John – Glamwire

Wall Street Chic

Posted on March 11, 2009by admin

Ultra Stylish Valuations…From Josh Perskey.

Look, the valuations business is tough…but right now its at core of any kind of rebounding economy. Had someone done a proper valuation, ultra chic or otherwise, on Bernard Madoff….we would have found out that The Emperor had been wearing the same clothes…from Sears (which he got like in the 70’s)…..for a long time.

In a world where one of the inventors of electronic trading was not trading at all for years…the idea of the closed Hedge Fund has to be decimated…if it is not….there are even more greedy suckers out there than we imagined possible. Tried and true intelligent valuation is at the center of good investing….and looking great while doing it…is what Glamwire is all about. You don’t have to look like a schmo to be honest, hardworking and talented. And Josh Perskey proves that once again in the following report.

Chairman Bernanke, speaking at the Council on Foreign Relations, had a few words to say about valuations:

The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support.

However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly.

Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle.

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Wall Street Chic

Posted on February 11, 2009by admin

Wall Street Chic by Josh Persky

You’ve just been bailed out. You and your buddies are getting hefty bonuses for basically losing billions of middle class pensioners’ dollars. Question: What do you wear to the Big Bonus Luncheon at 21? Do you go with the bespoke Kiton that screams “this cost $22, 500,” or do you sport a navy pinpoint Kenneth Cole that you scored on Overstock.com for $135 with free shipping? This moral question is not addressed by Josh Persky in this installment of “Wall Street Chic” but stay tuned.

The History of Mark to Market accounting Part 2 By Josh Persky

Historical-cost-based financial statements also allowed financial institutions to engage in gains trading.

In this situation management could opportunistically choose which assets to sell, or which liabilities to settle, in order to realize gains (or losses) in particular accounting periods. This afforded management a powerful income statement management tool.

In addition, for financial institutions short of capital, this created an incentive for the management to sell their well-performing assets in order to realize gains to boost their capital, but retain their poorly-performing assets (which had unrealized losses).
The change in the business environment during the 1980s also provides the backdrop that is necessary to understand the progress of fair value accounting. Historically, many financial institutions did not have dynamic risk management strategies and would rarely sell investments before their maturity. Deregulation of interest rates during this period caused a change in the strategies of financial institutions, and securities positions were traded more actively.

New financial instruments were created in response to changes in the market, such as deregulation, tax law changes, volatility, and other factors. U.S. GAAP for such changes in financial instruments was being developed on an issue-by-issue basis. For example, accounting literature issued included SFAS No. 52, Foreign Currency Translation, issued in 1981, which required fair value accounting for certain foreign exchange contracts through the income statement and SFAS No. 80, Accounting for Futures Contracts, issued in 1984, which required futures contracts that do not qualify for hedge accounting to be measured at fair value through income.