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Friday, March 29, 2024

Hey, Big Wall Street Bank Execs Always Tell the Truth When They’re in Trouble, RIIIIGHT????

Courtesy of Reggie Middleton

I present this as an introduction to my opinion and analysis of JP Morgan’s 3rd quarter operating results for those of you who have not followed me in the past. You can save some time and just review , but this is probably a lot more entertaining! I will be on CNBC’s Squawk on the Street Monday Morning, Oct 18th to discuss my (probably controversial) opinions on banking, technology and real estate. It should be interesting, for I believe I am a very “different” type of pundit. Be sure to tune in and write CNBC with your opinions and comments. So, while putting together my thoughts on JPM’s 3rd quarter and particularly comments from management, I took the time to pour through my blog’s archives, and asked myself…

Hey, Big Wall Street Bank Execs Always Tell the Truth When They’re in Trouble, RIIIIGHT????

Here’s more of Alan Schwartz lying on TV in March of 2008

Meredith Whitney downgraded Bear Stearns today Friday, March 14th, 2008: “Yep, she did it. The ratings agencies are considering a downgrade. I thought it was a joke when I first heard it. Let’s just imagine that I used these wise sources as an info source to make my money! The ratings agencies and sell sides are jokes that I can no longer laugh at.”

It’s a good thing no one listened to that damn blogger who has the gall to charge money for his research and opinion. We had to listen to him bitch and moan for 2 months before… Is this the Breaking of the Bear? (January 2008)”

Bear Stearns is in Real trouble

Bear Stearns will soon be, if not already, in a fight for its life… the biggest issues don’t seem all that prevalent in the media though. Bear Stearns is in a real financial bind due to the assets that it specialized in, and it is not in it by itself, either. For some reason, the Street consistently underestimates the severity of this real estate crash. If you look throughout my blog, it appears as if I have an outstanding track record. I would love to take the credit as superior intelligence, but the reality of the matter is that I just respect the severity of the current housing downturn – something that it appears many analysts, pundits, speculators, and investors have yet to do with aplomb. With a primary value driver linked to the biggest drag on the US economy for the last century or so, Bear Stearn’s excessive reliance on highly “modeled” and real asset/mortgage backed products in its portfolio may potentially be its undoing. This is exacerbated significantly by leverage, lack of transparency, and products that are relatively illiquid, even when the mortgage days were good.”

Notice how the worse case scenario is economic insolvency – as in less than ZERO!

Book Value, Schmook Value – How Marking to Market Will Break the Bear’s Back

…  I can say that when I do watch it I hear a lot of perma-bulls stating that this and that stock is cheap because it is trading at or below its book value. They then go on to quote the historical significance of this event, yada, yada, yada. This is then picked up by a bunch of other individual investors, media pundits and other “professionals,” and it appears that rampant buying ensues. I don’t know how much of it is momentum trading versus actual investors really believing they are buying on the fundamentals, but the buying pressure is certainly there. They then lose their money as the stock they thought was cheap, actually gets a lot cheaper, bringing their investment down the crapper with it. What happened in this scenario? These investors bought accounting numbers instead of true economic book value. Anything outside of simple widget manufacturers are bound to have some twists and turns to ascertain actual book value, actual marketable book value that is. This is what the investor is interested in, the ECONOMIC market value of book, not what the accounting ledger says. After all, you are paying economic dollars to buy this book value in the market, so you want to be able to ascertain marketable book value, I hope it sounds simplistic, because the premise behind it is quite simple – How much is this stuff really worth?. The implementation may be a different matter, though. I set out to ascertain the true book value of Bear Stearns, and the following is the path that I took.

Then he had the nerve to come back with Bear Stearn’s Bear Market – revisited Friday, February 22nd, 2008

So, who was right?

The Bust that Broke the Bear’s Back? Monday, March 10th, 2008: My ruminations on Bear Stearns look to come into their own…

It looks as if the prudent should start debating the ability of Bear Stearns to remain a going concern Thursday, March 13th, 2008

Despite the Federal Reserve’s efforts Wall Street fears a big US bank is in trouble Thursday, March 13th, 2008: While I can’t know for sure which IB it may be, my studies tell me it is either the Bear with the Broken Back or the Riskiest Bank on the Street, and that’s where I’m concentrating my bets…

From the London Business Times: Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed’s unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive. The name on most people’s lips was Bear Stearns. [Hey, it pays to read the boombustblog.com. ...] “The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn’t flush with cash and needed funds in a hurry,” Simon Maughan, an analyst with MF Global in London, said. Bear Stearn’s new CEO states unequivocally that his balance sheet hasn’t changed since November and that they have $17 billion of cushion. [He did not outright say that they were in good shape though. My concern was looking forward. They are a significant counterparty risk (along with Morgan Stanley) and they have significant illiquid level 2 and 3 assets as a percentage of tangible equity. In addition, 17 billion is not much considering the leverage and amount of illiquid assets held by this bank.]

And what happens after the fact? Yes, I can turn bullish as well…

Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008: The problem with the deal is that it is too low, and too favorable for Morgan. It is literally guaranteed to drive angst from the other side. Whenever you do a deal, you always make sure the other side gets to walk away with something.  If you don’t you always risk the deal falling though unnecessarily. $2 is a slap in the face to employees who have lost a life savings and have the power to block the deal. At the very least, by the building at market price and get the company for free!

BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008

This is going to be an exciting, and scary morning Monday, March 17th, 2008

As I anticipated, Bear Stearns is not a done deal Tuesday, March 18th, 2008

Reggie Turns Bearish on Lehman in February, before anyone had a clue!!!

  1. Is Lehman really a lemming in disguise? Thursday, February 21st, 2008
  2. Web chatter on Lehman Brothers Sunday, March 16th, 2008: It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?” I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now.
  3. I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton

Like I said above, it’s not as if upper management of these Wall Street banks would ever mislead us, RIGHT????

Erin Callan, CFO of Lehman Brothers Lying giving an interview on TV in March and again in June of 2008.

Even if the big Wall Street banks would lie to us, we have expert analysts at hot shot, white shoe firms such as Goldman Sachs, who of course not only are “Doing God’s Work” but also happen to be the smartest of the smart and the “bestest” of the best, RIIIGHT!!!??? Below we have both Erin from Lehman AND Goldman lying on TV in a single screen shot. Ain’t a picture worth a thousand words???

We even had the inscrutable Meredith Whitney say “To suggest that Lehman Brothers is going out of business is a real stretch!” (She OBVIOUSLY DOESN’T READ THE BOOMBUST) as well as Erin Callan, the CFO of this big Wall Street bank on TV lying interviewing again…

But that damn blogger guy Reggie Middleton put his “put parade”short combo on Lehman right about that time, and had all of these additional negative things to say…

Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008

May 2008: I never got a chance to perform a full forensic analysis of Lehman, but did put a fair size short on them a few months back due to their “smoke and mirrors” PR (oops), I mean financial reporting. There were just too many inconsistencies, and too much exposure. I was familiar with the game that some I banks play, for I did get a chance to do a deep dive on Morgan Stanley, and did not like what I found. As usual, I am significantly short those companies that I issue negative reports on, MS and LEH included. I urge all who have an economic interest in these companies to read through the PDF’s below and my MS updated report linked later on in this post. In January, it was worth reviewing “Is this the Breaking of the Bear?”, for just two months later we all know what happened. I came across this speech by David Eihorn and he has clearly delineated not only all of the financial shenanigans that I mentioned in my blog, but a few more as well. Very well articulated and researched.

So, who was right? The Ivy league, ivory tower boys doing God’s work or that blogger with the smart ass mouth from Brooklyn?

Please click the graph to enlarge to print quality size.

You can find the public version of my JPM quarterly opinion here. I will have an updated valuation complete with my foreclosure forecasts and “Fraudclosure” opinions for subscribers by Monday or Tuesday morning.

Learn more about BoomBustBlog here: Who is Reggie Middleton!!!

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