this is a forensic accounting blog (yes im a geek). this guy focuses on financials and he's been dead to right on all of them
Level 3 Assets
Financial assets and liabilities whose values are based on prices or
valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. These inputs reflect
management’s own assumptions about the assumptions a market participant
would use in pricing the asset or liability (examples include certain
private equity investments, certain residential and commercial mortgage
related assets (including loans, securities and derivatives), and
long-dated or complex derivatives including certain foreign exchange
options and long dated options on gas and power).
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To remove first post, remove entire topic.
i hope not
link - go about halfway down
this is a forensic accounting blog (yes im a geek). this guy focuses on financials and he's been dead to right on all of them
Level 3 Assets
Financial assets and liabilities whose values are based on prices or
valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. These inputs reflect
management’s own assumptions about the assumptions a market participant
would use in pricing the asset or liability (examples include certain
private equity investments, certain residential and commercial mortgage
related assets (including loans, securities and derivatives), and
long-dated or complex derivatives including certain foreign exchange
options and long dated options on gas and power).
That is a pretty interesting blog. SFAS 157 seems to have come out just at the right time . . . no? It definitely offers A LOT more transparency for investors.
Determining where to price our assets at my company (Level II or Level III) is an issue we wrestle with every single day. Especially now that it seems there really is not a market to trade these assets.
I'm worried about what the next 6 months will bring us from a financial/banking perspective. I mean my Bank only purchases all triple A rated securities and even these are starting to be downgaded. And that is the best of the best. I'd hate to be someone who owns A- and B+ securities.
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That is a pretty interesting blog. SFAS 157 seems to have come out just at the right time . . . no? It definitely offers A LOT more transparency for investors.
Determining where to price our assets at my company (Level II or Level III) is an issue we wrestle with every single day. Especially now that it seems there really is not a market to trade these assets.
I'm worried about what the next 6 months will bring us from a financial/banking perspective. I mean my Bank only purchases all triple A rated securities and even these are starting to be downgaded. And that is the best of the best. I'd hate to be someone who owns A- and B+ securities.
According to CNBC early early this morning (3 a.m.??)..pausing to look over my shoulder for CC and WSC's reaction....the strong rumor was that they would be absorbed by someone, or fold altogether.
By the way I have enjoyed reading that blog ever since I first saw your mention of it.
The math guys were and are smart, but they put a huge one over on a lot of people. People did not understand what the hell they were buying, were gulled by incredibly elaborate computer models which they felt could not be wrong, and they went for it.En masse.And en masse they are dropping.
It is truly ironic that creations touted as minimizing risk ended up maximizing it, and the carnage we witness is the proof that no one, absolutely no one, can place a real value on it.
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According to CNBC early early this morning (3 a.m.??)..pausing to look over my shoulder for CC and WSC's reaction....the strong rumor was that they would be absorbed by someone, or fold altogether.
By the way I have enjoyed reading that blog ever since I first saw your mention of it.
The math guys were and are smart, but they put a huge one over on a lot of people. People did not understand what the hell they were buying, were gulled by incredibly elaborate computer models which they felt could not be wrong, and they went for it.En masse.And en masse they are dropping.
It is truly ironic that creations touted as minimizing risk ended up maximizing it, and the carnage we witness is the proof that no one, absolutely no one, can place a real value on it.
The best book ever written to explain the past, present, and future of collective finance is Popular Delusions and the Madness of Crowds.The section on tulipmania in Holland should be read each year...
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PS
The best book ever written to explain the past, present, and future of collective finance is Popular Delusions and the Madness of Crowds.The section on tulipmania in Holland should be read each year...
HG - for STI to sell their coke stake, they have to be in trouble
Well exactly . . . technically they are all AAA rated . . . or most are. I will recover 100% of my principal balance along with receiving a good interest rate . . . however, due to a lack of market to trade this stuff (no one has the funds to buy them from us these days) this bond that should be trading at say 98 or 97 is now trading at 60 due to liquidity issues. But there is no way in hell we would sell a bond we expect to recover 100% of the principal balance on for 60. That is nuts. Luckily, we do not have any liquidity problems at this time so not a problem for us.
But for those banks that do have problems i feel bad. They need to go out into the market and get a severely deflated price which is just criminal.
Look at this excerpt from Capital One Financial in their Fair Value disclosure for their latest Q. I'm surprised every single company doesn't have this. They should. In laymans terms . . . we couldn't sell it even if we wanted to!
"Level 3 assets increased $2.4
billion, due primarily to the reclassification of AAA rated non-agency
mortgage backed securities backed by prime jumbo collateral
that we classified as Level 2 last quarter. The ongoing capital markets
dislocation has decreased new
issuance and secondary trading volumes for many fixed income markets.
This lower level of activity makes it increasingly
difficult to find consistent pricing of many fixed income securities.
In particular, this quarter’s pricing of our prime jumbo non-agency
mortgage-backed securities exhibited a variation that was outside of
our Level 2 assets policy tolerances.
Consequently, we reclassified those securities to Level 3.
The
amount of Level 3 securities will likely continue to be a
function of market conditions. An increase in dislocation and
corresponding decrease in new issuance and trading volumes could result
in the reclassification of additional securities to Level 3. If market
conditions improve and pricing transparency
and consistency increase, assets currently classified as Level 3 could
be reclassified.
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Quote Originally Posted by KOAJ:
vh2 - define AAA rated these days
HG - for STI to sell their coke stake, they have to be in trouble
Well exactly . . . technically they are all AAA rated . . . or most are. I will recover 100% of my principal balance along with receiving a good interest rate . . . however, due to a lack of market to trade this stuff (no one has the funds to buy them from us these days) this bond that should be trading at say 98 or 97 is now trading at 60 due to liquidity issues. But there is no way in hell we would sell a bond we expect to recover 100% of the principal balance on for 60. That is nuts. Luckily, we do not have any liquidity problems at this time so not a problem for us.
But for those banks that do have problems i feel bad. They need to go out into the market and get a severely deflated price which is just criminal.
Look at this excerpt from Capital One Financial in their Fair Value disclosure for their latest Q. I'm surprised every single company doesn't have this. They should. In laymans terms . . . we couldn't sell it even if we wanted to!
"Level 3 assets increased $2.4
billion, due primarily to the reclassification of AAA rated non-agency
mortgage backed securities backed by prime jumbo collateral
that we classified as Level 2 last quarter. The ongoing capital markets
dislocation has decreased new
issuance and secondary trading volumes for many fixed income markets.
This lower level of activity makes it increasingly
difficult to find consistent pricing of many fixed income securities.
In particular, this quarter’s pricing of our prime jumbo non-agency
mortgage-backed securities exhibited a variation that was outside of
our Level 2 assets policy tolerances.
Consequently, we reclassified those securities to Level 3.
The
amount of Level 3 securities will likely continue to be a
function of market conditions. An increase in dislocation and
corresponding decrease in new issuance and trading volumes could result
in the reclassification of additional securities to Level 3. If market
conditions improve and pricing transparency
and consistency increase, assets currently classified as Level 3 could
be reclassified.
Hadn't heard any rumor about Morgan Stanley. As you know, I loathe CNBC and don't make a habit of listening to those iceholes and their blabber.
As a trader, it probably wouldn't be a bad idea to listen in, so I always had a good fade opportunity, but all the yakkety yak in between the few informative dialogues is too much for me to stomach.
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Vermeer-
Hadn't heard any rumor about Morgan Stanley. As you know, I loathe CNBC and don't make a habit of listening to those iceholes and their blabber.
As a trader, it probably wouldn't be a bad idea to listen in, so I always had a good fade opportunity, but all the yakkety yak in between the few informative dialogues is too much for me to stomach.
From a trading perspective, October is "usually" the month of crashes, so John Q401 K will be too nervous and worried to buy anything until November, which is why the quick, fast, easy money will be made BEFORE November in the good, strong, well managed companies that are getting torn apart right now.
No doubt about it, those who have cash have a nice opportunity to put their buy hats on now and figure out what they want, cause basically everything and anything is currently going on sale.
It'd be ideal to have like a down 2500 point open on the Dow tomorrow.
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From a trading perspective, October is "usually" the month of crashes, so John Q401 K will be too nervous and worried to buy anything until November, which is why the quick, fast, easy money will be made BEFORE November in the good, strong, well managed companies that are getting torn apart right now.
No doubt about it, those who have cash have a nice opportunity to put their buy hats on now and figure out what they want, cause basically everything and anything is currently going on sale.
It'd be ideal to have like a down 2500 point open on the Dow tomorrow.
I have a friend who is a senior banker at HSBC in Asia. He says HSBC hasn't been hurt much by the sub-prime stuff, he isn't worried one bit about his job etc. If one was interested in financials wouldn't HBC also be a good one to look at? Not sure if it is at bargain prices yet though.
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I have a friend who is a senior banker at HSBC in Asia. He says HSBC hasn't been hurt much by the sub-prime stuff, he isn't worried one bit about his job etc. If one was interested in financials wouldn't HBC also be a good one to look at? Not sure if it is at bargain prices yet though.
C has a ton of the nasty stuff on their books, how shocking would it be if they started teetering?
VH2, you work for COF?
ING DIRECT actually (sub of ING Group). We have been doing a lot of peer group analysis lately though seeing where other companies are with this SFAS 157 mess and that is the worst disclosure I have seen yet other than WAMU.
I work in the accounting group and handle the 10-Q's, annual statements, etc. among other things.
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Quote Originally Posted by wallstreetcappers:
C has a ton of the nasty stuff on their books, how shocking would it be if they started teetering?
VH2, you work for COF?
ING DIRECT actually (sub of ING Group). We have been doing a lot of peer group analysis lately though seeing where other companies are with this SFAS 157 mess and that is the worst disclosure I have seen yet other than WAMU.
I work in the accounting group and handle the 10-Q's, annual statements, etc. among other things.
Did you have to get a CPA in order to do what you are?
I got an accounting degree from college years ago but didnt pursue the CPA because I was not interested in being a Jr for years making 35k to get started.
So are you an internal auditor/consultant?
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VH2,
Did you have to get a CPA in order to do what you are?
I got an accounting degree from college years ago but didnt pursue the CPA because I was not interested in being a Jr for years making 35k to get started.
Yeah Wallstreet I did get my CPA a few years back. maybe 5 years ago. However, it is not like I use it for anything . . . more a resume builder / something i need to climb the corporate ladder. When you get down to it the CPA is just a test. But for whatever reason you need it. Here is a quick rundown.
VT grad
5 years at KPMG doing audit for various clients in Philly / Wilmington area . . . got tired of the ridiculous hours so left public for private and went to ING DIRECT (which used to be one of my clients).
Been at ING DIRECT for 3 years now. Head up the Accounting Policy and Reporting team there. I.e. we handle financial statements / researching accounting positions for all new products the Bank enters into. Report to the Assistant Controller.
That is about it . . . I suggest you open an ING DIRECT account for your excess cash you may have . . . and use ShareBuilder our newest acquisition.
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Yeah Wallstreet I did get my CPA a few years back. maybe 5 years ago. However, it is not like I use it for anything . . . more a resume builder / something i need to climb the corporate ladder. When you get down to it the CPA is just a test. But for whatever reason you need it. Here is a quick rundown.
VT grad
5 years at KPMG doing audit for various clients in Philly / Wilmington area . . . got tired of the ridiculous hours so left public for private and went to ING DIRECT (which used to be one of my clients).
Been at ING DIRECT for 3 years now. Head up the Accounting Policy and Reporting team there. I.e. we handle financial statements / researching accounting positions for all new products the Bank enters into. Report to the Assistant Controller.
That is about it . . . I suggest you open an ING DIRECT account for your excess cash you may have . . . and use ShareBuilder our newest acquisition.
You went the route I would have if I wasnt a bit older getting out of college. I went the slow route so after college I went to work for a broker directly..Fidelity.
For the reasons you listed I didnt want to cut my teeth being an auditor for 5 years working 70 hrs a week making 8 an hour and flying all over. Back when I graduated there were all firms still in business and the coasts were where you had to live..so I scrapped getting the masters degree and the CPA (in the state I resided it was required to sit for the CPA).
Good job, that position sounds pretty interesting to be honest.
I will pass on sharebuilder and BIG Orange..
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VH2,
You went the route I would have if I wasnt a bit older getting out of college. I went the slow route so after college I went to work for a broker directly..Fidelity.
For the reasons you listed I didnt want to cut my teeth being an auditor for 5 years working 70 hrs a week making 8 an hour and flying all over. Back when I graduated there were all firms still in business and the coasts were where you had to live..so I scrapped getting the masters degree and the CPA (in the state I resided it was required to sit for the CPA).
Good job, that position sounds pretty interesting to be honest.
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