financials ready to explode

Quote from sirgiyan:

As for the coming meeting I think it will be classsical buy rumors sell news event. So I wouldn't hold FAS after thursday
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couldn't agree with you more ..

the market has rallied on this rumor several times before ..it's not old news ..

another thing about m2m, the SEC has already stated that distressed asset sales and illiquid and irrational markets do not have to be used to determine a fair value of a companies assets... these are level 2 or level 3 assets which are NOT mark to market ... why do you think all of these banks have shifted this toxic sludge over to level 2 , level 3 ..?? so they don't have to mark to market ... if EVERYTHING was mark to market .. most banks would go under ! this suspension of mark to market does nothing but provide less transparency.. something the market doesn't need right now ... It's a bad idea and will most likely provide nothing but a temporary rally ..and a great shorting opportunity.
 
Quote from JJacksET4:

No. The problem with mark-to-market is that it forces a price that might be unrealistic for an asset. For example, lets say you owned a house that was "worth" $200K, but if you had to sell it in the next 1 hour, you couldn't be sure of getting more then say $100K

However, this doesn't mean your house is realistically only worth $100K - it is worth $200K, but if sold at a fire sale with only a few people even hearing of the sale, it would go super cheap.

So, these banks, etc. have assets that can have quite a bit more value then they are being credited with, because stuff is being priced as though it were fire-sale.

I think of it this way - let's say you had $2000 in cash to your name, and you had an inheritance coming in 3 weeks for $100,000. In the meantime, you put $3000 on your credit card for a big expense that comes up.

You would now be considered insolvent using mark to market, as it would value you at $-1000, despite the fact that the credit card payments aren't due yet, and the inheritance is coming!

At least that is my understanding and my opinion.

JJacksET4
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You need to read fooling some of the people all the time by David Einhorn.
 
let's not also forget the stress test results, some of the gov't officials have already stated that the results will be positively surprising.

the STRESS test results will once and for all, end all the rumors and separate the good banks from the junk.

as of now, a lot of it is based on rumor and fear.
 
Quote from JJacksET4:

No. The problem with mark-to-market is that it forces a price that might be unrealistic for an asset. For example, lets say you owned a house that was "worth" $200K, but if you had to sell it in the next 1 hour, you couldn't be sure of getting more then say $100K

However, this doesn't mean your house is realistically only worth $100K - it is worth $200K, but if sold at a fire sale with only a few people even hearing of the sale, it would go super cheap.

So, these banks, etc. have assets that can have quite a bit more value then they are being credited with, because stuff is being priced as though it were fire-sale.

I think of it this way - let's say you had $2000 in cash to your name, and you had an inheritance coming in 3 weeks for $100,000. In the meantime, you put $3000 on your credit card for a big expense that comes up.

You would now be considered insolvent using mark to market, as it would value you at $-1000, despite the fact that the credit card payments aren't due yet, and the inheritance is coming!

At least that is my understanding and my opinion.

JJacksET4
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:D :D :D :D

Is it any wonder that we find ourselves in the midst of this financial mess?
 
Man we're a mess.

Mark-to-market is JUNK and flawed. 8/10 it over-values the assets. You can't price illiquid assets based on it. That's exactly what we did. We're on our way to finding a BETTER alternative. Unfortunately, we're going to use a FAR worse alternative in the mean-time...be sure of that.

Aside from that I can't comment because I have zero clue what to do now as well.
 
I hardly think M2M is a minor item.

Here is some information from Steve Forbes (who knows quite a bit about money BTW) about it:

http://voluntaryxchange.typepad.com.../03/steve-forbes-mark-to-market-factoids.html

Here are some highlights (I added the bold and some caps :) ):

First up, mark-to-market ends up working the opposite way that dollar cost-averaging does on your portfolio:


Mark-to-market accounting does just the opposite. When times are good, it artificially boosts banks' capital, thereby encouraging more investing and lending. In a downturn it sets off a devastating deflation.

Mark-to-market accounting is the principal reason why our financial system is in a meltdown. The destructiveness of mark-to-market -- which was in force before the Great Depression -- is why FDR suspended it in 1938. It was unnecessarily destroying banks.

Of the more than $700 billion that financial institutions have written off, almost ALL of it has been book write-downs, not actual cash losses.

So although banks have twice the amount of cash on hand that they did a year ago, they lend only under duress, or apply onerous conditions. This is because they know that EVERY time they make a loan or an investment there is a risk of a book write-down, EVEN if the loan is unimpaired.


Again I am not sure if the M2M rules will be suspended, but I know for a fact banks would like it and investors in banks would like it and I believe it would set off a rally. If M2M is not suspended, then I have no idea how FAS will do.

JJacksET4
 
Oh, as for the topic the financials showed their first divergence today. They held strong. Should bode well for the market once March 12th rolls around.
 
Quote from Corelio:

:D :D :D :D

Is it any wonder that we find ourselves in the midst of this financial mess?
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Nope, not when they keep hiring Harvard business grads as CEOs and paying them millions of dollars and then they run fine institutions into the ground. A piece of paper showing what they did in school - geez.

JJacksET4
 
The March 12th meeting is just a hearing. I don't think they can pass any new rules (or in this case rescind FAS 157).

They can make a reco to suspend M2M, which should set off a rally, but I don't think they can pass the rule by themselves.
 
Quote from chuckybrown70:

that is what this article says:


http://seekingalpha.com/article/124908-the-mark-to-market-bank-trade-this-week

i think this is the one. get in now before the news comes out.

other people are already in the know, that is why the FAS was at break even when the overall market was down 2%. image if the financials would have tanked today? might have been down 4%.

they know they have to suspend it this time
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"How can you play this possible move?

Buy the Ultra Financial ProShares (NYSE: UYG). This ETF is trading at $1.50 right now so all you are theoretically risking, in a worst case scenario, is that $1.50 per share. It is very unlikely that all the banks included in this ETF will go to zero - but this is your worst case exposure.

The UYG consists of derivatives (options, futures, etc…) that have been constructed to DOUBLE the move made by the index of the financial sector.

This ETF could pop to $4 or a lot higher in no time at all. So, you have a 200% plus upside and a 100% downside (which is very, very, very unlikely). Most likely if the 12th comes and goes and the regulations are not altered at all you lose up to 50 cents - tops - on the index.

I like those odds (5+ to 1) and if decoupling the index from the banks portfolios for a while allows some recovery in the banks and stabilizes the market as a whole - a bottom could be put in and turn the fortunes of this entire market around"


+200% with low risk! what a great deal! where do i subscribe to get alerts like this before everyone else?!!
 
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