Ken,
Mark to Market would be wonderful if there was an actual market for those securities.
Unfortunately they're opaque and no one trusts the rating agency pronouncement.
If potential buyers could see their content (how much subprime, non performing, mortgage, credit card debt, car loans, ???), then it may be possible for a sophisticated buyer to price the product.
With the complete lack of information it's impossible for almost all potential buyers to know what percentage of the debt will ultimately be repaid. But clearly some, perhaps even most, will get repaid one way or the other.
Mark to Market puts the value at or near zero. Perhaps that's the proper GAAP approach.
To the extent that this becomes the norm, significant assets will be hidden from view. And, I suspect, will lead to very substantial assets unexpectedly returning to balance sheets over time.
At some point, the financial institutions will be an exceptional opportunity for capital appreciation. I have no idea how to determine when but for the first time I'm tempted to start nibbling.
FWIW,
Ian |
