Tue, Nov 21, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: How can we mark-to-market when there is no market? `Let`s call the loans` and other aberrations

Monday, March 09, 2009

This is an excerpt from Bedrock Group’s latest newsletter:

...We feel like expanding our witch-hunt of last week; We had pointed our finger at Basel (II) and now point it at the accounting rules- FASB115 in particular, the one that sets the rules for mark-to-market. Whilst written in good faith in what had been reasonably good and stable times, it simply wrecks havoc in times such as these! How can we mark-to-market when there is no market?

Here are some aberrations which occur: A bank holds perfectly good bonds which pay their interest regularly, never missing a beat. These are held in a category “Available For Sale”. Normally, these are held at cost or market, the lower of the two. The diligent accountants/auditors check for valuation and get indicated bids at $0.60 so the Bank is forced to mark-down these perfectly good securities by 40%. This markdown does not pass through the Profit & Loss accounts, but does hit the company’s equity. So we could see a bank with a positive P&L and then a huge impairment of capital. The operation is fine, the stock is destroyed based on the collapsed book-value.

It may make sense in the semi virtual world of banks, but let’s extrapolate to an airline: They bought a 747 Boeing for say $400 million two years ago. The plane flies well, with reasonable occupancy and generates a positive cash-flow. Now, the company’s Auditor reads that airplane prices have co......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Middle East - Saudi-Iran war would create this domino effect of global disaster, Saudi billionaires said to move funds from region to escape asset freeze[more]

    Saudi-Iran war would create this domino effect of global disaster From CNBC.com: Events appear to be spinning out of control in the Middle East, and the threat a Saudi-Iranian war is looking increasingly credible. Make no mistake, an out and out conflict between the two nations would be

  2. Paradise Papers - Robert Mercer's effort to avoid taxes appears in Paradise Papers, Tycoon made $41m from 'people's fund', Oxford and Cambridge 'investing millions of pounds offshore', Paradise Papers reveal[more]

    Robert Mercer's effort to avoid taxes appears in Paradise Papers From Therealnews.com: The Guardian has reported that conservative billionaire and Trump backer Robert Mercer "appears as a director of eight Bermuda companies in the Paradise Papers," the trove of documents reviewed by the

  3. Wall Street hedge fund veteran hits highs with copycat tactics[more]

    From FNLondon.com: A Wall Street veteran who has made big returns for wealthy clients by piggybacking on the strategies of well-known hedge funds is taking his novel approach to stock-picking to institutional clients. Dixon Boardman, chief executive of $2.5bn fund of hedge funds Optima Fund Ma

  4. Launches - Eaton Vance, Oaktree to launch diversified credit NextShares fund, FIM launches Nordic AI-powered fund[more]

    Eaton Vance, Oaktree to launch diversified credit NextShares fund Eaton Vance Management, a subsidiary of Eaton Vance Corp., announced the expected mid-November launch of Eaton Vance Oaktree Diversified Credit NextShares, a new Eaton Vance-sponsored exchange-traded managed fund. Eaton Va

  5. Outlook - Gundlach's stock market warning comes true[more]

    From Bloomberg.com: Jeffrey Gundlach has been warning something's got to give. Based on the past two days, looks like we have our answer. Stocks fell around the world a second day and high-yield bonds headed for a fourth straight loss, resuming a historic correlation that the hedge fund manager on W