John Cordes

Obama's Donut Economics

So?

S&P 500 Watch: March 'Winners' Are Actually the Biggest Losers

Old t has an excellent point, many of the "beat down" dogs are targeted for help, take over, guarantees and also are the most likely to have been towing the anchor chain of massive short selling, which would naturally result in more covering in a general correction wave. Ergo, not so much an anomaly in the first docile after all. They have also shown greater volatility which magnifies the volume and mob reaction to momentum.

More Turmoil - Not International Regulation - Needed

How much self regulation has greed supplied the industry? Poretz is quite right, there is outrage and loss of confidence, and why shouldn't there be. Better to restore the confidence and quell the anger. At this point in time a little over regulation is hardly the thing to be overly fearful of. Protectionism, and political upheaval are good deal more threatening. Or to put it another way, get over it!

The Latest on Bank Nationalization

Very nice article, thanks.

Accounting Rule Changes Creating False Rally in Financials

"Mark-to-market has neither forced banks to sell assets at prices they consider too low nor has it forced them to raise capital or sell other liquid assets to meet capital demands."
Really, so AIG and CITI are making voluntary choices when they sell their remaining profitable businesses, and the Bond rating analysts don't care if the quarter was profitable because the write downs just nuked their bottom lines and the bond rating is coming down anyway. Get your head out of. M2M is like "gun to the head" accounting principles. Today you are underwater on your, (house, car, rent properties, etc.) pay up or sell into an illiquid market. A seller that doesn't want to sell to a buyer who doesn't want to buy. Time to not only think out of the box but to get out of it as well.

M2M may have been a boon to leverage at one time, but that doesn't justify burning down the house now. It was a poor idea then, still a poor idea.

Mark-to-Market Marches Towards Extinction

If my small company is trying to get a loan or sell itself to a buyer, I attempt to put the best light on my assets, my financial statement. I look for the highest valuations on inventory, fixtures, property and goodwill. If, on the other hand I am preparing information to argue my property or inventory tax, or income tax, I am looking for the lowest valuations (depreciaton) on these same assets.

Is it very hard to imagine that these same tangible items may end up with notably different valuations courtesy of two different accountants or appraisers, (or perhaps even the same ones). Now try to imagine selling your small business. Your proposed selling price is at one end, the buyers at another and the outside audit will place it at another. If everyone is satisfied with the final figures, the sell takes place. If it doesn't the sell is cancelled and another buyer is sought, or perhpaps the original will compromise on the enterprise value, the goodwill value, or some other component of sell valuation.

In a third scenario, you are told that every week, or every month you have to value your entire business based on these asset assessments. From time to time, as circumstances fluctuate, your business is variously valued higher and lower, and in rare difficult times your business shows an extreme devaluation. Now lets say that this is all happening with a gun to your head, by which I mean, that you are told that you must be prepared to liquidate your business each week or else have the rug pulled out from under you by your bank. Doesn't look too good, nor fair. Your customers, for the most part are paying, you made a modest profit last quarter, but the accountant just told you to write down you Real Estate and inventory anyway and to call your bank and tell them your broke. Hmm. Not a very rational way to plan your next move.

It was recently said that mark to market endeavors to value assets in a market condition in which the seller doesn't want to sell and the buyer doesn't want to buy. As with most things in life, it's not black or white, it's mostly gray. Just try raising a teenager or owning a small business and you'll get the point.

Is Nationalization Contagious?

It"s rather amazing to see how many people think that a cataclysm is a viable option. It's almost as though there is a perverse vengence or subtext of hoped for melt down in which all those who are underserving malefactors and the elite will suffer and set the stage for the survivors to ascend. Too many movies and armagedon dwellers I think. It's a particularly American characteristic perhaps, wipe the slate clean, start over, the losers deserve it mentality. I think it's a product of social darwinism and a culture that has insufficient experience with humanistic philosophies and spiritualism. Not a plug for religion, just an observation.

By the way, nationalization is tantamount to a collapse, just more costly to the public. As one poster noted, Obama's team is too smart to do either. Distasteful as it is, we will preserve the big three banks for the sake of the economy, which could not endure another psychological blow of this magnitude nor the financial bomb it would set off. Think of it as you like, either a spider web, a cancer, a root rhizome that goes everywhere and is tangled up with hundreds of corporations and businesses. A bankruptcy of such magnitude is like an emt explosion that frys the infrastructure of everything it touches. Look at what Lehman's collapse did to dozens of otherwise innocent corporations and funds. Magnify that by 50 in the case of CITI or BAC.

So grow up people, it's not a Mad Max movie, it's your society and economy as you know it. No fuzzy, grainy black and white newsreels of hobos and soup lines, but a modern day catastrophy that would produce havoc and wealth destruction that would last for years and most likely change world order politics and our own social fabric. Unless that's what you Mad Maxers think we need.