Sunday, 17 January 2021

A Analysis

Banks are showing thin NIM, yet many of the big banks are able to boast stable if not slightly improving credit metrics. This doesn’t make sense considering the explosive growth of real estate development and prices amid an environment of much slower income growth. When comparing income growth to real estate price and rent growth, an obvious bubble seems to appear. The answer seems to lie in financial engineering. Once the credit metrics of the bank's loan and loan products deteriorate (that is, when the financial alchemy once again fails to turn MBS lead into AAA gold), they will pull back on financing, putting a hard stop brake on inflationary home purchasing, and there goes the bubble pop!

20160202 171444

There has never been a time in recorded history when US Treasuries have been this inflated in price and this low in yield.

These record low rates have created bursts in financial asset appreciation and incomes.

But… and there always is a “but”, financial asset price increases have dramatically oustripped increases in incomes.


This has, and always will mean… Bubble! This bubble is only 9 years after the peak of the previous property bubble - which banks are still trying to recover from. Amazing! As was the previous bubble, there are pockets of growth that outstrip others, and it’s not uniform across the board. For instance, NYC has condo bubble (from new construction being priced above income growth, yet getting purchased anyway) but single family detached housing hasn’t topped previous bubble highs.

We have identified several public companies and several other markets who seem to have an oustized exposure to this new "bubble". We are currently digging deeper. Our findings are available as a one time purchase (The 2017 Real Estate Bubble) or part of an annual subscription (email us at This email address is being protected from spambots. You need JavaScript enabled to view it.). 

Below is an illustrative Veritaseum Smart Contract (the reference client doesn't read Case Shiller tickers) that we are offering as a rebate for the research purchase. You will get 10x the relative price difference of long GLD (gold ETF) vs short S&P Case Shiller 20 City Home Price Index, up to the net capital at risk. This is heady stuff people, and is a perfect way to demonstrate both our superb research and our fantastic, patent-pending smart contract/blockchain technology.

 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.

Veritaseum 5x Short DB Smart Contract

Click here to explore and subscribe to our research. You will have to be willing to fully identify yourself and comply to the terms or our program (in essence, promise not to use the package for anything other than our rebate) in order to qualify for the rebate. Once the subsciption is paid for, email us to get started.

Oh yeah, if you haven't heard...

An Analysis of Deutsche Bank's Likely Recapitalization - German Tax Payer Bailout or German Bank Depositor Bail-in?

Deutsche Bank is going to need some money, and it's going to need some quite soon. The next two or three articles that I write will focus on why there is such a need. In a concerted effort to reduce or potentially eliminated the risk of taxpayer-funded bail-outs of European banks, the EU implemented a new “bail-in” regime beginning on January 1, 2016. As such, rules which require banks and certain systemically significant market participants in EU member states will have to write-down, cancel, convert into equity or otherwise modify certain unsecured liabilities if such steps are required to recapitalize the institution. What is the most bountiful unsecured liabilities of a bank? Read more...


Our next article will continue to hammer home the liklhood that DB will have to recapitalize, and where they probably WONT'T be getting the money from, as well as the likelihood it will come from someone who really didn't plan on giving it up (Ahem, depositors/savers/checking account holders). For those who are not yet convinced, peruse these related items...

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


During the financial crisis of 2008, money market funds who subjectively agreed to hold their NAV (net asset value) unit prices at $1 “broke the buck”. That is, the unit of share of the fund fell below $1 (the $62.5 billion Reserve Fund, to be specific, one of only two funds to “break the buck”), which was a significant problem for the investors who used (and considered) said money market funds as cash in the bank. All of a sudden, everyone’s cash account at the Reserve Fund just dipped in value. Uh Oh! This caused short term credit to literally freeze, worldwide, because others were concerned that their bank-like security and liquidity was no longer that secure nor liquid.

Regulators stepped in to make sure this didn’t happen again by demanding that all money funds who do not invest in sovereign securities (those entities who “should” be able to print their own monies, but we’ll get into that in a later post) allow their NAV to freely float with market prices.

The result? Money flew out of prime money funds into perceived safer vehicles.

Demand for government short term paper has increased (to the tune of hundreds of billion of dollars).


... and demand for private commercial paper, ie. banks, have dropped by a similar amount, materially driving costs - materially, as in doubling it!

What does this mean?

No, this is not a punishment. This is actually a good thing, for it forces money to have an appropriately derived price tag attached to it. Risky banks were being funded at the same risk rate as (less risky) sovereign governments. That didn’t make sense. Now the system makes more sense, and banks should be repriced according to their access to, and true cost of, capital. The true cost of capital means that banks can no longer hide behind fake LIBOR quotes to conceal their deteriorating credit metrics. Reference Wikipedia:

The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks across the world. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were.[3] Libor underpins approximately $350 trillion in derivatives. It is currently administered by NYSE Euronext, which took over running the Libor in January 2014.[4]

Look at what happened to LIBOR consistently after NYSE Euronext took over adminstration. Those spikes that you see previous to that takeover stem from the European sovereign debt crisis. Those numbers had been faked! No telling what the true level of stress really was. Well, this time around we may get to find out. To put this into perspective, the global money market industry is $2.6 trillion in assets. Deutsche Bank’s (a bank that is in trouble) balance sheet is almost $2 trillion dollars. JP Morgan’s balance sheet is $2.4 trillion dollars. Both of these banks have been shrinking their balance sheets.

As excerpted from Bloomberg:

With a seismic overhaul of the $2.6 trillion money-market industry weeks away from kicking in, money managers are bracing for a last-minute exodus of as much as $300 billion from funds in regulators’ cross hairs.

Prime funds, which seek higher yields by buying securities like commercial paper, are at the center of the upheaval. Their assets have already plunged by almost $700 billion since the start of 2015, to $789 billion, Investment Company Institute data show. The outflow has rippled across financial markets, shattering demand for banks’ and other companies’ short-term debt and raising their funding costs.

Interestingly enough, and as is par for the course, we see things differently from the Street, as also excerpted:

Financial firms paying higher rates to attract investors to their IOUs will push three-month Libor to about 0.95 percent by the end of September, according to JPMorgan Chase & Co.

Click here to read more about rising Libor rates.

Although bank funding costs are rising, it isn’t a signal of financial strain as in 2008, said Jerome Schneider, head of short-term portfolio management at Newport Beach, California-based Pacific Investment Management Co., which oversees about $1.5 trillion.

“This is not a credit stress event, it’s a credit repricing due to systemic and structural changes,” he said.

He’s right. It’s not a credit stress event… yet! But, the credit repricing will force a reality and discipline on an industry accustomed to near zero and negative interest rates that it is ill-fitted to handle, and thus in due time, it will likely provide at least a partial impetus for… “a credit stress event”.

NiM (net interest margin - the profit from actual old school banking businesses, ie. lending) is still quite sparse in banks. So, revenue is slim, but expenses to access said capital to conduct business are going up. That's never a good sign. Worse yet, the Fed has signalled it will, yet again, hold off on an interest rate increase - As I have been telling you since December of 2014.

The issue is, the Fed does not truly control the market, it simply manipulates it to the best of its ability. When it's ready, the market will raise rates on its own. Reference where short term rates are trending now, likely as reflection of the Fed not raising rates.

This is particularly true for the European banks...

Our next post will describe how well Deutsche Bank is prepared for such an event. Stay tuned, and if you have not already done so, subscribe to our long/short, macro and educational research (including blockchain tech) - see Corporate Valuation & Equity Research.

We have a brand new DB report out today, reference Derivative Risk Exposure of Major Banks to Deutsche Bank.

This is the 4th installment of our public service announcements on Deutsche Bank subsidiary, Xetra-Gold's gold note offerings. Since a lot has been covered already, it's advisable that you read the first 3 articles to catch up:

  1. Veritaseum Knowledge Exposes Frightening Counterparty Risk At Deutsche Bank for "Gold Investors"
  2. Is Deutsche Bank Prepping for Fraud Charges Against It's Gold Derivative Products?
  3. The Debate on the Potential of Fraudulent Actions At Deutsche Bank Subsidiary, Xetra-Gold

Now, that we have determined that Deutsche Bank subsidiary Xetra-Gold "may" not have been fraudulent, mainly because they stated in their prospectus things that contradict and befuddle the misleading things they stated in their marketing material, we are left to ponder, "Well, we know the offering was unethical, but was it illegal?" Unfortunately, I'm not a lawyer thus cannot accurately opine on such. Alas, I can speculate as a laymen. The Xetra-Gold derivatives were offered in the UK, as well as several other jurisdictions. Let's peruse the UK perspective via the FCA in the difference between clear and misleading financial advertising:

"Financial adverts and promotions can be misleading for many reasons, but there are some questions you can consider to help you spot and avoid misleading financial adverts, such as: ... Are there important points that are only shown in the small print?"

Hmm... Let's take a look at the Xetra-Gold advertisement, and cross reference it to it's prospectus:

DB Xetra-Gold false advertising test

You guys tell me, is this a blatant case of false advertising, or is it not? Let me know in the comment section below. It's not as if DB is totally innocent in these matters, for they just signed a consent order admitting the manipulation of gold prices. This goes deeper than many may care to admit. Deutsche bank seems to be dumping its gold exposure, and what better way to dump it than to sell it unsuspecting gold derivative note buyers. This is how it could be going down...

Deutsche Bank, through it's Xetra-Gold subsidiary, has a guaranteed, zero premium call option.

  1. DB/Xetra-Gold accepts money from investors who are told they are buying gold, from “an economic perspective”.
  2. DB/Xetra-Gold takes money that was supposed to buy gold (at least in the eyes of many investors) and does whatever they want with it (which could include buying gold) because gold delivery on demand is not guaranteed and the investors have been disclaimed against ownership of, and rights to, the gold underlying as well as price correlation, and failure to deliver.
  3. If the price of gold goes up, DB/Xetra-Gold can fail to deliver (as disclaimed) and keep the capital gains profits. They don't even have to match the price of the gold underlying. or return the initial investment.
  4. If the price of gold goes down, DB can deliver gold on demand and keep the spread from gold spot and the price originally charged for the gold notes.

This is good work, if you can get it, no? 

This is how a company like DB can have over 90% in profitable trading days, because they never had a chance of losing in the first place. The losses belong to their clients! This is speculation, of course (wink, wink). Now, legal eagles say that we can't scream fraud, because Deutsche clearly says they have the motivation to, and the ability to, rip you off in their prospectus (but not in their marketing materials).


Which leads us to the end of "The Debate on the Potential of Fraudulent Actions At Deutsche Bank Subsidiary, Xetra-Gold", where John Titus (see his videos at the end of this article at the bottom) explained to me after I queried about misleading and contradictory marketing materials:

I asked, "If marketing materials are negatively contradicted by the prospectus then the marketing materials are fraudulent and misrepresentative, no?" He replied...

Misrepresentative, yes (accepting your definition of economic), and the marketing materials probably do in fact flout any number of laws against false advertising.
But fraudulent, no. The essence of fraud is to falsely induce someone by words or acts into doing something against his interests that he wouldn't have done but for the dishonesty. Courts consider the totality of the circumstances. So while you would undoubtedly tear the economic investment statement to shreds, you'd still be left with the many other statements from the prospectus that are true, and herein lies the problem.
The UK Fraud Act of 2006 is a criminal statute. So each element of the crime has to be proved beyond a reasonable doubt (or whatever the English equivalent burden of proof is). The first element of fraud by false representation under the Act is "dishonestly makes a false representation." The problem posed by the prospectus is that it would preclude a finding that DB acted dishonestly beyond a reasonable doubt. I mean, you've got one false (but arguably vague) statement vs. several clear-cut disclaimers that are accurate. The totality of the statements are perhaps half false and half true, but dishonest beyond a reasonable doubt? Fuhgetaboutit. DB played the game with all of its cards face up. Yeah, they contradicted each other, but they were damn sure visible to investors, who can claim they were misled only in a subjective (personal) sense, not in an objective way (which is how a judge would look at it).
Now, if--in addition to the mktg mat's and the prospectus--you've got some Goldman-like behavior where DB took out massive insurance policies on the investments it sold and concealed them from the buyer, it's a totally different story."

Hmmm... On that note, let's take a look at whether DB has been a net buyer or net seller of gold exposure. Remember, Goldman, sold MBS structures to clients and then took big short positions betting against their own clients, reference "Goldman 'bet against securities it sold to clients'.

The subcommittee also released four internal Goldman Sachs emails. In one, says a subcommittee statement: "Goldman employees discussed the ups and downs of securities that were underwritten and sold by Goldman and tied to mortgages issued by Washington Mutual Bank's sub-prime lender, Long Beach Mortgage Company. Reporting the 'wipe-out' of one Long Beach security and the 'imminent' collapse of another as 'bad news' that would cost the firm $2.5m, a Goldman Sachs employee then reported the 'good news' – that the failure would bring the firm $5m from a bet it had placed against the very securities it had assembled and sold."

Goldman is fighting to clear its name after the $1bn fraud charges brought by the US Securities and Exchange Commission last week, and wants the case settled in court.

The movie, "The Big Short" dramatized this rather well.

Well, guess what it looks like Deustche has been doing...

DB gold exposure expressed as VaRDeustche has been a net seller of foreign exchange risk, which includes (wait for it now, and guess....) gold! They probably were not cash sellers, but purchased swaps to reduce exposure, possibly along the parameters I mentioned above with the guaranteed, zero premium call option.

If you enjoy this free analysis, there's much more where this came from as we pick apart many other banks in our paid research and knowledge modules. WE just finished a true forensic valuation (very extensive, and detailed analysis) of a very large European bank that led to a huge short recommendation. Subscribe here and pass the word. Our bank analyses have performed very well in 2016, with Banco Popular and Banco Popular Milano doing roughly 40% to 80% in theoretical returns (contingent on how the positions were taken). We have done an excellent job historically as well, calling the fall of Bear Stearns, Lehman, Countrywide, GGP, etc. If you think the free stuff is intense, you should see the stuff that we sell!

Listen to this video to hear my opinion of ZIRP starving the banks in 2010 when nearly every single economist analyst and pundit swore that ZIRP would be free money and unlimited profits for said industry. If you don't want to hear my opinion on derivative daisy chain risk afterward, fast forward to the 6:18 marker to see how the contrarian opinion panned out the following year.

Fast forward again, by three years, and we're not only still flirting with ZIRP (despite proclamations to the contrary) but European NIRP. Those that read my analysis know how I feel that will turn out for European banks. After all, if zero is bad, less than zero is probably...

I have been warning Veritaseum users about the unbridled risks the ECB is taking with its banking system by slamming its yield curve - driving short and medium term rates negative. Despite the ECB's proclamations, its banking system is still quite fragile, and it is putting pressure on the barely recovered fractures, causing additional stress fissures.

Before we go on, if you haven't read "It's All Out War, Pt 3: Is the Danish Krone Peg to Euro More Fragile Than Glass Beads? The Danish National Bank Infers So! and "How the Danish Central Bank is Destroying the Danish Citizens' Wealth Form Both Sides While Stressing It's Bank!", please do. My warnings in 2010 on the PAN-EUROPEAN SOVEREIGN DEBT CRISIS will do a lot to fill in the background as well.

Yesterday, the Wall Street Journal ran a story on the Spanish bank, Bankinter S.A., which was actually paying customers interest on their mortgages, in a rather backwards twist that is the result of the perverse incentives (basically, the opposite of typical tenets that underlying fundamental analysis) that come about when you turn the world of borrowing, literally, upside down. Here's an excerpt (and remember I warned about Spain 5 years ago in "The Spanish Inquisition is About to Begin..."):

“47% of all jobs will be automated by 2034, and no government is prepared.” -Economist 

“In the next 10-20 years, 58% of financial advisors will be replaced by robots and AI.”-Frey and Osborne, Oxford University.

This article's goal is to demonstrate how true those statements are. Below you will find the face of today's investment bank as pictured by the article "Yes, Goldman Sachs is a great place to work"...


... and this is the face of invesment banking tomorrow:

//// Have the payee sign the resolution transaction and send it back over the wire
LetterOfCredit.signInchoateTx(new_tx, lc_tx_script_pub_key, this._payee_key_priv);
new_tx = new Transaction(LetterOfCreditTest.params, new_tx.bitcoinSerialize());
Set<ECKey>[] keys = LetterOfCredit.checkInchoateTx(orig_tx, new_tx, lc_tx_script_pub_key);
Set<ECKey> signed = keys[0];
Set<ECKey> candidates = keys[1];
Assert.assertEquals(1, signed.size());
Assert.assertEquals(2, candidates.size());

Introducing DACe 

Decentralized -  dispersed functions, powers and assets away from a central location or authority

Autonomous - self-governing; independent; subject to its own laws only

Commercial - of or relating to a system of voluntary exchange of products and services to the market

entity -  something that exists as distinct, independent, and/or self-contained

DACe (pronounced “dak-ee”) - A network-based logical business entity that replicates the functions of centralized legacy businesses and business operations profitably and at substantially lower costs through disintermediation. Disintermediation is: the reduction of rent seeking by connecting natural producers and natural consumers of products and services directly (in our case, peer-to-peer) while providing the ability for said actors to facilitate the required business functions through decentralized software designed exclusively for network-based, distributed use with appropriate failsafes for both temporary and catastrophic failures.

UltraCoin is an example of a DACe. It is essentially an investment bank/brokerage in the cloud without the bank and brokerage components. It consists entirely of computer code. It currently facilitates the trading of the exposures of over 45,000 tickers, long, short or in unique relative combinations, and can do so while offering up to 10,000x leverage without the risk of default, negative equity, non-payment or margin calls. It provides its own exchange and rents space along the Blockchain rails with which it often does business. Best yet, it is totally transparent by allowing all users to track their assets at any time, and it never, ever holds or has any control over customer assets. Your capital stays either in your wallet or the blockchain (of which I will define below) at all times. Users are never exposed to our balance sheet, or the counterparty risks inherent therein. Deals are done in basis points, negating the need for gouging to support billions of dollars annually in salaries and bonuses - and computer code has no incentive to Bernie Madoff, and abscond with your money.


UltraCoin’s aim is to disintermediate the banking system by congealing the business processes of Wall Street banks into software and code that lives and thrives in the cloud, and the blockchain in particular.


smartcontrats infographic


This DACe in the cloud allows disparate consumers of banking products and services to purchase said services directly from each other through UltraCoin using unbreachable smart contracts as the medium.


 smartcontrats infographic1


Through the disintermediation of investment banks and brokerages, the nominal and economic profits of rent seekers are now redistributed to consumers as “inefficiency rebates” - or extreme discounts to products and services in the absence of the rent seeking middlemen who charge for what software can now do better, cheaper, safer and more efficiently. These inefficiency rebates reallocated to consumers can be, and are substantial. Wall Street banks compensation and benefits as a percentage of revenues range from 35-50%.


A few months ago, I approached several of the big banks to discuss partnership, and relayed the reaction of one of them in the post, "Reggie Middleton's Open Letter of Commoditization and Disintermediation to Wall Street: Pay Attention Jamie Dimon!". Further to that point, this downloadable research document forensically describes the specific weak points in the banking business model, to wit:   Banking Risks, Rewards & Demise: The Rise of Programmable Currencies & Smart Contracts 

Stress Test on [This Bank’s] Earnings Resulting from the Introduction of Smart Contract Platforms as an Alternate Value Transaction System

We have carried out a stress test on [This Bank]’s 2013 earnings to assess the potential impact of digital currency transaction platforms on the bank’s future earnings. The revenue of the banks is categorized into interest income (net of interest expense) and non-interest income that comprises income from investment banking operations, asset management business, trading income, insurance, and other commission or fee based businesses.

Impact Analysis

[This Bank] derives more than 60% of its total revenues from net interest income, and less than 40% from non-interest income. Net interest income depends upon the bank’s net interest margin and volume of loans and advances as well as deposits with the bank. A decrease in margins and volume could significantly impact net interest income, due to [This Bank]’s heavy reliance on interest earning assets for revenue.

In assessing the impact of an alternate digital currency transaction system on the bank’s annual revenues and profitability, our analysis assumes a certain percentage of business that is vulnerable and a certain percentage reduction in fees (see below).

Key points:

  • [This Bank] could see around 3% decline in its non-interest income. The bank’s net interest income could fall by 7-8% from a contraction in its net interest margin.

  • The bank could see lower charge on account of compensation benefits for employees (due to decrease in variable pay). However, this will not be enough to offset the decline in revenues.

  • Net income could drop by as much as 21%.



 Veritaseum’s UltraCoin is not a concept, nor a whitepaper or even a prototype. It is a functional, ongoing business in the form of a nascent start-up. Here is a snapshot of revenue ramp-up before the official launch. The provervial "hickey stick"!.

The hockey stick

Update: ...and this is what it looked like the day after this post was made...

image 5

We are on the lookout for financial and strategic partners, liquidity providers and traders. If you qualify of any or all of those, I'd love to hear from you. You can Download the UtlraCoin client here.

I have been in discussion with one of the world's largest banks, a US domiciled bank, with over 200 million customers and clients worldwide. After my second meeting with the American FX group, I was referred to one of their biggest clients as it was understood that there were significant synergies to be had between their global operations and our UltraCoin ecosystem which allows counterparty and credit risk free value trades. This particular aspect of our product was, as fate would have it, not only extremely pertinent to the topic at hand but arrived just a few days too late. I was scheduled to meet with one of the original founders of this FX brokerage firm yesterday, but earlier that morning the Swiss National Bank decided to remove thier much publicized and promised floor from their Swiss francs from the euro. Carnage ensued, as I promised that it would.

Of course, this guy was much too busy to meet with me. His firm is now all over the news (there are several firms that could fit the bill, but I will not mention the firm to keep it anonymous nonetheless) as nearly all of the specialist currency brokerages face insolvency issues - the very thing that UltraCoin was designed to prevent! Yesterday Bloomberg reported Casualties From Swiss Shock Spread From New York to New Zealand and today we find members of this group have lost up 90% of thier share price, as per Business Insider: Foreign Exchange Brokers Are Going Bankrupt In The Swiss Franc's Surge

UK FX broker

The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity. This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency. 

That follows New Zealand's Excel Markets, which made the same statement earlier, according to the Financial Times.

Brokers can go out of business on big moves like this because they give their clients access to leverage. For example, an account holder might have $1,000 with the broker, but hold positions worth $10,000 in currency markets. That doesn't matter so long as the holder's losses are covered by the initial amount. But on Wednesday, for at least two brokers, that wasn't the case for a lot of those clients.

Our solution for these brokerages is to give the leveraged return of $10k but to have contract unwind when his principal and collateral are exhausted. There are NEVER negative equity situations.

New York-based FXCM, one of the world's biggest foreign exchange brokers, says that it may be in breach of rules on capital requirements and that it is owed $225 million by clients who are now in negative equity. FXCM shares are down by an astonishing 90% ahead of the US open. 

IG Group, a publicly listed UK-based broker said yesterday that its losses would not exceed £30 million ($45.7 million)...

swiss franc 2 repeat-x;">, Business Insider

As of 11:30 a.m. GMT (6:30 a.m. ET) the franc is currently looking more settled, down 3.9% at 1.016 against the euro.

Veritaseum's UltraCoin was designed specifically to avoid solvency issues by:

  1. Forcing all participants to prefund their accounts with full principal and optionally additional collateral (margin);
  2. Forcing all participants lever up (via actual loans) outside of the system, leaving the system sacrosanct;
  3. Enabling implied leverage by gearing the returns upon mutual consent of the parties, or using levered securities as price fees (ex. Proshares Ultra);
  4. and most importantly, replacing all counterparies in the trade with the blockchain, which essentially removes all counterparty and credit risk.  

This is what a sample contract looks like before being submitted to trade:

Allianz short and long Franc

I'm thoroughly convinced that this is the trading model for, and of, the future and this week's carnage should go a long way in convincing banks, brokerages and regulators to agree with me. Insolvency can be one hell of a motivator.

Even those who aren't facing insolvency issues still have to deal with the structural decline in big bank profitabilty. I have answers for that as well, right fellas?

Embedded image permalink

On January 6, 2011 I penned, "As JP Morgan & Other Banks Legal Costs Spike, Many Should Ask If It Was Not Obvious Years Ago That This Industry May Become The "New" Tobacco Companies". Was I right? Fastforward to January 14th, 2015 and you find "JPM Misses Revenues And EPS Due To Another $1 Billion In Legal Costs", as reported by ZeroHedge, as excerpted:

... a miss on both the top and bottom line, reporting $1.19 in EPS, well below the $1.32 consensus, and just barely above the lower estimate of $1.16. This was a decline from both the previous quarter (by 17 cents) and from a year ago (by 11 cents). Revenues missed as well, with JPM reporting $23.552 billion in top line, a decline of $560 million from a year ago ($1.6 billion lower than Q3), and below the $24.0 billion consensus. And while JPM's latest recurring, non-one time "one-time, non-recurring" charge came as a surprise to most (although how over $30 billion in legal charges can be considered one-time is beyond us), at the same time JPM once again resorted to the oldest trick in the book, taking the benefit of some $704 million in loan loss reserve releases, nearly offsetting the entire negative impact of the legal charge.

Of course, the reported revenue should not be confused with the GAAP revenue, which actually was $1 billion less at $22.5 billion, the lowest quarterly real revenue in over a year!

The miss happened despite JPM repurchasing another $1.5 billion in common stock, leaving $2 billion in buyback capacity for Q1 2015.

The weakness in earnings was widespread, and now that JPM's prop desk is dead and buried, and the bank has to make money the old fashioned way using NIM, the fact that Mortgage Banking Income dropped from both the prior quarter and Q4 2013 will hardly inspire much confidence in the firm. Still the result was better than some had expected - the reason: Total headcount down over 7,500 for the year.

Speaking of net interest margin, that's going to be a challenge. AFter all, we have a market crash to deal with.

On October 17th I penned Reggie Middleton's Open Letter of Commoditization and Disintermediation to Wall Street: Pay Attention Jamie Dimon! Here's an excerpt from the intro of a letter written to the CEO iof a bulge bracket bank included in said missive:

...this is my more fleshed out missive detailing what I see as the inevitable commoditization of your industry. Wall Street in general (and XXXXXXXXXXX in particular) is about to become “MP3’d” (disintermediated), just as the music industry did along its 75% slide in revenues over a 10 year period. Our goal is, in no uncertain terms, to expedite this disintermediation. In essence, our job is to cleave at least 75% of the revenues off of Wall Street banks!

Hopefully, I’ve gotten your attention. Let’s discuss the opportunity - and the threat - to XXXXXXXXXXX in more detail as I present a clearly laid out roadmap to either your firm’s relative failure, or resounding success.


The Challenge to Wall Street and XXXXXXXXXXX

“In the next 10-20 years, 58% of financial advisors will be replaced by software robots and AI.”Frey and Osborne, Oxford University

This is not grandiloquence. We can show our venture alone cutting over 3-4% off of XXXXXXXXXXX’s non-interest revenues and up to 30% of net income attributable to common within 8 to 12 quarters of gaining traction. This is accomplished by removing your pricing power in your most lucrative businesses – transactions, fees and commissions.

In Banking Risk, Reward and Demise - The Age of Programmable Currencies, I posted a most telling graphic...

This drop in revenues and profitability is extreme when viewed today. The effect of "robots" (cloud based streaming services powered by algorithms [robots]) as reported by Wired Magazine today, and as excerpted [emphasis added]:

Consider the fact that it takes roughly one million spins on Pandora for a songwriter to earn just $90. Avicii’s release “Wake Me Up!” that I co-wrote and sing, for example, was the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US. And yet, that yielded only $12,359 in Pandora domestic royalties— which were then split among three songwriters and our publishers. In return for co-writing a major hit song, I’ve earned less than $4,000 domestically from the largest digital music service.

The streaming services and their cloud based "robots" are hurting more than just songrwriters. Record companies are forced to see that graphic above, which was exacerbated by streaming services as they usurped control from MP3 download services that started the decline, which was exacerbated by the iTunes business model. Now, even iTunes is facing the heat from streaming services as its margins and revenues are pressured, forcing them to by the Beats music streaming service (along with the headphone/hardware operation for a gross $3.2B).

Veritaseum's UltraCoin is a potent brew consisting of a combination of:

  2. the ULTIMATE ROBOTS - Scripted money and "SMART CONTRACTS"
  3. and the same peer to peer technology that precipitated the fall of the record industry - ALL WRAPPED UP IN ONE PRODUCT AIMED AT WALL STREET!!! 

The letter to that bulge bracket bank CEO referenced at the beginning of this post ended like this:

One simply cannot stuff the technology genie back into the bottle. Even before critical mass in adoption is achieved, the bulge bracket banks (XXXXXXXXXXX included) will witness a structural decline in margins. Despite this margin compression, there will be a small contingent of banks who will emerge as winners because they will cannibalize the revenues of their competitors adopting and embracing the forces behind this paradigm shift. Doing this will require not only sufficient vision, dexterity and entrepreneurial expertise (the type seldom found in multi-billion dollar global institutions), but exceptional execution to be among the first movers. Money center banks can try to figure this out on their own (good luck being entrepreneurial and first movers), or they can team up with us.

We are a startup, and we’re the first movers! To maintain our advantage, and to gain traction quickly, we’re soliciting established distribution partners. Teaming with us can essentially be boiled down to whether you are the disintermediators - or the disintermediated!

Our Advantage

UltraCoin provides, with full transparency, universal access to any publicly traded financial instrument, on any exchange, at a fraction of the cost of bulge bracket and even many deep discount brokers.

Our patent-pending (we are confident that we’re the first to file, meaning the rest of the Street must come in behind us) products provide access to over 75,000 tickers in all major asset classes from exchanges and bourses from around the world in an innumerable combination of pairs and combinations – not merely just the traditional, binary, long and short. This is not an idea, or mere concept, or whitepaper. This is a tangible product that is available right now and already making significant waves in money center bank circles (download here). Below is a screenshot of my active wallet on my tablet as I type this. 


How do we get started? 


I offer you in gift wrapped packaging - the “first mover advantage”!

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