market to market accounting

Discussion in 'Stock Market' started by wimpy77, Mar 4, 2009.

  1. wimpy77
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    wimpy77 Member

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    there is tentatively a house finance meeting march 12 to talk about suspending market to market accounting for 12 to 18 months.
     
  2. Immanuel
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    Immanuel Gold Member

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    I haven't really followed this, but what is the significance of doing that as you see it?

    By the way, it is Mark to Market rather than Market to market if anyone wants to look it up.

    I'm not sure exactly what this will accomplish or why the thought on suspending the procedure. I understand the idea, but have not really weighted out the consequences of the suspension. Anyone have any insight on this?

    Immie
     
  3. wimpy77
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    wimpy77 Member

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    when i get to a more stable computer i will post a link
     
  4. DavidS
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    DavidS Anti-Tea Party Member

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    Everyone on the floor of the NYSE has said that this needs to be done away with completely. THIS would trigger a rally in the markets if it was suspended.

    For those who don't know what mark-to-market is, here is an example:

    If an investor owns 10 shares of a stock purchased for $4 per share, and that stock now trades at $6, the "mark-to-market" value of the shares is equal to (10 shares × $6), or $60, whereas the book value might (depending on the accounting principles used) only equal $40.

    Similarly, if the stock falls to $3, the mark-to-market value is $30 and the investor has lost $10 of the original investment. If the stock was purchased on margin, this might trigger a margin call and the investor would have to come up with an amount sufficient to meet the margin requirements for his account.

    Mark-to-market accounting - Wikipedia, the free encyclopedia
     
  5. Skull Pilot
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    Skull Pilot Platinum Member

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    Mark to market is basically a way of making a loss on paper seem like a real loss.

    It is especially damaging to the housing market. A lender holding a 30 year note, even though the loan is being serviced and will most likely continue to be serviced for the next 29 years is compelled to write down the asset acting as collateral for the loan as if it had to be sold today. It's reactionary silliness to think that this would be the case and in over 86% of mortgages it is not the case.

    Suspending mark to market and only writing down actual losses rather than potential losses will go a long way to stabilizing things and particularly the housing market.
     
  6. Terral
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    Terral Terral Corp CEO

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    Hi David and Wimpy:

    Now I can see the reason why you guys want to chase me out of these economy discussions . . .

    David is confusing apples and oranges by even bringing up the NYSE and stock purchases, because this mark-to-market topic is about how home values are established having nothing to do with stocks at all. A good place to find information about this topic is at MarkToMarket.com – Real Estate Valuation Services (here).

    If you read through the marketwatch.com news story (here) then you will see:

    Some people want to throw away the “fair value” accounting methods used by property appraisers to determine the value of distressed properties in favor of simply pulling a number out of thin air to help banks represent a much ‘higher’ value for ‘toxic assets’ on their balance sheets. The property appraisers at marktomarket.com will plug the data from your property into their computer (I sold real estate for years since the mid 1970's) where comparisons will be made against similar properties that have sold in the past three or six months ‘and’ against properties like yours that have failed to sell over the same period. Their appraisal will give you a fair market ‘mark-to-market’ value of your property in the ‘current economic environment,’ which is what determining ‘fair market value’ is all about. Your property is worth whatever buyers in your area right now ‘are’ willing to pay for similar properties in ‘your’ neighborhood and not the higher price that banks want to use to bolster the appearance of their mortgage-backed securities portfolio through fancy calculations and bribes to government officials.

    Removing ‘mark-to-market’ methods from the equation is a terrible idea, because we deliberately walk away from the kind of ‘transparency’ that is needed for eventually solving the ‘deflationary’ problems of continuing home-price devaluation. If the bank really believes that their distressed property is worth ‘more’ than the number assigned by the mark-to-market property appraiser, then let him simply sell the property at that inflated price. :0) The real problem facing these banks is that the value of their mortgage-backed securities portfolios is ‘decreasing’ with every passing day ‘and’ with every passing week ‘and’ every passing month and quarter, because the housing market is currently caught in a deflationary tailspin that has no bottom! The housing market cannot find a bottom, because the Gov’t keeps playing around with the fundamentals ‘and’ the market cannot make decisions based upon all the uncertainty. Outsourcing is killing JOBS and too many Illegal Alien Foreign Nationals are ‘displacing’ too many U.S. workers from JOBS, which means the ‘price’ that legal U.S. Citizens ‘can’ afford to pay is continuing to go DOWN.

    This is the same exact point that I make on David’s “The Official Dow 7000” Thread here, but Beavis is unwilling to make the “NO BOTTOM” in the Housing Market ‘and’ Stock Market connection. So he sends nasty notes in my direction telling me to ‘go away’ (heh), because somebody is very much full of himself and trying to lead these readers in a completely different direction than that told by all the evidence. If we investigate the information on David’s Wiki link (here), the we also see:

    These ‘financial institutions’ want to assign ‘their’ inflated price to each ‘distressed’ property in their own mortgage-backed securities portfolio, so they can obtain higher sums of taxpayer money when liquidating these assets off their balance sheets; even though nobody on God’s Green Earth is willing to actually pay that price in the real market. Remember that mark-to-market accounting, to determine the ‘fair market value,’ was instituted “to help INVESTORS understand the value of these assets at a point in time.” If the banks really want to liquidate these distressed properties ‘today’ for removal off of their balance sheets, then the only way to establish the ‘real’ fair value is to use the same ‘mark-to-market’ formulas that apply to everybody else and their properties. Period.

    Call up the property appraiser and have him place his name on the dotted line along with the ‘fair market value’ of your property and pay his commission, because that number will be based upon all available data related to comparable homes in the same neighborhood for this particular day and ‘time.’ Eliminating mark-to-market protocols will only open the door to banking institutions coming up with their own numbers based upon wishful thinking, when their only intention is to unload the ‘toxic asset’ onto We The People, or someone else foolish enough to buy into their fantasy.

    GL,

    Terral
     
    Last edited: Mar 5, 2009
  7. editec
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    editec Mr. Forgot-it-All

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    Sounds like a good plan to me.

    How can banks establish a value to those toxic assets when there is no market for them?

    And if the government (as it appears to have been doing) is declaring banks insolvent based on unknowable valuations of thier assets, then we appear to be shooting off our own feet by making banks fearful that their assets values will be established by the government without having a REAL MARKET to test those valuations against.
     
  8. Skull Pilot
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    Skull Pilot Platinum Member

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    that's the point, there is no market for some of these assets, but there will be again eventually. So why call assets held as collateral as worthless if they're not needed to recoup money lent?

    As I said better than 86% of mortgages are NOT in trouble and there will most likely be no need to liquidate the collateralized assets to recoup a loss from a loan default. So don't claim a loss until it actually happens.
     
  9. wimpy77
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    wimpy77 Member

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    your conspiracy theories are stupid and retarded.
     
  10. DavidS
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    DavidS Anti-Tea Party Member

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    Just ignore him. Trolls usually starve when no one feeds them.

    Hey, I found a new avatar for you:

    [​IMG]
     

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