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Sunday, Nov 8, 2009
Roman Berry
Published Letters: 198 Editor's Choice: 10
Hallelujah on the decepti...er....the accounting rule change. Let's party 'cause apparently now I am rich. Why am I rich all of a sudden? Easy!
See, I sort of inherited (stuff a former wife left after a divorce) a box full of extraordinarily valuable Beanie Babies (Remember those?) that has been sitting in storage for years, mostly because I never got around to digging down and throwing them out. Boy, am I glad now that I held onto 'em.
If there is an inactive market, the market for Beanie Babies is it. So instead of valuing these things for what they are worth...er...at the going rate in an inactive market, I've decided to use my judgment and value them according to what they are really worth when the market for them comes roaring back as surely it will. (It will, won't it?)
Now that I get to adjust my books to reflect the real value of these assets, I'm sure (Sure I tell you!) that some of these big banks and financial institutions will be beating down my door to offer me no-recourse loans against the true value of these assets.
No wonder the stock market is rising. Obviously we are all surrounded by assets with enormous hidden value which, in an active market, are truly worth much more.
Have a box of buddy whips? Well, that market is not all that active these days but you and I both know those really nice buggy whips are worth at least ten times the going rate. Or maybe you have, oh, I dunno...let's say you have your own invention lying around...maybe it's a machine that produces unlimited free energy through the harnessing of perpetual motion. We all know what a bitch it's been trying to find an active market for something like that. Mark that baby up to it's true value and head on down to Citigroup or Government Sachs for a non-recourse loan. If you can't pay it back, then yeah, you'll lose your machine, but the bank will be sitting pretty 'cause they will be able to hold it until its true value becomes apparent in an active market.
We're rich! All of us. RICH! Hallelujah!
Posted the last comment/letter to the wrong section. (The hazards of too many browser windows open...)
I guess it's relevant here as well given that the stock market is going ga-ga over the chance to bid up stocks based on the hidden value of assets in an inactive market, but the comment was meant for the "Stupid Way to Fix the Banks: Change the Rules" post from Mr. Leonard earlier today.
(I hope it violates no rules to repost the comment in the place it was meant to be.)
Not only did I post in the wrong place, I also made a very embarrassing typo. Not "buddy whips" (not that there is anything wrong with that if you're into that sort of thing), buGGy whips. You know...like you use with a horse and buggy.
Maybe just not my day...
Hallelujah on the decepti...er....the accounting rule change. Let's party 'cause apparently now I am rich. Why am I rich all of a sudden? Easy!
See, I sort of inherited some stuff a former wife left after a divorce, in this case a box full of extraordinarily valuable Beanie Babies. (Remember those?) That box has been sitting in storage for years, mostly because I never got around to digging down and throwing them out. Boy, am I glad now that I held onto those darling little bits of cloth and...beans?
If there is an inactive market, the market for Beanie Babies is it. So instead of valuing these things for what they are worth...er...at the going rate in an inactive market, I've decided to use my judgment and value them according to what they are really worth when the market for them comes roaring back as surely it will. (It will, won't it?)
Now that I get to adjust my books to reflect the real value of these assets, I'm sure (Sure I tell you!) that some of these big banks and financial institutions will be beating down my door to offer me no-recourse loans against the true value of these assets.
No wonder the stock market is rising. Obviously we are all surrounded by assets with enormous hidden value which, in an active market, are truly worth much more.
Have a box of buggy whips? Well, that market is not all that active these days but you and I both know those really nice buggy whips are worth at least ten times the going rate. Or maybe you have, oh, I dunno...let's say you have your own invention lying around...maybe it's a machine that produces unlimited free energy through the harnessing of perpetual motion. We all know what a bitch it's been trying to find an active market for something like that. Mark that baby up to it's true value and head on down to Citigroup or Government Sachs for a non-recourse loan. If you can't pay it back, then yeah, you'll lose your machine, but the bank will be sitting pretty 'cause they will be able to hold it until its true value becomes apparent in an active market.
We're rich! All of us. RICH! Hallelujah!
Once again, we have people who are pleased as punch to use mark-to-market for their assets when it increases capital but start screaming bloody murder when it isn't helping them.
Exactly! In a bubble, they want to "write up" the assets to reflect their "true" value. And when they bubble bursts? Well, the standard for valuation (read "what the market will bear") must be rejected, 'cause at that point the same market that drove bubble valuations is just a market of fools.
We. Are. So. Screwed.
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Salon headlines in your mailbox
