly optimistic, as usual).

Italy IMF forecast GDP

Lastly, Italy's banking system will be drag that turns into a bust. Italian banks are laden with bad loans, high NPAs, and dangerous derivative admixtures. Oh yeah, don't believe that "notional value" defense, either. Just look at the basic math...

Banco Popular Research teaser3

Banco Popular Research teaser4The only real potential salve would be for them to earn their way out of the mess. That's not going to happen with negative interest rates and a recessionary economy.

P1-BY264 NEGRAT 16U 20160808131805

The banks are in bad enough shape to set off a true chain reaction. Reference our extensive report and analysis (over 2 hours worth) in Veritaseum University, aptly called European Bank Contagion Assessment, Forensic Analysis & Valuation. We have two very large sections on EU bank and financial institution contagion, and have covered 6 banks thus far. We are working on several more institutions as I type this.

This is very, very important for the ECB has stress tested its banks but has refused to release the results. Don't confuse this with the stress test results from the EBA, who refused to give a pass/fail to any bank. Regulators NEVER refuse to release good news. Never fear, we're stress testing the banks for you (the same team that predicted Bear Stearns, Lehman, CountryWide and WaMu). I would be highly suspect of the EBA results for they failed to mention how unrealistic the Deutsche Bank reporting was, nor the derivative accounting of many banks that we noticed. Even more suspect is the ECB's silence.

Those of you in the sell side blockchain space, expect those budgets to dry up very quickly over the next year as banks start to exhibit some real problems!

All those who are interested in this topic, the European Bank Contagion Assessment, Forensic Analysis & Valuation course goes into this in depth. I wil be adding additional Deutsche Bank and contagion content over the next 48 hours as well.

 

 

Thursday, 25 August 2016 15:01

How Deutsche Bank Can Destroy Europe

How can Deutsche Bank destroy the EU? Capital fight and extreme, involuntary deleveraging. DB is closing nearly 200 German bank branches. Not a big deal, right? German bank's depositor base is 111% of German GDP. A run on German banks is literally a run on the German economy - the largest economy in Europe...

fredgraph 1

...not to mention a major (the major) funding source for DB's massive derivative positions.  

Current news events don't portend a positive outcome for Germany's largest bank either. Bloomberg reports: NordLB Boosts Shipping Provisions Five-Fold, Warns of High Loss

Norddeutsche Landesbank boosted provisions for bad loans nearly fivefold to 1 billion euros ($1.1 billion), as Germany’s biggest shipping lender prepares for its first full-year loss since 2009.

NordLB, controlled by the state of Lower Saxony, posted a loss of 406 million euros in the first half as it battles a prolonged slump in maritime markets, including eight years of crisis in the container segment. That compares with a profit of 290 million euros in the same period last year.

“The shipping crisis, which further intensified in the first half of the year, has necessitated impairments that were higher than planned,” Chief Executive Officer Gunter Dunkel said in a statement. The bank lowered its outlook for the year, now anticipating a “significant” loss. It had projected a “negative result” in the spring.

... NordLB’s pessimistic view highlights risks at other German banks, which hold roughly one-quarter of the about 400 billion euros in global shipping loans. Under pressure to unwind sour legacy maritime assets, banks including HSH Nordbank AG and Commerzbank AG are also trying to shrink their loan books.

 What does this have to do with Deutsche Bank? A lot! Because everybody wants to sell these assets that aren't considered very desirable, and all at the same time, we've made a bad situation worse - precisely when DB can't afford it.DB mass selling bad shiping loans

Then there's the issue of DB's somewhat questionable assumptions and characteristics in its financial reporting. Deutsche Bank addendums are quoted as saying:

"The credit risk on the securities purchased under resale agreements and securities borrowed designated under the fair value option is mitigated by the holding of collateral. The valuation of these instruments takes into account the credit enhancement in the form of the collateral received. As such there is no material movement during the year or cumulatively due to movements in counterparty credit risk on these instruments."

What???!!! So, the value of collateral doesn't move now? On planet Earth, not only does the value of collateral move, it tends to move in the exact same direction as the value of the loan, borrowing or underlying, often at an exaggerated pace in the beginning (it's markets are the first to know of turmoil). Reference my podcast interview with Max Keiser at the 2:40 marker. Want some more? Read this page from our EU banking report a couple of quarters ago...

For those who don't believe me, I made this call in early 2008 - twice. Once for Bear Stearns (Is this the Breaking of the Bear?) and once for Lehman Brothers (Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008). Was I right? Of course, that was then and this is now, so the banks are better prepared, right? Of course. The graphic below was taken from our Banco Popular report (click here for more info), not from 8 years ago, but from a quarter ago - yes, 2016! Hey, there's more...

Banco Popular Research teaser3

Now, just imagine that Italy's Banco Popular is the entity that DB used to hedge it's exposure, and Banco Popular (obviously) can't pay up on every(any?)thing. DB's gross exposure become's DB's net exposure as DB's notion value and market value converge near instantaneously if (or when) market shoots off in one direction (you can likely guess what direction that would be for stakeholders, and this time around that includes depositors and bondholders, not just shareholders).

What does this all mean?  Well, we went through this in explicit detail and have identified no less than 6 (and we're still actively looking) financial institutions that may have passed the EBA stress tests, but have miserably failed our examination - and that's without adding in the bank contagion factor!

To partake in this knowledge, join Veritaseum University and purchase the interactive research asset called "European Bank Contagion Assessment, Forensic Analysis & Valuation".

 

So, Brexit. And... Czexit, Pexit, Frexit as EU referendum CONTAGION sweeps Europe amid political quake.

EUEXit gains steam1

EUEXit gains steam

 

Go to 5:38 and you will see I predicted this day exactly 3 months ago. The accuracy is uncanny...

I also called it in 2010 as well. Reference Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!, to wit:

What about the UK?

I'm glad you asked. We just finished our UK analysis (subscribers, see UK Public Finances March 2010 UK Public Finances March 2010 2010-03-24 09:32:01 617.23 Kb), and the Greek theme has continued into the land of the Brits.

uk_economic_estimtes.pnguk_economic_estimtes.pnguk_economic_estimtes.png

... and in terms of government balance over-optimism???

uk_gaovernment_balance_projections.pnguk_gaovernment_balance_projections.pnguk_gaovernment_balance_projections.png

The UK government’s projections are based on real GDP growth of 1.3% and 3.5% in 2010-11 and 2011-12, respectively while the (extremely and unrealistically optimistic) consensus estimates stand at 1.2% and 2.1%, respectively. The latest estimates announced by the EIU (Economist intelligence unit) in March 2010 are even lower at 1.2% and 1.5% for 2010-11 and 2011-12, respectively. The European Commission has also raised similar concerns with the Commissioner for Economic and Monetary Affairs, Olli Rehn, criticizing governments after scrutinizing the strategies of 14 countries, including Germany, France, Italy, the U.K. and Spain, that “their budget projections were based on favorable macroeconomic assumptions after 2010 that may not materialize” (stated in a press article on March 18, 2010)
Raising concerns on the UK, the European Commission also stated that “The U.K. won't meet the EU's recommended target of reaching a 3% budget deficit by 2014-15, and projections for economic recovery may also fall short. Details on how the U.K. government, whose budget deficit is expected to hit 12.7% in the current financial year, will rein back its spending are also lacking. The absence of detailed departmental spending limits is a source of uncertainty”.

Continuously rising fiscal deficit has led to a continuous increase in the government total debt, which increased from 43.3% of GDP in 2007-08 to 72.9% in 2009-10. Moreover, according to EU Commission estimates, after Ireland, the UK is poised to incur the worst deterioration in the gross debt ratio in the EU, from 44.2% of GDP in 2008 to 88.2% of GDP in 2011. Though the average maturity of UK’s debt is considerably higher compared to other nations (thus no refinancing risk in the near future), the expanding interest burden is exacerbating the already strained fiscal deficit.

Moreover, rising debt not only restricts government’s fiscal stimulus and support to the economy, but is also forcing the government to undertake sharp fiscal consolidation measures to moderate the adverse impact of rising interest expenses on the fiscal deficit. This is bound to have an internal deflationary effect.

The government expects an increase in its debt from 55.5% of GDP in 2008-09 to 90.9% in 2012-13. In absolute terms, the government debt is expected to grow from £796.4 billion in 2009-10 to £1,486.2 billion in 2012-13. However, we expect the debt to increase much higher off higher primary deficit owing to relatively lower GDP growth assumptions.

And what about Italy???

Again, we're glad you inquired. Subscribers should download Italy public finances projection Italy public finances projection2010-03-22 10:47:41 588.19 Kb as well as theFile Icon Italian Banking Macro-Fundamental Discussion Noteand the

File Icon Spanish Banking Macro Discussion Note in anticipation of our upcoming Spain analysis, which should be a doozy!

This is Italy's presumption of economic growth used in their fiscal projections:

italian_real_gdp_growth.pngitalian_real_gdp_growth.pngitalian_real_gdp_growth.png

image006.pngimage006.pngimage006.png

image042.pngimage042.pngimage042.png

For those that don't subscribe, there is still a lot of nitty gritty that I made publicly available on Italy here: Once You Catch a Few EU Countries "Stretching the Truth", Why Should You Trust the Rest?

More on Euro stretching of the truth

If you haven't had your fill of innuendo, ambiguity, creativity and sleight of hand (my polite way of saying "lying"), you can peruse Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

For the complete Pan-European Sovereign Debt Crisis series, see:

  1. The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

On a closing note....

BTC as GBP Brexit hedge

Contact me to learn more about Veritaseum's unbreachable, blockchain-based smart contracts. reggie at veritaseum.com

Bitcoin is up 40% over the last two weeks. Whoa! 

Zerohedge reports Bitcoin Spikes Above $600 - 2 Year Highs - On Sudden Massive Chinese Buying. Focusing on Chinese buying tends to conceal a very, very important point - the network effect. Alas, I'm getting ahead of myself...

The public Bitcoin network has been growing steadily since its inception 7 years ago - without much of a hiccup. That should tell you something. 

 

Bitcoins in circulation 6-12-2016Bitcoins mining revenue 6-12-2016Bitcoins transaction volume 6-12-2016

Bitcoins Hash rate 6-12-2016

As excerpted from Muneeb's Blog:

The “Bitcoin is bigger than Google” analogy that Balaji is using is technically accurate [1] and extremely interesting if you look at it as Google attempting to do the work that Bitcoin is doing (calculating SHA256) instead of thinking of the Bitcoin network as a general-purpose supercomputer.

And Balaji nails it in this tweet:

It’s not that Google cannot take over Bitcoin. They have more than $60B in cash. But they cannot do it without making huge new investments. Google’s current infrastructure doesn’t give them enough hashing power.

This is a slide that I love to use in my cloud computing lecture at Princeton:

 

Now imagine these football field size datacenters that Google owns. If they shutdown all other operations and point all this compute power to Bitcoin, they still won’t be able to take down Bitcoin.

That is a powerful visualization.

This is why Veritaseum's value trading platform is build upon the public Bitcoin blockchain. It's the network effect, silly!

If you want to learn more about the only capital markets system with over 45,000 tradable tickers built directly upon the backbone of the 2nd largest network in the world (the Internet is the first, for now), download the "Pathogenic Finance" report.

Or if you're lazy, just watch the video....

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