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June 09, 2008

... And in Today's News, the World Discovers the Obvious!
by Reggie Middleton

It is amazing that this stuff is headline material. Fact is indeed stranger than fiction.

Ratings Agencies Sold AAA status to the highest bidder

The U.S. Securities and Exchange Commission may recommend this week that Moody's Investors Service, Standard & Poor's and Fitch Ratings be prohibited from advising investment banks on how to earn top rankings for asset- backed securities, according to people familiar with the matter.

SEC staff may also propose at a June 11 meeting in Washington that the companies disclose all the data that goes into a rating so competitors can grade bonds even if they weren't compensated by the underwriter, said the people, who declined to be identified because the rules aren't final. Moody's, S&P and Fitch help design securities backed by a stream of payments, making it impossible for them to be impartial raters, a May 2007 study by academics Joseph Mason and Joshua Rosner concluded.

It is much too early to invest in land. I will get an update to the Lennar report out this week. This refers to the JVs that I busted Lennar under reporting, and eventually selling off to CALPERS, who obviously does not read my blog. Some should offer those guys a gift subscription, it would have saved them a BILLION dollars!

A partnership that involves the nation's largest pension fund and owns 15,000 acres of land outside of Los Angeles has filed for bankruptcy-court protection, representing one of the biggest land deals to sour amid the housing bust.

The Chapter 11 filing by LandSource Communities Development LLC late Sunday is a potentially costly and embarrassing blow for the venture's main investor, the California Public Employees' Retirement System, known as Calpers.

The bankruptcy filing in federal court in Delaware means Calpers could lose much of its $970 million investment in the venture, which it made through an investment vehicle in February 2007, only months before land values plunged. At the time, the venture's assets were appraised at about $2.6 billion. Earlier this year, the value had shrunk to $1.8 billion....

The 2007 deal allowed home builder Lennar Corp. and Cerberus Capital Management's LNR Property Inc. to reduce their ownership in much of the land to 16% each from a 50-50 split. Lennar and LNR also each received $660 million from the deal.

The Calpers investment vehicle, MW Housing Partners, took a 68% stake. MW Housing involves MacFarlane and Weyerhaeuser Realty Investors, a unit of timber titan Weyerhaeuser Co. The equity holders say they aren't responsible for paying back the nearly $1.2 billion of syndicated debt that was bought by more than 100 banks and institutional investors.

"Lennar and the other owners are not responsible for, nor a guarantor of, any of LandSource's debt," the Miami-based home builder said in a statement...

Lehman Brothers is awash in liquidity and does not need capital again, as it raises $5 billion , the 4th trip to the capital markets and the Fed for money, amounting to over $11 billion total over a 4 month period. Well, if this is what they need when there is no liquidity issue, just imagine how much money they would suck up if they ACTUALLY HAD A PROBLEM.

I would also like to note that they are reportedly about to announce $2 billion in losses. I made it very clear that they took a significant economic loss last quarter, and this quarter would be much harder to hide the losses (even though it didn't appear that they did a very good job last quarter either, but the Street seems to have fell for it).

Lehman Brothers Holdings Inc. is close to raising more than $5 billion of fresh capital from an array of investors including the New Jersey Division of Investment, according to a person familiar with the matter.

The move comes as the firm is set to report a second-quarter loss of more than $2 billion, this person said. Until recently, most analysts who follow Lehman have been predicting a loss of about $300 million.

On Sunday afternoon, the firm was still pulling together final details of the capital raising, which could be announced Monday or Tuesday. Additional capital raisings are sure to follow for other banks.

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2009 Reggie Middleton

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