American Banks ask SEC to give them a fair deal

Well to be honest, i guess Fair value accounting was reserved more for columnists and bloggers like us, rather than to be used practically.

In the latest dent, the American Banking Association (ABA) has asked the SEC to step in and override the controversial FAS 157. In a sharp critique, the ABA has gone after FASB' staff position 157-3 arguing that the revised guidance by the FASB still requires banks to mark-to-market assets at fire sale prices. "Given the importance of this issue, the impact it has on the crisis in the financial markets, and the seeming inability of the FASB to address in a meaningful way the problems of using fair-value in dysfunctional markets, we believe it is necessary for the SEC to use its statutory authority to step in and override the guidance issued by FASB," Edward L. Yingling, president and chief executive officer of the ABA wrote in a letter to SEC Chairman Christopher Cox.

I am not sure what the FASB's revised guidance (FSP 157-3) was set to achieve, after taking more flak than any other accounting pronouncement, the revised guidance should have addressed the needs of the current market situations, rather it has complicated to level beyond compare. This is why

• The revised guidance did away with the requirement of mark-to-marking distressed assets at exit prices - Kudos to this (the BIG 4 were against this)
• Distressed assets were to be valued on a composite valuation model to reflect the true value of the assets. This is a much required guidance, as in illiquid markets, the best way to mark-to-market is on the basis of the holding capacity of the investor rather than the market condition - kudos to this
• In calculating the fair value, the valuation model must factor in the liquidity risk of the asset........did i hear it right THE LIQUIDITY RISK........... ain't this a circular error.

On one hand, the pronouncement does away with the requirement of fair-valuing the assets at fire prices in an illiquid market, but at the same time requires valuation models to include the impact of liquidity risk in valuing this assets. Whats the difference.....does the need to value distressed assets arises in liquid market or illiquid markets.....

Well a silver lining, the DOW Jones is up 11% at the time of writing this blog, here's hoping we get out of this illiquid mess and FAS 157. SEC its upta you

Wall Street gets ready to PLAY-BOY

A 700 point crash...ouch. market to go below 10K ......ooof......no increments this year...oooi maa/biwi/GF, a quarter close admist dusshera and diwali.........arre mat yaad dilao yaar, then what about financial analysts on PLAYBOY ...oomph bring it on

Well when the chips are down, sex is the best thing to cheer you up. Playboy the adult entertainment magazine, might just get your spirits UP.

The adult entertainment magazine, famous for its photo spreads of nude women is launching a search for models to pose for its upcoming feature, "Women of Wall Street" for its Feb 2009 edition.

Playboy has in the past published editions with themes such as Women of Enron and Women of Worldcom, now comes up with this idea "Women of Wall Street" to cheer up moods in a dull and sombre market. "When the news gets bad, then maybe that's a chance to make people smile by coming up with something that puts a different twist on it," said Gary Cole, Playboy's photo editor.

To be eligible for the shoot, the model (female) must be 18 years of age and must have worked in a financial institution. Well wonder what accountants will have to comment on the true fair value of the fairer sex .... i mean the financial statements as per FAS 157.

So coming Feb 09,  for starters; quit looking at ICICIdirect.com (by popular vote) you aint gonna get richer, stop reading financial news portals....... just oogle by visiting playboy.com to get real hot Wall Street action. I bet even your boss may put in his shirt.

FORGET THE BULLS AND THE BEARS, ITS THE REIGN OF THE BUNNY.

P.S - Disclaimer -  this article is meant only for readers over 18........ I do not hold any playboy.com stocks (hmm not a bad company to invest in - what do you say) and neither do i have any affiliations with LAY-MAN (lehman)

GE serves warrants for Buffet

General Electric received a helping hand in the wake of US's "credit crisis" from the BANK BUFFET. A lot of valuers and investors around the world have been speculating to know the true valuations of GE, with its opaque mix of finance and manufacturing. Well the BANK OF BUFFET just figured it out.

GE issued warrants of preferred stock worth $3 BN @ $22.25 per share, $2 below its last traded price and almost half its stock price at the beginning of the year.

GE who, wants to hold on to its AAA rating, also offered to issue another $12BN in form of common stock to other investors.

Many analysts felt Buffet's move is a show of returning the favour to the US, by giving a helping hand and bringing back confidence in resurrecting the US economy. Buffet who last week invested $5BN in Goldman Sachs, has now contributed personally close to 1% of money equivalent of the massive $700BN bailout package.

The soothsayer from Ohama did play it tough in striking the deal, with the interest rate on the stock pegged at 10%, a shade lower than GE's cost of equity, which is pegged to be in the range of 12% to 14%, and much higher than GE's average cost of debt @5.5%.

Many investment bankers felt that, this move would further disturb the sentiments of the economy, as they expected the big giant "GE" to give a helping hand to the US economy.

While GE boasts some $846 billion in assets, close to $600 billion of that is on the finance side--either in the form of loans or leased assets like airplanes. There's also $100 billion in intangibles and goodwill, leaving less than $200 billion in hard assets like buildings, equipment and inventory. It has about $90 billion in commercial paper, which is short-term, low-cost borrowing made for as little as one month. Commercial paper costs have risen for G.E., as it has for others, though it has been tapping that market throughout the crisis

Warren believes he may have bought GE's stock at rock bottom & believes the US economy have hit the bottom. If he is right then the US conglomerate will recover, will sell and lease more planes, automotive and finance them.

If he is wrong, then GE will be forced to borrow more or sell its stock much cheaper. Hoping Brand Buffet's gamble pays off this time.