Sunday, 16 June 2019

A Analysis

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If you do a Google search in Goldman's latest quarterly earnings, it looks something like this:

Goldman earnings google search Q1 2015 -1

Dudes!!! Don't you guys read the fine print?

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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..."):

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Though many of the libertarian bent bitcoin aficionados, and those uber liberal early proponents of the Internet lauded the decentralized topologies of these networks, they presumably failed to take into consideration groupthink enabled rent seeking on a massive scale and basic human nature. No matter how decentralized one makes a platform or system, pursuit of power and rent seeking always results in a darwinistic survival of the fittest contest that ultimately results in the centralization of social, political and economic (usually in that order) control over the very infrastructure within which the decentralized topology has been built.

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With nearly a billion USD invested in blockchain related startups over the last two years, even the true luddites are starting to take notice. Most still have no idea what this tech is capable of, so my job is to show all the light. On that note, I present a step-by-step guide to Collateralizing and Ensuring Physical Delivery of Gold Through the Blockchain - Faster, Cheaper, Safer!

What many may not realize is that Veritaseum, when used with our commoditized intellectual capital (Veritas), can actually move the value of, and secure, physical assets through the blockchain. This is the trade architecture from a high level.

Veritaseum Pitch Deck

If one where to speculate or hedge the value of gold, you can receive the price value of gold in exchange for USD (or EUR, or even forex pairs such as EURUSD, or even other assets such as copper). The Veritaseum contract would look like this...

Recieve

This is a speculative/hedging contract receiving the derivative gold price and paying the derivative USD price over the weekend to NYSE market close on Monday. Yes! This is cool, but suppose you actually wanted to take physical delivery of said gold rather than take cash settled exposure? Well, to do that you still enter into this contract with the seller of said gold, but set the expiry date at time certain in the future for physical delivery of said gold (to be provided and guaranteed by the transportation service). Let's assume that time and date is as stated above. Said transportation service feeds into the Veritaseum system (via a custom implementation created through a Veritas purchase) and upon delivery confirmation of the physical gold the contract unwinds and the seller gets the buyer's funds plus a refund of their deposit which is put up as BTC collateral linked to the USD price - essentially paying him in USD up front - but locked into the blockchain. The buyer of the physical gold has been hedged into the GLD price this entire time and exchanges his gold-linked BTC for actual physical gold upon arrival as this BTC is released to the physical gold seller along with his USD-linked deposit. With such an arrangement, the gold purchase transaction can literally happen immediately, with all parties hedged into their respected requested exposures as they await physical delivery of the underlying.

If the physical gold does not arrive for whatever reason, the buyer still has his direct gold price exposure - basically a win-win situation. If the seller did not deliver the physical gold, then he/she will be forced to pay as if they sold and delivered the gold anyway by being exposed to USD price exposure relative gold and not receiving that deposit back until the end of the contract - whose expiry was defined as provable physical delivery of the gold.

But what about being exposed to BTC price volatility?

For those who do not want to be exposed to BTC volatility, simply open the advanced tab on the markets tab/interface and lever the contract to "outrun" your perceived exposure to BTC volatility. If you feel bitcoin will have an 4% standard deviation and you lever 5x, you will significantly mute said price delta in your trade results (the actual amount of leverage to use can be calculated using our trade modeling spreadsheet - in this case, 5x is rather excessive for an expected 4% STD).

Recieve GLD lto USD evered 5x

This what that "smart contract" would look like...

Recieve GLD lto USD evered 5x contract

This is what the entire trade would look like, levered 5x with BTC featuring 4% volatility.

Recieve GLD lto USD evered 5x contract trade results chart

Recieve GLD lto USD evered 5x contract trade results descriptionRecieve GLD lto USD evered 5x contract unbounded PL 

Download the Veritaseum wallet and all tools needed to conduct this transaction (sans the physical gold and BTC, of course) here. Purchase Veritas (our tradeable Intellectual Commodity token) here.

Feel free to contact me directly here - I love to chat.

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Veritaseum will be announcing asset-backed bitcoins after the end of our token sale. These are bitcoins that will have both the full value and capability of bitcoins that actually ride along the bitcoin blockchain plus the additional attribute of being backed by a variety of real world commodity assets. This essentially inflation-proofs the coin (more so than the possibly deflationary effect of limited supply) and in addition it puts a hard floor on the value of the coin - setting it aside from bitcoins not modified by Veritaseum.

The Accepted Defintions of Money

According to Wikipedia:

Money is any item or verifiable record that is generally accepted as payment for goods and servicesand repayment of debts in a particular country or socio-economic context.[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment.[4][5] Any item or verifiable record that fulfills these functions can be considered money.

Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money.[4] Fiat money, like any check or note of debt, is without intrinsic use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".[6] Such laws in practice cause fiat money to acquire the value of any of the goods and services that it may be traded for within the nation that issues it.

Commodity money, whose value comes from a commodity of which it is made consists of other things that have utility value in and of themselves in addition to the value attribuated to their use as money. Examples of such include goldsilvercoppersaltcocoa beans, oil and barley. These items historically ran into practical barriers as the global economy expanded - through limitations in storage, transport and rancity - basically techological barriers. As such they were overtaken by representative money. 20 US Gold note

According to Wikipedia, representative money is defined as:

  • A claim on a commodity, for example gold certificates or silver certificates. In this sense it may be called "commodity-backed money".
  • Any type of money that has face value greater than its value as material substance. Used in this sense,fiat money is a type of representative money.

Unfortunaely, as fiat took hold, the former defintion of representative money failed to hold sway - the result of which has been rampant seignorage. Seigniorage is the action of exchanging sovereign-issued securities for freshly printed money by a central bank. This is in essence, borrowing real money and paying with "created" money - or basically not needing to repay at all. These actions are not without consequences. Monetary seigniorage is an action which takes this theme a step further, wherein the sovereign entity relies on seignorage as an active revenue stream through regular and routine debt monetization (printing new money to repay old money to meet budgetary targets. The use (or misuse) of these newly printed notes can exacerbate the inherent problems of rampant monetization. For many developed nations, seignorage is relied upon as a regular revenue source, despite the fact it has wrecked the economies of smaller nations.

 
Sweeping up the banknotes from the street after the Hungarian pengőwas replaced in 1946.
highest inflation periods in history

The United States is certainly not immune from these effects. The economic thirst of war has pushed the US to the brink at least two times in the past. Continental currency (the precursor to the current USD) printed during the Revolutionary War reached a monthly inflation rate of 47% in November 1779. 

Again, during the U.S. Civil War, the 50 months preceeding April 1865 saw the Lerner Commodity Price Index of leading cities in the eastern Confederacy states increased from 100 to over 9,000.

The Confederate dollar was nearly worthless by the end of the civil war. Towards the north, greenbacks (the currency of the Union) were purposely inflated up to a 40% monthly inflation rate. In many of these instances, the money was purposely inflated to fund the war. This monetary seigniorage still exists today in the US and abroad. 

Seigniorage in the United States: How Much Does the U. S. Government Make from Money Production?

Referencing the study made by Federal Reserve Bank's own St. Louis Fed...

As you can see, monetary seingniorage has been and is, a profitable business for the US and has been such for some time.

monetary seigniorage profitability in the US 1

Seiniorage has been responsible for paying between 1% to 3% of the federal budget of the largest single economy in the world - but that's before the crisis and QE, which we will get to in a minute.

monetary seigniorage profitability in the US 2

Pay very close attention to this table, where the US.gov had its debt bought outright by the Fed. The number peaked in teh '71-'80 period at just over $12B. Be aware that, pre-Bernanke Fed did not have a mandate (as popularly interpreted) to purchase private debt.

monetary seigniorage profitability in the US 3

Let's look at this from a 2014 perspective, and please notice the delta in the numbers...

The 3 rounds of US QE:

  1. QE1 (December 2008). In December 2008, the Fed started buying longer-term Treasury securities as well as the debt and the mortgage-backed securities (MBS) of Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs).[3] The Fed announced it would purchase up to $100 billion of the GSEs’ debt and up to $500 billion of their MBS from both banks and the GSEs themselves.
  2. QE2 (November 2010). In November 2010, the Fed announced that it would purchase $75 billion per month of longer-termed Treasuries, for a total of $600 billion. These purchases were to be concentrated in Treasury securities with maturities of two to 10 years, though the Fed also intended to purchase some shorter-term and some longer-term securities.
  3. QE3 (September 2012). In September 2012, the Fed announced its third round of easing, now referred to as QE3. Under QE3, the Fed’s combined securities purchases (long-term Treasuries, GSE debt, and MBS) were increased to approximately $85 billion per month. Unlike its counterparts, QE3 was an open-ended commitment. Rather than commit to purchasing a fixed amount of securities by a certain date, the Fed declared that it would make purchases until it decided that the labor market had sufficiently improved.

So we, go from $12B in US .gov debt to somewhere around $500B of the same in 2007, in addition to a category labeled as "All Other" to $4.4 Trillion as of last year, including unheard of asset classes in the comparable tables above - MBS, etc.). Even if one were to exclude such (and I query as to the reason why one would do that), there is still over $2 Trillion of note and bond purchases. If one were to linearly extrapolate the relationship between monetary senioriage in the tables above as a percentage of the US Federal Budget and the Fed's balance sheet bloat as a result of QE, it would look something like this...

monetary seigniorage profitability in the US 4 Now, we're not economists at Veritaseum, and I'm sure this little analysis may be rife with holes, but its purpose is to illustrate the vast revenue and profit machine that is Monetary and Fiscal Seigniorage, ex. money printing. QE, NIRP, ZIRP generates funny money at the expense of the holders of said money. Reference this graphic from "How the Danish Central Bank is Destroying the Danish Citizens' Wealth Form Both Sides While Stressing It's Banks":

Danish Central Bank prints risk into its economy

 Other examples of current day seignorage and their results are exemplified by the Currency War series linked below. We, @Veritaseum, are using the power of the blockchain to resurrect commodity money and commodity-backed money in a fashion that brings it into the 21st century through our smart contracts technology. We will infuse bitcoins with a definitive floor value (but the coins will also feature the value of bitcoin itself, hence be able to float freely above said floor) based on the following liquid commodities:

  1. Gold
  2. Brent crude and heating oil
  3. Natural gas
  4. Copper
  5. Aluminum
  6. Corn
  7. Wheat

More info will be available after the Veritas sales end. Institutions and accredited investors who are interested in learning more can reach us here.

The Currency War Series:

Interesting tools for the community:

 

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About two months ago, I posted "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!" wherein I feel I made a rather cogent argument against the fidelity of the Danish peg to the euro. Yes, they have not made the same mistakes that Switzerland made when they engaged in, and broker their ped - they're making a whole different set of mistakes. I urge all to read (re-read) that piece and then review the inforgraphic-like graphic below which was created to illustrate the folly of printing for printing's sake to those who may not quite grasp the concept of more currency not being the equivalent of being wealthier.

As always, you can use the Veritaseum platform to take our positions, whatever they may be.

Danish Central Bank prints risk into its economy

So, will Denmark break its peg to the euro? Who knows, but I can guarantee you that the probability is much, much higher than the Danish Central Bankers are proclaiming. If they break the peg, go long the DKKEUR pair, if they don't break the peg, short their banks. It's possible to construct a decent risk weighted reward trade from this - despite the fact this iis dated information. If any of you do make a Veritaseum-powered profit, be sure to send the Danish Central Bank a thank you note, and Cc: us while you're at it.

Note: The 7,000x leverage setting is illustrative only! It is impractical to use leverage rates that high. Danish Central Bank prints risk into its economy1

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Yesterday, I illustrated a detailed use case for a Veritas purchase for the institutional investor (pension fund, sovereign wealth fund, family office, etc.). In essence, I explained how we can provide those entities with exposure to the venture capital asset class without the excessive fees and 10 year commitments which lead to an extreme lack of liquidity - reference Venture Capital Mis-allocation, Illiquidity & Disintermediation: Veritas Use Case #1.

Today we illustrate a Veritas use case for the professional and/or self directed investor. The team that delivered award winning research at BoomBustBlog is available for packaged and bespoke research to be use with the Veritas Value Trading Platform. Here's the result and some research samples (you can download the historical research example here - Apple Margin Compression Analysis and Forensic Valuation Note [PDF])...

AAPL research example

Apple -Competition and Cost Structure - unlocked Page 01

Apple -Competition and Cost Structure - unlocked Page 10Apple -Competition and Cost Structure - unlocked Page 03Apple -Competition and Cost Structure - unlocked Page 04Apple -Competition and Cost Structure - unlocked Page 05Apple -Competition and Cost Structure - unlocked Page 06Apple -Competition and Cost Structure - unlocked Page 07Apple -Competition and Cost Structure - unlocked Page 08Apple -Competition and Cost Structure - unlocked Page 09Apple -Competition and Cost Structure - unlocked Page 10

See our Quick Start Guide for details on how to conduct a purchase.

When: From March 14 to April 25, 2015, or until we sell all 21M Veritas, whichever comes first. If you purchase them within the first fifteen days of the sale, you will get a discount off of the retail price. Please see this presentation to learn more. Click here to view as full page presentation.

The tokens will be transferable - free to be bought and sold between customers and purchasers and potentially on crypto-exchanges. A 13% discount will be in effect for those who purchase the tokens within 24 hours of the sale's commencement. Those who miss the first twenty four hour period can still purchase the tokens at a sliding discounted price for up to 14 days. 

 

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Vertias Driven Disintermediation

Team Veritaseum is uniquely trained, and highly motivated. Specialists with few equals, immune to the concept of “can’t”!

—Reggie Middleton, CEO and Founder of Veritaseum, Inc.

Veritaseum is in the business of disintermediation. Our profit model is based on the displacement of rentseeking entities. As a result, our profit is your profit, since we split the difference of monies extracted by those who have gained as financial gatekeeper. We have demonstrated how Veritaseum poses to disintermediate “legacy” banking system (reference “DACe, Disintermediation and the Death of Wall Street”), but our search for capital has opened our eyes to an ever inreasing pool of industries that will likely be disrupted as our technology and methodologies become more widespread. I will present a barrage of facts and data and let you come to your own conclusions as to whether this is the dawn of a new age.

The Evolution that is Veritaseum

The impetus of this article is Veritas, our software token that you can redeem for our products and services. The aim is to provide real-time proof of the value of said services. (I will explain what these tokens are and how to get them as we progress in the article.)

You probably already know that the Internet circa 1994 was the biggest investment opportunity (for those who had the foresight and resources to capitalize on it) of the 20th century. Imagine a world where there was a near “guarantee” of a similar monumental investment opportunity (x2) and where many (but most certainly not all) of the world’s most powerful and influential investors are quietly backing entrepreneurs from all over the world to monetize and stake claims of control well ahead of the lay investor.

In other words, imagine lightening is about to strike twice

Let me show you something (slides with the “Coindesk” designation are sourced from the State of Bitcoin 2015 slide presentation, annotated as shown):

Yes, the opportunity is real. Growth metrics are popping three years in a row, even as media froth and rampant speculation has died down. (BTW, that’s a good thing!)

Some of us saw through the noise years ago. That is why I started Veritaseum (formerly marketed under the moniker “UltraCoin”). As of late the venture capital community is truly starting to come around. What does this Bitcoin VC investment look like? 

The deals are not necessarily small deals either. Here are the latest:

The “Contrarian Badass” (yours truly)—who has shown a strong proclivity for things finance and technological, and who has created a start-up with a crack-shot team and a first mover advantage on many fronts—is in an ideal position considering this activity.

Investors (should) look for four things when plowing money into startup:

  1. Astute, driven management;
  2. A strong, unique product;
  3. Ample opportunity and timing; and
  4. A charismatic, analytical, and communicative leader.

Let’s walk through each of these and examine exactly what it is we’re doing at Veritaseum with Veritas.

Our launch product is a bitcoin wallet, and there is rapid growth in wallets, worldwide.

But our product is not just any bitcoin wallet. It was (and still is, we believe) the first MULTISIG, smart contract-aware, universal FinTech wallet that we know of. VCs love MULTISIG, they adore smart contracts [Bitcoin 2.0], and if there’s something they cream over even more than those two it would be a universal wallet.

I warned early on that, although a lot of money was going into bitcoin payment processors (ex. Bitpay, Coinbase), it was a bad idea to invest in the strategy that the transaction business would enrich all. The margins are indefensible in a market rife with better capitalized competitors with larger existing customer bases. Reference my post from a year ago, “Payment Processors, Patents and a Dollop of Healthy Paranoia”:

… the big media interest in Bitcoin combined with the increasing VC interest in Bitcoin companies (reference BitPay Gets $30 Million in Venture Capital Funding) is a very good thing for the industry, but also illustrates shortsigtedness in both the investment community and many practitioners.

The problem with the processors...

When bitcoin is as easy as PayPal to use then it will be on the path to mass adoption, but to assume that’s the most lucrative path to take in bitcoin company private equity investment begs the wrong question.

...That 25x markup on the high end is significant (even for the Bitcoin companies), and ripe for disintermediation itself (that's right, the disintermediating agents are poised for disintermediaion). Particularly once the UX of Bitcoin evolves, as email and web browsing did, and users realize how easy and cheap it is to jump onto the blockchain and do this stuff themselves.

Even assuming users don’t follow the historical model of those that left proprietary walled gardens (think AOL) and jumped directly into the open World Wide Web themselves, there are no material barriers to entry to enter into the processing business other than potentially a money transmitter license. The only material barrier, hence the business opportunity, is that Bitcoin is cumbersome to use. As the UI/UX polish increases and the amount of competitors in the space increase, the lower the prices charged - hence the margins - will be.

With such low barriers to entry and potentially humongous markups to exploit, what do you think happens next? The wild, untamed hordes of competitors swoop down upon the masses, and we have a concerted race to zero, and likely negative margin as competitors attempt to make processing a loss leader to draw users into the folds of richer, higher margin services!!!

The race to marginal zero, then negative, does not make a strong business plan. So, what do these companies such as BitPay, Coinbase, etc. do once that point is reached (rather quickly)? They look to value added (high margin) services on top of their low margin, utility-like payment infrastructures.

Enter smart contracts and the true use of programmability in the crypto-currencies. The easiest and the likely first implementation of such will be multi-sig operations which allow multiple parties to share funds without having to worry about trusting and single party in a transaction. Our ZeroTrust Letters of Credit (patent pending) is just such a product. It allows for multiple parties to tranfer payment for simple and complex transactions contingent upon the mutual agreed upon successful execution of said transactions. This is done without the parties having to:

    1. Know each other;
    2. Trust each other; or
    3. Have any form of proximity to each other;

and can be done using micropayments all the way up to multi-million dollar macro payments. The barriers to this business are much higher. For one, it takes more than just programming code. You have to be able to congeal the legal logic of the conventional law in equity contract into code. You have to be able to congeal the business logic into code, and you have to be able to implement it into the blockchain or whatever other underlying transmission mechanism you choose to utilize.

Once the race to negative zero is in full swing, a few of the wiser companies will wake-up and say "Hey, there has to be a better way, and we think we found it!". It is at that point Reggie Middleton's UltraCoin products and assets will shine. It is not hard to foresee that the entrenched companies (Visa, Mastercard, PayPal, Western Union) may enter a bidding war with the new comers armed with material VC warchests (much more than we're seeing with $30 million investments of today - all over the guys who had the foresight to see the next evolutionary step in plain vanilla payments - smart transactions and self-executing digital contracts and transactions.

That was a year ago. Was I right? Well, pricing models changed to drop prices and the business slowed down:

Which led to exactly what I predicted, business model drift:

 And at the same time margins shrunk.

What is Multisig?

A multi-signature address is an address that is associated with more than one private key (in cryptograsphy, security is handled by pairs of unique alphanumeric keys - one private to open a lock, the other public to send to the locked funds/data to others through open passageways [ex. Internet, email]. Once the other side gets the locked package, they will need a private key to open it. The two unique keys must fit with and recognize each other in order to open the lock). The simplest type of multisig is an m-of-n address - it is associated with n private keys, and sending bitcoins from this address requires signatures from at least m keys. A multi-signature transaction is one that sends funds from a multi-signature address.

The primary use case is to greatly increase the difficulty of stealing the coins. With a 2-of-2 address, you can keep the two keys on separate machines, and then theft will require compromising both, which is very difficult - especially if the machines are as different as possible (e.g., one pc and one dedicated device, or two hosted machines with a different host and OS).

It can also be used for redundancy to protect against loss - with a 2-of-3 address, not only does theft require obtaining 2 different keys, but you can still use the coins if you forget any single key. This allows for more flexible options than just backups.

It can also be used for more advanced scenarios such as an address shared by multiple people, where a majority vote is required to use the funds.

Cross-reference the companies below with the green spreadsheet graphic above, and you’ll see that VCs simply love MULTISIG technology.

multisg

Veritaseum is also a universal wallet. VCs adore universal wallets. Cross reference the names in this graphic with the names in the funding sheet above.

Veritaseum was not only one of the early universal wallets, but to finance and investment guys, it’s likely the most powerful universal wallet ever made. You see, not only can it send, receive, and store bitcoins. It allows you to act as your own broker by buying exposure to nearly any publicly traded financial asset (over 45k tickers), in any asset class, through any major exchange around the world, and do this with up to 10,000x leverage. This is all done without counterparty, credit, or default risk.

Here’s some obligatory screenshots:

aapl trade

usd-bkx


Crude Oil Volatility Hedge - veritas

With nothing more than a 15 second download of our trading client (no signups, registrations, no accounts) you can:

  1. Create your own bespoke, custom trading vehicles to...
  2. Directly trade peer-to-peer and OTC, exposure to over 45,000 ticker symbols...
  3. In any asset class...
  4. From exchanges from around the world...
  5. Without an exchange or broker...
  6. With up to 10,000x digital leverage...
  7. Without fear of margin calls or negative equity...
  8. While eliminating practically all counterparty/default/credit risks...
  9. For the least expensive transaction and leverage costs in the industry - as little as 5 bp.

Eliminate your broker, exchange and clearing house - all while actually increasing the safety of your trading.

Veritaseum's offerings and technology are right on time:

Let me show you something more:

So, with Veritaseum you have a universal financial services and self-contained P2P exchange wallet—quintessentially what’s in demand by the “smart money” right now.

When I say we do financial services, I mean we do heavy lifting financial services—going after the big money.

Veritaseum Pitch Deck - Public Pre-sale - Copy

This is quite timely from a VC investment perspective:

 

Keep in mind that Veritaseum doesn’t just trade bitcoins. It trades everything that’s available on public exchanges (including stocks, bonds, forex, and commodities) and more!

Veritaseum Pitch Deck - Public Pre-sale 2

Veritaseum Pitch Deck - Public Pre-sale 1

Veritaseum Pitch Deck - Public Pre-sale 3

Veritaseum has a very, very diverse management team with expertise in IP law, software engineering and architecture, investment stategy, forensic/fundamental/global macro strategy and analysis—and we're just getting started. The CEO has a strong media presence as well:

The Business Media Sees This as DISRUPTION!

image001.jpg

"You're going to put JP Morgan out of business! The banks are going to hate you!"

image002.png

"At least one of the top global money center banks have approached us, and I expect to hear from at least 3 of the top 6!" “MP3 technology combined with innovative business models have cut the music industry profits in half, and they're not coming back!  I query all banking execs, 'Do you want to get MP3'd?'"

image003.jpg

"You are building a virtual Goldman Sachs on top of Bitcoin!"

image004.png

“Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that ‘…what I’m doing right now is a direct threat to fiat merchant banking.’”

image005.jpg

“It’s the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete. The sheer scale of disruption this technology brings with it makes it something to watch.”

image006.png

“Veritaseum is ripe for a strategic investor to approach us before the end of the calendar year, likely payment processors, global banks, and innovative technology companies such as Google, Facebook, Microsoft or Apple.”

These are the reasons to learn more about Veritas and Veritaseum.

In closing, I urge all to read Using Veritaseum's Free Crypto 2.0 Valuation Tool To Value Tokens, Crypto Assets & Smart Properties. Feel free to download the model, tweak the assumptions to your liking or value any other Crytpo 2.0 venture you desire. The results are sure to be illuminating.

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Vertias Driven Disintermediation

Following up on yesterday's research, "The Evolution That Is Veritaseum: Benchmarking It To Venture Funded Competition", I wiush to lead into the first publsihed use case of Veritas - our commoditized, tradeable intellectual capital. This particular use case is a real life story  - mine. It is a solution that I used Veritas to come up with after pondering the state of the venture capital industry. Please read on...

Everybody is piling into the venture capital space, including angels, websites (ex. Angelist), and corporate venture funds. Corporate funds have taken more than 12% of the total VC takedown. California had more than 50% of all corporate VC deals last year, followed by New York (Veritaseum’s home turf) and Massachusetts. Google Ventures did more investments than any other corporate VC last year. As you may know, Vertitaseum’s founder recommended the Long GOOG/short APPL pair trade in 2012 and introduce Google Glass to Wall Street on CNBC.

Here are the top 20 corporate venture funds in terms of activity:

CB Insights on corporate VCs

It does seem that raising money with the big brand name professional VCs leads to much larger rounds, and it seems those rounds are often more profitable than with smaller VC funds that don’t seem to have the same connections to capital and deal flow. The chart and list below was sourced from the CB Insights article: If You Raise From These Smart VCs, You’ll Raise More Money:

The smart money investors analyzed include:

    1. Accel Partners
    2. Andreessen Horowitz
    3. Battery Ventures
    4. Benchmark Capital
    5. Bessemer Venture Partners
    6. CRV
    7. Felicis Ventures
    8. First Round Capital
    9. Floodgate Fund
    10. Founders Fund
    11. Google Ventures
    12. Greylock Partners
    13. Index Ventures
    14. Khosla Ventures
    15. Kleiner Perkins Caufield & Byers
    16. New Enterprise Associates
    17. Redpoint Ventures
    18. Sequoia Capital
    19. Spark Capital
    20. Union Square Ventures

Notice that many of the companies listed here are funders for the Bitcoin company rounds listed in "The Evolution That Is Veritaseum: Benchmarking It To Venture Funded Competition". Be aware, looking at the amounts raised and who raised them is only a small part of the real story.

We’ve solicited each and every one of the funds above, and many of them two and three times. The advantage of being better positioned as a larger VC may be a red herring, a misnomer, after all we have circumstantial (albeit first hand) evidence that deal flow may not be vetted empirically, but subectively, and (more importantly) very expensively for the investor and entrepreneur. The legacy vetting process may be more akin to the “membership to the club” methodology vs. picking the best opportunity available. If this is true, there’s potentially a very profitable arbitrage opportunity. (We’ll come back to this point in a minute after reviewing the Veritaseum business model of disruptive disintermediation.)

The Inefficiencies of the Venture Capital Industry Will Lead To Veritaseum-style Disintermediation - Before or After the Bubble Bursts

Our analysis exposed some market inefficiencies, such as clients of hedge funds having nearly as much expertise and bandwidth as some of the funds they were investing in, yet paying said funds 2 and 20 (or more, such as 2.5 and 30) to deploy their capital anyway. This is a point that I must expound upon. The reason that most VC funds do not have a hurdle rate (a minimum amount they must generate in profits before they can participate in said profits via their "carry") is not to disincentivize risk taking. After all VCs (particularly seed and early stage VCs) are in the business of funding high risk ventures, and if their compensation structure discourages this due to the possibilty of losing a big paycheck already earned, then said compensation structure work's against the interests of the LPs who chartered their money for high risk/high reward investments. This situation is called distorted compensatory motivations. 

Looking a Bit More Closely At What You, the Client Pays a Typical VC

But... (yes, there's always a but), this methodology of avoiding distorted compensatory motivations can actually distort compensatory motivations. The management fees, normally 2- 2.5% of the assets committed to be invested, are designed for a fund to be able to meet its ongoing expenses as a business as it goes about its business of finding, vetting, and (allegedly) nurturing companies that have promise. This works out practically for smaller to medium sized funds. The problem is, with worldwide NIRP and ZIRP, fund sizes are growing ridiculously large. A $100 million fund (it appears to be thought that sub-$100M funds are uneconomical) would receive $2-2.5M per year. That's enough $7k per month rent, an analysts and 2 partners (one senior, one junior) taking a low range comp package (to be made up with a larger carry bonus) a secretary and SG&A and marketing/contingency expenses. The point is to make the partners work for the carry, not the salaries - and at this level it works fine, even with a cushion or safety net.

With larger funds, the meritorious compensation rubric becomes dramatically distorted...

Venture Capital Compensation

  1. Analyst $ 80K - $ 150K
  2. Associate $ 130K - $ 250K
  3. Vice Presidents $ 200K - $ 250K + $ 0-1MM carry bonus
  4. Principal/Junior MD $ 500K - $ 700K + $ 1-2 MM carry bonus
  5. Managing Directors/Partners $ 1MM + $ 3-9MM carry bonus

(Much like private equity compensation, venture capital pay also includes a carry bonus, which may result in a large payout.)

These venture capital salary figures are an approximation and rough range based on the user registration data on Wall Street Oasis as well as the thousands of discussions on venture capital compensation that the community has had around compensation at these levels (source: http://www.wallstreetoasis.com/)

As funds break the billion dollar mark, these distortions become considerably more intense. As you can see from he $1.5B fund raise modeled below, the partners are pulling in$35 million per year, by hook or by crook. That is a lot of money to make annually before the first cent of profit is ever (if ever) generated!  

VC fund expenses 3

Ten partners can pull down $3 million salaries plus pay associates and analysts, while horribly and spectacularly failing - see below under our "adverse scenario" where GPs can produce a near 1,400% return while the LPs take a near total loss - and that's including the GPs 1% equity contribution to the fund. In such a scenario, the carry can be the investor's call option from hell - or the GPs call option from heaven - really depending from which side of the fence you are standing!

VC fund expenses 4

As more insight and better tools (such as Veritas) become available, I see these institutional investors competing directly with the VCs they invest in as financiers. 

Why, you Ask?

While not being an expert in the field of venture finance, I'm damn good at finance in general, and looking at how capriciously our offerings have been glanced over without any inquiry, there is circumstantial evidence that VCs aren’t paid to generate above market returns. That 2.5% fee that you see modeled up above puts a considerably higher risk-adjusted reward on being an asset gatherer rather than an asset investor. As an investor myself, I modeled my startup after what I thought would be the prime investment opportunity. Alas, it is high risk and there's much lower risk (if the fund manager has enough traction) to raise $1.5B at 2.5% yield than to invest in 20 - 30 companies with one hitting 10,000% return, 2 hitting 100% an the rest trailing towards zero or complete loss. Even when the funds do well, carry is not disbursed until successful exit, likely several years after the raise closes. You know what they say, a bird in the hand is worth two in the bush. Plus, one should recongize that they would likely not be able to deploy the full $1.5B unless they engaged in very large rounds, hence putting even more pressure on the entrepenuer for ROI.

In addition, Entrepeneurs are being pushed to deliver returns on 100% of capital despite only recieving 85% of it. Yes, that 2.5% is not only expensive for the investors, but for the entrepeneur as well. The funds ROI is not calculated net of mangement fees, hence the entrepenuers efforts are guage gross of management compensation, not net. It would have been more favorable to the entrepeneurs to source the capital themselves, they would feel and immediate 15% bump in return for their investors.

These perverse incentives quickly and dramatically misalign the incentives of the GP in relation to both the investors and the entrepenuers. I feel I've explained the misalignemnt between GPs adn LPs above, but how about entrepeneurs? 

This Quora question inquired about whether a $100k salary for a startup was inappropriate. All VCs answered basically yes, with the reason being it looks like you are acting like and employee rather than an owner. Here are some key quotes:

David S. RoseManaging Partner, Rose Tech Ventures; CEO, Gust: ... in my experience, that fact pattern (a pair of founders, $500K seed round) would typically see them each taking $50-$75K, at least until they either start generating revenue, or raise a larger round. At that point, $100K (which is pretty close to market) might be a little more palatable.

Which would be similar to the management fee capped at 1% and scaling upward after successful subsquent rounds at higher prices for GPs and the fund. If the investors would manage VCs the way VCs purportedly manage entrepeneurs, this is what we'd see.

Sean OwenUK early stage tech VC: It is normal to draw a minimal salary, not market-rate salary. At this early stage, everyone needs to be investing in the business. Investors put in money; founders put in work. Someone drawing a market-rate salary is being fully compensated in cash and can't be said to be investing; this only makes sense if said person is not getting equity in the business.

This is exactly the point that I made above, re: management fees, particularly with thebigger funds. It's good to see that we agree on this, no? :-)

Nicholas ChavezReceived VC funding: In life you don't get what you deserve.  You get what you negotiate.

Anonymousit sounds like he's negotiating for a job, not making an investment.

Bingo!

VCs expect entretpenuers to have put skin in the game, yet the industry practice is for GPs to put only 1% in as a fund contribution, and many of them don't invest that 1% from personal assets - they pledge it from expected management fees!

If investors structured funds with the same structural expectations VCs have from startups, investors would see both lower fees and much less overcompensation for underperformance while allowing the funds to bathe in appropriate compensaion for overpeformance.

The VC industry has failed to innovate, and that usually presages disintermediation

Outside of Angelist and similar online ventures, not much has changed in the VC space over the last 20 years except for fund sizes getting larger due to the ZIRP. As ZIRP either tapers or backfires (either way, we'll likely find out within two years), the hedy VC rerturns will revert to mean, but not before overshooting the target to the downside.

U.S. Venture Capital Index Returns

The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,522 U.S. venture capital funds, including fully liquidated partnerships, formed between 1981 and 2014 and the U.S. Growth Equity Index is based on data compiled from 164 U.S. growth equity funds, including fully liquidated funds formed between 1986 and 2014.
1 Pooled end-to-end return, net of fees, expenses, and carried interest.
*Capital change only.

Static technological advancement is usually the precursor to disintermediation. Ask the media industry, they know all about it. Between the lack of innovation and the cyclical change about to run its course, this is a ripe opportunity for a different way to access this asset class to come about. I propose investors be able to  various aspects of VC exposure - both long and short - on a liquid basis, and without the massive fees associated with it. How's that for rapid innovation in a short period of time. Read on to find out more...

 The Veritaseum business model is usually executed through a two pronged approach, but each prong has a common theme: disruptive disintermediation.

Disintermediation 1.0: Take out the inefficient middleman

  1. We are directly soliciting the clients of those we initially sought to finance us. I’m personally soliciting the institutions and investors who fund the VCs to teach them about the new commoditized intellectual capital product we’ve launched (Veritas) and how it can assist in their investment efforts, namely:

    1. Angels or former clients from BoomBustBlog literally cold called me to invest. These are smaller amounts in the 6 digit range, but every amount helps when you’re bootstrapping. Thus far, these are the only outside equity investors. There were some ex-clients who were willing to put in much more, up to $20 million. I’m going down the list of all 10k or so subscribers to spread the gospel.

    2. Family offices who are now competing directly with the VC funds they are investing in.

    3. Large sovereign wealth funds. The result so far? BINGO. They absolutely love the concept, the team, the execution to date, particularly the middle eastern funds. 

Disintermediation 2.0: Take out the middleman and the distribution network

  1. As we’ve reached out directly to the potential (and actual, since we are the first to actually have a product up and running) users and started financing ourselves Kickstarter-style by pre-selling our software and services (through Veritas). This is very similar to what Microsoft does with its unearned revenue annuity model or Macy’s does with its gift cards. The difference is that purchasers of Veritas (our gift card for products and services) can:

    1. redeem them immediately (because we have both products and services available now as well as a portfolio of upcoming offereings),

    2. horde them,

    3. turn around and resell their gift cards (we call them tokens) OTC or on an open exchange if they wish.

One cool part? They’re divisible. (Try regifting half of your Target gift card and see how far that gets you.) The selling and trading of these tokens allow for the tokens to be valued by others through word of mouth, thus validating the value of our products, services, and brand via the public opinions and actions of others.

Please be aware that these are not financial investments. They are not stocks or securities. They are direct economic stakes in access to our actual products and services (direct purchases of said products and services as opposed to purchases into our company or operation). These products and services are essentially and literally built directly upon the backbone of the Bitcoin network. Our software/services token is called Veritas, which we refer to as the “Capability Commodity” because it encapsulates tradeable intellectual capital (ours). That is the Veritas difference! From day one, it is backed by actual, definable, quantifiable value that has already proven itself in the market as sure as you can find only one wallet that will allow you to short JPM and go long the EUR/USD pair at the same time at 100x leverage without fear of margin calls, negative equity, or counterparty failure. And you can redeem your Veritas (capability commodities) for our services.

 Click here to view as full page presentation.

Here you have three distinct differences between Veritas and many other token sales:

  1. Immediate backing by something of demonstrable, historical, and provable value;
  2. The ability to redeem the token to the issuer for products or services - effective immediately - with plans to rapidly expand the ways in which Veritas can be redeemed in the near future; and
  3. The existence of intrinsic value and marketable value from the outset.

What Are Veritas- 4

What Are Veritas- 5

How Is Deploying Capital Into Veritas Better than Buying LP Units from a VC Fund If Veritas Are Not Securities?

Unbridled, Unmatched Expertise - For instance, we can show you how to disintermediate your own illiquid investments in VCs and funds and make them liquid

One obvious answer is that you get instant expertise. If you have any questions related to our Veritaseum platform and its use, there is no better source for the answer and its implementation than the people who made it. Few realize how powerful and answer this can be. For instance, you can use Veritaseum to create synthetic, liquid “LP-like units” that track and mimic the value of that sold by specific VC funds for 2 and 20. The difference? You pay 50bp instead of up to 2,200 bp - and you can go long or short! Yes! You can actually use our product to disintermediate the funds, and we’d be happy to show you how, and build out the entire implementation for you. Veritaseum, the value transfer platform, is vehicle that you’d use to do this and Veritas is the Intellectual Fuel that you’d purchase for us to put that vehicle together for you.

You can purchase Veritas in bulk and use it all at once, or purchase it piecemeal, or buy a large amount and sell it off to other parties if you feel you don’t have any further immediate use for it.

Remember, tech VC funds are highly correlated to the NASDAQ, with such a high correlation many institutional investors have concentration and diversification risk that they are not aware of. It would actually be imprudent not to consider an exploratory purchase of Veritas of you have such a high concentration. If you are a high net worth individual, family office, sovereign wealth fund, or pension fund that deploys more than $500,000 into this asset class, you should buy some Veritas then talk to us.

Financial capital commitment is flexible, even while the intellectual capital deployment can be aimed at a longer term horizon

You can buy, sell, and trade your Veritas immediately.

There’s a High Correlation Between Economic Revenue and Equity Valuations

Veritas are essentially pre-sold products and services. There’s a high correlation between revenues, economic profits, and equity values. Basically, if we do well through product and service sales, you do well. If you do well using our purchased products and services, we do well. There’s a wealth of research to substantiate this synergy:

  1. Revenue Growth and Stock Returns
  2. Relationship Between Market Share and Profitability

Your purchase of our product, whether in real time delivery or through Veritas, enriches both you and us. How?

Each purchase of Veritas increases our sales, which increases our brand equity and value, which enables us to deliver even more fantastic products and services, which increases the impetus to purchase Veritas for our products and services, which increases both the value and the market price of our products and services, and thus increases the value and market price of Veritas, which is the key to our products and services. 

Get it? Yes, there's sometimes a method to the madness of circular logic! Buying our products and services through Veritas allows you to compete head-to-head with the leading venture capital funds, and Veritas owners already have a significant head start! Veritaseum was likely the first entity to apply for patent protection for many of the key technology applications and uses illustrated above. 

Veritaseum has a very, very diverse management team with expertise in IP law, software engineering and architecture, investment stategy, forensic/fundamental/global macro strategy and analysis—and we're just getting started. The CEO has a strong media presence as well:

The Business Media Sees This as DISRUPTION!

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"You're going to put JP Morgan out of business! The banks are going to hate you!"

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"At least one of the top global money center banks have approached us, and I expect to hear from at least 3 of the top 6!" “MP3 technology combined with innovative business models have cut the music industry profits in half, and they're not coming back!  I query all banking execs, 'Do you want to get MP3'd?'"

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"You are building a virtual Goldman Sachs on top of Bitcoin!"

image004.png

“Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that ‘…what I’m doing right now is a direct threat to fiat merchant banking.’”

image005.jpg

“It’s the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete. The sheer scale of disruption this technology brings with it makes it something to watch.”

image006.png

“Veritaseum is ripe for a strategic investor to approach us before the end of the calendar year, likely payment processors, global banks, and innovative technology companies such as Google, Facebook, Microsoft or Apple.”

Why Go Veritas Instead Of Venture Capital?

The majority of successful entrepreneurs and professionals will likely be solicited by (or seek the opportunity to participate in) a VC and/or private equity fund. Technology has changed the way things can be done and disintermediation is not constrained to the media industry and P2P file sharing anymore:

  1. The number one, universal, irrefutable characteristic of private equity, regardless of the source of that private equity exposure (fund, online aggregator, bank, or adviser) is a lack of liquidity. At the very least you’re stuck with your capital outlay for 3 years, but more likely 5 to 10 years. Since these are capital appreciation plays, that is dead money until an exit occurs, if it occurs. The reason to invest in private equity is to garner higher than mean returns on a risk adjusted basis. As you can see from the chart below, the larger the fund the greater the return (on average) but all funds of all sizes drop precipitously in performance as the horizon stretches. Then there’s that 2 and 20! Trust me, it can really add up.

Source: Pitchbook

In addition, the field is getting crowded as high returns bring a higher level of competition—meaning more people at the table looking to eat—diluting returns as prices get bid up and payouts are split more even thinner. Alison J. Mass, the co-head of the Financial Sponsors Group, Investment Banking Division of Goldman Sachs, recently said there were now 500 funds worldwide with assets of more than $1 billion.

So, diminishing returns due to being awashed in capital, bypassing potentially lucrative investments due to “club mentality”, and—oh yeah—those fees....

These are the reasons to learn more about Veritas and Veritaseum to gain exposure to this asset class (venture capital, as well as broader private equity and hedge funds) without giving up liquidity.

In closing, I urge all to read Using Veritaseum's Free Crypto 2.0 Valuation Tool To Value Tokens, Crypto Assets & Smart Properties. Feel free to download the model, tweak the assumptions to your liking or value any other Crytpo 2.0 venture you desire. The results are sure to be illuminating.

Team Veritaseum is uniquely trained, and highly motivated. Specialists with few equals, immune to the concept of “can’t”!

—Reggie Middleton, CEO and Founder of Veritaseum

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Summary: With custom, high-end consultation obtained through a relatively small (~$2,250,000) acquisition of Veritas (our commoditized, tradeable intellectual capital), Veritaseum Digital Swaps can allow Goldman Sachs, JP Morgan Chase, and Morgan Stanley to maintain thier share buyback/dividend aspirations and still pass the Federal Reserves stress test requirements.

We have finally issued our own tradeable digital asset. It is much, much different from anything currently available on the market, and arguably materially more valuable. For those not familiar with our new offering, please see Veritas Pre-sale: Intellectual Capital Abstracted Into a Blockchain Tradeable Asset With True Intrinsic Value

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What Are Veritas- 19

I'm sure there are a lot of you wondering exactly what tradeable, Intellectual Capital is. Well, Wall Street has made an entire industry of hoarding and controlling the commodity known as financial capital - basically, the life blood of business. Yet, financial capital is useless without being properly wielded. Consulting firms such as Accenture (Revenues of $30.0 billion, clients in more than 200 cities, 56 countries including 91 of the Fortune Global 100 and more than 3/4th of the Fortune Global 500) and McKinsey & Co. (80% of the world's largest corporations are clients) make a lot of money selling "bespoke" consulting services which can be seen as intellectual capital for hire, but it is expensive (hence the high incomes of the consultants) and extremely unwieldy and inefficient for all but the largest of engagements.

What we have done was to take "capability", essentially intellectual capital in action, and packaged it as a digital commodity that can be traded on an exchange, bought and sold, and redeemed for services rendered. In essence, we've digitized and commoditized the management "intelligence" that these companies sell for well over $40 billion per year and have it on offer for sale, trade and exchange. This article represents a user case of the venerable Goldman Sachs and JP Morgan and their hypothetical use of Veritas. 

What Are Veritas- 22

From Fool.com's Why Goldman Sachs (and 2 Other Wall Street Banks) Nearly Failed This Year's Stress Test

In its most severe scenario this year, the Fed assumed that unemployment would spike to 10%, stocks would fall by 60%, interest rates would stay low, and housing values would decline by 25%. On top of this, the Fed applied a special test to the six financial firms with the largest trading operations -- namely, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.

The primary consequence of the general scenario was large loan losses. According to the Fed's projections, Wells Fargo would have to write off an estimated $56.4 billion in loan losses (or, more specifically, loan loss provisions), JPMorgan Chase's tab came to $55.5 billion, Citigroup's to $50.3 billion, and so on.

The fallout of the trading-specific scenario was large trading and counterparty losses. And it was here where JPMorgan Chase, Goldman Sachs, and Morgan Stanley appear to have run into problems, as the Fed estimated that the three firms would lose an additional $56 billion combined.

The added losses from trading, coupled with the firms' original dividend and share buyback requests, caused certain capital ratios at the three banks to fall below the regulatory minimum at the nadir of the Fed's severely adverse economic scenario. As the central bank explained:

In the supervisory severely adverse scenario, three [bank holding companies] -- Goldman Sachs, JPMorgan Chase, and Morgan Stanley -- were projected to have at least one minimum post-stress capital ratio lower than regulatory minimum levels based on their original planned capital actions. Goldman Sachs fell below the minimum required post-stress tier 1 risk-based and total risk-based capital ratios; JPMorgan Chase fell below the minimum required post-stress tier 1 leverage ratio; and Morgan Stanley fell below the minimum required post-stress tier 1 risk-based and total risk-based capital ratios.

The net result was that, in the week between the first round of this year's stress test (the results of which were announced March 5) and Wednesday, these three banks had to reduce the size of their proposed dividend increases and/or share buyback programs.

We propose "provable" solutions to Goldman and JP Morgan that can enable them to maintain there proposed share buyback and dividend programs, accomplished through the purchase of Veritas. 

 If you remember, we've seen this risk adjusted capital horror movie before. In 2009, the same financial analysis team represented in slide 12 of our "What is Veritas?" presentation ran their own stress tests of the US money center banks. I have included the full 47 page Goldman Sachs report as an example of the quality of the work ( Goldman Sachs 2009 Stress Test). The bottom of page 7 of said report reads as follows (for those not familiar with industry parlance, FICC stands for fixed income and currencies - basically interest rates and forex, which are tightly correlated): 

Higher revenues from FICC are not expected to be sustainable going forward

Although year-on-year trading and principal revenues are expected to grow 54% in 2009 due to record contribution in 1Q09 with revenues of $5.7 bn versus $4.4 bn loss in 4Q08, trading and principal revenues are expected to decline sharply the coming quarters. Trading and principal revenues are expected to decline of 57% and 12.5% in 2Q09 and 3Q08, respectively over 1Q09.  In 1Q09 GS trading and principal revenues showed a considerable strength due to higher contribution from FICC. FICC revenues increased to $6.6 bn due to higher bid-ask spreads and increased volatility although total volumes continued to decline. As spreads revert back to mean and volatility subsides revenues from FICC are expected to fall sharply particularly if volumes continue to decline. In addition, the government’s indemnification of AIG’s CDS obligations funneled at least $12 to Goldman Sachs despite the fact that we have not been able to track down where it landed in the FICC landscape. It may be very likely that this payment contributed to the FICC revenue boost.

This is want Goldman's FICC revenues looked like going forward...

FT Goldman Sachs FICC 1-16-14

From the FT.com article this graphic is referenced from:

The latest profits from Goldman Sachs beat Wall Street's forecasts even though they fell from a year earlier.

While fourth-quarter results were buoyed by a strong performance from equity underwriting, including Twitter's November flotation, revenues from its fixed-income, currency and commodities (FICC) business dropped 15 per cent in the quarter to $1.72bn.

It capped a year in which its annual revenues from FICC were the weakest in eight years.

The Federal Reserve is justifiably concerned, for the currency wars that I have been harping on will make things even worse for Goldman and the money center banks - reference:

  1. Despite What You Don't Hear In The Media, It's ALL OUT (Currency) WAR! Pt. 1
  2. Stab, er... I Mean... Beggar Thy Neighbor - It's ALL OUT (Currency) WAR! Pt 2
  3. As US Companies Report, Signs of Imported Unemployment/Deflation Appear: It's ALL OUT (Currency) WAR! Pt. 2.5
  4. 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!

What does all of this mean? Well, I laid out the road map clearly in "Currency Brokers Fighting Insolvency Are Learning the Value of Our Blockchain Technologies - the Hard Way".

This volatility is poised to hit the banks hard. The following is an excerpt from one of my past articles on the topic of FICC risk in banks.

So, How are Banks Entangled in the Mother of All Carry Trades?

High dependency on Forex and interest rate contracts (amounts reference 2009 timeline)

As of Q2, 2009, Goldman Sachs with interest rate contracts to total assets at 318.x and Forex contracts to total assets at 11.2x has the largest relative exposure. Those of you with substantive Veritas holdings can request an update to the afore-linked analysis. It can be argued that Goldman is trading at an extreme premium from a risk adjusted book value perspective.

As you can see, Goldman Sachs had significantly more exposure that its competitors as a multiple of tangible assets. Not only does the acquisition and ownership of Veritas pose significant value for investors, regulators and counterparties of these banks - it poses significant value for the banks themselves. Revisiting "Currency Brokers Fighting Insolvency Are Learning the Value of Our Blockchain Technologies - the Hard Way", as excerpted:

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 2http://static3.businessinsider.com/assets/images/back_gradient_20x40.png?1421356676) repeat-x;">Investing.com, 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 (no rebranded as simply "Veritaseum") 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.

The following is an example posted in a BTC trading chat room of an exotic forex pair, heavily levered, that I recommended to a Romanian trader. Please forgive the informal description in the middle of the graphic, and realize the power of using Veritaseum Digital Contracts to limit risk in the banking system. This set uses an exaggerated 222x leverage (prove a point) yet is significantly safer than anything the banks are currently offering.

Notice how maximum profit and loss are bounded in the smart contract description (the black dialog box on the left side of the graphic above). Participants can ONLY lose or gain the capital amount put at risk. No more, no less.

I'm thoroughly convinced that this is the trading model for, and of, the future and the recent FICC 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 profitability. I have answers for that as well, right fellas?

Goldman Sachs Posts Lowest Annual Trading Revenue Since 2005

Goldman Sachs Pay Ratio Slips to Second-Lowest Level Since IPO

3 of the 4 largest U.S. banks reported falling profits and revenue below analysts’ estimates 

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Goldman can purchase 2 million Veritas for less than $1.9 million USD (if done today, Veritas is undergoing a pre-retail discount sale for the next week and a half) that will enable it to:
    1. Consult with us to create custom swaps based on our digital system that PROVABLY (this cannot be understated) limit losses to certain mathematically demonstrable limits, thus freeing up significant capital that would normally be tied up in reserves. This means, bigger stock buybacks, and bigger dividends to share holders.
    2. Goldman can also consult with us to integrate their retail, HNW and institutional client systems with our API, thus offering the same capabilities directly to their clients.
    3. Lastly, we can meet with regulators on behalf of Goldman to discuss and explain the material relief in risk adjusted capital requirements such an implementation will entail.

Using the $158 billion fair value from Goldman's 2009 numbers and assuming a mere 50 basis point (1/2 of 1%) risk adjusted capital reserve reduction would yield a $790,000,000 freedom (from a less than $2M investment in intellectual capital) to give back to shareholders. Any Goldman employee (think stock option plan) or shareholder (think, "it's your money!") should consider it imprudent that Goldman NOT load up on Veritas TODAY!

See our Quick Start Guide for details on how to conduct a purchase.

When: From March 14 to April 25, 2015, or until we sell all 21M Veritas, whichever comes first. If you purchase them within the first fifteen days of the sale, you will get a discount off of the retail price. Please see this presentation to learn more. Click here to view as full page presentation.

The tokens will be transferable - free to be bought and sold between customers and purchasers and potentially on crypto-exchanges. A 13% discount will be in effect for those who purchase the tokens within 24 hours of the sale's commencement. Those who miss the first twenty four hour period can still purchase the tokens at a sliding discounted price for up to 14 days. 


*Approximate translation into USD as of 3/9/2015

Learn more about Veritaseum, the company here.

Download Veritaseum, the value trading platform here.

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The Business Media Sees This as DISRUPTION!

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"You're going to put JP Morgan out of business! The banks are going to hate you!"

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"At least one of the top global money center banks have approached us, and I expect to hear from at least 3 of the top 6!" “MP3 technology combined with innovative business models have cut the music industry profits in half, and they're not coming back!  I query all banking execs, 'Do you want to get MP3'd?'"

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"You are building a virtual Goldman Sachs on top of Bitcoin!"

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“Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that ‘…what I’m doing right now is a direct threat to fiat merchant banking.’”

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“It’s the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete. The sheer scale of disruption this technology brings with it makes it something to watch.”

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“Veritaseum is ripe for a strategic investor to approach us before the end of the calendar year, likely payment processors, global banks, and innovative technology companies such as Google, Facebook, Microsoft or Apple.”

My Twitter Updates

ReggieMiddleton VeADIR access options have exploded! You can now log in or create a new account through nearly any popular browser… https://t.co/Mr4D7NM8uL
About 14 hours ago
From TweetDeck
ReggieMiddleton @eddiejRobo Veritaseum is much, much cheaper than any source available publicly online. Currently, we're selling go… https://t.co/lhqv4UeF6c
Sunday, 09 June 2019 23:17
From TweetDeck
ReggieMiddleton RT @joshthedavid: How France keeps a grip on Africa. This is why @ReggieMiddleton is important. https://t.co/UhzVcFxfdK
Friday, 07 June 2019 20:32
ReggieMiddleton VeADIR: most comprehensive dashboard in Blockchain (Bloomberg-ish, https://t.co/QbrxPp69FE) has dropped price of d… https://t.co/d115i8QREP
Tuesday, 04 June 2019 13:54
From TweetDeck
ReggieMiddleton @kai_trading That is basically what we are doing now. The model has evolved over time, but still remains true. Tokenization of everything!
Friday, 31 May 2019 15:00

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Veritaseum

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