Reggie Middleton's blog

No matter what financial engineering scheme you attempt to wrap around it, no matter what socio-political financial nomenclature you attempt to drape it in, and no matter how far you attempt to kick said can down the road in a "delay and pray" tactic of pushing the inevitable collapse past your particular tenure at the helm, the only way out of this is the recognition of capital destruction, AKA Default!

I invite, if not challenge those who question the utility of the higher end of the blogoshpere to compare this opinion/analysis (as biting, cynical and hard hitting as it may be) to that of the mainstream media and the sell side analyst community of Wall Street to determine if independent, proprietarry research in the form of a blog is something that this country and the global investment community is in need of... or not!

Certainly, if we compare the fiscal trajectory of the Eurozone as a whole with the US, the US is not really on a better path.

The EU vs US - Who Crashes First? Reserve currency status is a very strong lever, historically. Equally important, the holder of said status has usually held the most powerful military and technology as well. Meanwhile, the EU has the twin problem of CRE debt rolling over on underwater properties and devalued (by up to 50%) sovereign debt held at 30x leverage as risk free assets at par by the banking system. True, the US has similar CRE issues + housing depression... So much to contrast & compare.

... I would tend to believe that from here, things are more double sided than before, and risk-reward much less interesting than it used to be, because there are now external factors like government intervention which can kick the can, and screw valuations for a long time.

In 2009 I warned that putback risk will be the harbinger of big bank downfall. Not much was made of it then, but to quote WSJ now, $8.5 billion in putbacks for BofA could "embolden mutual-fund managers, insurance companies and investment partnerships to seek similar settlements with other major U.S. banks by arguing that billions of dollars in loans they bought before the housing collapse didn't meet sellers' promises or were improperly managed."

Hey Mr. & Mrs. investment committee members, here's a strong investment idea. Let's take 30% of our money off of the table after losing 48% of it already, and reinvest 70% of it back into the original investment pool, but this time accept 20% in equity risk just as the country we're investing in is about to undergo a nasty, self-imposed austerity driven recession while our new fixed income position is subordinated in real time by the IMF, and soon likely to trade underwater just about as quickly. Now, where's my damn bonus??? I have an appointment with the Azimut dealer!

Have you ever looked beneath the hood of the big European banks? It's scary for the average layperson & it even scarier if you actually understand what it is you are looking at. What we have hear is EXACTLY what I found in early 2008, INSOLVENCY - laid out plainly for all to see - at least all who ever bothered to take a look! Throw Kilo after Kilo of leveraged fiat currency meat into the insolvent sovereign PIIGS' maw & you won't ever see it again:

With mainstream acceptance of my presumptions of the potential of serial sovereign debt defaults, its time to take a more realistic look at how it may happen & the potential consequences.

Nine months after I debuted the Margin Compression Thesis on CNBC (along with the JPM issues), the MSM is finally pulling out of their lovefest with Apple and at least trying to become a tad bit more objective. In the meantime, Goldman still has Apple on its CONVICTion buy list as it sells nearly half a billion dollars of stock into its loyal customers buy orders. Where, oh where, can you get halfway decent, unbiased research these days?

1999, the year the Matrix was released and the year dot.com companies trampled on the rules of fundamentals in investing. A look at the sustainability of Groupon's valuation and business model...

From the Telegraph (UK): Moves by [UK] stronger banks to cut back their lending to weaker [EU] banks is reminiscent of the build-up to the financial crisis in 2008, when the refusal of banks to lend to one another led to a seizing-up of the markets that eventually led to the collapse of several major banks and taxpayer bail-outs of many more.

This is exactly what I've been crowing about for 2 years. It's actually much worse than Lehman... Much Worse!

There's a 50% off sale in Research in Motion shares today! Why? Well, investors are still controlled by name brand marketing and past is prologue propaganda. The new open sourced business model has taken out Nokia (was #1 worldwide), RIM (was #2 worldwide) and guess whose #3. Yeah, I know. It'll never happen, you say [plug in your various fan boy reasons hear, ex. strong earnings growth - just like RIM, superior technology - just like Nokia, etc.) Just remember, our warning was a year ago and it was against the tide then as well.

Summary: As our research illustrated in explicit detail 5 months ago, Facebook’s growth is slowing after an outrageously rich offering of private shares. Now, I’m sure that GS can put on the ole’ shuck & jive show to garner enough interest to cause an initial IPO pop, but then you are basically gambling on - I mean,,, investing in Goldman’s marketing talents and not the fundamental prospects of Facebook, no?

The near 100% equity run up at the height of the correction was easily seen by my and my staff, but I severely underestimated the breadth and depth of this synthetically contrived, central bank centrally planned, bear market rally (which is essentially what has been called a "recovery" of late).