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March 02, 2009

Its Been a Rough Day Worldwide for Banks, and the US is Up Next
by Reggie Middleton

For those of you who follow global markets, it's been a round Monday. The selloffs are being led primarily by the banks, and for good reason. HSBC, which I believe I advised readers to sell in the 80's last year, is near the mid 20's pre-market as it issues a rights offering at a 48% discount to last weeks share price at the close. Wheww! Talk about a crew cut. A set of 20 at the money puts should have thrown off about $70 to $90k by now with at least $20k to $30k to go. If you were creative, you would have done much better. For instance, my institutional guys would have hit a home-run with just a few hundred thousand put out of the money, long dated - of course you would have had to have faith in my research and opinions. Still, $500k in, $4million out and still counting would do a lot to take the edge off of some of the other mistakes that may have been made.

Reggie says: "Part one of three of my opinion of HSBC and the macro factors affecting it) - Nevertheless, the slowdown in the US economy and spiraling global inflation are likely to hurt economic growth in Asia and the Middle East. This factor could have a huge negative impact on the bank's financial health in the near-to-medium term. Another cause for concern are the European markets, especially the UK, that are mirroring the recessionary trend seen in the US, where effects of the weakening housing market are likely to spill over into the personal loans business. Added to these issues, as mentioned in the earlier snapshot on HSBC, the bank's stock price has declined by a mere 7.5% since the turmoil began in the middle of 2007, while its peers, such as Citigroup, JP Morgan Chase, Bank of America, and Barclays Plc, have lost on average 38% of their market values until now. 14 August 2008.

In the news this morning:

HSBC Trims U.S. Lending Unit: HSBC will abandon much of its U.S. consumer lending while planning to raise capital and cut its dividend.

Then there's Amex, whom I think I recommended short at $20 or $30 last year. They, admittedly, have been volatile as hell and difficult to hold on to, but the ride is paying off handsomely - currently trading at $11.40.

Reggie says: When the best of the best start with the shenanigans, what does that mean for the rest... My team has finished the Amex analysis, and it is interesting. Amex is considered the creme de la creme of credit card lenders, with a premium upscale consumer and business clientele that generally. The deteriorating consumer credit environment in the US has seen large credit card companies, including American Express (AXP), witness large write-offs and provisions in the last two quarters. AXP reported 2Q2008 net income from continuing operations of $655 million, or 56 cents a share, down from $1.04 billion or 86 cents a share in 2Q2007, off higher-than-expected provisions on its credit card lending portfolio. Credit metrics for AXP continue to weaken with 30 days past due card loans and 90 days past due card receivables rising to one of their highest levels ever at 3.9% and 3.0%, respectively, in 2Q2008. Amid the continuing US housing price decline, rising unemployment levels and increasing energy, commodity and food prices borne from burgeoning inflationary pressures, we expect AXP's delinquent credit card payments, credit cards defaults and losses to rise over the current levels. This coupled with rising funding cost off hastily dwindling liquidity in the credit markets, near non-existent securitization activities in the US, and deceleration in AXP's core credit card income due to slackening consumer spending, should weigh on AXP's near-to-medium-term earnings. However, we believe that AXP's liquidity position remains reasonable to weather the current difficult operating environment, particularly as the Company is expected to receive approximately $880 million annually for the next three years consequent to a favorable settlement of antitrust lawsuit against MasterCard and Visa. Thursday, 31 July 2008

In the news this morning:

Bruised AmEx Returns to Roots: AmEx is returning to its roots as a charge-card issuer to well-heeled Americans, as the company reels from late payments and defaults.

Also from the Doo Doo 32 - PNC Slashes Dividend to Build Capital 3/2/2009 8:13 AM EST. I warned on this one way back in May of 2008 , and it has paid handsomely, and repetitively.

Then there's AIG: AIG Posts $61.7B 4Q Loss, Bailout Is Restructured - AP - American International Group Inc., once the world's largest insurer, said Monday it lost $61.7 billion in the fourth quarter, the biggest quarterly loss in U.S. corporate history, amid continued financial market turmoil.

I hope you guys don't believe AIG is in this mess by themselves. I have already caught one prominent insurer in the same hanky panky, just on a smaller scale using different acronyms for the activity. As I have said numerous times, the insurance sector's systemic risk to the economy is woefully underestimated.

And from around the globe...

Asia Pacific Markets

Symbol	Name	Last Trade	Change
^AORD	All Ordinaries	3,203.800 12:10AM ET	93.100 (2.82%)
^SSEC	Shanghai Composite	2,093.447 2:00AM ET	10.595 (0.51%)
^HSI	Hang Seng	12,317.46 4:59AM ET	494.11 (3.86%)
^BSESN	BSE 30	8,607.08 5:28AM ET	284.53 (3.20%)
^JKSE	Jakarta Composite	1,256.109 3:59AM ET	29.367 (2.28%)
^KLSE	KLSE Composite	876.56 5:18AM ET	14.11 (1.58%)
^N225	Nikkei 225	7,280.15 2:00AM ET	288.27 (3.81%)
^NZ50	NZSE 50	2,481.515 Mar 1	40.802 (1.62%)
^STI	Straits Times	1,533.40 4:10AM ET	61.47 (3.85%)
^KS11	Seoul Composite	1,018.81 4:03AM ET	44.22 (4.16%)
^TWII	Taiwan Weighted	4,425.83 12:45AM ET	131.32 (2.88%)

Africa/Middle East

Symbol	Name	Last Trade	Change
^CCSI	CMA	1,310.23 Mar 1	22.88 (1.78%)
^TA100	TA-100	579.89 Mar 1	23.80 (3.94%)

Europe

Symbol	Name	Last Trade	Change
^ATX	ATX	1,430.60 7:11AM ET	51.07 (3.45%)
^BFX	BEL-20	1,627.92 7:26AM ET	68.66 (4.05%)
^FCHI	CAC 40	2,609.8201 7:11AM ET	92.66 (3.43%)
^GDAXI	DAX	3,732.44 7:11AM ET	111.30 (2.90%)
^AEX	AEX General	211.69 7:26AM ET	8.12 (3.69%)
^OSEAX	OSE All Share	250.79 7:11AM ET	8.27 (3.19%)
^MIBTEL	MIBTel	12,048.0000 7:26AM ET	478.0000 (3.82%)
^SMSI	Madrid General	773.03 7:25AM ET	30.89 (3.84%)
^OMXSPI	Stockholm General	190.86 7:26AM ET	6.69 (3.38%)
^SSMI	Swiss Market	4,499.83 7:11AM ET	190.84 (4.07%)
^FTSE	FTSE 100	3,672.56 7:11AM ET	157.53 (4.11%)

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.