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April 17, 2009

More on the Goldmans Sachs - GGP Connection
by Reggie Middleton

In finishing up the GS Stress Test, I decided to throw in this chart to the free part of the blog as well. The Goldman Stress test is a Tour de Force, and I seriously doubt if the government has put as much into uncovering the truth as I have.

Reference the CMBS exposure that Goldman has above (at no less than 14x leverage), then reference this chart directly below.

We are talking a 6x increase in CMBS spreads that GS is rife with at a minimum of 14x leverage over a comparable time period (and a 30x increase all in all). This will just get worse as we get more of this: For those that attempt to argue that short sellers are bad for the market, I bring you GGP! and GGP has finally filed Bankruptcy, Proving My Analysis to be On Point Over the Course of 18 Months. With this GGP bankruptcy, spreads will blow out even wider as asset values drop farther. Then there are all of the other REITs who share similar problems, just on a lower scale (at least thus far).

With the advent of the new FASB Fantasy Accounting Rules, it is possible that Goldman can hide these stresses and losses from average institutional and retail investors as well as the government. Well, they can't hide it from BoomBustBlog subscribers. Bear Stearns and Lehman Brothers had very, very similar real estate exposure. Look at where they are now! As a matter of fact, there are charts comparing the exposure of Goldman, Lehman, Merrill Lynch and Morgan Stanley in the Stress Test that I am about to release. It is revealing and interesting indeed. Goldman is trading at nearly $130...

As I have stated, I believe the Goldman Research to be above and beyond anything available to the typical instituional or retail investor, and I am sure I have covered (or uncovered) bases that the government has failed to. Here is an (unfinished) table of contents (the Pro report is over 100 pages long, consiting primarily of numbers, tables and stats) as I wrap up the report to release some time today for Professional Level users (along with a summary for Retail subscibers):

Contents
Goldman Sachs 1Q09 results 2
Reggie Middleton's Goldman Sachs Stress Test 4
Summary 4
Stress Test Macro Assumptions 5
VAR and Risk Data 6
Comparative Var Analysis 8
CMBS Pressure Points and Other Risk Factors Not Reflect in VaR 12
Economic Writedowns 16
Future Value of Assets (economic) 19
Future Value of Liabilities (economic) 28
Financial liabilities at fair value 34
Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) 40
Writedowns (accounting) 44
Future Value of Assets (accounting) 46
Financial Liabilities at Fair Value (accounting) 56
Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) (accounting) 65
SFAS 157 and SFAS 159 70
Debt Maturity 72
Level Three Comparison 72
Level 2, Level 3, CDOs and Related Assets 77
Revenue, Expense and Off Balance Sheet Loss Assumptions 80
Relative Book Valuation 81
Financial Projections 84
Income Drivers 88
Key Ratios 93
Unconsolidated Variable Interest Entity (VIE) Exposure 95
Scenario Analysis 99
Disclaimer 111

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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