« August 2008 | Main | October 2008 »

Fair-Value Accounting & FASB 157

Tuesday, September 30, 2008 | 07:41 PM

"Blaming fair-value accounting for the credit crisis is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick.''
-Dane Mott , JPMorgan Chase & Co.

>

The debate on fair value accounting, FASB157, and transparency continues apace. If you want to understand why this is so important, just see LIBOR tagging all time highs today.

Banks don't want to lend to each other because they are not sure how much explosive dreck is in the other guy's balance sheet. Hiding the junk isn't going to help this at all . . .

Bloomberg:

"The U.S. Securities and Exchange Commission probably will resist calls to suspend the fair-value accounting rules that some members of Congress blame for exacerbating the global financial crisis, people familiar with the matter said.

The SEC and Financial Accounting Standards Board today issued "clarifications'' on how banks should interpret existing rules requiring them to review assets each quarter and report losses if values decline. A moratorium isn't being considered, said the people, who declined to be identified because the plan hasn't been completed.

Congressmen, banking lobbyists and companies including American International Group Inc. have urged the SEC to suspend fair-value accounting, saying it forces firms to report losses they never expect to incur. Federal Reserve Chairman Ben S. Bernanke and other proponents say removing the rule would erode confidence that firms are owning up to losses."

I don't see how transparency and accurately reporting investment holdings works against investors. I can see how allowing banks to hide this junk might prevent them from lending to each other.


>

Source:
SEC, FASB Resist Calls to Suspend Fair-Value Rules
Jesse Westbrook
Bloomberg, Sept. 30  2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=agj5r6nhOtpM&

Summary of Statement No. 157
Fair Value Measurements
http://www.fasb.org/st/summary/stsum157.shtml

Tuesday, September 30, 2008 | 07:41 PM | Permalink | Comments (78) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Trusting the Hedgies

Tuesday, September 30, 2008 | 04:30 PM

Did you get your hedge fund redemption demand in yet? The window closes today!

>

Trust_hedgies

Tuesday, September 30, 2008 | 04:30 PM | Permalink | Comments (24) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Best of "Bloomberg on the Economy"

Tuesday, September 30, 2008 | 03:00 PM

click for iTunes

Bloomberg_on_the_economy_best_of

Excellent series of podcasts by Tom Keene of Bloomberg on the Economy. Highlights include conversations with Nobel Laureates, professors and top economists.

Great stuff.

If you don't use iTunes, there is a listing of podcasts at Bloomberg.com after the jump . . .

Continue reading "Best of "Bloomberg on the Economy""

Tuesday, September 30, 2008 | 03:00 PM | Permalink | Comments (14) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Markets as Rorschach Tests: Dow up 400

Tuesday, September 30, 2008 | 02:00 PM

Today's silly market junk is this wingnut nonsense:

On the political front the polls have turned very swiftly against Sen. McCain, and we are certain that that is one reason why share prices plunged so easily yesterday, and why the US market led the way down even as markets around the world fell.

>

That is a classic example of selective perception. Its one of the reasons why market participants and many of the idiots known as economists should steer far far away from politics.

As we wrote back in January 2008:

Markets are not skittish because the incumbent party is in trouble - that’s getting it ass-backwards. When the ruling party is in election trouble, its because the future discounting mechanism of markets is incorporating a slowing economy into its pricing. Markets may be imperfect and subject to the excesses of crowd behavior, but they eventually get the big picture correct. The current market malaise reflects a recognition what is occurring in the macro-environment.

With the markets up 350 today, we will see that sort of thing turn very quiet very quickly. I guess we all Misunderestimated the Dow again.

>

Previously:
Confusing Cause & Effect: Elections and Markets   
TBP, January 9, 2008
http://bigpicture.typepad.com/comments/2008/01/confusing-cause.html

Confusing Cause & Effect
TBP, July 26, 2004 
http://bigpicture.typepad.com/comments/2004/07/confusing_cause.html

Related:
McCain's Odds Crash Along With Stock Market
Henry Blodget
Silicon Alley Insider, September 29, 2008 9:00 PM 
http://www.alleyinsider.com/2008/9/mccain-s-odds-crash-along-with-stock-market

Obama at 64%, McCain at 36%
Electoral College is 338 to 200 in Democrats favor
Intrade, September 30, 2008
http://www.intrade.com/

Tuesday, September 30, 2008 | 02:00 PM | Permalink | Comments (38) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

September Madness, Financial Edition

Tuesday, September 30, 2008 | 11:00 AM

Kudos to Tech Crunch for this fantastic bracket breakdown -- the Financial version of the March Madness:

>
Septembermadnessb

Michael Arrington credits Mark Slavonia, a general partner at Sansome Partners for the wit.


>

Hat tip Petey!

Source:
September Madness
Michael Arrington
Tech Crunch, September 29, 2008
http://www.techcrunch.com/2008/09/29/september-madness/

Tuesday, September 30, 2008 | 11:00 AM | Permalink | Comments (44) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Case Shiller Index Falls 17.5% in July

Tuesday, September 30, 2008 | 09:49 AM

U.S. home prices show continued record declines and double digit declines in existing single family homes across the United States.

During the 1990-92 cycle the record low was -6.3%. While the annual returns of the two indices continue to reach record lows, the pace of the decline has slowed, particularly over the last three months. For the three months of May thru July, home prices cumulatively fell about 2.2%; whereas for the three months of February thru April, and November 2007 thru January, the cumulative rates of decline were closer to 6.0-6.5%.

“There are signs of a slow down in the rate of decline across the metro areas, but no evidence of a bottom” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Little positive news can be found when cities like Las Vegas and Phoenix report annual declines as large as -29.9% and -29.3%, respectively, and all 20 cities are still in negative territory on a year-over-year basis. The Sunbelt continues to be the story, with the seven cities that basically represent that area reporting annual declines roughly between 20 and 30%.

While some cities did show some marginal improvement over last month’s data, there is still very little evidence of any particular region experiencing an absolute turnaround.” (emphasis added)

Here is the Case Shiller Price Indices, and a table of cities:

>

S&P/Case-Shiller Index - July 2008Case_shiller_july_08

chart courtesy of Standard & Poors

>

S&P/Case-Shiller Index - July 2008

Case_shiller_july_city_index

table  courtesy of TFS Derivatives



>>

Source:
Continued Record Home Price Declines
S&P/Case-Shiller Home Price Indices, July 2008 (published Sep. 30)
http://www.homeprice.standardandpoors.com
(Spreadsheet)

Tuesday, September 30, 2008 | 09:49 AM | Permalink | Comments (29) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

6.875%: LIBOR Tags All Time High

Tuesday, September 30, 2008 | 09:05 AM

"The money markets have completely broken down, with no trading taking place at all. There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.''

-Christoph Rieger, a fixed- income strategist, Dresdner Kleinwort.

>

The London interbank offered rate reached an all time high yesterday on the failure of the bailout plan, and the market sell off. For those of you new to the site, this interest rate is frequently used by banks to lend money to each other. When this spikes, it means that credit is very tight.

What did the Fixed Income Markets see that the Equity markets completely missed?  Was it availability of credit, the dollar, or unrealized risk?

Most likely, all of the above.

Note that the line below is where LIBOR first started breaking out -- late 2005. For those of you who believe that markets are future discounting mechanisms, what did that tell you?

Sure, markets remained irrational for quite a while, but there was no escaping the inevitable . . .


>

LIBOR 5 year Chart
Libor_5_years

Chart via Bloomberg

TED Spread Chart since 1984

Ted_spread
via Bill Laggner Bearing Asset.com


>
Excerpt:

"The cost of borrowing in dollars overnight surged the most on record after the U.S. Congress rejected a $700 billion bank rescue plan, heightening concern more institutions will fail.

The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers' Association said. The euro interbank offered rate, or Euribor, for one-month loans climbed to record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, advanced to a record. Rates in Asia also rose...

Credit markets have seized up, tipping lenders toward insolvency and forcing U.S. and European governments to rescue five banks in the past two days, including Dexia SA, the world's biggest lender to local governments, and Wachovia Corp. Money- market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620 billion. Banks borrowed dollars from the ECB at almost six times the Fed's benchmark interest rate today."

>

Source:
Libor Surges Most on Record After U.S. Congress Rejects Bailout
Gavin Finch and David Yong
Bloomberg, Sept. 30 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=alszNo3N0CHo&

Tuesday, September 30, 2008 | 09:05 AM | Permalink | Comments (43) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Front Page Crash Coverage

Tuesday, September 30, 2008 | 08:17 AM

Interesting front page coverage of yesterday's market action:
>

Crash_wsj

Crash_nyt_market_2

Lli

Econ_currentcoverus_large

1101081006_400

Tuesday, September 30, 2008 | 08:17 AM | Permalink | Comments (45) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Bacevich: The Limits of Power

Tuesday, September 30, 2008 | 12:30 AM

Is an imperial presidency destroying what America stands for?

Bill Moyers sits down with history and international relations expert and former US Army Colonel Andrew J. Bacevich who identifies three major problems facing our democracy: the crises of economy, government and militarism, and calls for a redefinition of the American way of life.

>

Part I

click for video
Linits_power_1

>

Part II

 

click for video
Bacevich

Continue reading "Bacevich: The Limits of Power"

Tuesday, September 30, 2008 | 12:30 AM | Permalink | Comments (50) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

All the Kings Horses and All the Kings Men . . .

Monday, September 29, 2008 | 04:30 PM

Humpty_dumpty_nyer


Humpty Dumpty sat on a Wall

Humpty Dumpty had a great fall

All the King's horses, and all the king's men

Didn't bankrupt the country and devaluate the currency putting the shifty bastard together again.

-Church

Monday, September 29, 2008 | 04:30 PM | Permalink | Comments (132) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner