Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (12394)	12/26/1997 7:59:00 PM
From: Joan Osland Graffius	Respond to of 18056

Zeev, >>In the last week BOJ allowed valuation based on the book value of the companies in which the banks and financial institutions are invested, and that is what I referred to in my post. Thanks for your explaination, I was not aware that this was happening. Things are going from bad to worse. This is a very dangerous game they are playing and good hedge fund folks around the world will have a ball with the game. Joan

To: Zeev Hed who wrote (12394)	12/26/1997 8:53:00 PM
From: Defrocked	Read Replies (4) \| Respond to of 18056

RE: "In the last week BOJ allowed valuation based on the book value of the companies in which the banks and financial institutions are invested, and that is what I referred to in my post." Zeev, please post a link for this information or additional guidance for its source for verification. My stomach turned upon reading this information, which if true, will increase the number of vultures circling over the Japanese financial markets. I am not doubting your credibility but desire additional corroboration. I may have missed this serious departure from GAAP principles during the flurry of Christmas day annoucements issued by MOF and others during our holiday. One item I did not miss was the postponement of the imposition of a paltry 4% capital-to-asset ratio for domestic Japanese banks by one year to April 1,1999. This deferral was a major reason,IMHO, for the 3.5% decline on Dec.26 in Tokyo. I just cannot imagine the use of book value instead of the lower-of-cost-or-market valuation method which has had most equity participants eyeing the 14,000 level for the last 8 years. It is even difficult for me to conceptualize the balance sheet distortions and exaggerations, even beyond current real estate and equity holdings misvaluations, this would engender. I can't believe the Bank for International Settlements or other international institutions would permit it. Certainly, the premium for Japanese bank debt would widen for institutions employing this accounting device. Swap transactions would definitely take into account the increase in credit risk. Are you sure about this?? At a time when the market is demanding, crying, pleading for greater transparency there is no justification for this policy except desperation. Say it ain't so Zeev. Did the term "book value" refer to the "currently booked value", in other words, "lower-of-cost" for the asset already booked? If so, using the original cost of the asset instead of a lower market price for appraisal still provides distortions for market participants intent on measuring value and risk. TIA, Zeev or other Threaders. This needs attention.BWDIK.