Here's a live, as we speak example of a mismark. Take a look where Markit.com closed the ABX.HE on Friday vs. where the stuff was trading in the market. It was closed POINTS too high. The street makes me sick. And these marks were for quarter end financials.
Here's the street level view of the problem. In yesteday's Realtytrac alert:
A single family house in Naples FL has 1700 SF of air-conditioned space. Assessed at $320,000 and the owner has lived in it long enough to have a Save Our Home exemption of $206,000 and a Homestead exemption of $25,000 resulting in a taxable value of $89,000. In short, not a very high taxed house.
Seems she went out and took a $475,000 mortgage in 3/06. Wanna bet it was sub-prime and no doc?? Now it is on Realtytrac's alert for foreclosure. Try selling it in Southwest Florida market where there are thousands of properties like this beauty and guess what the realized value might be. The house next door is a bit smaller at 1400 SF and sold in 1/07 for $360,000. Maybe that is the next one for foreclosure.
Someone needs to inform Mr. Brooks that the performance issues began with the inability to supervise the excessive leverage that was employed by his wild-west team of merry bandits.
What amazes me is that to this day, leverage is encouraged due to the enormous fee income, yet the situation makes "any" model ineffective in certain circumstances.
Speaking of disasters - a friend of mine at work said he was going to try to get an iPhone. Foolishly I went along. The line wasn't too long so I recycled 600 of my petrodollars into that shiny new handheld pinnacle of human technology.
Well as it turns out, to even turn the damn thing on you have to go through the online registration process.
Which doesn't work.
Fortunately they give you an AT&T support number to call.
Unfortunately when you call the support number you just get a recorded message that says "Sorry, sucks to be you."
I've notified the SEC and eagerly await the congressional hearings on the matter.
AC - It's like buying a security - do your research. Mossberger of the WSJ did a review of the IPhone which he had used for two weeks. Rave reviews overall - a brillant portable computer bascially.
" However, legal experts say investors may have a hard time to prove they werent fully informed a risks, especially in light of warnings in the BS funds marketing material and even harder to find a sympathetic court who would pity sophisticated investors who should know better."
Mark to market is what your Ameritrade account does - every time there is an open market sale of something you own, Ameritrade shows your shares at the new price.
Some securities are slower to update than others. If you own Canadian junior mining shares traded on the pink sheets in the US, they only get updated once a day after closing.
The problem is when somebody is doing something different from mark to market, so their values are basically fictional.
I am looking at my Ameritrade statement and see many "Mark to Market adj." entries on transaction type "Journal". I just see some dollar amounts and no stock symboles.
All of my positions in my protfolio are short sells.
Still I do not undrestand what it is and why it is done. I can not figure this out.
wawawa, "mark to market" is basically an accounting issue.
If you hold something in a trading account--that includes not just a retail brokerage account but things like a mortgage lender's "held for sale" pipeline of closed but not yet sold mortgage loans--the value of your assets, expressed as their market price, can obviously change over time. The practice of "marking" your holdings really comes down to a matter of answering the question, what would all this be worth if I had to sell it today? It might be worth more or less than what you originally bought it for; you can have MTM gains as well as MTM losses. (My point in the post was that people don't tend to bitch about having to mark their portfolios when prices are rising.)
That's critically important if you are buying shares--or lenders are making loans--with borrowed money. The shares or loans "collateralize" the margin account or warehouse line in question, and the margin or warehouse lender wants to make sure that the value of the collateral stays greater than or equal to the loan balance outstanding. So one use of MTM is by the margin lender: if your holdings get marked to a substantially lower market price this month, you are likely to get a "margin call": you have to put some cash in your brokerage account to bring the margin balance back into line. If you don't do that, the margin lender forces the sale of some or all of your holdings to pay off the margin loan. Of course, as soon as that happens, the prices of the holdings can get even worse, and there's a new "market price" to mark to tomorrow.
In some ways this is what happened to New Century, for instance. They got what amounted to a "margin call" when their warehouse lenders determined that the value of the held-for-sale mortgage loans had dropped in market value such that the warehouse line of credit was insufficiently collateralized. With no more warehouse borrowings available, NEW hit BK PDQ.
Financial institutions do not, by the way, use MTM accounting for loans "held for investment." If you declare that you are holding loans to maturity, you are allowed to account for them on a present value of future cash-flows basis. The only time you'd have to "mark" an HFI loan is if it becomes "impaired," or if you decide you don't want to hold it any longer and you move it to your HFS account.
I bring this up because I expect to see some interesting results of MTM on the HFS when AHM gets around to reporting on Q2.
"If you're an "investor" with $1.5 million to blow? The SEC will get right on it."
Don't count on it. The retail investors who invested at Brookstreet will probably look in vain to the SEC which agency won't be activist in that area. There was a recent court case that blocked investors in Enron from going after the finance companies that supported Enron in its financial pipe-dreams. That shows the current government attitude in protecting investors. For retail investors it's buyer beware even $1.5 million is still small stuff. Bigger institutions that invested in BS's funds will have larger legal budgets to duke it out.
What happens if the big four finance companies and BS get into trouble, contagion, is the arena to watch.
I keep reading people stating things like "money that used to be in..." something (e.g., real estate, stocks, MBS, CDOs, take your pick) fleeing into something else. Always cracks me up. Well, that BS investor's 1.5M isn't fleeing anywhere... it's just gone.
How much money invested somewhere isn't going anywhere else because it's going to die in place? IMO trillions...
Here's a live, as we speak example of a mismark. Take a look where Markit.com closed the ABX.HE on Friday vs. where the stuff was trading in the market. It was closed POINTS too high. The street makes me sick. And these marks were for quarter end financials.
Here's the street level view of the problem. In yesteday's Realtytrac alert:
A single family house in Naples FL has 1700 SF of air-conditioned space. Assessed at $320,000 and the owner has lived in it long enough to have a Save Our Home exemption of $206,000 and a Homestead exemption of $25,000 resulting in a taxable value of $89,000. In short, not a very high taxed house.
Seems she went out and took a $475,000 mortgage in 3/06. Wanna bet it was sub-prime and no doc?? Now it is on Realtytrac's alert for foreclosure. Try selling it in Southwest Florida market where there are thousands of properties like this beauty and guess what the realized value might be. The house next door is a bit smaller at 1400 SF and sold in 1/07 for $360,000. Maybe that is the next one for foreclosure.
Tanta-
"We never had a performance issue," Brooks said of the CMOs. "We had a notional pricing disparity."
SEC watches Brookstreet close | brookstreet, brooks, securities - Business - The Orange County Register
Someone needs to inform Mr. Brooks that the performance issues began with the inability to supervise the excessive leverage that was employed by his wild-west team of merry bandits.
What amazes me is that to this day, leverage is encouraged due to the enormous fee income, yet the situation makes "any" model ineffective in certain circumstances.
I am sure this is not a "new" problem which makes it even more troubling.
"They're here making sure we shut down the right way," preserving records when required, he said.
Yeah, I'm sure that's it Stanley-
Brookstreet is getting a look from regulators - Los Angeles Times
Speaking of disasters - a friend of mine at work said he was going to try to get an iPhone. Foolishly I went along. The line wasn't too long so I recycled 600 of my petrodollars into that shiny new handheld pinnacle of human technology.
Well as it turns out, to even turn the damn thing on you have to go through the online registration process.
Which doesn't work.
Fortunately they give you an AT&T support number to call.
Unfortunately when you call the support number you just get a recorded message that says "Sorry, sucks to be you."
I've notified the SEC and eagerly await the congressional hearings on the matter.
AC - It's like buying a security - do your research. Mossberger of the WSJ did a review of the IPhone which he had used for two weeks. Rave reviews overall - a brillant portable computer bascially.
Testing Out the iPhone - WSJ.com
BUT you do have to Register on Line! I am sure the network is overloaded.
Avoir patience!
Churchill Fan,
I can see where Markit closed the ABX, but where can I find what it was actually trading at? Thanks.
CDO sales drying up-
The resource cannot be found.
" However, legal experts say investors may have a hard time to prove they werent fully informed a risks, especially in light of warnings in the BS funds marketing material and even harder to find a sympathetic court who would pity sophisticated investors who should know better."
The resource cannot be found.
What is "mark to market" ?
Mark to market is what your Ameritrade account does - every time there is an open market sale of something you own, Ameritrade shows your shares at the new price.
Some securities are slower to update than others. If you own Canadian junior mining shares traded on the pink sheets in the US, they only get updated once a day after closing.
The problem is when somebody is doing something different from mark to market, so their values are basically fictional.
The Ronco Pocket Cliche Generator: priceless!
Ahh, I needed that.
OK albrt now that you mentioned it.
I am looking at my Ameritrade statement and see many "Mark to Market adj." entries on transaction type "Journal". I just see some dollar amounts and no stock symboles.
All of my positions in my protfolio are short sells.
Still I do not undrestand what it is and why it is done. I can not figure this out.
Any explanation from anyone is appreciated.
wawawa, "mark to market" is basically an accounting issue.
If you hold something in a trading account--that includes not just a retail brokerage account but things like a mortgage lender's "held for sale" pipeline of closed but not yet sold mortgage loans--the value of your assets, expressed as their market price, can obviously change over time. The practice of "marking" your holdings really comes down to a matter of answering the question, what would all this be worth if I had to sell it today? It might be worth more or less than what you originally bought it for; you can have MTM gains as well as MTM losses. (My point in the post was that people don't tend to bitch about having to mark their portfolios when prices are rising.)
That's critically important if you are buying shares--or lenders are making loans--with borrowed money. The shares or loans "collateralize" the margin account or warehouse line in question, and the margin or warehouse lender wants to make sure that the value of the collateral stays greater than or equal to the loan balance outstanding. So one use of MTM is by the margin lender: if your holdings get marked to a substantially lower market price this month, you are likely to get a "margin call": you have to put some cash in your brokerage account to bring the margin balance back into line. If you don't do that, the margin lender forces the sale of some or all of your holdings to pay off the margin loan. Of course, as soon as that happens, the prices of the holdings can get even worse, and there's a new "market price" to mark to tomorrow.
In some ways this is what happened to New Century, for instance. They got what amounted to a "margin call" when their warehouse lenders determined that the value of the held-for-sale mortgage loans had dropped in market value such that the warehouse line of credit was insufficiently collateralized. With no more warehouse borrowings available, NEW hit BK PDQ.
Financial institutions do not, by the way, use MTM accounting for loans "held for investment." If you declare that you are holding loans to maturity, you are allowed to account for them on a present value of future cash-flows basis. The only time you'd have to "mark" an HFI loan is if it becomes "impaired," or if you decide you don't want to hold it any longer and you move it to your HFS account.
I bring this up because I expect to see some interesting results of MTM on the HFS when AHM gets around to reporting on Q2.
Yep, got their lunch handed to them and it sure the hell wasn't free!
"We are not responsible," Adam.
See also Genesis, Ch 3.
Calvert; Call your friendly neighborhood Investment Bank
I'm just captivated by the notational value of recording indices differently than where they traded. This is a major issue.
"If you're an "investor" with $1.5 million to blow? The SEC will get right on it."
Don't count on it. The retail investors who invested at Brookstreet will probably look in vain to the SEC which agency won't be activist in that area. There was a recent court case that blocked investors in Enron from going after the finance companies that supported Enron in its financial pipe-dreams. That shows the current government attitude in protecting investors. For retail investors it's buyer beware even $1.5 million is still small stuff. Bigger institutions that invested in BS's funds will have larger legal budgets to duke it out.
What happens if the big four finance companies and BS get into trouble, contagion, is the arena to watch.
For a similar story, take a look at American Business Financial Services.
I keep reading people stating things like "money that used to be in..." something (e.g., real estate, stocks, MBS, CDOs, take your pick) fleeing into something else. Always cracks me up. Well, that BS investor's 1.5M isn't fleeing anywhere... it's just gone.
How much money invested somewhere isn't going anywhere else because it's going to die in place? IMO trillions...