No joke. I bought some more FAS and TCK after the "sell-off" around 2pm and made some quick money. I kept some to see what happens tomorrow. I thought for sure there'd be a nice sell-off today. I think the markets may be hoping for a bottom in housing.
Everything's all about anticipating the M2M changes. If the rules actually get changed during market hours, my guess is you're going to have one of those 3-5% super-rallies, probably continuing into Friday. Then next week, reality will set in and you'll probably have a at least a small pullback. But the reality is that M2M would be a real game-changing event for the financials - not just a blip on the radar. It actually makes these companies far more solvent in the near-term. My guess is it will start a pretty nice rally over the next few weeks. On the other hand, if FASB doesn't change the rules, all hell is going to break loose in a bad way.
no it wouldn't be game changing...they still have the issue of being far overlevered and tons of garbage that is off the balance sheets.
Sure - but it takes the need for immediate capital and the risk of immediate collapse off the table. Some of these banks would have failed regardless, but M2M accelerated the process. Similarly, removing M2M will slow the process, allowing them the time for the economy to recover to stabilize their operations a bit and de-leverage under more favorable conditions than an emergency "gotta raise capital NOW" situation. It changes the timetables and the capital requirement conditions under which the banks are operating - that's game-changing for the banks.
most international markets seem to be up 3.5-4% with the hang seng getting a nice 7% boost (the ol' 1000 point move).
FASB Schedule for today. The meeting starts at 7am : http://fasb.org/calendar/ (scroll down to Apr 2) FAS 157-e is the mark-to-market discussion. It seems like it will be the first to be discussed. Internet audio/telephone broadcast : http://fasb.org/action/mtgs_webcast&telephone.shtml
I'm unsure as to the exact details of it, but my initial reaction is that I don't agree with the M2M change. I think one of the overwhelming lessons of the last few months is that the more places you give people to hide things, the more they will do it, and the bigger the shock will be in the end.
you want to see something game changing then check out interest rate swaps cds's held by commercial banks topped out at $15.9 trillion in '08....interest rate swaps help by commercial banks were at $164.4 trillion. nothing going wrong there right now but... http://zerohedge.blogspot.com/2009/03/is-gs-tempting-interest-rate-black-swan.html
I think there are two different pieces here that M2M affects: one is the transparency and the other is the actual capital requirements. M2M is good for transparency, but it was causing a wreck in the capital requirements aspect. In theory with liquid markets, M2M makes some good sense. But if you don't have a properly functioning market to dispose of assets, it doesn't make sense to value those assets based on "what are they worth if I had to sell them today". Its like saying "what is my house worth if I had to sell it this week?" That's only relevant if you have to sell it th today, but it's basically as though you're forced to sell low and in emergency conditions. Your house would be worth more if you had a month to hold out for a better price, and it will likely be worth even more if you had a few years to hold out. The idea of the new rules is to value your house in the latter scenarios. That said, it does hurt transparency. Hopefully, analysts have learned their lessons and will come up with their own valuations for these assets. I would like to have seen more transparency requirements in terms of disclosing the nature of the various assets, but that might still be to come.
you got it... http://zerohedge.blogspot.com/2009/03/ridiculous-marks-of-toxic-assets.html Tuesday, March 24, 2009 The Ridiculous Marks Of Toxic Assets Posted by Tyler Durden at 1:27 PM The Treasury's arbitrary transaction price of 84 for the "pool of residential mortgages" seems to not have been all that arbitrary after all. In fact, as it may turn out, it was gloriously optimistic. A report by Goldman today on the PPIP caught my eye, with one chart in particular, indicating that bank are still marking the bulk of their "assets" at 90-95! Of particular note is Citi's delirious optimism on marks in its assorted asset classes, especially commercial mortgages. A PPIP transaction at 70 is one thing, one at 95 is very much different, especially when the FMV is in the 30-40s, as the potential equity upside is very limited, while the downside is... well... much less so. Have not had much time to dig into this but present it for consideration and commentary. If banks have expectations for bid levels north of 90 on the bulk of TALF-mediated transactions, this could really end up being a lot of hot air, despite PIMROCK's enthusiastic endorsement of the proposal.
Robbie - am I wrong, or is that chart a list of ALL assets as opposed to the toxic ones? 94% for ALL mortgages doesn't seem all that unreasonable - the default rate us much lower than that. 94% for subprime would probably be bad.
It's true, but I think this underlies the inherent problem with hard-to-value assets - I think it's better to have overly punitive accounting rules in that case to discourage firms from getting into them if they don't understand them (which they didn't). Of course it didn't deter anybody this time as they just pretended like it could never happen. So who knows.
