Posts Tagged ‘marked-to-market’

Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Courtesy of Mish 

Reader "Henry" has a question on the loan loss provision chart I posted in Former Fed Vice Chairman vs. Mish: Is the Fed Out of Ammo?

Henry writes …

Hello Mish,

Thanks for writing and sharing your wonderful column. It has been very informative and educational.

Could you please help us mere mortals decipher the ALLL/LLRNPT chart in a follow up post?

I have difficulty reconciling the units, and I suspect I’m not the only one. Exactly what does that chart depict?

Thanks.

Henry

From my previous post …

Assets at Banks whose ALLL Exceeds their Nonperforming Loans

The ALLL is a bank’s best estimate of the amount it will not be able to collect on its loans and leases based on current information and events. To fund the ALLL, the bank takes a periodic charge against earnings. Such a charge is called a provision for loan and lease losses.

One look at the above chart in light of an economy headed back into recession and a housing market already back in the toilet should be enough to convince anyone that banks already have insufficient loan loss provisions.

That is one of the reasons banks are reluctant to lend. Lack of creditworthy customers is a second. Quite frankly would be idiotic to force more lending in such an environment.

To further clarify, the chart depicts the ratio of loan loss provisions to nonperforming loans across the entire banking system (all banks). There are 33 ALLL charts by bank size and region for inquiring minds to consider. The above chart is the aggregate.

The implication what the chart suggests is that banks believe nonperforming loans are NOT a problem (or alternatively they are simply ignoring expected losses to goose earnings).

The implication what I suggest is banks earnings have been overstated. Why? Because provisions for loan losses are a hit to earnings. I believe losses are coming for which there are no provisions.

The chart depicts a form of "extend and pretend" and overvaluation of assets on bank balance sheets. The Fed and the accounting board ignore this happening (encourage is probably a better word), hoping the problem will get better. With more foreclosures and bankruptcies on the horizon, I suggest it won’t.

Magnitude of the Problem

The above…
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In Defense Of Secrecy; Three Prong Attack On The Fed; Selective Myopia

Here’s another terrific article by Mish.  If you’ve wondered like I have about the 45B the Fed apparently made last year, towards the end, Mish questions that figure. Op-Toons has a suggestion to improve the accuracy of reported numbers (keep reading). – Ilene

In Defense Of Secrecy; Three Prong Attack On The Fed; Selective Myopia

Courtesy of Mish 

The Fed is pulling out all stops to defend its secrets, including publishing self-serving mathematical gibberish. Please consider the St. Louis Fed article on the Social Cost of Transparency.

Unless you are an academic wonk, you will be stymied by pages that look like this …

There are 24 pages of such nonsense with titles like

  • 2.2 Private Information and Full Commitment
  • 2.3 Private Information and Limited Commitment
  • 3.2.1 Decision Making in the Day
  • 3.2.2 Decision Making at Night
  • 3.2.4 A No-News Economy

Just for good measure here is the page describing 3.2.4 A No-News Economy

The article culminates with …

For an asset economy then, the prescription of “full transparency” is not generally warranted.

Approaching the problem under the premise that fuller transparency is always desirable may not be the right place to start.

Hiding Behind Empirical Formulas

The problem is Bernanke places his complete faith in such gibberish, so much so that he has lost all sense of real world action by real people. The result is that in spite of his PhD, he could not see a housing bubble that was obvious to anyone using a single ounce of common sense.

Moreover, had Bernanke simply opened his eyes instead of relying on a poor interpretation of an already fatally flawed Taylor Rule, the credit/housing bubble would not have gotten as big as it did, and we might not be discussing the above ridiculous mathematical formulas that supposedly show us the Fed needs to be secretive.

For more on Bernanke’s love affair with the Taylor Rule (even though Taylor Disputes Bernanke on its usage), please see Taylor, NY Times, Dean Baker Call Out Bernanke.

Appeals Court To Hear Bloomberg’s Freedom of Information Suit

Bloomberg has been in a battle with the Fed for two years over the Fed’s “unprecedented and highly controversial use” of public money. In August it "won" the lawsuit but the Fed has appealed.

Please consider


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Phil's Favorites

Kurds targeted in Turkish attack include thousands of female fighters who battled Islamic State

 

Kurds targeted in Turkish attack include thousands of female fighters who battled Islamic State

Courtesy of Haidar Khezri, University of Central Florida

Kurdish fighters under attack by Turkey have described President Donald Trump’s decision to withdraw U.S. troops from northern Syria as a “stab in the back.”

Since bombing began on Oct. 9, Turkish military operations against the Syrian Democratic Forces in northern Syria, Washington’s staunchest and most effective allies in the war against the Islamic State, has killed at least 11 civilians...



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Zero Hedge

Uber & Out: Ride-Hailing Firms Lays Off Another 350 Staff

Courtesy of ZeroHedge

In the third round of layoffs since its IPO (and post-IPO share price plunge), Uber CEO Dara Khosrowshahi announced the job cuts in a company-wide email this morning.

Khosrowshahi told staff that around 350 employees across several teams within the organization, including Uber Eats, will be laid off.

All of this comes about one month after Uber laid off 435 employees across its product and engineering teams and less than three months after Uber laid off about 400 people from its marketing team. At this point, most departments at Uber have been affected by layoffs.

One wonders if, like the...



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Insider Scoop

'Wait For A Better Entry Point': Datadog Analysts Initiate Coverage Following IPO

Courtesy of Benzinga

Datadog Inc (NASDAQ: DDOG) shares got off to a hot start on the public market following the company’s IPO in September. After pricing its IPO at $27 per share, Datadog jumped nearly 50% on its first day of trading and has held onto most of those gains in the stock’s first month of trading.

This week, investors get their first taste of what Datadog underwriter...



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Kimble Charting Solutions

New Gold Bull Market? Not Until This Happens!

Courtesy of Chris Kimble

After a big summer rally, Gold peaked out at $1566/oz in September.

Since then, Gold prices have been consolidating between $1475 and $1550.

So what’s happening here? Enter the Swiss Franc currency…

In today’s chart, we look at a key indicator (and correlation) for Gold. As you can see, the Swiss Franc has an uncanny resemblance to Gold.

Both Gold and the Franc are testing heavy resistance at the same time.

Until both breakout at (2), odds are low that a new Gold bull market emerges with another big rally leg higher....



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The Technical Traders

Lots of Upside Ahead for the Metals and Miners

Courtesy of Technical Traders

Palisade Radio talks with Chris as he discusses his approach to trading and why technical analysis works for him. He focuses on the chart and price action and explains why investors need to follow a trading strategy that suits their personality.

He cautions that a broad sell-off is likely when stocks move into the next bear market. This liquidation will pull everything down, including gold, for a time. Afterward, he anticipates a massive rally in the juniors.

Time Stamp References:

...



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Chart School

US Economic Review 2019Q4

Courtesy of Read the Ticker

An investor must form an opinion of the wider economic risk, here is a small sample of readtheticker.com US economy review.


More from RTT Tv






Example of the first chart in the video.


Click for popup. Clear your browser cache if image is not showing.



Fundamentals are important, and so is market timing, here at readtheticker.com we believe a combination of ...

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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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