Mark-To-Market

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Rob Z's picture
Rob Z
Status: Bronze Member (Offline)
Joined: Nov 30 2008
Posts: 49
Mark-To-Market

FASB discussing changes to mark to market rules.

http://www.marketwatch.com/news/story/fasb-discussing-changes-mark-market/story.aspx?guid=%7BD4468C73%2DBF63%2D4738%2D80D6%2D7F973499E984%7D#comment1976478

 WASHINGTON (MarketWatch) - Responding to pressure applied by lawmakers on Capitol Hill, the Financial Accounting Standards Board on Thursday morning engaged in discussions to give auditors more flexibility in valuing illiquid mortgage assets that may have long-term value and strong cash flow.

 

 

kemosavvy's picture
kemosavvy
Status: Martenson Brigade Member (Offline)
Joined: Oct 13 2008
Posts: 254
Re: Mark-To-Market

i think nassim taleb (author of the black swan) said it best on cnbc the other day.

here is the link to the video

http://www.huffingtonpost.com/huff-tv/emblack-swanem-author-nas_b_181551.html

he likens the change in mark-to-market accounting to burying your head in the sand, or if you prefer, gauging a patients temperature without a thermometer. this video is worthy of watching.

also, you can catch taleb on russ roberts econtalk podcast here. 1 hour.

http://www.econtalk.org/archives/2009/03/taleb_on_the_fi.html

 steve

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: Mark-To-Market

Is there anything our government could possibly do to make this situation worse? I mean if they tried to make it worse, could they do so or have they already exhausted all the bonehead moves under the sun.

The really scary part is the market surging 300+ pts on the news that it will now be permissible for institutions to lie to investors about what things are worth. I can't believe this!

Erik

 

mpelchat's picture
mpelchat
Status: Silver Member (Offline)
Joined: Sep 10 2008
Posts: 214
Re: Mark-To-Market

They did it, my god they did it.

"U.S. regulators relaxed rules on how banks price assets, which had shaken financial institutions with hefty write-downs, and leaders of the G20 announced an additional trillion dollars to support the International Monetary Fund and boost trade" (article below) 

 

http://finance.yahoo.com/news/Wall-Street-jumps-on-G20-hope-rb-14829282.html?sec=topStories&pos=1&asset=TBD&ccode=TBD 

 

So banks and other financail institutions can lie outright to us legally and giving our money to a group (IMF) to bail ourselves out is good for the markets.

Let the bulls run, it is too bad for most the end of the road is off a cliff.

I am going to check my tomatoes out.

kemosavvy's picture
kemosavvy
Status: Martenson Brigade Member (Offline)
Joined: Oct 13 2008
Posts: 254
Re: Mark-To-Market

looking just a little bit off into the future (late may and early june) we will see that this change to mark to market accounting is going to cut the treasury secretaries plan of public-private investment off at the knees. here's why.

when this plan kicks off it is up to the banks to put these toxic assets up for auction. as we all know they will put up their most horrid assets and the public-private investment firm, with excellent financing terms, will buy it for far more than it's worth for sure, maybe $0.50-0.60 on the dollar but the banks have got the toxic assets still listed for $0.70-0.80 on the dollar.

with mark-to-market accounting the banks would be forced to take the loss on the books this quarter. now with relaxed mark-to-market accounting we be rest assured that these bad assets aren't going anywhere. the 500 point bump in the market after this program was launched will have to be factored once again back into the market (or marked back to market) as a -500 drop.

now, this theory of mine assumes that this public-private investment is legit, if not, as chris martenson points out in his podcast, then intentionally fraudelent investors will shutter doors after a few weeks in the program and the money smoothly moves from the taxpayers into the banks without having to nationalize the banks. 

steve

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