Rumpole

Government's New Credit Approach: Does the End Justify the Means?

Since the secondary market has dried up and credit card companies have to keep the loans on their books, could someone please tell me why they can't secure them against a card holder's real estate or personal property using personal property security legislation? Granted, it's not a perfect solution, but the companies could at least do that much. but your larger point is correct, too much credit was issued on very loose terms and it's been abused by many of the people to whom it's been issued. Pain will ensue, it's inevitable.

Are Markets Starting to Recover?

Train spotting again are we, Macro Man??!!

The Critical Slipping Cog in the Global Financial Machine

When you said: "...What happens is the ratings agencies have just unilaterally relaxed monetary policy by reducing the effective system-wide rrr. Monetary policy has been relaxed quite unbeknownst to the central bank, which thinks monetary policy is unchanged as its interest rates and monetary base targets remain unchanged."

"Unbenownst" is not the word I'd use to describe central banks in this situation. I find it very difficult to believe central bankers were unaware of the effect that private rating agencies were having.

And with the more recent actions of the central banks especially the Fed, are you so sure central banks would do a better job on ratings than the private agencies? Ballooning its balance sheet with so much toxic assets doesn't inspire confidence!

Fundamental Valuation: How Low Could We Go?

Personally, I found Brett's article rather useful. Historically it simply asserts that if this recession/downturn is something comparable to the 1930s, then we could expect something like an S&P level of 500 or possibly less. So it begs the question of whether it is in fact such a recession/downturn. My own view is that the markets are in a long-term downturn, long-term being years. So playing put options either by buying puts or establishing put option spreads is the approach I think is prudent, e.g., following the trend. There will of course be playable rallies on the up-side favourable to call options and call option spreads. But in the end a level such as that suggested by Brett is credible.

EU Eases Mark-to-Market Rules; What's the U.S. Waiting For?

"...M-T-M, recall, requires companies to mark their financial assets to market each quarter, and run the price changes through their
P&L. For assets that trade on liquid markets, that makes sense. But if the asset is illiquid, or trades in a market that occasionally (like now) freezes up, “market” prices can often be totally unrelated to the asset’s actual intrinsic value. In cases like that, all MTM accounting does is blow up a company’s balance sheet for no reason."
For no reason?? Perhaps the part of the cycle we're now in is saying something about how you're calculating intrinsic value? You're assuming that your version of "intrinsic value" is somehow stable and enduring. But I think that assumption has got to be questioned now that the credit/debt bubble has been popped and the excess cash being pumped into the system is being sucked down the drain of debt and "intrinsic value" is being sucked down that same drain.

In effect, what you're saying is that when times get tough, let's re-write the rules so that we can fudge the books. Who exactly does that help??!!

TSX Trading Strong: Time to Buy Canadian Shares?

I'm a Canadian and, while I'm proud of my people generally speaking and while I'll wave the Maple Leaf loud and proud, you should bear something else in mind. Canada has tied much of its economic future to that of the U.S. And the ties are strong. So as the downturn in the U.S. intensifies, it'll have more and more impact in Canada. And while we haven't entered a housing crisis like the U.S., house prices are softening up here now too. And our levels of consumer indebtedness are not that much different than in the States. But because of their relative conservatism, the Canadian banks are probably more of a safe haven than in the States and elsewhere.

Bailout Bill Passes; What Happens Now?

In my view, the only effective pressure the American populace can assert in order to regain control over its government is not to pay taxes. yes, this will present some risks. yes, those who advocate for a tax revolt will be threatened, will be labelled as traitors, etc. But it'll be those in authority doing the threatening and labelling. But the time to start this campaign is now, during your presidential and congressional elections. it would of course have to persist beyond this, right up to fiscal year end.
The SEC's alteration of mark to market rules is laughable. Just one more piece of evidence that the game is soooo shamelesslly rigged. Isn't the principle of a "free" market that the market sets the value of a company at any given point in time? Markets aren't entirely rational. But concepts like book value or intrinsic value are based on some idea of rationality. So these concepts go out the window in times of crisis. But that doesn't make the values ascribed by the market in crisis times invalid. But that's exactly what the SEC's intervention and those who support it are saying. But not me.