Seeking Alpha

Old Trader's  Instablog

Old Trader is a 59 year old private investor, managing a retirement portfolio constructed to a) generate a high current yield, b) preserve capital, and c) increase capital. His methodology involves taking a "top down" macro view to identify favorable trends, and then engage in... More
  • "Mark to Model" : Redux 2 comments
    Oct 26, 2009 10:18 PM
    "Mark to model" redux.

    One would have thought that, given the debacle in last fall's markets,  it would be QUITE some time before that method of valuing assets would be used by banks, or other lenders. It seems that one would be mistaken, however, according to an article in Monday's (Oct. 26) FT.

    Two of the largest banks involved in ship financing, HSH Nordbank, the world's largest shipping bank, and Deutsche  Schiffsbank, Germany's second largest, are set to use the Hamburg Shipbrokers' Association's "Hamburg Ship Evaluation Standard" in computing the value of the ships that form the collateral for loans, rather than using "market value".

    Given the glut of shipping tonnage, both in bulk dry carriers, as well as tankers, its no surprise that the value of these vessels has plummeted, meaning that the banks that provided the financing are facing a very real possibility of having to take very sharp write-downs on the loans they made against the purchase of these vessels. Is this sounding a trifle familiar?

    The method that the Hamburg Shipbrokers' Association came up with values ships by their potential future earnings, rather than by what the "market" says is the going value for a comparable vessel. As in the real estate meltdown, the argument is made that "distressed" prices do not provide a "realistic" measure of value.

    At this point, its not entirely clear whether the proposed valuation methodology would be used for all accounting purposes, including financial reporting, or only to decide if a shipowner is in compliance with loan covenants, regarding LTV. Both banks mentioned above in a press conference last month, suggested the valuation method would have "wide-ranging applications".

    The one bright note is that there seems to be some sharp dissension from other bankers and ship brokers, so perhaps fiscal reason will prevail.

    Source: Financial Times

    Full Disclosure: Long DHT
Back To Old Trader's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

This post has 2 comments:

  •  
    Well...fiscal reason seems to not have prevailed for an awfully long time.

    The old guard is getting told they are behind the times with an iPhone email.

    What the young gents don't know is that the old guard remembers the consequences of fiscal irresponsibility and living for the moment (Deprression, World Wars, Civil Wars, etc.).
    Oct 27 01:40 AM | Link | Reply
  •  
    ebworthen,

    Cheer up a bit. I spend a fair bit of time around people in their mid-20's to mid-30's, and frankly, I'm often surprised by how many "get it". Certainly not a majority, but more than one might think.


    On Oct 27 01:40 AM ebworthen wrote:

    > Well...fiscal reason seems to not have prevailed for an awfully long
    > time.
    >
    > The old guard is getting told they are behind the times with an iPhone
    > email.
    >
    > What the young gents don't know is that the old guard remembers the
    > consequences of fiscal irresponsibility and living for the moment
    > (Deprression, World Wars, Civil Wars, etc.).
    Oct 27 05:32 PM | Link | Reply
Full index of posts »
Latest Followers

StockTalks

  • Bought GG @ $42.14
    Nov 27, 2009
  • Sold GG @45.23
    Nov 23, 2009
  • Trailing stop triggered on GG. Looking to get back in at a bit better level.
    Nov 12, 2009
More »
Posts by Ticker
SDS

Latest Comments


Most Commented
  1. Administration's Green Initiative Wilts (14 Comments)
  2. Dealing with unemployment (8 Comments)
  3. Doublehull Disappoints: The perils of dividend investing. (7 Comments)
  4. Most bearish I've been in a while... (6 Comments)
  5. Overnight, 6-14/15 (5 Comments)
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.