Changes to Mark-to-Market??? Absolutely Not!
March 18, 2009
Mark-to-market rules, AKA fair value accounting, requires companies to value their assets at market prices when they report their accounts.
Under pressure from banks and lawmakers, the FASB is now looking at allowing banks more discretion on how to value their assets.
The argument from banks is that they have to write down the value of their assets under an environment with very little liquidity even though they argue that they have no plans to sell under this environment.
My advice to them: don’t invest in such risky assets! It’s your own damn fault.
What we don’t want is to give these same “FINANCIAL ABUSERS” even more leeway to artificially inflate the value of their books.
Have we not learned anything from Enron? Last time we had a company make up their own value for assets we had arguably the most spectacular collapse in corporate history.
If this passes, I will have lost all faith in the quality and all faith in how this government operates.
Obama, I had high hopes for you, but this is just cooking the books to make it seem like the recovery is under way.
Auto Sales in Canada up???
November 5, 2008
Even as some U.S. auto manufacturers watched their October sales plummet by close to 50 per cent, demand for cars continues to rise in Canada, figures cited by analyst Dennis Desrosiers show.
In Canada, sales of cars and light trucks were up 1.5 per cent to 122,711 in October, compared to the same month in 2007, Desrosiers noted yesterday.
Automaker Toyota Motor ADR, which yesterday reported 26 per cent lower U.S. sales during October, saw sales rise 10 per cent year over year in Canada.
Apparently it is not all gloomy for businesses everywhere. With the election and the liquidity crisis, the U.S. has been the center of attention in recent months… but it is time that everyone’s focal point shifts.
How long do you think the public will give Obama? The reality is that he is going to be thrown into the fire and given a bottle of water to put out a major inferno. The financial crisis is not going away anytime soon, and once the public wakes up to the fact that the election has not changed much, the gloom will begin again.
We need to stop thinking of the economy as a local one and start looking outside to the international market. There may be better opportunities outside; in countries whose economies are showing more resilience. I’m not saying that it is time to give up on the local economy but that if you are looking for a place to park your money or parties to do business with… elsewhere might be better.
The Canadian economy is showing some resilience, so are some of the countries in Asia (not South Korea). It is just time people expand the scope of their thinking.
OPEC cuts production; European leaders ask China for more help
October 24, 2008
Not really a surprise for anyone, but OPEC is really looking after its own interest by cutting production by 1.5 million barrels to boost oil prices. (see http://www.bloomberg.com/apps/news?pid=20601087&sid=azg0in03PRLk&refer=home)
Most of the Western world could use a helping hand, but don’t expect it to come from oil producing countries. The troublesome part about all this is that oil plays a large role in our economies, and a higher oil price may boost inflation at a time when interest rates are being cut. In fact, Singapore reported that September inflation rose to 6.7%!
Many European leaders are asking China to take a larger role in relieving the financial crisis. But China is being shrewd in its dealings. It will want concessions before it commits to a large role. In business, there is no such thing as a free meal – well, rarely at least – and China is hoping to ensure that it comes out of this crisis well-compensated for whatever help it provides.
For more info on this topic:
http://www.reuters.com/article/forexNews/idUSTRE49M41B20081023?pageNumber=1&virtualBrandChannel=0
The Next Minefield: GM, Ford and Chrysler
October 23, 2008
The economy in 2009 is going to be BAD, BAD, BAD! The liquidity crisis has ignited an already precarious situation with North American auto companies.
Everyone knows that GM and Ford are bleeding cash with outdated models and gas guzzling vehicles. Both have been burning through more than $1 billion in cash per month and are already looking towards government bailouts amid job and production cuts. Most analysts believe that, without raising funds, the two car companies will run out of cash some point in 2009.
The liquidity crisis is making it much more expensive to finance, or lease a car, putting a damper on both GM and Ford’s recovery plans.
A GM-Chrysler merger is being mooted… a merger that will destroy Michigan’s economy and probably shatter U.S. consumer confidence. Afterall, GM is after Chrysler for its cash position, and will almost certainly slash tens of thousands of jobs.
But what does it mean for people outside the auto industry??? It means a large jump in the unemployment rate, as the ripple effect cascades through the economy. Some analysts estimate that for each job loss at the automaker, 3 more jobs in related support industries may be lost as well!
The meltdown in the financial markets can only be described as irrational. There has a loss of confidence in both the banking sector and the government at a time when the only solution requires a collective effort to balance the negativity enveloping us all.
The government has made a lot of wrong moves. The U.S. has spent or committed somewhere around $2 trillion to bailouts and yet, it is hard to see what progress they have achieved… thus their lack of credibility.
What we need is some demonstration of what the U.S. government can do. Perhaps it is time to separate the good firms from the bad and show the public that the U.S. government has the ability to protect and isolate the good banks from this financial crisis.
By first restoring normal lending and business among these good banks… the government will establish a foothold which they can use to target more and more problematic institutions until all are gradually brought into the fold.
If the government can’t even rescue the “good” banks which are fundamentally sound… throwing money to rescue those bad firms will never result in anything positive.
Thinking out Loud 