I have been wondering since mid-October when they were going to give in and do the basic thing one needs to do to stabilize a market – provide a deep-pocketed bid!
In fact, I said it on the Cavuto show and have said many times since, until the Treasury starts bidding for some of these so called toxic assets, the banks would be stuck. It isn’t that I am SO smart – it is just the basic way auction markets work. Buyers bid up and sellers sell – if one of the other is lacking the price just keeping moving into the vacuum left by the lack of buyers or sellers.
It really doesn’t matter if it is on a one minute timeframe in the ES futures or for homes in Las Vegas…. auction markets need bids in order for the prices to stabilize.
“So-called toxic assets”?
Limit down moves, locked for however long, present a vacuum, too; the buggy-whip market gets smaller. Assets (should) be marked to market – & accounting rules should insist on it, as well. If the other side does not materialize, oh well, the stuff goes to dollar store inventory, or the scrap-yard. Good money – more accurately, worse money after bad money will only make the inevitable pain & suffering worse.
A market exists, or it doesn’t – counterfeit money can’t create it, or even prop it up, but it can kill it. These convulsions are likely death throes….
“So-called toxic assets”?
Limit down moves, locked for however long, present a vacuum, too; the buggy-whip market gets smaller. Assets (should) be marked to market – & accounting rules should insist on it, as well. If the other side does not materialize, oh well, the stuff goes to dollar store inventory, or the scrap-yard. Good money – more accurately, worse money after bad money will only make the inevitable pain & suffering worse.
A market exists, or it doesn’t – counterfeit money can’t create it, or even prop it up, but it can kill it. These convulsions are likely death throes….
You have a point but I still contend that with a very limited number of players and no speculative market (really – i.e. locals or other timeframe players) in CDO’s that what happened was the relatively small number of buyers all went “no bid” at the same time.
IF we had had exchange trading for these instruments this would have been less likely to happen.
I do think a more applicable mark-to-market period could have been invoked – once a quarter or two – as that would have been much more appropriate for the lifespan of the asset and the small number of buyers and sellers in that marketplace.
Likewise, these assets aren’t worth zero – or even only 50% of their cash flows – so they are currently marked at artificially low numbers.
You have a point but I still contend that with a very limited number of players and no speculative market (really – i.e. locals or other timeframe players) in CDO’s that what happened was the relatively small number of buyers all went “no bid” at the same time.
IF we had had exchange trading for these instruments this would have been less likely to happen.
I do think a more applicable mark-to-market period could have been invoked – once a quarter or two – as that would have been much more appropriate for the lifespan of the asset and the small number of buyers and sellers in that marketplace.
Likewise, these assets aren’t worth zero – or even only 50% of their cash flows – so they are currently marked at artificially low numbers.
If they are artificially low, then buyers will materialize…no buyers means not low enough, & in some percentage of this stuff, the price will never be low enough. Whatever the worth is or isn’t, cannot & will not be determined without exposure to an actual market. Actions so far? Psuedo-market by psuedo-experts…results are & will be pseudo-good (understatement).
Any possibility of marking to market went out the window with the so-called bailouts; neither ledgers nor inventory will be cleared. It’s the same strategy Japan used: hang on to all the toxic waste & stall out indefinitely. Only worse: the reserve fiat currency of the world (for a bit longer, at least) & massive expansion of it.
Truth is, there never was a market for this junk. It was a sweetheart game for insiders & their satellites, appendages. It was a ponzi scamthat only the most politically connected survived – so far, at least. Unprecedented malfeasance or cold calculation, depending what part of the chain is scrutinized. But then, fiat currency, the foundation for all this, is a pseudo-market too….
If they are artificially low, then buyers will materialize…no buyers means not low enough, & in some percentage of this stuff, the price will never be low enough. Whatever the worth is or isn’t, cannot & will not be determined without exposure to an actual market. Actions so far? Psuedo-market by psuedo-experts…results are & will be pseudo-good (understatement).
Any possibility of marking to market went out the window with the so-called bailouts; neither ledgers nor inventory will be cleared. It’s the same strategy Japan used: hang on to all the toxic waste & stall out indefinitely. Only worse: the reserve fiat currency of the world (for a bit longer, at least) & massive expansion of it.
Truth is, there never was a market for this junk. It was a sweetheart game for insiders & their satellites, appendages. It was a ponzi scamthat only the most politically connected survived – so far, at least. Unprecedented malfeasance or cold calculation, depending what part of the chain is scrutinized. But then, fiat currency, the foundation for all this, is a pseudo-market too….