Generali's Thread of Doom

setmefree2

There was me thinking all the threads on this board were threads of doom

I shall make it a mission to find good news and post it on MSE. However, it's possible that you may have to wait awhile........;)

Generali

setmefree2 wrote: »

There was me thinking all the threads on this board were threads of doom

I shall make it a mission to find good news and post it on MSE. However, it's possible that you may have to wait awhile........;)

I am looking forward to reading your uplifting post in 2011. Please hang around between now and then though.

setmefree2

Does this count as good news?

Mortgage approvals up in January(UK)


http://news.bbc.co.uk/1/hi/business/7907275.stm

Generali

setmefree2 wrote: »

Does this count as good news?

Mortgage approvals up in January(UK)


http://news.bbc.co.uk/1/hi/business/7907275.stm

I think better news (we've reached a bottom for mortgages for now at least) rather than actual good news.

chewmylegoff

bubblesmoney wrote: »

leaving it to the auditors discretion in valuations is asking for trouble as every major banking fraud / accounting scam involved previous big5 accountants passing the fictitious accounst for years (enron et al). there should be no discretion allowed in marking to market, anything else is just asking for trouble where valuations are coooked up in the clouds using fancy equations without any basis in reality

it's not mark to market valuations that are the problem. that's easy, look at the market, there you go. it's all the bespoke structured product nonsense which is the problem, because it's mostly valued on the basis of formulae written by the same people who designed the products.

chucky

setmefree2 wrote: »

Does this count as good news?

Mortgage approvals up in January(UK)


http://news.bbc.co.uk/1/hi/business/7907275.stm

no because they have a vested interest - they've fiddled the numbers

purch

Does this count as good news?

Mortgage approvals up in January(UK)

No..........Just means that there'll be more homes to repossess in the future

bubblesmoney

Wookster wrote: »

You raise an important point: yes there have been big scandals, however thus far they have been concentrated to the US which has a much more prescriptive rule based set of accounting rules. Until IFRS the UK was much more principle based where the auditors have been much more involved in the accounting policies rather than the box ticking exercise in the US.

The difference is in a wildly complex rule based environment you have very expensive lawyers navigating through gaps in the rules, where as in the UK it has always been more about the principles involved and the judgements taken.

Otherwise how do you get around the fact that some of these accounting policies (around pensions and financial instruments in particular) simply do compound market movements? If there is no effective market, as is the case now, then assets are written down to firesale values, despite the fact that many of those assets will yield significant cashflows - it creates a downwards spiral.

if there indeed was any significant value in the bad assets then private investors would have been fighting each other to get hold of these assets. the very fact that no one wants to touch these with a barge pole is proof as to their ultimate value. quite a few ex-management bigwigs of these banks are very well off and MORE important they have first hand inside knowledge of the true value of these assets as they worked for these banks before. if indeed there was something of value to take advantage of these ex-management guys (goodwin et all) would be the first to jump in with a management buyout and buy the stuff at firesale prices. but the proof of the pudding is that no one wants to buy these assets. if indeed they were valuable why wont the rival banks who have good cash assets try to acquire these assets at firesale prices??

actually what is happening is -

• banks have a load of crap assets which they say is valued at for eg. 1 trillion
• but banks cant sell these assets on the open market at that price or at any price as no one is stupid enough to buy these assets at near expected value of the banks
• now even the chance of forced fire sales is gone because of TARP, TALF, bad bank, bad assets insurance schemes which raise the expectation in banks carrying the crap assets that instead of getting 10p in the pound for the crap assets or worse on the open market, the govt has bent over and asked for a free for all by starting to talk about the insurance / bad bank scheme
• so now the same banks think they can have their cake and eat it too by not selling it at mark to market prices but wait for the govt to buy it off them at 80-90p for the pound. with them about to make a killing via the bad bank scheme no bank would be foolish enough to now mark these 'assets' to market value, instead they have got all the incentive to use their own proprietery mark to model valuations to hype up the valuation and then get 80-90p off the pound for such insane valuations. the only mugs will be the tax payers who get conned by the bankers and their regulatory chums working for the govt.
• in what way is this situation different from some of the house lotteries. owner thinks his house is worth a million but no one will pay that price on the open market, so he thinks he can have his cake and eat it too by starting a property lottery where tickets are supposed to raise a million (for house worth probably half that value) and even if they dont sell that many tickets they get to keep the admin fee.
• only difference from what the banks are doing now is that they are getting the govt to buy all the ticket on behalf of the tax payer and worse is there are not much assets present for the amount of money being doled out.
• how can a bank survive if their market capitalisation is 20 billion and they have 250billion plus of toxic assets. most of them are insolvent now and are just zombie banks being propped up by the govt p!!!y footing instead of taking definitive action. see what the market capitalisation of RBS, lloyds etc is now and see how much govt funds they have already got and see how much toxic assets (250 billion + each for starters!) they are further trying to palm off under the bad bank insurance schemes. same story with citibank and bank of america etc
• it is not lack of buyers creating a stalemate now but the stupid one foot forward and two feet backwards policy of the govt creating fear in the private investor that they will be wiped out by the govt changing the policy the next day if they buy the assets that is preventing sales and also banks waiting for 80-90p in the pound from the govt which they know they wont get in the open market. the govt is creating a bigger mess by changing policies frequently. if they said you have 1 week to publically state true assets and liabilities and start auction of these troubled assets then this would be solved fast. any unsold asset should be written off by the banks books as losses. any company lying about the troubled assets should face criminal prosecutions for accounting fraud and have the book thrown at them.

mewbie_2

Now I'm a bear as much as the next man mod: no you're not and I know it's all bad news. But having feasted off the anticipation of it for years I am now sick of it. I know the news is bad, and the outlook is bad, and everything's bad but I am trying to find some belief that it will be better. That jobs will come back, the economy and banks will recover, that house prices find their natural resting place. Because I want to be happy, and carefree and frolic... well not frolic.. but just be relaxed and positive about things.

Point of post? None at all really. Just trying to say there is an alternative to all the doom, and that is just to ignore it and hope things recover. It may be as practical as a belief in a higher being, but sometimes if you ignore the elephant long enough one day it goes away all by itself. (This is not the advice my therapist gave me).

Wookster

I think we'll have to disagree - I still believe that financial markets are utterly broken and that there is a loss of faith arising from credit rating agencies having stuffed up monumentally, the deteriorating economic climate where default rates are increasing and thus negatively affecting the value of such assets all of which push people into risk averse strategies.

However way you look at it the market for such instruments is behaving irrationally to the extreme and that can only lead to valuations at firesale amounts, which do not make a good bedrock for valuing significant chunks of banking assets.

That all having been said I agree with much else of what you say: more the fool Crash for even thinking about taking on the risk of such assets.

The market is SO ripe for a new, boring bank to be formed.