If you ever believed the short-selling ban was going to work, I have some pacific ocean front property for sale...........................in Las Vegas.......real cheap........I promise.
Warlock
So much for the ban on short-selling.........................
by Warlock 27 Replies latest jw friends
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asilentone
how much?
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Warlock
Wow, where did all the supporters of the short selling ban go?
Warlock
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BurnTheShips
The Shanghai exchange never allowed shortselling.
Much good it has done them.
This is a bullshit crisis. Politically manufactured.
They need to suspend the stupid SOX mark to market rule and lift capital gains taxes for a time so that people with cash can go to town on depressed assets. This will raise the prices and slow the bleeding.
BTS
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Warlock
This is a bullshit crisis. Politically manufactured.
Agreed.
Warlock
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FreeWilly
It is real silly. Short sellers do not affect macro trends and in times of panic short sellers provide a reserve of buyers. If he could Paulson would ban price discovery by the markets.
Regarding the crisis, Oh its real alright. Wallstreet leverage the farm on Real Estate remaining stable or rising. Quantitative computer models did not factor more than a 3% decline in values. All the investment houses leverage their customers assets heavily on this premis. BSC, MER, MS, LEH, GS and others were leverage in 20,30 and even 40:1 ! When that math works against you it vaporizes lots and lots of cash.
Treasury Secretary Paulson (ex CEO of Goldman) wants the Taxpayer to bail out his golf buddies. The bailout of AIG was a Goldman Sach bailout in disquise. As Goldman's largest trading partner, AIG's failure would have sunk GS's balance sheet below minimun capital requirements. This happened to Bear Stearns and Lehman causing their investors to pull their funds in fear of loss. * Poof * they were gone. Paulson made sure that wasn't the case with GS. Criminal
Paulson is truly a fox in the henhouse.
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BurnTheShips
They need to suspend the stupid SOX mark to market rule and lift capital gains taxes for a time so that people with cash can go to town on depressed assets. This will raise the prices and slow the bleeding.
This is what I wrote earlier today and.....Breaking, this is great news!!!
ARLINGTON, VA -- Today, Doug Holtz-Eakin, McCain-Palin 2008 Senior Policy Adviser, issued the following statement on the SEC's plan to relax mark-to-market accounting requirements:
"John McCain is pleased to see that the SEC has finally decided to permit alternative accounting methods to mark-to-market accounting for securities where no active market exists. There is serious concern that these accounting rules are worsening the credit crunch, making it difficult for small businesses to stay afloat and squeezing family budgets. In March, John McCain called for a meeting of accounting professionals to discuss whether mark-to-market accounting was magnifying problems in the financial markets."
Background:
In March, John McCain Called For A Meeting Of Accounting Professionals To Analyze The Current Mark To Market Accounting Systems. "[I]t is time to convene a meeting of the nation's accounting professionals to discuss the current mark to market accounting systems. We are witnessing an unprecedented situation as banks and investors try to determine the appropriate value of the assets they are holding and there is widespread concern that this approach is exacerbating the credit crunch." (John McCain, Remarks, Santa Ana, CA, 3/25/08)
A bit on the late side though, look at all the firms that have foundered. Part of the reason FannieMac got taken over is because the gov't ound that their subprime mortgage backed securities were not valued according to mark to market. They said they didn't have to, since they were holding these until maturity, but to no avail. The gov't ruled otherwise making them technically insolvent and getting them taken over. I wonder if this change gives former shareholders a massive legal case against the government.
BTS
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FreeWilly
Burningtheships.
Eliminating mark to market accounting is not part of the solution it is the problem. The alternative - Mark to model (aka mark to imagination) is basically a free pass for these companies to deceive investors and keep losses hidden away from their balance sheets. It's what allowed this credit tsunami to gain strength. As long as investors didn't see losses their risk appetite remained large. They kept fueling ill advised mortgages even after the RE markets peaked and as far as they knew everything was fine. It's a page from Enron. The problem is leverage and credit. If you are leverage 20:1 on bubble house mortgages whose value has now dropped over 25% then yes, you don't want to mark those losses to the market because the market says you collection of mortgages is now worth less than zero $. As it is the FASB had to delay their compliance order for all investment firms to mark their portfolio's level 3 assets to market to 2010. The Fed realized lots of big names out of business if they had to value their Mortgage portfolio's according to the current market rates. Real Estate values are not going back to their bubble days. They are correcting back to their historical norms.
For over a hundred years home prices maintained a relationship of price to income ratios and a price to rent ratios. Post 2001, prices began deviating and eventually surpassed two standard deviations above these historical relationships. Simply put, people cannot afford to sacrifice too a large portion of their houshold income just to support a bubble mortgage.
I think litigation will pursue corporations who did NOT mark to market. It's a deceptive practice.
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BurnTheShips
Eliminating mark to market accounting is not part of the is no solution it is the problem.
There has to be a sane method for assesing the value of these assets. It needs to be transparent and generally accepted. Mark to market works when the market fairly values assets, but in this case they are not doing so due to the panic. To simply say, while markets are frozen and collapsed; that these mortgage backed securities are worthless, is idiotic. They are not worthless, and if the government actually buys these assets in a bailout, there is some expectation that it will actually turn a profit on it in the long run. Mortgage loans have a value no matter what the securities are trading at. They are collateralized. Paulson was going to have to assign some sort of value to these assets in order to purchase them anyway. And I a sure it wasn't going to be mark to market! Part of the argument for the bailout is that the mortgage backed securties are vastly undervalued, and that the government can buy them at a fair price, then sell them when the market price has increased. If they are that undervalued, this helps solve the problem without a massive bailout.
Sub-prime mortgages will likely have much higher values if considered in a longer-term perspective -- such as hold-to-maturity.
http://www.americanthinker.com/2008/09/the_trilliondollar_question_ar.html
The problem now is hard to decipher books. Investors know that some firms are going to be in better shape than others, but they can't necessarily tell from the balance sheets. This means that the most nebulous part of the ledger, the value of mortgage backed securities, will get a big rise. Transparency is still an issue. Much more information is needed when a company restates due to this rule change. Caveat emptor. Smart investors will do their homework, and smart firms will make their process transparent in order to attract investment. Regulation is still needed here.
Remember too, that the MTM rule is only suspended for assets that don't have a a published market value. Does this fix everything? No it does not. Is it something we can do in the long term? Maybe, maybe not. A transparent, generally accepted valuation method is needed, and he current debacle clearly exposes the weakness of pure MTM in these kinds of assets. Will the rule change help slow the freefall and give the markets time to fix themselves? I think so, but fear over transparency may blunt the effect. We will see.
BTS
