Biotech Values

[medchal]

Obviously, the lunacy of the accounting profession as to "market value" continues apace. Bank loans are not "marketable" in the commonly accepted use of that word, so how is one to determine their "market value"? Note that the author uses "fair value" and "market value" interchangeably, which should tell you something of both his biases and his sphere of ignorance.

Commercial banks exist for the sole purpose of taking in non-marketable investments (deposits) and turning them into non-marketable assets (bank loans). If an investor cannot deal with that, he'd better steer clear of bank stocks instead of screaming for more "disclosure".

I wonder if the author has ever had any direct experience with the purchase and sale of bank loans. I doubt it. The few mutual funds which have attempted to trade in these assets (notably, the old Van Kampen Prime Rate Fund), have been spectacularly unsuccessful at it.

We can, of course, if we wish, push forward blindly with mark-to-market accounting until we have bankrupted all our financial institutions. Perhaps that would finally make the FASB happy.