Analysis
As Experts & Speculators Await Higher Oil Prices, I Anticipate A New Energy Paradigm: Monetize Your Outlook Through Veritaseum Featured
Written by Reggie MiddletonA Take On How Negative Interest Rates Hurt Banks That You Will Not See Anywhere Else Featured
Written by Reggie MiddletonThe Bank of Japan and the ECB are assisting me in teaching the world's savers, banking clients and corporations about the benefits of blockchain-based finance for the masses. How? Today, the Wall Street Journal published "Negative Rates: How One Swiss Bank Learned to Live in a Subzero World":
The Bearish Case Against Oil Gets... Bearier... Featured
Written by Reggie MiddletonMy 15 year old son and I went to the NY Hedge Fund Roundtable event on the energy sector at the Penn Club last week. It's good to have your children see you perform. The discussion surrounded the price of oil, LNG and the impact Elon Musk is having on the oil industry.
So, What's Going On In European Banks? You Won't Like the Answer Featured
Written by Reggie MiddletonIt's official, I'm calling a banking crisis in Europe. Things didn't go well the last time I did this.
So Called "Trusted Parties", Bank Collapse, the ECB and Blockchains: Watch as I Call the Next Bear Stearns, Again! Featured
Written by Reggie MiddletonThe vendors and proprietors of blockchain solutions have almost all traveled the private blockchain route. We, at Veritaseum, have decided to go in the opposite direction.
A Financial Industry First: Registered Hedge Funds Trading Real Value Via the Blockchain Without a Bank or Broker @Imagination, Tribeca Film Festival Featured
Written by Reggie MiddletonUpdate: Demand for the Tribeca Film Festival Imagination day is greater than expected. It's way past sold out. Even the hedge funds are blocked from getting in. We're postponing bank disrupt demo.
Veritaseum has partnered up with Hatchery and Tribeca Film Festival to bring education, experience and insight into what is easily one of the most disruptive, status quo busting and misunderstood paradigm shifts of the new millennium - the birth of the P2P economy and the ValuNet (the new “Internet of value”).
We are doing this through an amazing day of innovation and imagination @TribecaFilm Festival. Think the second coming of the Internet meets TED meets the economic Singularity.
The Paucity of Plausible Arguments for Private Blockchains in Banking Featured
Written by Reggie Middleton
Executable files founded in SHIM during Carbanak incident response
Following up on my detailed analysis of the faux pas of private blockchains and the possibility of 4 year settlement times endured by Lehman's counterparties from yesterday, I want to expound upon the extreme likelihood of a bank consortium blockchain being compromised through outright theft!
With Wall Street Bitten by the Blockchain Bug, How Do We Admit the Truth About the Technology's Disruptive Potential? Featured
Written by Reggie Middleton
I attended a panel discussion on private blockchains in banking at UBS in NYC last night. There were two overarching misconceptions that appeared to permeate the discussions:
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Counterparties can be trusted, hence you can build reliable systems with trusted parties, and;
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Capital markets are, and always will be predicated upon the legacy, highly centralized hub and spoke model that we know today. Basically, the influential gatekeepers that control access to a centralized, authoritative exchange.
"Pfandbriefe", or "It Wasn't Me!": Why Nobody Realizes That Germany Is the Biggest Systemic Risk in the EU Featured
Written by Reggie MiddletonI grew up in a small town in Long Island with some very funny people, Howard Stern and Eddie Murphy. Eddie had a skit in his stand-up comedy "Raw" which is a reminiscent of the macro scene of the modern day EU. Let me know if you get it...
The Next European Banking Crisis Looks to Be Upon Us Featured
Written by Reggie Middleton|
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.
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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.
This is at a time when the ECB has pushed rates negative, and pushing it even more into the negative.
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...
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...
More...
The Reason Why Greece and Cyprus Take An Outsized Interest In Veritaseum Featured
Written by Reggie Middleton
When Mother Market Force Takes Over Central Banking! Watch Rates Rise Even Though the Fed Doesn't Featured
Written by Reggie Middleton- CNN reports the US running out of space to store oil.
- At the same time, OPEC actually ramps up oil production...
Many "smart guys" allege that the drop in oil is bad for the ecomomy. I call BS. Oil prices are an input costs. Input costs are what strip revenues down to profits and potentially losses. The lower the input cost, the higher profit. What has occured was a decades long credit bubble that fueld a profligate binging on debt.
It is hard to get off of that drug called free money, particuarly as your dope pusher (those that push rates outside of market force bounds) continues to give you more of that smack. The problem is, eventually, it will catch up to you. The Central Banks have signaled higher rates, and have raised rates 25 bp (roughly 2% of retracement - whoo hoo!).
The market (well, the fed funds rates futures, not the market per se) is quite skeptical on the Fed raising rates any time soon. So am I, as you have seen above.
Alas, as rates scrape against the zero barrier for sometime now, and break through towards negative, the party is over and the punchbowl is being removed by the grownups, aka the natural market forces. The Financial Times reports:
The sharp drop in commodity prices and a rising expectation of defaults by highly indebted companies have shaken investors and closed the door on new debt sales. Investors say the dearth of liquidity has made it even more difficult to own paper rated triple C. Late last year several bond funds closed that held high amounts of low-rated and unrated debt.
“You are seeing a lack of appetite in the new issue market for these types of issuers,” said Matthew Mish, credit strategist with UBS. “[Funds] have outflows and the Federal Reserve is no longer printing money.
Portfolio managers are also experiencing a wave of redemptions from investors. US junk bond mutual and exchange traded funds have counted more than $20bn of withdrawals since mid-November, according to Lipper.
You know what that means. Those oil producers with higher than OPEC costs and high yield debt financing are GUARANTEED to meltdown as oil drops below their breakeven costs (I'd wager somewhere around $50 - $60/bbl if I was a betting man), and stays there. Recent financial reporting seems to corroborate this hunch...
“We expect a shakeout this year in the US oil and gas market, as highly leveraged companies will be forced to declare bankruptcy,” said Bronka Rzepkowski, an economist with Oxford Economics.
A Q&A: Using Veritaseum to take positiions in energy companies through multiple markets. Please be aware that Veritaseum is currently in beta, and the current Java client will be deprecated in lieu of a ubiquitous HTML5 client by the end of the quarter. The info below is for illustrative purposes only.
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How do I enter the trade via Veritaseum? Am I using the web client? My own client that consumes Veritaseum APIs? Place the trade over the phone / fax with Veritaseum’s sales team?
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If you are an advanced player you can simply go to our site and conduct the trade yourself using the system and/or your own network to find a counterparty.
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As an institution, you can purchase Veritas (ex. $50,000 blocks) to redeem them for advisory services such as setting up trades and finding bespoke counterparties.
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Large institutions with their own IT infrastructure can integrate Veritaseum into their system via API. This can also entail a Veritas purchase to assist in the integration, customizations and feature requests.
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Where does the counterparty for the trade come from?
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Japan is the largest consumer of Kuwaiti oil, followed by India, Singapore, and South Korea. Since Asia is such a large consumer of OPEC oil in general (and Kuwaiti oil in particular), they can be very aggressive in their purchasing terms, resulting in material concessions from the oil (and risk) producers - the most painful of which are price discounts. We can offer the oil consumers in these markets the ability to directly hedge their purchase risks - both in terms of currency and oil price fluctuation (or oil price volatility, as illustrated above) accentuating the benefits of discounts while simultaneously making discounts potentially less painful by hedging risks for the oil (risk) producers. Their (the Asian companies) purchase of said risks is the counterpart of the sale of the risk from KOC. The oil refineries of Japan, India, Singapore, and South Korea are the most likely potential counterparties but you can also include the money center banks within these countries, not not to mention the major hedge and trading funds and corporations who consume the finished product en masse. Remember, the USD component of the swap can easily be replaced with the Japanese yen, Chinese Remnibi/yuan, Indian rupee or the Korean won.
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This same chart expressed in USD shows where the hedge benefits, particularly in December…
Entities that aren’t exposed to the Kuwaiti Dinar can still benefit by buying the oil risk and selling their local currency with Veritaseum via a separate swap. The Kuwaiti dinar can also be substituted for Saudia Arabian native currency, or Iraqi dinars, etc.
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Who are the specific counterparties (consumers) of OPEC (producer, of which Kuwait is a major member) oil risk?
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A joint venture between PetroChina Co. (Chinese), Aramco (Saudi Arabian) and Yunnan Yuntianhua Co. (Chinese) is currently building a 260,000 barrel-a-day refinery in the southwest of the Asian nation.
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Aramco already manages a 280,000 barrel-a-day refinery and petrochemical complex in China’s Fujian province along with China Petroleum & Chemical Corp., known as Sinopec, and Exxon Mobil Corp.
China is the largest oil consumer after the U.S.
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IF you are interested in finding about more about this new way of accessing exposure and laying off risk, read the Pathogenic Finance research report, then contact me at reggie AT veritaseum.com.
- Here are the highlights from the report in this most excellent interview with Max Keiser of RT's Kesier Report.
Using Veritaseum to Streamlining Real Estate Sales At the Peak of a Bubble Featured
Written by Reggie MiddletonWe will be developing real estate modules for Veritaseum, and none to soon. In January I penned "My Predictions of Real Estate Corrections following Market Corrections Have Now Officially Come To Pass, 8 Days or So Tardy". A couple of weeks later, the verdict is in even more evident, yet many fail to see the forest for the trees.
This is downtown Brooklyn yesterday...
That's right, thee inventory dense hi-rise buildings going up on the corner of each adjacent block. Of course downtown Brooklyn can absorb an extra 350 units or so per two block area with rates on the way up and banks ready to tighten credit! Here's some more facts for ya...
Past is prologue. This is my documentary done with the the Dutch TV channel VPRO 6 years ago detailing that same 5 block radius pictured above...
This is downtown Miami last month...
Those fact thingies...
And for all of you who think the foreign hot money will dash in to save the bubble this time around...
We are building real estate closing systems into Veritaseum, but need real estate firms who are interested in assisting the buildout. If any of you guys believe numbers (and history) aren't lying (see above), reach out to me at reggie AT veritaseum.com and let's give you the tools you need to get ahead of your competition, and the obvious drop that anyone that counts can see coming.
My Predictions of Real Estate Corrections following Market Corrections Have Now Officially Come To Pass, 8 Days or So Tardy Featured
Written by Reggie MiddletonLast week I posted "I Was Finally Wrong on My Macro Call... By a Week!". On the Max Keiser show I forecasted the markets to sharply correct followed by real estate in the US and Europe during 2015. Well, one week into the new year, there 'ya go! Of course, real estate prices have a tail, so in looking back as well as looking at the continuing trend in equities, was I really right?
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