November 15th is FASB doomsday

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lendingmaestro_IHB

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http://www.rgemonitor.com/blog/roubini/225427





As of this Thursday, FASB 157 goes into place, and with it comes seriously implications. Institutions will now have to aggressively mark-to market their asset holdings instead of keeping them disguised. My question is what effect will this have on the markets? I haven't brushed up on my FASB and GAAP regs, so I am not sure about how long this process will take. Will companies have to immediately restate their balance sheets, or can they wait until their next quarterly 10k filing?





Goldman Sachs, which humorously was upgraded today, appears to be one of the largest holders of level 3 assets. I think someone is going to have egg on their face.
 
Scary, eh?<p>

And what if there is no market for the assets in question? Credit default swaps depend on the performance of the loser in the transaction. What if the loser can not pay? Correct me if I am wrong, but it seems to me the market value of the instrument is $0.00 if the obligatory party can not make good or is insolvent. The CDS market is estimated to be 50 times the size of the CDO market.<p>

Gold and silver are continuing to plunge in Eastern markets. Looks like a liquidity crunch to me.
 
David Faber on CNBC this morning said that the banks had been operating under this rule for quite sometime. So have they or have they not?
 
<p>Does any of that mean that lenders can only book the payment of a negatively amortizing mtg that they actually receive, rather than the whole thing.</p>

<p>The way this is booked seems totally crazy to me, but I've never even taken a bookkeeping course, so what do I know?</p>

<p>So November 15 will be remembered as the black 15th, stock mkt wise and the unwashed will regard that as the day Depression II began?</p>

<p>Awgee, why would a liquidity crunch cause precious metals to tank? Seems like it would be the reverse?</p>
 
LAWYERLIZ, if people are getting margin calls or need funds in a hurry and they aren't available, they often sell high quality investments. Gold and silver are very liquid, and current prices make them attractive to sell if you are hurting for money.
 
ll - WINEX said it better than I could have.<p>



mino - My understanding is that a form of the rule has existed, but on Nov. 15, some form of proof will needed to either show the Level 2 assets are marked to market, or ? It seems many assets have been included as Level 2 which require mark to market, which should have been Level 3 which is an admittance that the asset is marked to whatever. It seems many financial institutions have been pretending that certain assets have a value based on current market conditions, but this rule, when inforced, will force them to show how they value the asset instead of just taking the institution at it's word. If I can remember where I read about FASB 157, I will post the link here.
 
Awgee, aside from the liquidity issues, another thing worth noting is that we are overdue for a counter trend rally in the larger cycle of a decreasing dollar. As much as it pains me to admit it, when I saw Giselle being quoted for macro-economic advise in Bloomberg, I considered it as good of a sign as a magazine cover and knew it was time to close some DXDDX, GLD and SLV.





The time to reload will be with us soon.
 
WINEX - Yeah, the USD seemed ready for a good bounce, and gold and silver were getting a little long in the tooth. time to weed out the weak hands and the hedge funds. Personally, I am not in a postion to "reload" as I am no longer trading pms. The moves are too big and sudden for me at this point, so I am in and will ride out the corrections.
 
I didn't know exactly where to post this, but I sense more and more that the participants of this blog, and no longer finding it all quite so much fun, as it becomes more and more apparent, that it isn't just a case of a bunch of idiots losing money that they richly deserved to lose, and buyers finally being able to buy at a quasi reasonable price, but that our whole financial system is on the brink, and the ensuing pain isn't going to be fun and amusing to any of us.
 
I totally agree. Without debt you eliminate the concept of leverage. If we couldn't take risks (leverage), we wouldn't see our society and civilization grow. The problem is we operate on debt which is based on a fiat currency of no intrinsic value. It's all perceived value and right now that perceived value in our debt markets is plunging like the titanic.





The issuance of credit is the bloodstream that feeds our global economic body. At this moment, we have a nasty infection in our economic bloodstream. Right now there isn't a doctor in the world who knows how to fix it, not even Dr. House. If we somehow do find a cure it will be quite painful. We'll probably need to learn how to walk again.
 
AWGEE, there are certain things that I do establish core positions in, but I do like to trade too. Essentially, I want to position myself as well as possible for what comes after the next time down, and believe that I can do so by trading around on either side when things get overbought or oversold.
 
<p>Reply to lawyerliz:- there's not much cheerful when it hits home.</p>

<p>"Recession is when your neighbor loses his job. Depression is when you lose yours."</p>

<p>-Ronald Regan</p>

<p> </p>

<p>The Coming US Consumption Slowdown that Will Trigger an Economy-Wide Hard Landing</p>

<p>http://www.rgemonitor.com/blog/roubini/226072</p>
 
Anonymous, you forgot to include the best part of the Ronald Reagan quote "Recovery is when Jimmy Carter loses his job."
 
WINEX - I enjoy trading also, but being the paranoid that I am, I think equities held in a margin account are at risk. Trading on the long side does not seem to be my thing and since I have closed my margin accounts, I am no longer able to trade on the short side and am limited to puts. Puts are fun, but they sure are expensive right now. Good luck with your trading.
 
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