Thursday, March 12, 2009

Mark to Market Once Again

The rhetoric on mark to market is getting louder and louder. I happened to catch Art Cashin this morning on CNBC defending the argument to suspend or remove mark to market under the guise that just because the guy down the street has to sell his house at a depressed level doesn't mean you need to come up with more money to reflect that lower value.

Does Mr. Cashin really believe his analogy to be an appropriate one? Does he believe this is really the issue? I have a sneaky suspicion Art has fallen victim to the virus of "stocks are cheap" and is now long stocks and finds himself under water.


Art, I need to ask you is GE trading down here where it is because of mark to market accounting or because GE refuses to mark their book to market? The market has woken up to the games they play and now sees that GE's books (financials in general cannot be trusted) do not refect ANYWHERE NEAR current market value! Let me rephrase that, GE's carrying values for assets are not even in the same ballpark as to current market value.

I have the utmost respect for Art Cashin, he is wisened beyond words but he is not immune to emotion. Like many traders out there, one can get emotional or attached to his stance especially a losing one. Mr. Cashi may really believe stocks are a buy, he may be correct that stocks are undervalued, but does he really believe suspending or eliminating mark to market going to fix what is wrong or only pry one out of a bad trade.

I have no doubt that the mark to market abolitionists like Steve Forbes, Bill Issac, and Larry Kudlow will have their way for it tis the way things work. We will eventually realise it has done nothing to address the underlying problems, which these cats continue to obfuscate and be in denial about, and move on to the next comestic repair job.


Students of stock market history are well aware that after the first leg down in the debacle of 1929 we had a massive bear market rally that sucked in the professionals. The 'smart money' of the day got long stocks and the next leg down that took the Dow ultimately down 90% and were wiped out. I am keeping a watchful eye for this type of scenario to repeat once again, mainly as self-preservation so I do not get caught in it !!

The equity market has finally woken up to the fact that the financials are not what they say they are. The books they keep are fantasy and this is under mark to market accounting. rules. These rules HAVE ALREADY BEEN CIRCUMVENTED as they have off balance sheet vehicles holding worthless junk along with level 2 and level 3 assets of which we have to take their word on their value.

The fact that the politicians are clamoring all over this mark to market issue should tell you all you need to know about it. Do you really think they have a clue as to what will fix this. The fact that the all the aiders and abettors of the market shenanigans are all for it should be argument enough against. I am shocked at the number of purportedly free market capitalists and libertarians out there who are for it.

It truly is funny how a losing position or an under water account or portfolio performance can color you thinking and your policy stance. Pathetic.

You can stop right there with your flag draped, patriot driven claims that this is extraordinary times requiring extraordinary measures. The country, it's rules, its constitution, and its people are above window dressing maneuvers and deserve better than that.


The capital markets deserve better, the country deserves better, the public deserves better.


Housekeeping notes;

I was stopped out of AMZN late yesterday at $68.50 for a loss of just over a pt on 1 unit short.

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $123.28
Long 1 unit Ultrashort S&P500 ticker SDS @ $69.80 stop @ $93.42
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $82.95
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Short 1 unit Google ticker GOOG @ $316.95 stop @ $324.61
Long 2 units Ultra DJ Crude ticker UCO @ $8.05 stop @ $6.78

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