re: "Mark To Make Believe"

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It's like asking someone to make you an offer on your house when it is engulfed in flames.

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I'm pretty sure the market for your house on fire is the same as our current stock market which means if no one wants to buy it gets marked down to zero. It is a shame this partner is trying to keep assets valued higher than someone is willing to pay for them.

All I got from it is that the level 3 bullshite is just that - bullshite. I'm for getting rid of all of that crap. Mark EVERYTHING to market. If the bid is zero, then you're fricked. If I'm carrying a margin balance, I have to mark to market EVERY DAY. Scottrade doesn't care how thinly traded my stock is or what my assumptions about it are. If I exceed margin requirements, I have to put up capital or sell something. If banks had been held to those rules for the last 3 years, we wouldn't be where we are now.

ETA: and FWIW I will make a market in any CDO with a bid of $1. Consider this a published bid.

oh absolutely.

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I think you would see a minimal rally followed by further obfuscation of balance sheets, and increased investor skepticism. I see the argument/disadvantage to some mark to market related things, although I still believe that is an auditor/enforcement issue as opposed to a pure statement issue. I almost wish they would change it just to show that changing it now makes almost no difference.

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Some of the traders interviewed on CNBC today were expecting a surge in financials with relaxation of M2M. It’s anyone guess.

I have not kept up with disclosure requirements around the impaired assets, but my guess is that this reporting needs to be expanded. For example, I believe Allstate’s write-down of its investment portfolio was in the $16B range, nearly four times larger than its Katrina losses which were approximately $4B. Regardless of what is decided with M2M, I doubt that readers of financial statements will have adequate information on asset values to make sound investment decisions. Investor uncertainty will not help the market.

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I don't know what russian's deal is. He gets hostile unless you agree with 100%.

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GFY, you POS! I didn't get hostile with fizzle. I was apologizing to him for obviously thinking more highly of the article in the link than he did.

KMA, Mr. Hamburger Flipper!

(Now THAT'S being hostile. See the difference?)

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do you believe that the market/financials will get a nice pop if M2M requirements are relaxed (e.g., modified to reflect “hold to maturity” value in an “orderly” market)?

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I really don't know what the stock market would do if MtM is relaxed. I lean towards 'yes' to answer your question but there could be a backlash and their stock prices might fall even further.
My motivation for wanting MtM suspended for some definite period is not about helping their stock prices. It has to do with the recognition that it just does not work in this economic scenario.

In spite of the Colonel's accurate statement that his stock portfolio is marked to market every day and he has to pony up if there's a margin call, it is not the same. If the Colonel goes bankrupt, very few people would notice or even care. And there would be no ripple effects to his misfortune. If the largest banks in the world go under basically to please the professional bean counters, we will all suffer. It's a fantasy by absolutists that banks can't operate with low or negative capital. Of course they can. Banks have been operating in that condition for decades, even in 'developed' countries (Japan).

My thought is that if MtM is suspended, companies (banks) would still have to disclose in some fashion the securities they hold which would otherwise have to be marked to market. For example, they would have to disclose what they paid for them along with disclosing the P&I cash flows they are receiving from the underlying assets in the securities. Or maybe they would even have to provide an estimate of their current value. They just would not have to adjust their capital ratios (temporarily) for the decline in value.

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I guess I'm the only one here who thinks that MtM doesn't work in the panic mode market we're in as it does in a traditional market environment. And that's fine. I don't expect to always be able to convince everyone of the error of their ways.

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Interesting... let me ask you this... are you saying you have a problem with the current MTM rules or how they are being implemented. Again, under 157 and such, there is literature on disorderly (ie panic) markets that allows for other uses (ie income approach etc...)... is your argument such that that guidance is wrong, or that the practitioners are ignoring that.

No, they were allowed to have level 3 assets and mark them to a model. They SHOULD have been marking them to market every day and posting collateral as necessary. They would have been hurt much worse early on, but they'd have been forced to sell their shite paper before things really got bad.

The level 3 'assets' are not going to be worth a flip unless the consumer model returns, if it returns. If they sit on that crap we are all Japanese.