Morgan Stanley is next.....

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. 

  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.
  

 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...

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.

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?

jamheat - the only one unaffected as far as i know in the US is HCBK

USB is also a good name if you have to own a financial right now

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.

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.



So are you an internal auditor/consultant?

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.

oh by the way I hate audit and auditors (both internal and external) even though I used to be one.  So annoying. 

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.

I will pass on sharebuilder and BIG Orange..

Good deal . . . yeah ShareBuilder doesn't do much for me either.  I continue to use Ameritrade myself.

Sharebuilder is painfully bad to trade with

morgan to buy wachvoia...or vice versa

two troubled institutions...maybe they can fail together

heard this morning that john mack told the SEC and others that "if we go down b/c of short sellers, you will have blood on your hands"

interesting