From Pine View Farm

“Mark to Market” 0

“Mark to market” is Wall Street double-talk for valuing assets at their current market value. A number of firms have diddled their balance sheets by not marking assets to market. Rather, they have been valuing them based on some arbitrary number from the past.

It should surprise no one that the arbitrary number from the past is almost always higher than the current market value of the assets. “Wall Street Analysts,” the high gods of the financial system, winked at this fraudulent less-that-full disclosure accounting technique because, well, the bubble kept expanding and commissions were plentiful.

Now that the bubble is kaput, Wall Streeters are suddenly concluding that falsifying misrepresenting fudging not updating the value of assets maybe isn’t such a good idea.

The world’s biggest maker of jet engines and power turbines (General Electric-ed.) told shareholders last week that 2 percent of GE Capital Corp.’s assets are being valued based on market prices. The remaining $624 billion is being carried at levels that GE, the last original member of the Dow Jones Industrial Average, established in many cases years ago, according to CreditSights Inc.

“The notion of having 98 percent opaque and 2 percent valued with clarity is something that by its very nature would make investors nervous,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $30 billion in Newport Beach, California and owned 481,201 GE shares as of Dec. 31. “Having some clarity on what the other 98 percent is worth is valuable.”

“Tell me the story again, Daddy. You know, the one about how Big Bad Regulation stays Prince Free Hand of the Market.

“Daddy, I like fairy stories.”


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