How Has BoomBustBlog Research Done For 2010?

Crains NY ran a happy, go lucky article today:

The stubbornly dismal economy means
at least one thing: an extended stay in the spotlight for a handful of
star analysts whose defining characteristic is their extraordinary
bearishness. And, of course, their accuracy.

There’s Albert Edwards,
a London-based analyst from France’s Société Générale, who believes
the Standard & Poor’s 500 will sink to 450, a sickening 57% drop
from its current level. There’s David Rosenberg, chief
economist at Toronto money manager Gluskin Sheff, who warns that
deflation is going to pull down the U.S. economy for years.

And then there’s the New York star of this gloomy show: Reggie Middleton,
a Brooklyn entrepreneur who turned to analyzing global markets after a
stint buying and renovating apartments in Fort Greene and Clinton
Hill. (See “Prophet of doom,” April 19.)

Bad as things may be for the economy,
Mr. Middleton warns that they’re poised to get much worse. Prices of
real estate, stocks and bonds are all headed for serious falls… Wages
will decrease, unemployment will increase. Fun, eh?

…

The culprit, Mr. Middleton says, is
Washington. The bank bailouts, nationalization of Fannie Mae and
Freddie Mac, and other interventions during two presidencies prevented
the market from bottoming out in 2009 like it should have, he says. Now
that the economy is weakening again and the heavily indebted U.S.
government has fewer rescue options, the reckoning is coming. Markets of
all kinds in the United States and Europe will get hit—hard.

“In my opinion, the amount of risk in
the system is even higher than in 2008,” he says, adding this rare
dash of hope: “2013 might be a good time to start taking a look at
buying assets again.”

Mr. Middleton has been startlingly
accurate in the past. He forecast the collapse of the housing market in
2007, and in early 2008 warned of the demise of Bear Stearns weeks
before it happened. Earlier this year, he said that Ireland’s finances
were in terrible shape long before Standard & Poor’s got around to
downgrading that nation’s credit rating.

For those of you who don’t follow my blog, Mr. Elstein (the article’s author) was referring to:

1. The Housing Market in 2007 (as it turns out, I was actually overoptimistic – and to think that some call me a bear!): Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
2. Bear Stearns in January 2008 ( 2 months before they popped, while
   trading in the $180s and still had buy ratings and investment grade AA
   or better from the ratings agencies, may I add): Is this the Breaking of the Bear?
   This  was also about the time I got into it with GGP’s CFO for calling
   out their insolvency. He called me names, and then they filed for
   bankruptcy. Of course, they had an investment grade and buy ratings from
   the ratings agencies and the sell side: BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
3. My views on Ireland, austerity, and the disguised sink hole of debt and non-performing assets that is the Irish banking system:
   I Suggest Those That Dislike Hearing “I Told You So” Divest from
   Western and Southern European Debt, It’ll Get Worse Before It Get’s
   Better!

Those of you who follow my blog may remember that Crains ran an article earlier this summer as well (see Prophet of Doom!), wherein I wasn’t very bullish then, either (or even the summer before that, see Forbes,
Going short). I want to be crystal clear here. I am not a perma-bear,
bull, or anything of the sort. I’m just your typical brother that has a
keen nose for BS and seeks the truth. 2+2=4. It always equals 4. If you
are in an investment environment where the number after the “=” sign is
greater than 4, you are in a bubble. If the number is less than 4, the
market has over-discounted the price of assets. The vast majority of the
first decade of the new millennium has seen 2+2=16, and sell side
analysts, bankers, brokers, and private funds have been trying to tell
us that there is a new math in town. No, my friends. Its the same math,
the same story, and the eventually, the end result.

1. BOOM: the bubble blows high and wide
2. BUST: the bubble pops and deflates
3. (this is new) Central banker and policy maker re-BOOM: governments
   around the globe actually try to reinflate the bubbles of yore before
   they even finish popping.
4. BlOG: I get to blog about my investment adventures in taking
   advantage of egregious policy errors in the greatest macro experiment of
   mankind. See “The Great Global Macro Experiment, Revisited” for more on this topic.

So, how has my bearishness empirically
driven realism fared? Well, after riding the real estate boom up (I
told you I wasn’t a permabear), since the inception of the blog (2007)
until the second quarter of 2009 I knocked the ball out of the park with
personal returns pushing nearly 500%, while profitably predicting and
shorting the downfall of nearly every major financial, insurance,
banking and real estate institution during the period in question (I did
miss a few, though). I then gave back half of those profits by
underestimating the depth, breadth and ferocity of the government blown
bubble 2009. I seriously didn’t think our government would attempt to
mortgage our collective future to such an extent for the benefit of so
few in the present. The losses in the last 3 quarters 2009 hurt, and
they hurt a lot! Well, that’s what I get for thinking! See Updated 2008 performance, and 2009 Year End Note to BoomBustBlog Readers and Subscribers. for the full performance story and the numbers behind it.

As for 2010, let’s recap…

Jauuary and February 2010

I warned in explicit detail, the travails coming for Greece, and by
both extension and association, much of western, southern, central and
eastern Europe as well. A month or two later, the ratings agencies
follow suit (as usual, late to the party). See The Beginning of the Endgame is Coming??? Monday, February 22nd, 2010:

So, Fitch finally get’s around to
downgrading the Greek banks. The sovereign debt short is probably a bit
crowded right now, and may be due for a squeeze, but the fundamentals
and the macro situation still stands. As a matter of fact, I really
believe that most investors, speculators, pundits and regulators are
actually looking at the wrong sets of risks – hence may truly be
surprised when the choco-pudding hits the fan blades.

From Fitch:

Fitch Ratings-Barcelona/London-23 February 2010:
Fitch Ratings has today downgraded the Long-term and Short-term Issuer
Default Ratings (IDR) of Greece’s four largest banks,  National Bank of
Greece (NBG), Alpha Bank  (Alpha), Efg Eurobank Ergasias (Eurobank) and
Piraeus Bank (Piraeus) to ‘BBB’ from ‘BBB+’ and ‘F3′ from ‘F2′
respectively. The Outlook on the Long-term IDRs is Negative.

• • • Alpha Bank warned about in subscriber reports last week – Check!
    • National Bank of Greece warned about in subscriber report last week – Check!
    • Efg Eurobank Ergasias (Eurobank) warned about in subscriber report last week -Check!
    • Piraeus Bank (Piraeus)  warned about in subscriber report last week -Check

See the entire Pan-European Sovereign Debt Crisis series, for that was (and is) a recurring theme throughout the year. Oh yeah, and for a visual effect…

Practically every stock and bond negatively opined in the entire Pan-European Sovereign Debt Crisis series is down dramatically. I have also included haircut analysis for much of the sovereign debt for this is far from over.

February 2010

I reiterate my warnings about the Golden Boys who, at the time, were believed by the sheeple to be untouchable. See For Those Who Chose Not To Heed My Warning About Buying Products From Name Brand Wall Street Banks, wherein I state explicitly:

This is not a short post, for it is
packed with a lot of supporting information, analysis and data. If you
are looking for quippy paragraph, soundbyte or quick headline to get an
overview of,,, well whatever, click here, or better yet, click here.
For everyone else who may be looking for deeper investigative analysis
and the unbridled TRUTH for a change, please continue on.

First a little background info.
Goldman is supremely overvalued in my opinion. It is even more so
considering much of its profit is generated solely from the raping of
its clients. I say this holding absolutely no ill will towards Goldman.
This is strictly factual. Let’s walk through the evidence, of profit
potential, valuation, and the stuff behind some of the value drivers in
their business model, like brokerage and investment banking…

Even after the “big Goldman event” pundits held on to that brand name nonsense. See Can
You Believe There Are Still Analysts Arguing How Undervalued Goldman
Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look

I invite all who may be new to my blog to peruse the plethora of
writings and research from the year (or years) past, for I feel that
fundamentals are going to return to these markets, and return in a very
big way! There is a deluge of useful information on the site for those
who are serious about hardcore, forensic analysis. Although BoomBustBlog
is a subscription site, we feature tons of free analysis available to
the public. Topics covered for this year include commercial real estate,
residential real estate, technology (particularly
Apple/Google/Microsoft, which was been quite controversial), investment
banks, commercial banks, retail stocks, etc.

The archives are available via drop down menu in the lower left hand
corner of the site’s left side bar. Directly above the archives is the
ability to browse by topic. There is also a search bar in the upper
right had corner for textual searching in lieu of browsing.

Comments

[Cow]

Reggie, thanks for all the hard work.  Your articles are well researched and much appreciated.

[whiteshadow]

Congratulations Mr. Reggie.. Jus wanted to say thanks for sharing your insight with us.

he has his track record to prove what he has said...if some of you think that is jus luck, I would be very happy to see you try ur luck and show it to us....maybe you can even have a blog to back your luck...jus try n see and then you did appreciate how much time and effort it takes ..

so give this guy the proper credit he deserves....

conrats again n looking forward to more of your writing....

[WorkingFromHome]

A million people with a million ideas.  Someone is bound to have a good track record.  Doesn't mean they were smart, just that the sun shined on their ass.

The best part is that you've convinced yourself that you have a BS meter that allows you to see things that all of the smart people don't.  I have a BS meter to, and my BS meter says you are a blind squirrel.

[Manbearpig]

"Someone is bound to have a good track record."

How thoroughly "Random Walk" of you.

It's not like the guy got one random call right and even that on dubious reasoning, as many often do. He's articulated every point pretty well at least as far back as one can go in his archives, and they've generally played out along the lines of his thesis far more often than not.

Why is it so difficult to just give a guy his props?

[Reggie Middleton]

Yeah, I love you to. At least the blind squirrel was able to smell the BS for the last 10 years and counting. Being a squirrel, even a blind one, is not that bad - as long as you don't get eaten.

[AssFire]

I was expecting a "sign up now" from Cramer's the street, then I realized this was just an ad from Reggie's Boobs & Busts... (actually that title may be in use by RoboTrader).

In any event, I'll stick with Shadow Stats.

[sheeple]

Nice, Reggie's on board

[hbjork1]

Your hard work that backs your postings is much appreciated.  You don't BS. 

This cycle has been extreme and you have handled it very well.  If I seek outside help for my personal funds, rest assured, you will be  on the list.   

[Nihilarian]

I recall you were shorting WYNN when it was at $20.

[RockyRacoon]

That sure was a long advertisement...

It certainly exceeded my attention span, but that's not saying much.

[sheep92]

hi

do you have an audited track record and if so is it published anywhere?

thx

[Reggie Middleton]

I have a verifiable record, but I don't publish it since I don't run money and it is personal. My track record is easily enough verified though, just go back though the archives and compare my thoughts to the prices of what was being opined.

For extra measure, I syndicate content around the web as well, so you can do a Google search to get some of the posts from other sites where I do not have editorial control.

[sheep92]

I was under the impression that you managed money. thx for the info.

[Reggie Middleton]

I'm strongly considering it. The only impediment is that I have a longer term horizon than most with the "hot money" attitude, and it appears that hot money thing is more prevalent than I would like it to be. I can't control asset prices and I only follow the fundamentals and common sense, both of which tend to either assert, or reassert themselves on a regular basis. Those periods when they do not, is when the hot money tends to flee, leaving the asset manager in a bind - even the asset manager who is right and eventually turns out to be correct.

If I were to jump to the dark side, and it is legal (which it is probably not, at least through these forums) I would let interested parties know.

[sheep92]

Having been in the business, I can tell you that you will certainly face investor withdrawals at exactly the wrong times and that investors that actively give and take money from you will usually underperform your benchmark.  A while back I used to run a currency model for a ny based cta firm.  We had a bunch of banks as clients.  One of them a large french bank, thought they understood my model better than i did and would make monthly additions and withdrawels trying to 'out trade' the model.  At the end of the year their attorneys sent us a nasty letter when their performance trailed our yearly published fund performance by about half.  They were somewhat taken aback when I presented to them their series of withdrawals and additions which accounted for the difference in performance.  In the 10 years that I ran the fund, not a single entity which routinely 'rebalanced' thier portfolio EVER hit our benchmark.

I don't know what the business looks like today, but raising money is not an easy endeavor.  It may be easier in the 'fundamental' world but I can assure you that if you have quant strategies it is extremely difficult to get funding.

[Reggie Middleton]

 I am sure quant strategies probably get funded easier than fundamentals and forensics in this day and age. I have a few big banks as clients as well, and one very large one told me up front, "Reg, you know fundamentals don't mean a damn thing right now. We are subscribers because you do good work, but the government is trumping the fundamentals". I retorted (this was back in Nov. 2009), "Yeah, math is not the order of the day for the last couple of quarters, but you know and I know when 2+2=4 again, a few of you guys are going to get hurt, and hurt pretty bad."

Well, let's just say they are preparing the band aids...

[sheep92]

The problem with selling quant strategies is that you can not explain the whole thing to the potential client because of IP problems.  And even if you could the vast majority of your audience is unable to understand what the hell you are talking about anyway.  Never tried selling 'fundamentals', except for one time.

While I was running the afore mentioned currency fund I had developed a methodology for trading commodity futures from the long side which had pretty good historical returns over a long period in which commodities were going nowhere.  In 1999 I was in Milan, doing a dog and pony show for our marketing guy and meeting with some of our clients.  At some hedge fund gathering I did a presentation on my new long only commodity invention.  This was when gold was trading well under $300.  There were about 150 people in the audience and I went thru the whole emerging market case and a bunch of other particulars about why the physical commodities might be a good place to invest over the next chunk of time cause they were vastly undervalued relative to just about anything else on the planet and there were some pretty compelling reasons why that might change.  And to boot I had this really cool signal which did pretty well even in flatish market.  To make a long story short, at the end of my presentation I fielded exactly zero questions from the audience and recieved not a single query post conference. The bad part was we never got the product off the ground.  The good part was I became so convinced that this was a playground to play in I put all of my personal energy and capital into this space over the next decade.  That has worked out well.

[Greyzone]

Unfortunately, Reggie, investment is a dirty word on Wall Street these days. Instead the stock market has become nothing more than a carnival casino. I wish I could find a trustworthy advisor for investments, particularly one who didn't pay himself commission based on me being in the market. In other words, an advisor smart enough to say that sometimes he has to get his clients out of the market for their own good.

Far too many financial houses make money off the commissions and fees from sales and purchases of stocks so a customer who wants to sideline himself for safety's sake becomes a burden those companies actively try to avoid. That's unfortunate because it simply proves that most of these investment firms are not about investment at all, but instead are about stock churn to make their "cut" regardless of whether the customer wins or loses.

[Reggie Middleton]

True, which is a reason why thier performance is so poor. It is not as if I am any smarter than the guys on the Street (I'm sure many of those whiz kids have IQs that I can barely add). It is just that we have very different objectives and agendas and I am much freer to be open about mine. See this post from the heart of the crisis...

Reggie vs Wall Street

As many may have surmised, my team and I have blown out the results of Wall Street's biggest and most reknowned name brand brokers. It wasn't even close enough to fit in a small graph. JP Morgan failed to beat the S&P over the period that the blog has been in existence (since 9/07). The blog's research returns are 132% above the BEST performing Wall Street Broker's analyst recommendations. For the supporting data that goes behind this study, see Blog vs. Broker, whom do you trust!. Please click the graph to enlarge to print quality size.

⁵

[Stephen]

You can either lock up the money for 3-5 years or attract the right investors for your long-term strategy.  But you will learn that managing other people's money is different than managing your own.

[Reggie Middleton]

It is not that simple. I spent a small fortune at the inception of the blog setting up fund structures. When it came to marketing, a 3 to 5 year lockup for a startup fund and a brother NOT from Goldman's prop desk was a very hard sell. You  see, I would have had to have people rely on common sense vs what was popular in the street or easy to reconcile with quarterly performance reports. Of course, as it turned out looking three to four years into the future - I was absolutely right on track and would have made investors loads of money - but the hot money probably would have ran 2nd or 3rd quarter in 2009, despite the fact I was WAY UP 6 quarters out of 8, but what the hell does math have to do with this conversation :-)

A small fund (or even a big one, ask Paulson or Soros) can get devastated by a run on the fund. I just don't need any more stress in my life. I already have plenty. Anyone who is in the industry and wishes to discuss can feel free to contact me (Reggie Middleton), I'm always open.

BTW, interested parties can check me out on Bloomberg TV tomorrow: "Street Smart" with Matt Miller & Carol Massar at 3:30 pm.

[besodemuerte]

Congrats?

Oh, and get over yourself.

[Cow]

Reggie has written many great articles here and deserves the props.

[besodemuerte]

I agree, and I appreciate most of Reggie's work as I do many others on ZH.

I just don't agree with the self-pumping, and it reeks of a solicting advertisement.  Fact is the majority of the population here at ZH share the same views as Reggie.  We could all run around posting 'I told you so' but we don't, and I presume it's because that sort of behavior in general is just something not really accepted well by peers.  The only person I can think of that champions their own self is Obama, and I hate to even compare Reggie with Obama as that's not fair to Reggie.

Sorry for the verbose post here.  Please don't flame me for my initial remark, I just don't care to see a self-patronizing post like this.

[Reggie Middleton]

So, why don't my self flagellating remarks get the same attention. I tell you when I mess up with the same aplomb as when I get it right. I don't hear you congratulating me on my humility. Listen, its as simple as this. I do this investing and research stuff for a living. I am a small business and I need to get the word out. Without my getting the word out you would not have heard of me.

I am not self-pumping, I am laying out my accomplishments and failures. Hopefully, you will have an opportunity to call me a "self-pumper" many more times in the future for I really want to be right more often than I am wrong, but there really is no guarantee of that, is there?

If I can't be honest about my wins and losses, then what makes you think I can be honest about my investment perspective? Trust me, the executives at RIMM, BSC, GGP, LEH, JPM, GS and a list of about 75 other companies are much more pissed at me than you could ever be due to my "self-pumping". In my business I either need to be able to tell it like it is or be compensated for lying!

[besodemuerte]

Eh, sounds like you might be going through tough times then.  I just don't perceive ZH as an advertisement launchpad.  To me, it's more of the truth seeking type of place where people report what should be reported.  I'm not trying to argue with you, but let's be honest arrogance is not something received with open arms by most.  I'm sure those that appreciate your work to the point of paying for it already do, and this type of thread almost takes away from you imo. 

Sorry for the negative energy I brought to this thread all.  Reggie many greatly appreciate your work, and I'm constantly reminded how correct you are weekly just by following the market/economy.  This report does seem much more like a letter to clients to keep it fresh in mind how awesome you are.  I just don't care for it sorry.  Keep up the good fight though and good luck. 

[williambanzai7]

Respect...