Roger Ehrenberg

FAS 157: Blackstone and Its Banker Buddies Have It Wrong

mgv11 - quite true. there are no easy answers in accounting. the best you can do is to emphasize transparency and market-based measures, apply the rules consistently and let managers design their capital structures accordingly.

left coast rick - i wrote my post the way i did for a reason. if you didn't like it, ok. i think the fas 157 rules are pretty clear and your framing of the interpretation issue makes you sound like steve schwartzman. i don't agree.

goodbadandugly - if the income producing properties are so attractive, then fund them so you can hold them. if you can't, you are stupid and deserve to incur whatever wrath the market wishes to bring upon you.

user 219640 - all i read is how it difficult it is to specifically identify mortgages wtihin these securitized portfolios. while theoretically you may be right, the issue still remains that you should be prepared to fund the mortgages if they can't be moved. otherwise, you are subject to the short-term funding whims of the market, which are clearly pretty ugly at present. the liquidity issue is separate and apart from valuation. if you can hold something valued at zero until it becomes non-zero, then you have addressed the most pressing part of the problem.

roger

Did JP Morgan Overpay For Bear Stearns?

fxtrader07, your comment is emotional, populist drivel. JPM doesn't have a put back on the deal. They are assuming it all - the good, the bad and the ugly, with a margin of safety provided by the Fed. Your value of the building comment is inane, because you can't strip out an asset from the analysis and compare it to the acquisition consideration. As I wrote in my post, it is about the true assessment of hard book value taking into account the factors mentioned. So a guarantee is not what JPM received. Repeat, not a guarantee.

This isn't the result of a cabal; it is the work of a Fed and a Treasury that is completely at a loss about what to do. They are not acting out of malice - they are acting out of fear. I know you think you and Mr. Paul have all the answers, but I guarantee that you do not. While I am not happy with many if not most of the Fed's actions over the past six months, they can hardly be chided for trying to act quickly and decisively to stem the ripple effect of the failure of a bulge-bracket firm. With trillions of dollars of interconnected transactions in the swaps and credit derivatives markets, taking them out of the picture would leave a lot of loose ends.

Bear Stearns Investors Learn Just How Volatile Illiquid Assets Can Be

John, in my experience, "security selection" implies a view as to whether or not an investment is cheap or dear, and the likelihood of success once a position is established. If this was ambiguous, my bad. I thought my colloquial interpretation was pretty well-established. Therefore, issues such as liquidity, sector concentration, portfolio diversification, etc. are factors which, when viewed together with security selection, help an investor size a position.

Concerning your view of the Bear Stearns problem, I completely disagree. Is leverage a factor? Of course. Lack of diversification? Again a factor. But the driver of the melt-down is liqudity - these other factors merely exacerbate the problem, IMHO.