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April 1, 2008*
Today we’re witnessing a massive rally. Some propellants seem to be the new quarter, further short squeezing, a potential technical breakout, and “relief” rally in the financial sector. Of course the PPT is probably a part of it as well given the awful on-the-surface-news in the financials.
UBS and Lehman are both attempting to raise more capital because they are in need of it – not normally a good sign. Deutsche Bank and UBS especially, have announced enormous write downs as well. Some estimate UBS’ QUARTERLY write-down to be equivalent to 5% of Switzerland’s GDP!
We had believed that we saw improvement in the internals when we initiated the SPY long call position only to witness what was apparently a week of reverse “window dressing” that allowed funds to remove “bad” stocks from their end-of-quarter portfolios.
At the time, we believed that at best the financials would, as a group, tread water but that bargain hunters would be buying much of the rest of the market. Obviously with many financials up nearly 10% today there seems to be something more to it.
We’ve spent a great deal of time researching the problems in the financials over the past year. We knew that things were much worse than were being let on and that’s why we repeatedly tried to warn students, members and clients of the Options University throughout last year. We believe that it is still the case and FASB rule 157 was supposed to force the market value of the toxic securities that the financial firms hold on their books to the surface. WELL, we’re starting to reconsider if the truth will ever come out and it concerns us a great deal. We strongly believe that C and HBC have big problems on their books and additionally are suffering from credit derivatives exposure. Many hours of research confirmed this for us. UBS was another candidate that we considered. We came very close to considering a put spread in there “knowing” that they would have to come clean. Well they did and the stock is up huge on the news just like most of the financials. Sell on rumor, buy on news? We don’t think so. $19 billion is no laughing matter even for the PPT. We’ve been trying to decipher this reaction as it seems so overboard. We believe that the main reason may lie in something that is completely under reported at this point and was only a small blip of information that went unnoticed on our news services. We dug through the news rubble this morning trying to isolate what beyond what we cited above could be the catalyst for such a strong move.
This may be it and it may require us to reconsider our perspective on things.
SEC Openly Invites Corporations To Lie
The Securities and Exchange Commission sent out a Letter On Fair Value Measurements, (Financial Accounting Standards No. 157) that is tantamount to being an open invitation to lie.
More on this below, but if this is accurate then the SEC has effectively rendered 157, or in other words, “real world valuation”, moot. This will apparently allow the charade to go on and on and prevent the truth (insolvency) from seeing the light of day. This is a remarkable development given that the SEC and Paulson are supposed to serve the public investor and to encourage clarity and transparency. The Street apparently senses that all of these “players” will be off the hook indefinitely. If this is the case then we really have to reconsider our thesis going forward. Between the FEDs “black hole” wherein the “toxic waste” can be stashed and what’s left now being able to be ignored, that doesn’t leave much left to potentially drag down these financials. There is no finite time period on any of this as well. It may appear as such but they will simply extend things before they let the truth out. This is akin to raising the USA’s debt ceiling periodically so that we can go on living in Fantasyville.
Regardless, from what we can tell this development, which was “hidden” late on a Friday at the end of a quarter, seems to have been barely covered by the networks and major news outlets. Yet to us, this could be the real driver behind this rally.
It’s really this simple. Change the rules when you see fit. Unfortunately they do not provide any forewarning to small investors as this type of information is only telegraphed to the large connected players ahead of time. Once the quarter ended yesterday this apparently signaled an “all clear” for the movers and shakers.
Here is coverage from a few different sources and commentators on the subject that we promised above. We are contemplating how to manage this new information and potentially new environment with regard to our current positions and positions that we were about to add this morning until this eruption superseded our plans.
SFAS 157
*
March 28, 2008,*6:21 pm
If Market Prices Are Too Low, Ignore Them
The Securities and Exchange Commission is out today with a letter to companies that own a lot of financial instruments whose current market value must be reported to shareholders. For more than a few companies, disclosing market values is neither easy nor convenient.
The issue is the application of SFAS 157, which governs the way companies compute fair value of assets, assuming they have to do so anyway. (Banks and brokers have to do that a lot, but I won’t go into the details of when they can avoid it.) The rule took effect on Jan. 1, although some companies adopted it last year.
The rule sets out three categories of assets, with different ways to value them. Category 1 includes assets with easily observable market values. I.B.M. stock closed today at $114.57, and it is not easy to justify a different value if your quarter ended today. Category 2 is a little fuzzier, where there are observable markets that provide a good guide to prices of your asset, even though there is no direct market. And then there is Category 3, which is essentially mark to model.
In companies that adopted Statement 157 early, we have seen a lot of assets end up in Category 3. That may be proper, since there are plenty of complex financial instruments for which there is not much of a market these days. But it also provides companies with a way to fudge figures.
The S.E.C. letter asks companies for some disclosures on how they came up with those values, and on why a lot of assets may have moved into Category 3. Such disclosures can only help investors.
But one part of the letter stood out to me, providing an excuse for companies to ignore a market value if they don’t like it (italics added):
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.”
That sounds to me like an invitation to fudge. Some people on Wall Street think that nearly every sale today is a forced sale. There are entire categories of collateralized debt obligations where most, if not all, of the trades, occur because a holder has received, or expects, a margin call.
What the S.E.C. should require is a disclosure when a company concludes that a market price should be ignored because it came from a “forced liquidation or distress sale.” Then there should be a disclosure of how much lower that distress price was from the value the company is using in its own valuation.
Alternatively, there could be a simple rule, at least for banks. If you will ignore this price as irrelevant when you decide whether to send out margin calls to those to whom you have lent money, then you can ignore that market price when you make your own reports. But if you won’t lend based on a valuation that ignores actual market prices, then you should not use that valuation for your own accounts.
Addendum, Tuesday April 1:
The posting should have noted that the phrases the S.E.C. used are taken from the original rule. This is not a new loophole, merely an invitation to use an existing one without being forced to actually disclose its use. It is a fair bet that the rule writers did not contemplate a market where people could claim virtually every sale was a forced sale, but they did leave the opening.
*
*
SEC Openly Invites Corporations To Lie
The Securities and Exchange Commission sent out a Letter On Fair Value Measurements, (Financial Accounting Standards No. 157) that is tantamount to being an open invitation to lie. Let's take a look at what some are saying about that letter.
Floyd Norris at the New York Times writes If Market Prices Are Too Low, Ignore Them.
The Securities and Exchange Commission is out today with a letter to companies that own a lot of financial instruments whose current market value must be reported to shareholders. For more than a few companies, disclosing market values is neither easy nor convenient.
The issue is the application of SFAS 157, which governs the way companies compute fair value of assets. The rule sets out three categories of assets, with different ways to value them. Category 1 includes assets with easily observable market values. I.B.M. stock closed today at $114.57, and it is not easy to justify a different value if your quarter ended today. Category 2 is a little fuzzier, where there are observable markets that provide a good guide to prices of your asset, even though there is no direct market. And then there is Category 3, which is essentially mark to model.
But one part of the letter stood out to me, providing an excuse for companies to ignore a market value if they don’t like it (italics added):
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.”
That sounds to me like an invitation to fudge. Some people on Wall Street think that nearly every sale today is a forced sale. There are entire categories of collateralized debt obligations where most, if not all, of the trades, occur because a holder has received, or expects, a margin call.
Naked Capitalism wrote an excellent piece on this today called SEC Gives Permission to Fudge Mark-to-Market.
In the last couple of months, there has been increased worry that mark-to-market accounting leads to the operation of a destructive "financial accelerator." As prevailing values go down, banks have to lower the value of their holdings. This leads to a direct hit to their net worth, which will lead them to contract their balance sheets, either by withholding credit or selling assets. More sales in a weak market lead to further declines in the prices of financial instruments, leading to more writedowns and sales of inventory.
Funny how no one had a problem with mark-to-market when asset prices were rising.
But now the SEC has given banks and brokers a huge out. No matter how small or easily absorbed by the market a forced sale might be (think of a hedge fund hit by a margin call), a financial institution can ignore the price realized. In fact, they get to determine what trades constitute a forced sale.
Moreover, we've seen plenty of unintended consequences, or worse, backfires, as regulators intervene trying to alleviate the credit crisis. Banks have been reluctant to extend credit to each other precisely because they don't trust their creditworthiness. That's tantamount to saying they already don't trust their public financial statements, since according to their public filings, virtually all major financial institutions have more than the required statutory capital.
So this move, to stem the balance-sheet-shrinking impact of mark-to-market accounting in a falling price environment, may further undermine liquidity. Companies will less able to judge whether their published financials are telling the whole story, And where the numbers are in doubt, rumors are taken more seriously.
To paraphrase Winston Churchill, it has been said that mark to market accounting is the worst form of financial accounting except for all the others that have been tried. But it looks like we are going to try them anyhow.
Let's sum this all up. Corporations were happy to mark to market as long as asset prices were going up. This led to more loans on top of loans as corporations were making huge profits, at least on paper. Enormous bonuses were handed out based on those paper profits and corporations leveraged up loans.
Now we see those profits were nothing but a mirage.
Of course everyone knew those earnings were a mirage even at the time, but as long as the party was going on, no one wanted to spoil it, especially the Fed and the SEC. So the SEC looked away, and so did the Fed, and so did investors who were happy with everything as long as stock prices were going up.
In the asymmetrical world of the Fed and the SEC bubbles are never prevented, but everything is done to prevent them from busting. Now the SEC is openly inviting corporation to lie.
Disclosure that was fine on the way up is somehow not fine on the way down.
In the end all this does is create more mistrust and suspicion about what is real and what is imaginary. That suspicion may be more damaging than actual disclosure and may also create big temporary inequities between corporations that decide to come clean vs. those who keep sneaking more garbage into Category 3 assets, while pretending those assets are worth more than they are.
Nonetheless, if there was a futures market on pretending, "pretending futures" would be a screaming buy. To paraphrase Martha Stewart "That's not a good thing".
Mike "Mish" Shedlock
Mish's Global Economic Trend Analysis
SFAS 157: Market Prices Too Low? Just Ignore Them!
Monday, March 31, 2008 | 06:47 AM
in Credit | Derivatives | Markets | Taxes and Policy
Here's a honey of an idea that almost slipped by unnoticed last week. Thankfully, the NYT's sharp eyed business columnist, Floyd Norris, caught it.
An SEC opinion letter advising companies how to deal with their Level 3 assets made a rather curious suggestion. They advised that if the prices of mark-to-model crappy paper are underwater, well then, declare it the result of forced liquidation -- and then you can simply ignore them.
It truly boggles the mind.
Would someone please explain to me how providing an official mechanism for allowing companies to ignore market values of the bad investments they made help investors? Instead of working towards transparency, the SEC is providing a mechanism to allow banks to hide losses from their shareholders. This is nothing short of an invitation to commit fraud.
Here's the offending passage:
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.” (emphasis added)
Norris suggests this is an invitation for banks having two sets of books. One for Bank disclosures for shareholders: Ignore these paper losses, the prices are only due to a forced liquidation -- and another for Margin calls: Hey! You are underwater by XX% in this; send in more money! Apparently, the SEC believes prices are irrelevant, except when it comes to margin calls.
Stop and think about this for a moment: Every margin call is essentially a forced sale. Consider the alphabet soup of highly leveraged derivatives out there, where many of the most recent trades have occurred because some hedgie has blown up. What might the unintended consequences of this rule actually be?
Today is the last day of the quarter. There is often window dressing to the upside the last few days before a Q's end to make the fund's performance look better. Imagine if there was an incentive to make a huge category of derivatives' last trade appear to be the result of a margin call? We would have this enormous window dressing down -- so as to not have to come up with a legitimate value for tier 3 junk.
This is a directive to banks to make the situation much, much worse. They can clean up their own books by forcing liquidations elsewhere. Un-fricking-believable.
Trader Monkey
Today we’re witnessing a massive rally. Some propellants seem to be the new quarter, further short squeezing, a potential technical breakout, and “relief” rally in the financial sector. Of course the PPT is probably a part of it as well given the awful on-the-surface-news in the financials.
UBS and Lehman are both attempting to raise more capital because they are in need of it – not normally a good sign. Deutsche Bank and UBS especially, have announced enormous write downs as well. Some estimate UBS’ QUARTERLY write-down to be equivalent to 5% of Switzerland’s GDP!
We had believed that we saw improvement in the internals when we initiated the SPY long call position only to witness what was apparently a week of reverse “window dressing” that allowed funds to remove “bad” stocks from their end-of-quarter portfolios.
At the time, we believed that at best the financials would, as a group, tread water but that bargain hunters would be buying much of the rest of the market. Obviously with many financials up nearly 10% today there seems to be something more to it.
We’ve spent a great deal of time researching the problems in the financials over the past year. We knew that things were much worse than were being let on and that’s why we repeatedly tried to warn students, members and clients of the Options University throughout last year. We believe that it is still the case and FASB rule 157 was supposed to force the market value of the toxic securities that the financial firms hold on their books to the surface. WELL, we’re starting to reconsider if the truth will ever come out and it concerns us a great deal. We strongly believe that C and HBC have big problems on their books and additionally are suffering from credit derivatives exposure. Many hours of research confirmed this for us. UBS was another candidate that we considered. We came very close to considering a put spread in there “knowing” that they would have to come clean. Well they did and the stock is up huge on the news just like most of the financials. Sell on rumor, buy on news? We don’t think so. $19 billion is no laughing matter even for the PPT. We’ve been trying to decipher this reaction as it seems so overboard. We believe that the main reason may lie in something that is completely under reported at this point and was only a small blip of information that went unnoticed on our news services. We dug through the news rubble this morning trying to isolate what beyond what we cited above could be the catalyst for such a strong move.
This may be it and it may require us to reconsider our perspective on things.
SEC Openly Invites Corporations To Lie
The Securities and Exchange Commission sent out a Letter On Fair Value Measurements, (Financial Accounting Standards No. 157) that is tantamount to being an open invitation to lie.
More on this below, but if this is accurate then the SEC has effectively rendered 157, or in other words, “real world valuation”, moot. This will apparently allow the charade to go on and on and prevent the truth (insolvency) from seeing the light of day. This is a remarkable development given that the SEC and Paulson are supposed to serve the public investor and to encourage clarity and transparency. The Street apparently senses that all of these “players” will be off the hook indefinitely. If this is the case then we really have to reconsider our thesis going forward. Between the FEDs “black hole” wherein the “toxic waste” can be stashed and what’s left now being able to be ignored, that doesn’t leave much left to potentially drag down these financials. There is no finite time period on any of this as well. It may appear as such but they will simply extend things before they let the truth out. This is akin to raising the USA’s debt ceiling periodically so that we can go on living in Fantasyville.
Regardless, from what we can tell this development, which was “hidden” late on a Friday at the end of a quarter, seems to have been barely covered by the networks and major news outlets. Yet to us, this could be the real driver behind this rally.
It’s really this simple. Change the rules when you see fit. Unfortunately they do not provide any forewarning to small investors as this type of information is only telegraphed to the large connected players ahead of time. Once the quarter ended yesterday this apparently signaled an “all clear” for the movers and shakers.
Here is coverage from a few different sources and commentators on the subject that we promised above. We are contemplating how to manage this new information and potentially new environment with regard to our current positions and positions that we were about to add this morning until this eruption superseded our plans.
SFAS 157
*
March 28, 2008,*6:21 pm
If Market Prices Are Too Low, Ignore Them
The Securities and Exchange Commission is out today with a letter to companies that own a lot of financial instruments whose current market value must be reported to shareholders. For more than a few companies, disclosing market values is neither easy nor convenient.
The issue is the application of SFAS 157, which governs the way companies compute fair value of assets, assuming they have to do so anyway. (Banks and brokers have to do that a lot, but I won’t go into the details of when they can avoid it.) The rule took effect on Jan. 1, although some companies adopted it last year.
The rule sets out three categories of assets, with different ways to value them. Category 1 includes assets with easily observable market values. I.B.M. stock closed today at $114.57, and it is not easy to justify a different value if your quarter ended today. Category 2 is a little fuzzier, where there are observable markets that provide a good guide to prices of your asset, even though there is no direct market. And then there is Category 3, which is essentially mark to model.
In companies that adopted Statement 157 early, we have seen a lot of assets end up in Category 3. That may be proper, since there are plenty of complex financial instruments for which there is not much of a market these days. But it also provides companies with a way to fudge figures.
The S.E.C. letter asks companies for some disclosures on how they came up with those values, and on why a lot of assets may have moved into Category 3. Such disclosures can only help investors.
But one part of the letter stood out to me, providing an excuse for companies to ignore a market value if they don’t like it (italics added):
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.”
That sounds to me like an invitation to fudge. Some people on Wall Street think that nearly every sale today is a forced sale. There are entire categories of collateralized debt obligations where most, if not all, of the trades, occur because a holder has received, or expects, a margin call.
What the S.E.C. should require is a disclosure when a company concludes that a market price should be ignored because it came from a “forced liquidation or distress sale.” Then there should be a disclosure of how much lower that distress price was from the value the company is using in its own valuation.
Alternatively, there could be a simple rule, at least for banks. If you will ignore this price as irrelevant when you decide whether to send out margin calls to those to whom you have lent money, then you can ignore that market price when you make your own reports. But if you won’t lend based on a valuation that ignores actual market prices, then you should not use that valuation for your own accounts.
Addendum, Tuesday April 1:
The posting should have noted that the phrases the S.E.C. used are taken from the original rule. This is not a new loophole, merely an invitation to use an existing one without being forced to actually disclose its use. It is a fair bet that the rule writers did not contemplate a market where people could claim virtually every sale was a forced sale, but they did leave the opening.
*
*
SEC Openly Invites Corporations To Lie
The Securities and Exchange Commission sent out a Letter On Fair Value Measurements, (Financial Accounting Standards No. 157) that is tantamount to being an open invitation to lie. Let's take a look at what some are saying about that letter.
Floyd Norris at the New York Times writes If Market Prices Are Too Low, Ignore Them.
The Securities and Exchange Commission is out today with a letter to companies that own a lot of financial instruments whose current market value must be reported to shareholders. For more than a few companies, disclosing market values is neither easy nor convenient.
The issue is the application of SFAS 157, which governs the way companies compute fair value of assets. The rule sets out three categories of assets, with different ways to value them. Category 1 includes assets with easily observable market values. I.B.M. stock closed today at $114.57, and it is not easy to justify a different value if your quarter ended today. Category 2 is a little fuzzier, where there are observable markets that provide a good guide to prices of your asset, even though there is no direct market. And then there is Category 3, which is essentially mark to model.
But one part of the letter stood out to me, providing an excuse for companies to ignore a market value if they don’t like it (italics added):
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.”
That sounds to me like an invitation to fudge. Some people on Wall Street think that nearly every sale today is a forced sale. There are entire categories of collateralized debt obligations where most, if not all, of the trades, occur because a holder has received, or expects, a margin call.
Naked Capitalism wrote an excellent piece on this today called SEC Gives Permission to Fudge Mark-to-Market.
In the last couple of months, there has been increased worry that mark-to-market accounting leads to the operation of a destructive "financial accelerator." As prevailing values go down, banks have to lower the value of their holdings. This leads to a direct hit to their net worth, which will lead them to contract their balance sheets, either by withholding credit or selling assets. More sales in a weak market lead to further declines in the prices of financial instruments, leading to more writedowns and sales of inventory.
Funny how no one had a problem with mark-to-market when asset prices were rising.
But now the SEC has given banks and brokers a huge out. No matter how small or easily absorbed by the market a forced sale might be (think of a hedge fund hit by a margin call), a financial institution can ignore the price realized. In fact, they get to determine what trades constitute a forced sale.
Moreover, we've seen plenty of unintended consequences, or worse, backfires, as regulators intervene trying to alleviate the credit crisis. Banks have been reluctant to extend credit to each other precisely because they don't trust their creditworthiness. That's tantamount to saying they already don't trust their public financial statements, since according to their public filings, virtually all major financial institutions have more than the required statutory capital.
So this move, to stem the balance-sheet-shrinking impact of mark-to-market accounting in a falling price environment, may further undermine liquidity. Companies will less able to judge whether their published financials are telling the whole story, And where the numbers are in doubt, rumors are taken more seriously.
To paraphrase Winston Churchill, it has been said that mark to market accounting is the worst form of financial accounting except for all the others that have been tried. But it looks like we are going to try them anyhow.
Let's sum this all up. Corporations were happy to mark to market as long as asset prices were going up. This led to more loans on top of loans as corporations were making huge profits, at least on paper. Enormous bonuses were handed out based on those paper profits and corporations leveraged up loans.
Now we see those profits were nothing but a mirage.
Of course everyone knew those earnings were a mirage even at the time, but as long as the party was going on, no one wanted to spoil it, especially the Fed and the SEC. So the SEC looked away, and so did the Fed, and so did investors who were happy with everything as long as stock prices were going up.
In the asymmetrical world of the Fed and the SEC bubbles are never prevented, but everything is done to prevent them from busting. Now the SEC is openly inviting corporation to lie.
Disclosure that was fine on the way up is somehow not fine on the way down.
In the end all this does is create more mistrust and suspicion about what is real and what is imaginary. That suspicion may be more damaging than actual disclosure and may also create big temporary inequities between corporations that decide to come clean vs. those who keep sneaking more garbage into Category 3 assets, while pretending those assets are worth more than they are.
Nonetheless, if there was a futures market on pretending, "pretending futures" would be a screaming buy. To paraphrase Martha Stewart "That's not a good thing".
Mike "Mish" Shedlock
Mish's Global Economic Trend Analysis
SFAS 157: Market Prices Too Low? Just Ignore Them!
Monday, March 31, 2008 | 06:47 AM
in Credit | Derivatives | Markets | Taxes and Policy
Here's a honey of an idea that almost slipped by unnoticed last week. Thankfully, the NYT's sharp eyed business columnist, Floyd Norris, caught it.
An SEC opinion letter advising companies how to deal with their Level 3 assets made a rather curious suggestion. They advised that if the prices of mark-to-model crappy paper are underwater, well then, declare it the result of forced liquidation -- and then you can simply ignore them.
It truly boggles the mind.
Would someone please explain to me how providing an official mechanism for allowing companies to ignore market values of the bad investments they made help investors? Instead of working towards transparency, the SEC is providing a mechanism to allow banks to hide losses from their shareholders. This is nothing short of an invitation to commit fraud.
Here's the offending passage:
“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability.” (emphasis added)
Norris suggests this is an invitation for banks having two sets of books. One for Bank disclosures for shareholders: Ignore these paper losses, the prices are only due to a forced liquidation -- and another for Margin calls: Hey! You are underwater by XX% in this; send in more money! Apparently, the SEC believes prices are irrelevant, except when it comes to margin calls.
Stop and think about this for a moment: Every margin call is essentially a forced sale. Consider the alphabet soup of highly leveraged derivatives out there, where many of the most recent trades have occurred because some hedgie has blown up. What might the unintended consequences of this rule actually be?
Today is the last day of the quarter. There is often window dressing to the upside the last few days before a Q's end to make the fund's performance look better. Imagine if there was an incentive to make a huge category of derivatives' last trade appear to be the result of a margin call? We would have this enormous window dressing down -- so as to not have to come up with a legitimate value for tier 3 junk.
This is a directive to banks to make the situation much, much worse. They can clean up their own books by forcing liquidations elsewhere. Un-fricking-believable.
Trader Monkey
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