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I voted for the shoe that missed Bush..
Not sure what NSS home is, I must be getting old and stupid.
Doody has been banned...
....bagged and tagged
Nice to see a litle ZEN in the litter box...
Off with his FX-head...
Today's a snow day from work..
Blond date
Nettles has been washing dishes three times a day for over forty years and her hands are a bit rough.
A little hand lotion will clear up the problem....
Best Buy has Comm-condoms to protect both your telephone and computer line.
Good luck, just place a large trash bag around your computer to keep it internet safe.
How to Remove Mirar?
Follow these removal instructions to remove Mirar from your computer:
Click Start > Run , type 'regedit' and click Ok to open the Registry Editor.
Locate the following key:
HKEY_LOCAL_MACHINE \ SOFTWARE \ Microsoft \ Internet Explorer \ Toolbar,
in the right pane, delete the value {179E4B4A-76C3-4F65-BCED-C9FA1A28D2EF} , if it exists.
Locate the following key:
HKEY_CURRENT_USER \ SOFTWARE \ Microsoft \ Internet Explorer \ Toolbar \ WebBrowser,
in the right pane, delete the value {179E4B4A-76C3-4F65-BCED-C9FA1A28D2EF} , if it exists.
Delete the following key:
HKEY_LOCAL_MACHINE \ SOFTWARE \ Classes \ CLSID \ {179E4B4A-76C3-4F65-BCED-C9FA1A28D2EF}
HKEY_LOCAL_MACHINE \ SOFTWARE \ Classes \ CLSID \ {8A0DCBDA-6E20-489C-9041-C1E8A0352E75}
HKEY_LOCAL_MACHINE \ SOFTWARE \ Microsoft \ Windows \ CurrentVersion \ Explorer \ Browser Helper Objects \ {8A0DCBDA-6E20-489C-9041-C1E8A0352E75}
Reboot the computer.
Delete the following files (if exist ):
%SystemDir%\NN_BAR.DLL
%SystemDir%\NN_Bar21.dll
%SystemDir%\NN_Bar22.dll
%SystemDir%\NN_Bar31.dll
Note: %System% is a variable, you should replace it with the System directory in your computer. By default, this is C:\Windows\System (Windows 95/98/Me), C:\WINNT\System32 (Windows NT/2000), or C:\Windows\System32 (Windows XP).
Click Start > Settings > Control Panel, double click Internet Options, click the Programs tab, and then click on the Reset Web Settings .
Capitalism II: Brave New World
"The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew." Abraham Lincoln
"All conservatism is based upon the idea that if you leave things alone you leave them as they are. But you do not. If you leave a thing alone you leave it twisting in a torrent of change." G.K.Chesteron
"If you don't like change, you are going to like irrelevance even less." US Army General Eric Shinseki
When you have thoroughly made a mess of things, and realize that it is time for a change, one goes to wise mentors and more experienced friends if you are lucky enough to have them for constructive and sound advice.
But there are times when hearing from your critics as well is a good idea, because they will often tell you things too difficult for a friend to say openly and directly.
This essay below by Michael Hudson and Jeffrey Sommers strikes me as such a critical analysis of the US economy as it exists today. It is useful because it looks at the US from the eyes of the non-G7 countries through the lenses of what the authors call 'Managed Capitalism' in contrast to what they call Neo-Liberalism but what I might tend to refer to as "Financial Capitalism."
There are many things with which I disagree in this essay especially in terms of recommended courses of action in the particular. But there are a significant number of pointed observations "from the other guy's point of view" that makes it worth reading, carefully.
We need to recognize that Japan, China, and many countries today are hardly free markets, and that they embrace a very strong industrial policy formed by central bureaucracies. We may even have more of a structure such as this than we realize, with our outsized financial sector. These countries more are a form of Managed Capitalism.
My argument against that form of economic structure is that centralized decision making, especially as it becomes more particular, tends to get it wrong much more often than consensus decisions widely spread amongst market participants IF information is transparently dispersed. This is because bias and temperament tend to be blended out to the tails. Yes you may get a run of great leadership every so often in a centrally planned economy, but you will often enough get a Hitler, Stalin, or a Mao, and the damage they can do to a country is measured in the millions of the dead in addition to economic and structural loss.
To me, financial capitalism is a clear excess, a distortion of free market capitalism in the same way that managed capitalism is. They both assert unbalancing forces on the course of the neural structure of natural decision making and value transmission to productivity.
But I cannot argue with many, many of their observations. I do not think the US will willing change. Why should it? But I do think the change will first occur in the international trade mechanisms, with the displacement of that lynch pin of the Washington consensus, the dollar as reserve currency.
It is useful to read this not because you agree with it, but because a number of other countries who are your critics will agree, and change is coming. That is without doubt. The current financial system is inherently unstable because the self-correcting and price discovery mechanisms are broken.
I suspect the solution for the US will be to move back to a more progressive, less financial oriented and more productive economy. The cult of pervasive globalization is a hoax, an excuse to centralize power in a New World Order, that is not possible to implement in a world in which people have choices, and wish to maintain societies with the values and policies of their choosing.
If the US stays on its current course and seeks to maintain the status quo the next step will an attempt to establish stronger central planning in a New World Order. One can already see those in the Anglo-American establishment and the Neo-cons trying to pave the way for it.
It is true always and everywhere that if you surrender the management of your currency to another you have handed over the keys to your fiscal and societal freedom, because the control of the money strikes to the heart of your economy in ways that permeate interest rates, industrial production, health care, and personal freedoms.
As an aside, it will be interesting to see how Europe progresses in this, and whether the European Union will grow and transform, or fragment. The great variable will be leadership and vision.
Change is coming, whether we like it or not. It will be coming from the outside if not from within.
The days of both Soviet and Dollar imperialism are ending. The latest attempt to establish a New World Order is failing.
The 'big countries' may be dismantling neo-colonial empires once again, and planning will be moving from a central planning for the world at the Federal Reserve and Washington, as well as Moscow, and back to countries who for good or ill will be trying to manage their own economies for themselves.
"Few will have the greatness to bend history itself; but each of us can work to change a small portion of events, and in the total of all those acts will be written the history of this generation." Robert Kennedy
Link -
http://jessescrossroadscafe.blogspot.com/2008/12/capitalism-ii-brave-new-world.html
Sleeping prepare the o'body for trading Forex early next year...one more week till my three payed weeks off of Company time begins, and then 39 weeks of payed UE vacation time.
We only pay for A's or better....
....all of your Moms will be happy none the less.
Our son just pulled straight 4.0's in all of his classes this semester...I'm gonna have to hide the checkbook or see if he will take an IOU.
I'm waiting for Bernie Madoff to setup his offshore FX dealer account next year...
Santa Claus MOJO Rally coming soon...
....I've been good all year.
So Nettles there is a Santa Claus, and his name is George W. Bush....demo'crat must be singing and rejoying his name today.
Wait till Christmas and allow the market to place additional pressure on the UAW....
Treasury Bubble Talk Grows as U.S. Gets Free Money (Update3)
By Michael J. Moore
Dec. 11 (Bloomberg) -- The rally in Treasuries that pushed yields on bills below zero percent this week is adding to concerns that the $5.3 trillion market for government debt is a bubble waiting to burst.
Investors seeking safety from losses in equity and credit markets charged the Treasury zero percent interest when the government sold $30 billion of four-week bills on Dec. 9, the same day three-month bill rates turned negative for the first time since the U.S. began selling the debt in 1929. Yields on two-, 10- and 30-year securities touched record lows this month.
“Treasuries have some bubble characteristics, certainly the Treasury bill does,” said Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., which oversees the world’s largest bond fund. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk?” he said in a Bloomberg Television interview yesterday.
The 30-year bond returned 23.6 percent since September, including reinvested interest, more than it earned in any one year since gaining 34.1 percent in 1995, according to Merrill Lynch & Co. index data. Treasuries of all maturities gained an average of 11.9 percent this year, compared with a 41 percent drop in the Standard & Poor’s 500 Index and a loss of 15.3 percent in Merrill Lynch’s broadest corporate bond index.
Rising Supply
Rising supply of government debt to pay for the bailout of the economy and financial system has done little to damp demand. Treasury Assistant Secretary Karthik Ramanathan said in a speech yesterday in New York that the U.S. may introduce new financing methods to meet borrowing needs of $1.5 trillion to $2 trillion in the financial year that ends in September.
While supply has increased, rates on three-month bills fell 2.89 percentage points in the last year to 0.01 percent today, after trading as low as negative 0.05 percent on Dec. 9. The rate on four-week bills plummeted from a peak of 5.175 percent on Jan. 29, 2007. The three-month bill yield was unchanged today.
An investor who bought $1 million in three-month bills at the closing rate of negative 0.01 percent on Dec. 9 would realize a loss of $25.56 when the securities mature. Bills are sold at a discount and appreciate to par at maturity.
Even at the low yields, the government received bids for four times the amount of four-week bills it auctioned this week, according to the Treasury.
‘Insatiable Demand’
“There is basically insatiable demand for Treasury bills,” Ira Jersey, a New York-based interest-rate strategist at Credit Suisse Group AG, said in a Bloomberg Television interview. “There is a number of reasons for this, not only angst over deflation and what’s going on with risky assets, but there is also just a lot of cash that does not want to take any credit risk.”
Hunger for Treasuries increased as financial companies reported $984 billion of losses and writedowns related to the collapse of subprime mortgages since the start of 2007. The losses froze credit markets and helped send the U.S., Europe and Japan into the first simultaneous recessions since World War II.
Gross said he regrets not buying Treasuries in the past year. “If we went back 12 months and we had known then what we know now, it would have been all invested in Treasuries,” he said in the interview.
David Rosenberg, the chief North American economist at New York-based Merrill Lynch, said last week that demand for Treasuries had reached the “bubble” phase like in technology stocks in 2000 and real estate six years later.
Waive Fees
Record-low yields on government debt have led money-market funds to waive fees to keep returns positive. If the Federal Reserve cuts its 1 percent target rate for overnight loans between banks, as is expected next week by all but two of 56 economists surveyed by Bloomberg, some Treasury fund returns may turn negative, said Peter Crane, president of Crane Data LLC, a research firm in Westborough, Massachusetts.
Treasuries have “absolutely” entered a bubble, said David Brownlee, who oversees $15 billion as head of fixed income at Sentinel Asset Management in Montpelier, Vermont. “There is very little rationality in my mind to bills trading at zero.”
Sentiment among investors in Treasuries turned negative for the first time in four months, according to a JPMorgan Securities Inc. survey of clients. The firm’s weekly index fell to minus 6 on Dec. 8, from this year’s high of 27 a month ago. The figure is the difference between the percentage of investors betting prices will rise and those expecting a decline.
Deflation Speculation
Speculation that the recession will result in deflation, or a prolonged slide in prices, is also driving demand for Treasuries. Consumer prices fell 1 percent in October, the most since records began in 1947, and may drop 1.2 percent in November, according to a Bloomberg survey of economists.
Deflation may worsen the economic downturn by making debts harder to pay and countering the impact of Fed rate cuts. Deflation also makes bonds more valuable, even with yields at record lows.
Treasuries may actually be “fairly valued,” Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, said in a report yesterday. Even so, yields will likely rise in mid-January as investors’ focus turns to prospects for an economic recovery, he wrote.
The U.S. pledged $8.5 trillion, more than half of the country’s gross domestic product, to spur lending and limit the damage of the recession.
Economists forecast higher bond yields as those efforts take effect over the next year. The yield on the 10-year note will rise to 3.66 percent by the end of 2009 from 2.67 percent today, according to 50 estimates in a Bloomberg survey. That would result in a loss of 3.88 percent as bond prices decline.
“At some point we are going to get some signal, some indication that this massive policy response is getting some traction,” said Mitchell Stapley, who oversees $22 billion as chief fixed-income officer for Grand Rapids, Michigan-based Fifth Third Asset Management. “The flight out of Treasuries is something that will be breathtaking.”
Link - http://www.bloomberg.com/apps/news?pid=20601213&refer=home&sid=a9yyu08y5TMc
OT - Tell CaT to send you a $3,350.90 check for Christmas.
OT - Same here, but now we are in a different times, preparing for the perfect storm next year.
The house of cards has already collapsed and I'm not sure the new government can restore the house.
OT - No one should always pay the credit cards, but you can float your payment and pay just the min charges to help ride out the hard times.
With the extra 100K you get a sponge bath from a female nurse...
...400K only get you the following nurse.
Time to PONY up for another 100K
I checked with the local mental institution and only 500K shares are required.
OT - It's gonna be a long hard winter. I've been paying off the good debt (house) and letting the bad debt (credit cards) gather dust.
I'm expecting to be the lamb that get's the PINK slip beginning of the year and I'm prepared to gather the unemployment checks and enjoy my FREE vacation for the next year. Perfect time for a 401K to Roth retirment conversion.
OT - I see dead people...
...welcome back
OT- Cat's out of the bag.
Yes - We are sleeping for the winter and waiting for the Spring Eight-K.
OT - Classic line - wish I had more kids so I could watch more cartoons.
Pinky and the Brain:
OT - It's that time of the year when you pretend to be working to preserve your bonus check and try to keep your job for next year. Have to be careful about IHUB posting during working hours.
OT - IHUB blasphemy is not allowed....
....MATT is watching and he will smite ye
Smite ye Link:
OT - Good luck - I'm trying to pay the house off in April and then become an Omama FREE LOADER for the next nine months.
Stocks Rally Worldwide, Dow Hits One-Month High on Obama Plan
By Whitney Kisling
Dec. 8 (Bloomberg) -- Stocks rose around the world, sending the Dow Jones Industrial Average to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s.
The Standard & Poor’s 500 Index extended its gain from an 11-year low last month to 21 percent. U.S. Steel Corp. and Alcoa Inc. climbed at least 17 percent, while Chevron Corp. added 4.9 percent, as Obama’s plan to improve infrastructure triggered gains in commodities. General Motors Corp. jumped 21 percent as lawmakers agreed in principle with the White House to provide funds to shore up the car industry.
“Hopefully it helps get the economy turned around, jumpstarting private spending with public spending,” said Bill Stone, who helps oversee about $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “That’s the whole point of this is to try to get that jumpstart going.”
The S&P 500 surged 3.8 percent to 909.7, with all 10 industry groups advancing. The Dow added 298.76 points, or 3.5 percent, to 8,934.18 and earlier rose above 9,000 for the first time in a month. The Nasdaq Composite Index increased 4.1 percent to 1,571.74. Five stocks gained for each that fell on the New York Stock Exchange.
The S&P 500 has climbed in nine of the 11 trading sessions since Nov. 20, in part on speculation the Federal Reserve will cut interest rates and Congress will step up efforts to boost the economy. The benchmark index is still down 38 percent in 2008 after the collapse of the subprime mortgage market reduced average profits for five straight quarters.
‘Mad Bull’
All 10 industry groups in the S&P 500 have risen at least 9.2 percent since the U.S. benchmark sank to its 11-year low on Nov. 20. Financial stocks led the rally, climbing 46 percent collectively, followed by consumer discretionary and telephone companies.
Today’s gains put a technical end to the 13-month bear market that began after the S&P 500 reached a record close of 1,565.15 in October 2007. An advance of more than 20 percent from a low is the standard definition of a bull market.
“If it’s a bull it’s a mad bull, a very confused bull,” said John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $200 billion. “People are looking at the ruins of the stock market and saying there’s awfully cheap stocks. That’s different from strong conviction prices are moving in an upward direction because of improving fundamentals.”
The S&P 500 Financials Index is still down 53 percent this year, as credit-related losses and writedowns at banks and financial firms climbed to $981.2 billion worldwide amid the worst economic slump since the Great Depression.
‘Dramatic Action’
Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs after companies cut payrolls at the fastest pace in 34 years last month.
“There’s an awareness now that this is across the board,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, told Bloomberg Television. “A Band-Aid here and a Band-Aid there is not going to form a solution. You’ve got to really take some dramatic action, and I think that’s what investors are responding to today.”
U.S. Steel Corp. helped lead gains among raw material producers in the S&P 500 with a 24 percent advance to $35.79, its biggest gain in at least 17 years. The second-largest U.S. steelmaker was raised to “conviction buy” by Goldman Sachs Group Inc. analysts, who predicted steel prices are on the verge of rebounding after supply cuts outpaced the global collapse in demand.
Commodities Rally
Olympic Steel Inc. gained 25 percent to $19.02 after Goldman raised it to “buy” from “neutral.” AK Steel Holding Corp., the fourth-largest U.S. steelmaker, added 26 percent to $8.99.
Alcoa Inc., the largest U.S. aluminum maker, jumped $1.43 to $9.58. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, added 19 percent to $20.01.
Raw materials producers in the S&P 500 climbed 7.7 percent as a group for the biggest advance among 10 industries.
Commodity prices rebounded from last week’s losses on speculation Obama’s spending on roads, bridges and school repairs will boost demand. Copper rallied more than 9 percent, while crude climbed 7.1 percent to $43.71 a barrel.
Exxon Mobil Corp., the world’s largest oil company, climbed 3.9 percent to $79.60. Chevron, the second-biggest, increased $3.67 to $78.09.
Chesapeake Energy Corp. surged 24 percent to $14.08 for the steepest gain since April 1999. The second-biggest independent U.S. natural-gas producer said it will cut spending and plans to build cash resources because of a plunge in energy prices.
Construction, Automakers
Construction-equipment makers rallied, with Caterpillar Inc., the world’s largest maker of backhoes and excavators, adding 11 percent to $42.42. Manitowoc Co., the construction- crane maker based in the Wisconsin city of the same name, rose 18 percent to $8.80.
GM, the largest U.S. automaker, rallied the most in the Dow average, adding 85 cents to $4.93. Ford Motor Co., the second- biggest, surged 24 percent to $3.38.
Congress and the Bush administration are close to agreeing on the details of a $15 billion, short-term rescue plan for the auto-industry that will probably be passed and signed into law this week, House Financial Services Committee Chairman Barney Frank said.
House Speaker Nancy Pelosi also dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help carmakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.
Merger Speculation
NYSE Euronext jumped 23 percent to $26.21. Deutsche Boerse AG said it explored a merger offer for the world’s biggest owner of stock exchanges. The talks “ended without any conclusion,” Deutsche Boerse said.
NASDAQ OMX Group Inc. increased 9.1 percent to $25.47. The FTSE/Mondo Visione Exchanges Index, which tracks 17 of the world’s publicly traded exchanges, rose 14 percent.
JPMorgan Chase & Co. gained 9.4 percent to $36.49 after it was raised to “buy” from “neutral” by Ladenburg Thalmann Inc. analyst Dick Bove, who said the bank’s acquisition of Washington Mutual Inc. should contribute “meaningfully” to earnings.
End to ‘Hysteria’
“Additionally, the hysteria surrounding the banking industry is likely to come to an end in 2009 as these companies continue to report earnings,” Bove wrote in a note.
Bank of America Corp. rallied 17 percent to $17.84, while Citigroup Inc. added 9.9 percent to $8.47. The S&P 500 Financials Index advanced 6.9 percent.
Sun Microsystems Inc. climbed after agreeing to let its biggest shareholder pick two new independent directors, giving Southeastern Asset Management Inc. more authority to guide a restructuring. Sun, the server maker that has lost 79 percent of its value this year, rallied 9.7 percent to $3.83.
3M Co. posted the biggest decline in the Dow average after the maker of products from Post-it Notes to electronic road signs said it may need to cut more jobs next year, after eliminating 2,300 this quarter. 3M slipped 4.1 percent to $57.38.
Obama’s plan to boost the economy with a “substantial” infrastructure stimulus package triggered a global rally, with the MSCI World Index jumping 5.5 percent.
Global Rally
Benchmark indexes in Germany and France added 7.6 percent and 8.7 percent respectively, while Tokyo’s Nikkei 225 climbed 5.2 percent.
Siemens AG, Europe’s largest engineering company, jumped 10 percent to 49.40 euros. Hochtief AG, Germany’s biggest builder, added 16 percent to 30.94 euros. Royal Dutch Shell Plc, Europe’s biggest energy producer, advanced 8.3 percent to 1,691 pence in London.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, rose 11 percent to 1,007 yen. India’s biggest mortgage lender, Housing Development Finance Corp., added 5.7 percent to 1,511.95 rupees.
Stocks had fallen so far this year that 2,267 companies around the globe offered profits to investors for free as of the open of trading today. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.
Bank of New York Mellon Corp., Danieli SpA in Buttrio, Italy, and Seoul-based Namyang Dairy Products Co. held more cash than the value of their stock and debt as the slowing world economy wiped out $32 trillion in capitalization this year. Companies in the MSCI World Index traded for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sold at a discount to shareholder equity as of the open, data compiled by Bloomberg show.
Link - http://www.bloomberg.com/apps/news?pid=20601087&sid=a4ieRPJ34pW8&refer=home
Behind Schwarzman Spat With Wasserstein Lies Rule 115 (Update1)
By Ian Katz
Dec. 8 (Bloomberg) -- An argument between two Wall Street titans seated in director’s chairs at Per Se restaurant in New York in October has escalated into a fight over an obscure accounting rule known as Statement No. 115.
Five weeks ago the dispute was over so-called fair-value accounting, which requires companies to record assets every quarter to reflect market value. In one chair was Blackstone Group LP Chairman Stephen Schwarzman, who said the standard had aggravated the worst financial crisis since the Great Depression. In the other was Lazard Ltd. Chairman Bruce Wasserstein, who said the rule gives investors an honest look at corporate earnings.
Now banks, which have been unsuccessful in getting regulators to revamp fair-value, also known as mark-to-market, are trying to win revisions to another U.S. Financial Accounting Standards Board requirement that could preserve billions of dollars of their capital.
“Financial institutions, which have been woefully incompetent in running their own firms, are now trying to avoid providing investors with accurate numbers depicting the large losses they have suffered under their mismanagement,” said Lynn Turner, the Securities and Exchange Commission’s former chief accountant, in an interview.
The Financial Services Roundtable, whose members include New York-based Citigroup Inc. and Bank of America Corp. of Charlotte, North Carolina, are proposing using Statement No. 115, which applies to so-called impaired debt and equity, for some securities that now fall under the fair-value rule.
‘Downward Spiral’
In a Nov. 12 letter to the SEC, Robert Traficanti, Citigroup’s head of accounting policy, gave an example of mortgage-backed securities the bank owns and said the rule change would reduce a third-quarter charge to earnings to $19.2 million from $76.2 million. The proposed switch “is a much better reflection of the losses we expect to incur,” he wrote.
By using standard 115, banks could take into account cash generated from underlying assets such as mortgages and not rely on a market price dictated by the fair-value rule.
Moving to the impaired debt and equity standard would help “stop the downward spiral caused by the inability of ivory tower accounting rules to recognize the economic value of an asset,” Scott Talbott, the Washington-based roundtable’s chief lobbyist, said in an interview.
Michael Williams, research director for Gradient Analytics Inc. in Scottsdale, Arizona, says the change could allow banks to avoid raising capital to comply with federal regulations.
For banks, Williams said, “the biggest worry they have is regulatory capital.”
Fair-Value Review
SEC Deputy Chief Accountant James Kroeker said the agency has been urged to clarify the impairment rules. “We’ve heard from investors that there’s room for improvement,” Kroeker told reporters at a conference in New York last month.
Kroeker is leading a study on fair value that the SEC is required to conduct under terms of the $700 billion federal financial-rescue package enacted in October. The SEC must submit a written report to Congress by Jan. 2 that evaluates how the rule can be improved and whether it has caused banks to fail.
Preliminary findings from the study show that investors want the SEC to issue “guidance” to clarify fair-value, SEC Chairman Christopher Cox said in a speech in Washington today.
“Most investors and many others agree that fair-value is a meaningful and transparent measure of investment for financial- reporting purposes,” Cox said at an American Institute of Certified Public Accountants conference. “The work that we’ve already done suggests that the accounting standard-setters could improve upon” rules for impaired securities, he said.
Schwarzman’s Lament
The SEC, which can overrule FASB, has declined to overhaul the fair-value rule, known as Statement No. 157, releasing clarifications in September that didn’t satisfy industry groups. The global credit crunch transformed the rule, which took effect a year ago, into a mainstream economic topic.
“Historians will look back some day and say that the government drove companies into bankruptcy by creating artificial losses,” former House Speaker Newt Gingrich, 65, who led the 1994 Republican takeover of Congress, said in a Bloomberg interview in October.
Those arguing for change include some of the companies suffering the most since the subprime-mortgage crisis began last year, including Citigroup and American International Group Inc. Critics, who say the fair-value rule doesn’t work when there are no buyers for toxic assets, include the 61-year-old Schwarzman, whose New York-based Blackstone manages the world’s largest private-equity fund and whose shares have fallen 72 percent this year in New York Stock Exchange composite trading.
‘Major Contributor’
The rule “and the way it’s been implemented has been a major contributor to the financial crisis,” Schwarzman said at the Oct. 30 discussion hosted by Fortune magazine at Per Se.
Wasserstein, 60, who has a better track record this year with Lazard declining 37 percent in NYSE composite trading, took the opposite position.
“Accounting has now become an exercise in creative fiction,” he said. “Saying assets are worth a lot doesn’t make them worth a lot.”
Wasserstein and Schwarzman both declined to comment.
Democratic legislators are less eager to overhaul fair-value than Republicans. In a September letter, 65 House lawmakers urged SEC Chairman Cox to suspend the rule; only seven were Democrats.
Two of Obama’s closest economic advisers, former Treasury Secretary Lawrence Summers and former Federal Reserve Chairman Paul Volcker, have expressed support for fair-value accounting. So have Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson, who said on Nov. 20 that he knows of “no better accounting method,” even as he welcomed “steps to review and modify its implementation during severe market stress.”
Models Hindered
Private-equity executives, including Schwarzman, say mark- to-market accounting unfairly forces them to value holdings even if they have no intention of selling them at that time, hindering the business model of fixing up companies and disposing of them years later for a profit.
Brian Wesbury, chief economist at First Trust Advisors LP in Lisle, Illinois, compared the idea of forcing banks to price their assets now to a homeowner in California having to sell his house at the moment a fire is at his doorstep.
“If the bank knocked on your door and forced you to mark to market at that moment, you’d be bankrupt,” Wesbury said.
Citigroup Senior Vice Chairman William Rhodes and Deutsche Bank AG Chief Executive Officer Josef Ackermann are also fair- value critics. The two men, speaking in October in Washington on behalf of the Institute of International Finance, a global association of financial institutions, said the rule needs a review because it doesn’t work in illiquid markets.
Sour Grapes
Fair-value’s fans portray the complaints as sour grapes by banks that don’t want to admit how bad their subprime investments were.
Blaming the rule 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,” JPMorgan Chase & Co. analyst Dane Mott wrote in a September report.
U.S. companies have used fair-value accounting since an earlier FASB rule took effect in 1993, Mott said at an SEC conference in November, and the newer rule simply defines the method and sets up a framework for how to implement it.
Matthew Schroeder, managing director for accounting policy at Goldman Sachs Group Inc., is another fair-value advocate. “For us, fair value is the oxygen of the firm,” he told the SEC in July. “It’s part of our fabric. We follow a daily discipline of marking to market at our firm. It can be done.”
Link - http://www.bloomberg.com/apps/news?pid=20601109&sid=aGLHt9Kw7JNo&refer=home
OT - Thanks, I'm bring a bottle of SCOTCH, a roll of toilet paper, and a SHOVEL...
....I'm prepared for bathroom and mummy breaks.
OT - The most important thing is to break the cycle and become the BEST parent to your kids.
I'm starting to see life thru my Dads eyes, which is starting to help answer questions that I had as a child.
Looking forward to my roadtrips with Dad, so that I can ask him questions to prepare myself for the next thirty years.
OT - It's not that bad.
Mom been dead for six years, Dad has a retirement girlfriend and he wants to make sure that his four boys our taken care of after he dies.
Being the black sheep of the family, I've been guarding his henhouse to keep the FOXES out, so far his two favorite sons have turned into foxes.
Hopefully one of many future Road trip that I will be able to share with my Dad.
OT - My Reno visit has moved to March, but I'm schedule for Las Vegas and San Diego, Dad's planning on giving me a house in San Diego, I've planned some time to talk to Dad, put his last wishes in order and visit Mom grave during the Jan 4th to 7th timeframe.
OT - Thanks for the link - I can read it Sunday morning during the weekly feeding of the DUCKS and CHICKENS.
You want to pick some tumbleweeds in Stagecoach - during your RENO visit?