Wednesday, 07 December 2022

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A few days ago I was waxing poetic over the abilty of David Z. Morris' ability to grasp rather complex, intangible conceptyts and loquaciously lay them forth in the written word via the pages of Fortune magazine. After all, what creative destruction advocate wouldn't get all mushy after reading "Reggie Middleton, currently building a client called BTC Swap. Middleton, gravelly voiced, dapper, and businesslike, doesn't fit the stereotype of woolly young bitcoin developers. But he slyly describes himself as "not


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thumb Fortune Front CoverA few days ago I was waxing poetic over the abilty of David Z. Morris' ability to grasp rather complex, intangible concepts and loquaciously lay them forth in the written word via the pages of Fortune magazine. After all, what creative destruction advocate wouldn't get all mushy after reading "Reggie Middleton, currently building a client called BTC Swap. Middleton, gravelly voiced, dapper, and businesslike, doesn't fit the stereotype of woolly young bitcoin developers. But he slyly describes himself as "not quite an anarchist," and BTC Swap is a shot directly across the bow of the financial industry"...

Or "Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that "what I'm doing right now is a direct threat to fiat merchant banking." For him, excitement over value fluctuations in the bitcoin currency is missing the point: "It's not a threat as people sit there and ponder whether bitcoin is a bubble or not. But if people go through the protocol and use their imagination, the existing system is threatened."

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Friday, 18 March 2016 11:49

The Next European Banking Crisis Looks to Be Upon Us Featured

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Veritaseum founder, Reggie Middleton, has accurately called the banking crisis, European sovereign debt crisis, the housing & CRE crash as well as several major tech paradigm shifts over the last 10 years. Click graphic above for a video synopsis of his track record.

Cyprus Bank NPLs

The 2008 financial crisis and ensuing recessions have resulted in crisis in the global banking sector. Borrowers’ inability to make pay back debt or even service debt due to an economic slowdown had hurt the banking system. Contrary to popular rhetoric, the European economy is still far away from recovery and so are the banks that are domiciled there.


The sector is grappling with barrage of concerns including negative interest rates, elevated levels of NPL, China’s synthetic growth engine facing the real reality of a slowdown, the softening of apparently elevated oil prices and impending regulatory and litigation costs. 

The big banks in Europe have witnessed major reshuffles in 2015 with new CEOs taking over at Barclays, Credit Suisse, Deutsche Bank, and Standard Chartered. In the same year, Deutsche Bank lost a record (as in the most, ever) €6.8 billion ($7.6 billion). Europe’s banking barometer, the Stoxx Europe 600 Banks Index recorded seven straight weeks of loss in 2016, its longest weekly losing stretch since 2008 -  speaking of which…              

The Impact of Rising NPLs

The economic slowdown left many European countries with high levels of NPLs. The corporate sector has a higher share of NPLs within which SMEs exhibit the greatest concentration of NPL. Notably SMEs contribute almost two-thirds of Europe’s output and employment, and are more reliant on bank financing than large firms who have access to the capital markets. While NPL level is very high in Europe, writeoff rates are too low, less than a quarter of that in the United States despite the fact that the US is actually increasing loan loss reserves—creating a buildup of impaired assets nestled and likely hidden in bank balance sheets.

High NPLs affect profitability as it requires banks to raise provisions, which lowers net income. This creates a perverse incentive for banks to hide non-performing assets through methods ranging from creative accounting mechanism to outright misrepresentation. Whether NPLs are reported accurately or not, they are still non-performing, hence they when carried on banks’ books they usually do not generate income streams comparable to performing assets. NPLs, net of provisions, may also tie up substantial amounts of capital due to higher risk weights on impaired assets. In addition, a deteriorating balance sheet raises a bank’s funding costs because of lower expected revenue streams and, hence, heightened risk perceptions on the part of investors. Together, these factors result in some combination of higher lending rates, reduced lending volumes, and increased risk aversion – all at a time when much of the EU faces recessionary and deflationary pressures from within and abroad.

The next installment of this report will delve into the nitty gritty of what's going on. Here's a hint: half of all of the loans that have been made in Cyprus are NPLs (non-performing loans). That means 50% (actually, it's 49%) of the business that the banks have wrote half failed or are failing.

Cyprus Bank NPLs

This is at a time when the ECB has pushed rates negative, and pushing it even more into the negative.

Negative rate snapshot

This is at a time when the EU area regions are entering recession. This is at a time shortly after the Cypriot banks have been bailed-in - taking the depositors money to recapitalize the banks in lieur of the bank investor's money. Reference actual bank statements showing capital being confiscated.

Laiki Bank has offers details...

DecreeEN Page 1

It's not just Cyprus, either! Purchase the introduction to the report here for $25, directly through the blockchain. The follow-up reports will delve into individual bank situations and offer our team's opinions of each.

This was all foretold 6 years ago...

Aswath Damodoran has weighed in on the Deutsche Bank debacle. For those who are not familiar with him, he is a very prominent NYU Finance professor and author of over 30 books on corporate finance and valuation - and a man whom I respect greatly. As a matter of fact, I cut my teeth on his valuation books early on in my valuation pursuits. That being said, I'm in disagreement with his valuation of DB shares on his blog. On said blog, he went through a quick history of DB's situation and then put together an open sourced model where he found DB to be at least 35% undervalued. The other users of the open sourced model have come to an average price that's even higher.

DB valuation as per Damodoran model median value

I value DB (using Aswath's model, not our own) at a dramatically lower price than everyone on that list, save one. Why the difference? Well, if you remember my videos on knowledge...

Aswath's model inputs err in several ways from our perspective.

  1. They take the reporting of DB at face value. After wading through the notes in the financial statements, that does seem like a good idea. They need to be forensically scrubbed!
  2. The assume the issues that have received a lot of media attention are the only issues that endanger DB. Again, that doesn't seem like a value assumption. Reference the raising capital video below.
  3. The coming dearth of affordable capital is also not being adequately addressed.

DB's capital situation is not as rosy as Mr. El Arian is making it seem. All you, I or Mr. El-Arian has to do is read the balance sheet. Here, I'll do it for you - as excepted from page 5 of Derivative Risk Exposure of Major Banks to Deustche Bank:

Reference the video below...

The DOJ fine is but one in a cacophony of litigious sounds to be heard...

Aswath's stuff:

  1. My valuation of Deutsche Bank
  2. Global Banks - Data
  3. Google Shared Spreadsheet: Crowd Valuation of Deutsche Bank

Our stuff:

Knowledge subscribers of any level can email me at reggie AT to get a copy of Aswath's model with a few of my assumptions and comments in it. Feel free to leave your own comments as well.

Click here for our paid research on DB risks and click here for our more comprehensive EU Bank Crisis research - European Bank Contagion Assessment, Forensic Analysis & Valuation

More free links on the topic...

Why Do So Many Financial Pundits Try To Downplay the Obviously Serious Financial Problems of Deutsche Bank?


Here's What A Real, Live Veritaseum 5x Short DB Smart Contract Looks Like to Our Research Subscribers 

db research dynamic market driven rebate

 If you haven't heard, we're giving out free, fully smart contracts as a 5% rebate to anyone who purchases any of our research packages above the introductory novice $50 level. This is not your Daddy's rebate! The rebate actually gets larger as DB goes down in price. For those who may be coming late to the party, we can offer a 5x long gold (or even a long gold, short DB) smart contract rebate as well. Of course, the bulk of our research targets banks and entities other than DB, but I thought we'd make DB the subject of the rebate to drive the point home. Below is an actual contract crafted off of the price of a single share of DB for about 2 weeks.


The research and knowledge subscription module "European Bank Contagion Assessment, Forensic Analysis & Valuation" contains a full report of a very large European Deutsche Bank counterparty that faces a full 27% downside from current levels. It appears as if no one suspects a clue. It also contains much, much more (including at least 3 to 5 suspect banks). We can break this apart a la carte, if requested.

As excerpted:

Susceptible Bank 1: Financial Modeling


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DSC07926I'm rapidly unveiling what's been brewing in the BoomBust labs over the last few months - UltraCoin an intelligent derivative layer of smart financial contracts that sit on top of the Bitcoin architecture. In short, the recreation of the banking industry in software - without the trust and counterparty risk issues!

For those of you who are still skeptical re: cryptocurrencies, I please read the most excellent article by David Z. Morris, which also happens to grace the front page of Fortune magazine today.

adidas drop


A little less than 4 months ago we released a lesson to determine whether the stock was under or overvalued (reference

Introduction to Fundamental Stock Valuation). In this lesson we demonstrated our methods on the sneaker company Adidas and the ADR, ADDYY. We predicted that adidas was around 20% overvalued. Almost 4 months after we came to that conclusion adidas plummeted 17% from the time we released our data, while the German and US markets stayed relatively unchanged. Since 1926 till 2011 the average annual return of the stock market was 11%. A short position at the time of when we released our lesson would of beat the average annual return of the stock market by 20%, 3 times as fast. The it took a few hours to complete the research to predict that adidas was overvalued and we will soon be releasing more accurate and more in depth strategies.

adidas short sale profits

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