Monday, 25 September 2017

A Analysis

Press Release

ICODAO: Autonomous Robot That Obsolesces Bankers, Funds Managers & VCs

For Immediate Release - NY

Upfront:

  • Reincarnation of the DAO, done correctly

  • Autonomous robot selects ICOs and startups without a fund manager or VC

  • Use of “Zero Margin” model drives prices and compensation through the floor - Excellent for consumers, death knell for fund managers/VCs.

  • Powered by one of the most prescient strategists in the business

  • The future of finance, ICO slated for April 25th, 2107 at US market open

 

The man that called Bear Stearns, Lehman, the real estate and EU sovereign debt crashes as well as mobile tech booms is now mobilizing his films blockchain technology to go head-to-head with the captains of global industry - Wall Street. Unlike the vast majority of blockchain tech start-ups that strive to improve upon the business processes within the leaders of the finance , Reggie Middleton’s Veritaseum seeks to disintermediate said leaders in totality, thereby releasing an unprecedented cascading wave of value currently tied up in excessive fees, commissions and economic ents.

This disintermediation is accomplished by using a DAO (digital autonomous organization consisting purely of distributed software that lives on no single computer or server) which is essentially a smart contract (autonomous computer code, analogous to a legal or social contract that produces y or z result after X input, contingent upon the input).

Veritaseum’s ICODAO will have the ability to accept requests for Eth from prospective ICO issuers, evaluate said requests and if the requests past muster from the DAO’s perspective, then dig in deeper with due diligence and proprietary analysis to ascertain whether the offering will be participated in.

This occurs at a cost that is up to 90% cheaper than fund-like vehicles, meaning the ICODAO token holders (those who submitted Veritaseum’s Veritas tokens to the DAO) stand to benefit significantly more than those who may have invested in a fund with a similar gross return and risk profile, reference this complete illustration for more).

Reggie Middleton the Veritaseum team will support the ICODAO with analysis and development services. ICODAO takes robo-investing and brings it to a new, autonomous and significantly more paradigm shifting level, threatening the highest paid of professional financial investors - VCs and fund managers.

Veritaseum is planning its own ICO (initial coin offering) on April 25th, starting at the open of NY financial markets, through May 26th or as long as supply lasts. Click here for more information.

###

Download the Veritas deal sheet, 

Contact:

Reggie Middleton

This email address is being protected from spambots. You need JavaScript enabled to view it.

1-718-407-4751

Skype: reggie.middleton

Web-ready logo https://blog.veritaseum.com/images/logo/latest_logo.png  

Virtual roadshow https://docs.google.com/presentation/d/1FMyNvogofqojqG6nkIjgvvjAnsWs1qOtKUFExvtp_m0/pub?start=false&loop=false&delayms=3000&slide=id.p

On disripting hedge funds and VCs https://blog.veritaseum.com/current-analysis/1-blog/220-reggie-middleton-shows-what-happens-when-the-fund-fee-fight-hits-the-blockchain

Pathogenic Finance https://youtu.be/_vf8-Hl78pM

Veritaseum: Ushering in the P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu of going through middlemen, intermediaries and authoritative 3rd parties. We are holding an ICO for our Veritas tokens: the sole means of accessing the vehicles for the P2P economic markets. Here is an overview of the ICO details. The online Veritas presentation deck is rich with descriptions and links to other documentation and instructions on participating should you want to dig in deeper.

The Veritas deal sheet is now available for download.

Veritas Deal Sheet

Executive Summary

  • Veritaseum is to be considered a gateway, or onramp to the P2P economy, akin to how a browser is used to access the World Wide Web, or a Bitcoin or Ethereum wallet is used to access those distributed ledger platforms.

  • Veritaseum’s wallet uses a layman friendly interface to build, distribute, read and execute smart contracts.

  • The Veritaseum wallet interacts with Bitcoin and (soon) Ethereum blockhains and oracles to conditionally store and transfer value.

  • Veritaseum’s primary competition will initially  be the sell side Wall Street status quo. Its aim is two-fold:

    • o provide autonomous asset management and investment vehicles (DAOs) at near zero profit margin, drawing assets from the more traditional players and then selling information, data and advisory services on top of it;

    • Enable self-service P2P smart contract transactions over-the-counter, that mimic the transactional services of the legacy players, at considerably lower cost and without balance sheet exposures, credit risks or counterparty risks.

      • This near zero margin model will be replicated as a platform across the entire FIRE sector (finance, insurance and real estate), and then to sharing economy models (ie. Uber, AirBbB).

  • Veritas launched a long-running beta of its OTC value trading platform in 2013 and claims to not only be the first publicly viable P2P capital markets implementation of smart contracts technology but to to be the first to file for patent protection of the same.

  • Management pulled the Wallet from public access soon after the CFTC announced their regulation of bitcoin out of concerns of a requirement to register as an SEF (swap execution facility). Management’s goal is to be, and to remain, solely a software, software data services and advisory provider - and explicitly not a financial concern.

  • Veritaseum is moving to the Ethereum blockchain, while still retaining exposure to the Bitcoin token, in order to broaden its smart contract capabilities.

Product: What is Veritaseum Providing and How?

Veritaseum provides direct access to smart contract construction, execution and related products the non-technical individual. This direct access facilitates access to what Veritaseum management has coined the “Peer-to-Peer capital markets” - essentially an ever growing pool of users who transact value directly with each other instead of through intermediaries and middlemen, ie. Wall Street banks and brokerages. Veritaseum sees highly customizable and programmatic, direct, P2P transactions as the future of capital markets.

In addition, with the advent of low cost networking and geographically aware computing power (smart phones), blockchain tech and smart contracts, the concept of transferable value is easily expanded past real and financial assets to privacy, labor, data and a cornucopia of things none of us have through of yet.

All assets are stored client side, fully encrypted and are always in the complete control of the client (i.e., you, the individual user). Veritaseum doesn’t even store encrypted copies on its servers. Even in the event of a password compromise, bad actors must also locate the assets to access them. Something that is much easier to do on a centralized server (e.g., JP Morgan or Citibank) than a fully distributed system.

With Veritaseum, one can literally tweet an entire trade, or click a Friend on Facebook to take the other side of a short Goldman long Facebook trade, or transfer BTC linked to the price of gold through a text message. All without having to trust who’s on the other side! This level of friction free finance leads to the inevitable…

Pathogenic Finance - the Rise of Viral Financial Transactions

In the legacy financial world, in order to open a bank account, you have to present various forms of ID, go through multiple levels of KYC/AML, and wait a few days for funds to clear. In order to open a brokerage account, you have to fill out forms, answer questionnaires, meet minimum account balances and wait up to 3 days for funds to clear and 10 to 20 business days for assets to be transferred from account to account. All this is done to essentially remand control, custody, possession, and ownership of your funds and assets to a centralized hosted wallet (bank or brokerage) with oodles of balance sheet exposure to other centralized hosted wallets (banks, brokerages and exchanges). In return, you are given a promise not to plunder. With Veritaseum, you can create multiple accounts in under 60 seconds. You can start trading and transacting with others almost immediately, and in all cases no less than 60 minutes provided you have bitcoin on hand.

 

This ability to do practically everything your bank and brokerage offers through your browser (for dramatically less money) on practically any web-connected device with a modern browser, practically anywhere, with almost anyone, and without having to trust them inevitably leads to a massive proliferation of transactions. This proliferation will spread exponentially, not linearly, as more and more people realize they have been essentially freed from the “Matrix”.

·       This is what AT&T was afraid of in 1915, causing them to miss out on roughly 7 billion “new” customer accounts, and potentially controlling the telecommunications space.

·       This is what AOL was afraid of in the mid to late ‘90s, causing them to go from the Internet access market leader to an “also ran” in the space.

·       This is what the banks and financial industry are fighting against now, likely to have no more success than their historical compatriots in other industries.

This growth and proliferation in peer-to-peer transactions, is truly viral. The outbreak will not be media or telecomm this time around, but the very meaning, application, and use of money and value itself! This is the dawn of “Pathogenic Finance”!

What is the Disruption of the Normal Physiology of the Legacy Finance Mechanism?

Autonomy vs. Heteronomy

A pathogen is an infectious agent that disrupts the normal physiology of an organism. In this case, the disease is a new cultural meme. Pathogenic finance is a concept discovered and coined by Reggie Middleton, Disruptor-in-Chief at Veritaseum. Veritaseum acts as a virion (infectious virus particle) for carrying new pathogenic cultural memes, ideas, and practices of finance that can be transmitted from one mind to another through writing, speech, rituals, or media. Regardless of what the meme is transmitted through, it is transmitted by… Veritaseum. It is analogous to a virus in that it self-replicates, mutates, and respond to selective pressures on organisms to evolve (i.e., changes in habitat, weather, food availability and type, etc.). Veritaseum, like its biological counterpart, can infect multiple forms found throughout multiple ecosystems. Viruses are the most abundant type of biological entity. Being that Veritaseum now lives as a web page, it can live and multiply anywhere there’s an Internet connection and modern browser. Any geographic location, any device, any user. All it takes is a single Tweet, text, email, or drag and drop to get Veritaseum value transactions to spread and multiply.

Why is the Veritas token needed?

The Veritas token will act as the key and only gateway to access the contracts that build the P2P capital markets. The Veritas token is easily programmed (by the non-technical user) to take on the market exposure attributes of nearly any other financial or  real asset or commodity that has a generally accepted and accessible data feed and/or price discovery. As such, Veritas also acts as the fuel to run the P2P capital market’s engines.

The Veritas ICO will be capped, guaranteeing the scarcity of Veritas, Negotiations are being made to have Veritas accepted off blockchain by legacy institutions.

The New Age, 21st Century Gold Rush: The Grab for Intellectual Property Rights in Smart Contract and Blockchain Technologies

First things, first – let’s quantify the sum of money that is in question. Veritaseum’s platform deals in value transfer. That is not the same as securities, banking or even Wall Street industry. It is literally the exchange of things that are worth something. It is literally the largest potential market in existence. This is a page taken from our crowdfunding information deck.

Addressible market Putting this into perspective, that.s $16.35 of value for every basis point of market penetration. Five basis points of real penetration across markets will dramatically increase the demand and scarcity of Veritas.

Veritaseum doesn’t have to take over markets, it simply has to ensure reliable usage in a very small subsection of markets.

JP Morgan, Bank of America, Goldman Sachs and IBM are just a sampling of the some of the largest, most powerful and most influential companies that have rushed to file patents in this potentially unprecedented arena of profit. From a financial, technological and value perspective, it is literally the second coming of the Internet.


The smart(er) money appears to have started filing financially focused cryptocurrency-related patent applications in the 1st and 2nd quarter of 2014.

 

Below you will find the Veritas digital road show - a slide presentation that goes through what Veritas is, what Veritaseum does, and why you should get involved. This presentation is interactive and chocked full of content. To get the most out of such a dense offering, be sure to make use of the interactive table of contents on the 2nd slide, and please click through all of the videos, links to download the various documents and take your time to read and understand what Veritas is and is not, and what Veritaseum is and plans to be. 

 

Come back here on the 25th of April for more information and the links necessary to access  our crowdsale and initial coin offering smart contracts, be ready to get started! In the meantime, come and find out why we're so excited about this... transformation of capital markets...

 

 Ve value flow chart small

For more information, download the Veritas deal sheet and the step by step guide to purchasing Veritas can be downloaded here.

The online Veritas presentation deck is rich with descriptions and links to other documentation and instructions on participating should you want to dig in deeper.

Download the Pathogenic Finance report and view the video.

Come back to Veritaseum.com at the open of NY financial markets (9:30 am, EST sharp) on April 25th, 2017 to purchase your Veritas, and own your keys to the P2P Capital Markets.

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

 

Deutsche Bank is trading at 1/4 its book value. Book value is the measure that the street uses to value banks. Unfortunately, boo value is meaningless for banks today, who's books are no longer marked to market, distorted by negative interest rates and transformed by Harry Potter style accounting. It appears as if the market is not going for it. We, at Veritaseum, never did! Here's an example of why oen should heavily discount DB's book value number. Mortgages are one of the, if not the, biggest loan buckets on DB's balance sheet. Five percent of those mortgages are underwater (guaranteed losses). Seventeen percent are over 70% loan-to-value ration. Well, you may be saying to yourself "That's not bank run material".

The German housing market is on an absolute tear. One could be tempted to say its a bubble, but the German economy is the strongest in all of Europe, right? It's the engine that powers the EU, right? Well, German home prices have handily outgrown, and continue to do so, German wage growth - by a very wide margin. So, if real wages aren't powering these fantastic price gains, then what is???

Geran rates

IF the ECB fails to perfectly juggle all of those negative interest rate balls simultaneously (unlikely) then DB will have a hell of a Bear Stearns/Lehman-like problem on its hands, as housing prices crash and DB's mortgage portfolio goes from 5% underwater (likely quite understated) to something like 30-40% underwater. There goes bank equity and here come bank bail-ins!

The info below is taken from our DB subscription research (see Derivative Risk Exposure of Major Banks to Deutsche Bank). Those who are truly interest in this should purchase our DB counterparty research to see who we feel is the most profitable potential short in the sector. It can be found here -European Bank Contagion Assessment, Forensic Analysis & Valuation. We can break out the short only research for $500 fi you don't want to subscribe to the entire series.

DB mortgage problem

Americans are trained to know and to cherish the ideals of democracy and to believe in the American Dream which teaches most Americans that equal opportunity is here for all and that the chances for success for anyone lie within him/herself. None of us are taught to know and understand the American status system which is an important part of our American Dream and often makes the success story a brilliant reality. We all are trained in school to understand democratic ideals and principles and to believe in their fullest expression in American life, but we only learn by hard experience, often damaging to us, that some of the things we learned in early life exist only in our political ideals and are rarely found in the real world. We never learn these things in school, and no teacher teaches us the hard facts of our social-class system, and by extension, our capitalist class system.

We posit that one should study the basic facts of our status system and learn them through systematic, explicit training which will teach at least the adult student much of what he/she needs to know about our status order, how it operates, how he/she fits into the system, and what he/she should do to improve their position or make their present one more tolerable.

The primary drivers of social class mobility (i.e. Less stringent socio-economic stratification) are knowledge and access. Barriers to each of these is what drives socio-economic stratification and stifles social class mobility. For the extreme minority on the top of the socio-economic ladder, it is in their best interest to stifle mobility as much as possible, for mobility only represents:

  1. 1) Downward movement for them, or
  2. 2) Upward movement for those below them.

Any which way one can look at it, mobility, at best, represents displacement and lesser access, less capital, less relative status.

For those who are not members of the very top minority, socio-economic mobility usually means brighter outlooks – as long as said mobility is upward-facing (remember, mobility can be in both directions). As a matter of fact,

The primary products of Veritaseum are knowledge (through our interactively delivered research and opinion) …the lower you move down the socio-economic hierarchy, the more critical and leveraged the shift in socio-economic status becomes.... And access (through our patent-pending blockchain technologies) …

We are, in essence, the socio-economic mobility vendors.

Click here to access the Veritaseum Socioeconomic (Social Class) model... 

This model congeals basic materials about social class in America, identifies the multiple levels, and makes apparent the categories that can facilitate the movement from lower levels to higher ones, and vice versa. Its fundamental goals are to tell the reader (1) how to identify any class level, and (2) how to find the class level of any individual.

Social class enters into almost every aspect of our lives, into marriage, family, business, government, work, and play. It is an important determinant of personality development and is a factor in the kind of skills, abilities, and intelligence an individual uses to solve his problems. Knowledge of what it is and how it works is necessary in working with school records and the files of personnel offices of business and industry. What a woman buys to furnish her house and clothe her family is highly controlled by her social-class values. Keeping up with the Joneses and proving "I'm just as good as anybody else," although fit subjects for the wit of cartoonists because these slogans touch the self-regard of all Americans, are grim expressions of the serious life of most American families. The house they live in, the neighborhood they choose to live in, and the friends they invite to their home, consciously, or more often unconsciously, demonstrate that class values help determine what things we select and what people we choose as our associates.

This model provides a ready and easy means for anyone to equip him or herself with the basic knowledge of socio-economic class so that they can use this type of analysis whenever such factors are important in helping them to know a situation and adjust to it. I have used the model to help predict behavior in the investment real estate market, particularly the residential market in the NYC area where gentrification was rampant. It is now even more apropos, given the significant asset deflation, constriction and selective re-expansion of credit, and considerable shifting of wealth and resources within the US and worldwide.

The businesses of those who make, sell, and advertise merchandise as diverse as houses and women's garments, magazines and motion pictures, or, for that matter, all other mass products and media of communication, are forever at the mercy of the status evaluations of their customers, for their products are not only items of utility for those who buy but powerful symbols of status and social class. This model, and the more detailed and sophisticated one that shall follow, can greatly aid them in measuring and understanding the human beings who make up their markets. Note: This model has been geared towards the NYC Metropolitan area, hence may need to be fine-tuned for dissimilar rural, suburban or non-US areas.

The model has been built upon a modified version of the Index of Status Characteristics (I.S.C.).

 

Social Mobility

 Social class is defined (on this blog) as the amount of control one has over one's socio-economic environment. It is much more than money, although money is a large component. For instance, Barack Obama is in a higher class than Robert DeNiro or Michael Jackson, although Robert DeNiro and Jay-Z are most likely wealthier. Obama's higher class stems from his ability to exert more control over his socio-economic environment. The factors that this author uses to determine class combine (with the associated weights) to create a "socioeconomic index":

Socioeconomic Index=

(Occupation X 12) + (Income source X12) + (Income X 7) + (Wealth X 14) +

(Education X 7) + (Dwelling area X 15) + (Class Consciousness X 7) +

(Housing X 12)

As you can see, wealth is the largest contributor to the class standing, and coincidentally it is the factor that is the most at risk in this current economic climate. I believe that there will be a significant entry into the upper middle class by those who were once firmly entrenched into the upper classes! While that may not seem like a big deal to many, it is damn big deal to those who are moving down the ladder. This also means, that there will be some space for others to move (relatively speaking) up the ladder. One man's (or woman's) misfortune is another's opportunity. I believe this blog can not only be used to insure and proof against downward mobility for those in the upper strata, but can also be used by those in the lower, middle and lower upper strata to rise upward a notch or even two. Social Mobility is the name of the game in times of severe dislocation - times like we will ikely be experiencing soon.

Lower Strata

Underclass/Poor

 
 

Working Poor

 

Middle Strata

Lower Middle Class

 
 

Upper Middle Class

 

Upper Strata

Lower Upper Class

<-- 20% to 30% of Veritaseum users are here, roughly 1,000 of you! We would like to diversify and smooth this out...

 

Higher Upper Class

 

  Now, in term of wealth (not social class and influence, just wealth) we can split the upper strata into three different categories (there are only two above because of the other factors that come into play when social class or socioeconomic standing is taken into consideration). There is the poor wealthy, those guys and girls that are just a hair's breath from being pulled into the upper middle class strata due to marginal wealth. This would be the $1m to $10m net worth crowd, who rely on business profits, salary and investment returns for income. The next would be the middle strata of the wealthy, hailing between $10 t0 $100 million in Net Worth, and then there is the upper strata wealthy at above $100 million. Each of these three strata of wealth represent, in my opinion, distinct behavior tranches in terms of discretionary expenditures, investment, and politics and (what passes as, this is a story for another post) philanthropic activities.  

 

Demographic

Source of wealth

Net Worth

Lower strata wealthy (High net worth)

Service professionals, corporate executives, entrepreneurs, inheritors

Salaries, stock options, restricted stock, small business profits, investment returns

$1 m to $10 m

Middle strata wealthy (Very High Net Worth)

Corporate executives, entrepreneurs, inheritors

Business ownership, investment returns, salaries, restricted stock, stock options

$10 m to $100 m

Upper strata  (the truly Rich!)

Entrepreneurs, inheritors, very few CEOs

Business ownership, investment returns

$100 m to several $billion

A trip to practically any decent sized yacht club or recreational vehicle port reveals the relatively stark differences in discretionary spending behavior. The first strata can be found in the 36 ft. to 68 ft. yacht docks (where a captain is optional, but not mandatory and you really don't need a crew). The second strata can be found 50 ft to 120 ft docks, where captains, crews and semi-custom fiberglass boats abound. The third strata are almost exclusively in the super yacht category, where the carrying cost alone for these (basically waste of money) fully custom built hulls and vehicles are about million a year to start with. You can also see the other social economic strata as well, upper middle class in the 20 to 35 ft boats, the middle and working class in the considerably smaller fishing boats - as opposed to the ultra fast Viking and Hatteras deep sea fishers, etc. It is an interesting and instructional study in social studies and anthropology just walking along your local docks! Once you are aware of how these things break down, you will see many settings in a different light.

Many of those in the higher strata would not be there if they had to compete on a more level playing ground. Alas, elimination of said level playing ground is a goal of those in the upper strata. The problem with that is that such behavior is good for the individual in the upper strata, but bad for society in general for it prevents efficient utilization of human capital. Basically, the best people don't get to do the most things, because they are blocked by those of lesser capability but greater access - access to infrastructure and access to knowledge.

Enter Veritaseum. Our business is to supply said access. We offer knowledge...

Access our knowledge through our proprietary research, analysis and education courses.

We offer access to infrastructure through our gateways to the peer-to-peer capital markets...

If one purchases our research (anything besides the introductory course) we will offer a 5x gold smart contract as a perk. Basically, we will give you a 5% rebate in the form of a Veritaseum smart contract that pays you the price of gold (or a gold index), levered 5x up to a stated maximum. This is a perfect way to both learn and get introduced into the new P2P capital markets and smart contracts.

 

 

 

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.

Following up on Deutsche Bank as Ground Zero?, I'd like to focus on the deteriorating credit metrics at Germany's largest bank. To be absolutely honest, an educatied consumer is the at odds with the bank's other stakeholders in this situation. Educated consumers, particularly those seeking safe, secure bank accounts and lending faciilities should be moving out of Deutshe bank right now. DB is far from safe and secure, particularly in relation to other destiniations. Remember, bank bail-ins are EU law now. European regulatory authorities can force these failing institutions to cancel or severely dilute shareholder equity or to cancel, write-down or convert unsecured liabilities to equity. Such regulatory action is referred to as a “bail-in.” Bank depositors (checking, savings, demand accounts) are investors as well, in the form of unsecured creditors. 

Most depositors still don't realize this (despite Icelandic bank depositors getting smashed). Depositors are the largest, one of the cheapest, and currently the most stable form of bank financing.

DB credit matrix

Most depositors, when they realize they actually are investors, should head to safer pastures. This will leave a gaping whole in Deustche Bank where 312 euros once stood. Let's recent how I described The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs:

... Below is a chart excerpted from our most recent work showing the asset/liability funding mismatch of a bank detailed within the report. The actual name of the bank is not at issue here. What is at issue is what situation this bank has found itself in and why it is in said situation after both Lehman and Bear Stearns collapsed from the EXACT SAME PROBLEM!

image015

 

... The problem then is the same as the European problem now, leveraging up to buy assets that have dropped precipitously in value and then lying about it until you cannot lie anymore. You see, the lies work on everybody but your counterparties - who actually want to see cash!

image012

... The modern central banking system has proven resilient enough to fortify banks against depositor runs, as was recently exemplified in the recent depositor runs on UK, Irish, Portuguese and Greek banks – most of which received relatively little fanfare. Where the risk truly lies in today’s fiat/fractional reserve banking system is the run on counterparties. Today’s global fractional reserve bank get’s more financing from institutional counterparties than any other source save its short term depositors.  In cases of the perception of extreme risk, these counterparties are prone to pull funding are request overcollateralization for said funding. This is what precipitated the collapse of Bear Stearns and Lehman Brothers, the pulling of liquidity by skittish counterparties, and the excessive capital/collateralization calls by other counterparties. Keep in mind that as some counterparties and/or depositors pull liquidity, covenants are tripped that often demand additional capital/collateral/ liquidity be put up by the remaining counterparties, thus daisy-chaining into a modern day run on the bank!

image006

 The research and knowledge subscription module "European Bank Contagion Assessment, Forensic Analysis & Valuation" contains a full report of a very large European Deustche 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

 

Friday, 09 September 2016 16:25

Deutsche Bank as Ground Zero?

Wells Fargo was recently fined $185 million for opening over a million fake accounts and credit cards. This got a lot of attention in the media. It is our assention that Deustche Bank's situation is far more worthy of attention.

DB credit woes

We all know how I feel about credit agencies...

Well, as slow as the ratings agencies are to pull the trigger, even they have downgraded DB to "subprime"...

Subscribe to European Bank Contagion Assessment, Forensic Analysis & Valuation to access our research on the Deutsche Bank counterparty that has a 27% potential downside near to medium term. It is one of the most thorough analyses of a bank that you are likely to ever have seen. Remember, we the guys to call Bear, Lehman, Countrywide and WaMu.

We are releasing new information on Deutsche Bank three times per week, with new free content and analysis coming out this weekend. In the meantime, this is what you may have missed:

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).

DB

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!

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