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Mark-to-Market: The Bogeyman of the 1930s Is Back

"Mr. Sunshine...I usually agree with you,but not this time.

No amount of mark-to-magic accounting can save many of these banks with home values down 50% in some parts of the country.Add to that HELOCs and credit card losses,with profitable lines of business shrinking at the banks...and lending down."

Mr. Doom, I have to disagree with you on this post. In your statement that home values are down 50%, you make the very case for getting rid of hard line Mark to Market. House prices have fallen 50% - not 100%. The marks on some of these portfolios are pricing in a devaluation on the underlying asset secured as worth 10 to 20 cents on the dollar - if not at zero for certain tranches. I will be the first to admit that a HELOC is probably worth nothing due to the value drop - IF the borrower walk tomorrow - if they don't walk, assuming it is worthless is dangerous as well. The Credit Card debt is worth Zero as it is non-recourse and probably spent on crap - if the borrower defaults. But a lot of these tranches on loans are on 1st lien Mortgages, and 90% of Americans are still CURRENT which means that those loans are still worth Par. You can argue the risk may be higher due to unemployment rising, however, if the asset is still getting cash flow, and the asset underneath is not at 20 cents on the dollar if liquidated, it is pretty hard to believe that M to M is accurate. And on that logic, M to M in the bubble would have way overvalued the same asset, even though it was quite clear that it's price was unsustainable. Think this through before just using a general paint brush of "Mark to Magic" or "Mark to myth" - I think what should happen is Mark to Cash flow to future earnings - or Mark to future Ammortization. That makes a lot more sense, and hopefully FASB sees it that way as well.

Mark-to-Market: The Bogeyman of the 1930s Is Back

Could not agree more. This accounting change was bourne of the same great thinking that got rid of another Depression Era safe guard - Glass-Steigal and lets not forget the uptick rule. Hell, maybe we should get rid of FDIC insurance too, that way all the people that got ill gotten gains from flipping houses will lose their money? So what if we crash the economy in the process - those evil doers won't get away with house flipping...right. Just listen to that nut-job Shelby "we should let the banks fail". That worked so well after Lehman you know....I wonder if he would have the same attitude if his family had money in one of those banks, or if his job was on the line in the economy rather than a cushy rep seat? The US financial system has gone through many financial problems in the last 70 years, but is it any wonder that this one is worse than those because of the same reasons those rules were originally put in place? If we don't learn from History, we are doomed to repeat it. As far as transparency goes, in the 80's S&L scandal, 1300 banks failed in this country - does that mean for 70 years, no investor in the stock market knew what banks were worth, including Buffet? Come on?? If a person can read a balance sheet, and take loss provisions for a statistical loan failure - REAL LOAN FAILURE - then you can judge a balance sheet. If you can't DON"T INVEST IN A BANK...BTW, even if the house was to foreclose, is the house worth nothing? If the loan is being paid, is it worth nothing? Stupid, that is all this is, stupid....

Not a Day to Dive Back In

The best thing to do right now is to sell half your position that was hopefully taken last Friday. This way, if you are wrong, and the market rally's further you are making money, if it tanks again, you have dry powder to buy more. Greed and fear folks, balance the two, and then you make good solid gains.

Cheap Crude: A Flash in the (Oil) Pan

"Political nonsense. This article makes no sense at all. Antiscience. Sun and wind were great in the middle ages. Its time to move into the 21th century with nuclear power. Your uneducated leftist doesnt know what nuclear means."

And your uneducated rightness does not even know how to pronounce nuclear "nucaler". This is not a political problem, this is an environmental, economic (national wealth going to nations that hate us), and national security problem (see last perenthesis). If "W" had not wasted our national funds and youth on this ridiculus war, we would not be facing a lot of the angst we have now. There is no way a country can win a war abroad without being storng at home. That strength comes from a robust economy and domestic resources (energy, manufacturing, technology). Until that happens, spending more money (debt) in Iraq is a waste and useless. And, why in the hell can't Iraq pay for our troops to be there. Why should we foot the bill, while they make all the money. Gee, maybe you will come and sell my products for me, pay my electric bill and my rent, and I will get all the profits. That is the Bush "economic" and foreign policy.

Boone Pickens' BP Capital Funds Down Significantly

User 238404 - could not agree more. I am a holder of Transocean (RIG), and in reading their financials, the only difference that the price of oil makes is a little less gravy on top of their record earnings. Some of their contracts are a fixed daily rate AND a premium on oil being over $80.00 a barrel. Some of those contracts were entered into in 2007 and will be effective until 2010 and beyond. So, until I see oil hit 80.00 I am not even going to blink. T Boone is no idiot, and has been through many recessions at his age. Nor are people in developing countries or the US going to stop driving any time soon. They can't afford an expensive hybrid, and will most likely continue to use their own car they have. Would you enter in to a new car loan in this environment, even if you could get a loan? Think it through, and then ask yourself, would you rather be in oil, cash, or retail in the long run?

Where's the Bottom? Still Anybody's Guess

Outtanames999 I believe hit the nail right on the head. And, I will go as far as to say that this is the Paulson plan itself. He used to be the top guy at GS, he knows what he is doing. Now, this weeks problem is not quite so easy to fix - political pandering by clueless congressmen and women in an election year. And they unfortunately are pandering to an uneducated public by and large, that has no idea what a CDS, RMBS, CDO, or Tranche is. The way the public sees this is just a "bailout of fat cats". In that kind of context and in an election cycle, you can rest assured that logical thinking will be thrown away, and rhetoric and running at the mouth will be the order of the day. The best we can hope for is that a deal was already struck over the weekend, and all this is just political theatre for the benefit of the masses that want "accountability".

Why The Paulson Plan Won’t Work

I could not agree more. It is childish for people to let the whole country (and world) go down, because of some sleeze in Wall Street. Let the FBI jail the villains, but don't make every man, woman and child have to suffer for years just to prove a point. The plan is an injection of good guaranteed capital in to the system to replace toxic junk. Think about why this is toxic junk? If these notes are purchased at a good price, reworked and modified, immediately they become good stuff. The problem, over valued principal and punitive interest rates. People would stay in their homes if given a real alternative in forebearance and not some stupid "lets tack on more fees and delay the inevitable" work out. A real workout that gives a borrower INCENTIVE to stay in their home, will stablize the market, make toxic junk in to good cash flowing assets and begin to repair a mess created by Wall Street's stupidity and greed.

Fannie, Freddie Bailout To Wipe Out Equity Holders?

We all should have told Paulson to screw himself back in March when he said that they would not bail out anyone. In fact the entire leadership should be shown the door for attempting to regulate after the damage is done. They need to nationalize Fannie and Freddie and be done with it. This half ass approach to financial engineering is just prolonging a painful process caused by regulators asleep at the switch for years. The machine is broken, kill it and move on....

PPC Advertising Takes Its Toll on Google

As you can see from my handle, I like Google so take this with a grain of salt. However, from the simplest point of view, anytime that people make a verb out of a company ie:" Lets Google this person" or tv ads stating to "google" their keyword - that tells me this company is as Warren Buffet would say "A company with a mote around it". They have 70% of the market in a market that is growing by 50% a year. I find it difficult to believe that Yahoo and M$ combining are going to be much of threat to Google in the short term, and in the long term there is so much advertising moving from print to online media that both can share and still make money. Besides, Google is deversifying itself in so many ways that I doubt in a few years the bulk of their revenue will be from ad clicks anyway. It all depends on your time horizon. I am 33 and will not need to touch that money for a long long time so I don't care much what it does now. Since I bought it at about the middle 400's I think I am safe even in short term drops. I think it all boils down to time horizon. Maybe it won't go up at the clip that it did in the past, but hey I still think it will beat the S&P average handily in the long run.