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blackcat
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 Posted: Tue Nov 13, 2007 5:10 pm Post subject: Financial meltdown |
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http://www.dailykos.com/story/2007/11/13/31440/217
| Quote: | The Financials Really Start Hitting the Fan on Thursday.
by xynz, Tue Nov 13, 2007 at 01:25:05 AM PST
On November 15th, FASB 157 (Financial Accounting Standard Board's "Fair Value Measurements") goes into effect.
This will have a very serious impact on Level 3 asset valuations.
Level 1 assets are like stocks and most bonds: there's always a market bid for them, so you always know what fair value is.
Level 2 assets are less liquid assets. Like certain kinds of high-yield bonds that don't have standing market bids, but you can still figure out a fair value by checking around.
Level 3 assets are instruments like subprime CDOs and SIVs. Up until now, their value for accounting purposes has been whatever value the asset holder has claimed.
But starting this Thursday, financial institutions will no longer be able to pull Level 3 asset valuations out of their asses.
xynz's diary :: ::
From the Canadian Globe and Mail story:"Thought the subprime mess was bad? Wait till the accountants get involved"
....starting Nov. 15, fair value [of a Level 3 asset] at any given moment is the price you can sell the thing for, period. So now all the banks and dealers have to disclose how much of what's on their books is nonsense that there's no bid for, and write down the value to what it's really worth, which, in some cases, may be bupkes. Needless to say, the previous valuations of those investments, using management's presumptuous assumptions, were much closer to par than the new ones will be."
"Yow. That could get downright ugly. I mean, ABCP and SIVs are already on life support, and that new MLEC fund they're talking about to buy the SIV assets is dumb - solving a debt problem with more debt, yeah, like that'll work - and the markets for CDOs, CMOs, RMBS and CLOs are all similarly distressed, so either the banks and investment banks have to take the nonsense onto their own books and take big writedowns or sell it at a huge loss. Either way, it could be real nasty."
This doesn't mean that it all hits on Thursday....it means that every time the books are opened after Thursday, all asset valuations will have to be based on Fair Value Measurements.
How bad is the exposure? Well, check out these numbers:
Citigroup
Equity base: $128bn
Level three assets: $134.8bn
Level 3 to equity ratio: 105%
Goldman Sachs
Equity base: $39bn
Level three assets: $72bn
Level 3 to equity ratio: 185%
Morgan Stanley
Equity base: $35bn
Level three assets: $88bn
Level 3 to equity ratio: 251%
Bear Stearns
Equity base: $13bn
Level three assets: $20bn
Level 3 to equity ratio: 154%
Lehman Brothers
Equity base: $22bn
Level three assets: $35bn
Level 3 to equity ratio: 159%
Merrill Lynch
Equity base: $42bn
Level three assets: $16bn
Level 3 to equity ratio: 38%
Of course, this doesn't mean that all these Level 3 assets will be worthless or significantly discounted.....nobody knows how bad the situation really is.
But, after this Thursday, we're going to start finding out.
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Read some of the blog's for a better understanding of what this means. |
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John White
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| Posted: Tue Nov 13, 2007 6:38 pm Post subject: |
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I get the gist  
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Free your Self and Free the World |
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acrobat74
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blackcat
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| Posted: Tue Apr 15, 2008 7:55 am Post subject: |
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http://www.naturalnews.com/z023005.html
| Quote: |
NaturalNews.com
Originally published April 13 2008
Meltdown of U.S. Dollar Underway as China Dumps the Currency
by David Gutierrez
(NaturalNews) Comments by China that it intends to move away from its reliance on the dollar triggered a sharp drop in the Dow Jones Industrial Average and heightened worldwide fears about the U.S. currency's stability. Chinese Central Bank Vice Director Xiu Jian said that his country is planning to shift much of its $1.4 trillion national currency reserve from dollars to more stable currencies, such as the euro or Canadian dollar. After these comments, the dollar fell to record lows relative to other currencies -- the lowest ever against the euro, the lowest in a generation against the British pound, and the lowest in 57 years against the Canadian dollar.
"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.
China is the world's largest investor in U.S. Treasury bonds and securities, holding more U.S. debt than any country but Japan. Because China's currency is linked to the dollar, the country also maintains a massive reserve of the currency.
But this policy had already begun to shift at the time of Xiu's comments. China has divested approximately 5 percent of its $400 billion holdings in the U.S. Treasury and established a $200 billion fund to help diversify its investments in equities and stocks around the world.
"We will favor stronger currencies over weaker ones, and will readjust accordingly," said Cheng Siwei, vice chairman of China's National People's Congress.
It is not just U.S. investors who are concerned. Because the dollar's fluctuations have driven up the euro, exports in Europe have fallen and sparked fears for the stability of that continent's economy. In a recent speech, French president Nicolas Sarkozy added his voice to those calling for the Bush administration to act to stabilize the currency.
"The dollar cannot remain 'someone else's problem,' " Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims." |
Closer and closer!!
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"The conflict between corporations and activists is that of narcolepsy versus remembrance. The corporations have money, power and influence. Our sole influence is public outrage. Extract from "Cloud Atlas (page 125) by David Mitchell. |
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blackcat
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| Posted: Tue Apr 15, 2008 9:15 am Post subject: |
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http://rawstory.com/news/2008/NYT_Retailer_bankruptcies_set_to_prompt_ 0414.html
| Quote: | NYT: Retailer bankruptcies set to prompt thousands of store closings
Mike Sheehan,Published: Monday April 14, 2008
growing number of bankruptcies among US retailers is set to prompt thousands of store closings, the New York Times will report on the front page of its Tuesday edition.
"The consumer spending slump and tightening credit markets are triggering a wave of bankruptcies in American retailing," with ensuing store closures "expected to remake suburban malls and downtown shopping districts across the country," writes Michael Barbaro for the Times.
Barbaro notes that over half a dozen store chains have filed for bankruptcy in recent months amidst "mounting debt and plummeting sales" and warns that financial troubles are "quickly spreading to bigger national companies."
The Times articles comes amid a slew of reports underscoring America's economic woes. Even presumptive Republican presidential nominee Sen. John McCain, who only months ago panned talk of a recession, admitted today that he thought the country was now in one.
Even relatively well-off retailers face troubles. Added Barbaro in the article, such store chains who can avoid bankruptcy "are shutting down stores to preserve cash through what could be a long economic downturn."
Excerpts from the Times article, available in full at this link, follow...
The surging cost of necessities has led to a national belt-tightening among consumers. Figures released on Monday showed that spending on food and gasoline is crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics. Consequently, chains specializing in those goods are proving vulnerable.
"You have the makings of a wave of significant bankruptcies," said Al Koch, who helped bring Kmart out of bankruptcy in 2003 as the company's interim chief financial officer and works at a corporate turnaround firm called AlixPartners. "For years, no deal was too ugly to finance," he said. "But now, nobody will throw money at these companies."
Because retailers rely on a broad network of suppliers, their bankruptcies are rippling across the economy. The cash-strapped chains are leaving behind tens of millions of dollars in unpaid bills to shipping companies, furniture manufacturers, mall owners and advertising agencies. Many are unlikely to be paid in full, spreading the economic pain.
In most cases, the collapses stemmed from a combination of factors: flawed business strategies, a souring economy and banks' unwillingness to issue cheap loans. |
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"The conflict between corporations and activists is that of narcolepsy versus remembrance. The corporations have money, power and influence. Our sole influence is public outrage. Extract from "Cloud Atlas (page 125) by David Mitchell. |
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blackcat
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| Posted: Thu Jun 12, 2008 11:34 am Post subject: |
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http://www.financialsense.com/fsu/editorials/2008/0610.html
| Quote: | Kobyashi Maru
by Doug Tjaden | June 10, 2008
People do not fully appreciate what we are witnessing in the markets right now. This week and last could very well be a historic landmark in the unfolding economic crisis. Last week, Ben Bernanke, faced with a raging inflation problem that can no longer be denied, came out and merely talked hawkish, indicating rate cuts were likely over. He took a gamble doing this, as the stock market was already weakening. It did not pay off. When the employment figures were released Friday, even these rigged figures showed that the US economy is shedding jobs at a rapid pace. The markets all were then gripped by extreme volatility. It appears as though the market players that are suddenly awakening to the reality of the Fed's untenable position is now spreading rapidly beyond those of us who are gold (and silver) bugs.
The Forex markets are hit with the reality that the Fed cannot raise rates to defend the dollar without bringing down the stock market and the multi-trillion dollar derivatives mess, thus the dollar sold off sharply. The stock market is beginning to grasp that the Fed cannot lower rates to help the rapidly deteriorating economy without sending the dollar into the tank and causing all commodities (and precious metals) to take their long awaited trip to the moon, cementing the dreaded increased "inflation expectations" in the public psyche. Yet doing nothing is not an option either. The inflation that is already in the pipeline will continue to increase, choking off an economy on life support. What then is the Fed to do?
What began last week is leading to a full realization and acceptance by the markets what we (Austrian gold bugs) have known for years - the Fed would eventually get itself into a position where it was in a no win situation. It’s the Kobayashi Maru. |
Rest of article at above site - with an explanation of what the Kobayashi Maru is.
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"The conflict between corporations and activists is that of narcolepsy versus remembrance. The corporations have money, power and influence. Our sole influence is public outrage. Extract from "Cloud Atlas (page 125) by David Mitchell. |
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blackcat
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| Posted: Fri Jun 13, 2008 8:52 am Post subject: |
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| Quote: | Gridlocked cities, empty shelves and bloodshed as fury at soaring costs spreads around the world
Last updated at 19:51pm on 12.06.08
Worldwide protests over the rising price of fuel escalated today, with the Philippines presidential palace besieged by lorries, fishermen burning their boats in Thailand, and Spanish petrol stations running dry as hauliers blockade major roads.
Violence has already claimed lives of lorry drivers on either side of the dispute, while one haulier was nearly burned to death in his cab by strikers.
Hundreds of lorries and minibuses blocked roads in Manila leading to Malacanang Palace today to demand the lifting of a 12 per cent sales tax on fuel. Petrol prices there have risen about 24 per cent this year.
Traffic ground to a halt as anti-riot police halted the convoy, including about 500 tuk-tuks, Manila's three-wheeled taxis.
In Thai capital Bangkok, tens of thousands of heavy lorries are threatening to cause havoc while farmers are demonstrating and fishermen have begun burning their boats in nationwide protests against soaring prices of fuel and other essentials.
Lorry drivers' leaders warned the government that it has until next Tuesday to subsidise their fuel or face at least 100,000 vehicles rumbling into Bangkok.
A half-day strike yesterday by lorry drivers who parked their vehicles on roads across the country was only a prelude to next week's possible push into Bangkok, they said.
Finance Minister Suraphong Suebwonglee said there were plans to help reduce transport costs.
'I am not concerned about the lorry drivers' threat to strike because the government is seeking to subsidise the transport sectors as the whole,' he said.
One fishermen's group said more than half of the 50,000 fishing boats under its wing are being kept ashore because of the high cost of diesel.
Thai Airways International raised its fuel surcharges by up to 100 per cent yesterday day due to the rising cost of jet fuel. |
Rest of lengthy article at above link.
_________________
"The conflict between corporations and activists is that of narcolepsy versus remembrance. The corporations have money, power and influence. Our sole influence is public outrage. Extract from "Cloud Atlas (page 125) by David Mitchell. |
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