Market could explode upward after 3/12

[OAG]

If M2M is done away with: UPDATE: Stocks Could Skyrocket After March 12th - Tomorrows Playbook - CNBC.com

Anyone care to "guess" this one?

 

[FinallyRetired]

If M2M is done away with: UPDATE: Stocks Could Skyrocket After March 12th - Tomorrows Playbook - CNBC.com

Anyone care to "guess" this one?

More material for a future John Steward show.

 

[W2R]

Wow, let's hope they do skyrocket!!

However, I wouldn't bet half a plugged nickel on it. Guess I'm a pessimist.

 

[Meadbh]

That would be nice, but I won't hold my breath. In any case, that's an accounting issue. I would rather see real strength in the economy.

 

[Maurice]

Eliminating MTM won't help. Just ask GE.

 

[Gone4Good]

If an accountant finds an asset in the woods but nobody believes it's real, is it still an asset?

 

[Rustic23]

Well it should go up leading up to the 12th and crater on the 12th.

 

[FIREd]

I feel like eliminating mark-to-market is kinda like sweeping the dirt under the rug.

 

[BunsGettingFirm]

Let's hope not. I vote for another 8 months of 0% return so that I can buy more.

 

[ziggy29]

I feel like eliminating mark-to-market is kinda like sweeping the dirt under the rug.

Maybe. But I do think it had a role in toxifying the balance sheets of some banks that would have otherwise been at least borderline solvent. When performing assets are "marked to market" at 20-30 cents on the dollar because there's no bid for those securities, you have a dysfunctional and illiquid market for which M2M might not be the best way to go.

I understand the reasoning for it -- in a word, Enron -- but in this illiquid market that's risk-averse to the point of panic, I think a lot of perfectly good items on the balance sheet are being valued as almost worthless -- again, even if they are performing. I really don't think the architects of the M2M system intended that for markets like these; in fact, in markets like these it can help fuel a death spiral.

I think M2M's a good rule in the general case, but I'd like to think there's some way to find an alternative common-sense way to value some of the illiquid MBS's of today without canning M2M completely. But make no mistake: without M2M accounting there's no way the death spiral in balance sheets and reserves is this bad.

 

[tjon72]

Or mebby not..........

 

[bbbamI]

 

[Frugality_of_Apathy]

maybe he's holding the graph upside down?

 

[RonBoyd]

Paul Krugman, of the NYTimes, thinks differently:

Behind the Curve

A real fix for the troubles of the banking system might help make up for the inadequate size of the stimulus plan, so it was good to hear that Mr. Obama spends at least an hour each day with his economic advisors, “talking through how we are approaching the financial markets.” But he went on to dismiss calls for decisive action as coming from “blogs” (actually, they’re coming from many other places, including at least one president of a Federal Reserve bank), and suggested that critics want to “nationalize all the banks” (something nobody is proposing).

As I read it, this dismissal — together with the continuing failure to announce any broad plans for bank restructuring — means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around. And with the stimulus plan too small to deliver an economic recovery ... well, you get the picture.

 

[Gpond]

I feel like eliminating mark-to-market is kinda like sweeping the dirt under the rug.

How do you think corporations were able to beat earnings by a penny?

Have a pile of toxic waste on your balance sheet and price it anything you want.

Eliminating mark to market is a sure fire way to create another unsustainable bubble.

 

[al_bundy]

I feel like eliminating mark-to-market is kinda like sweeping the dirt under the rug.

it is, but it will also solve some problems

right now with most CDS contracts if the value of the bond drops then you have to pay up cash as extra collateral. this is the reason we are feeding money to AIG all the time. you get rid of mark to market and this will probably free up some cash that could be used to lend to consumers and businesses

and more importantly, the rate of change of bad news seems to have slowed

 

[Grep]

Moderating mark to market rules could help Wall Street (and many of us) in the short run. I'd likely cheer if so.

However, it does not seem compatible with the nascent efforts to leverage, subsidize and/or guarantee private purchases of debt.

It could also cement zombie status for wide swathes of the banking and insurance system.