Under the emerging plan, the government will buy toxic assets below the banks "carrying value," which is basically market value, but not at fire sale levels, the source said. That approach will likely placate both taxpayer and Congressional concerns about the government over-paying for the assets. But, the source noted, it could "trigger an accounting problem for the banks," presumably because the institutions will have to report a loss on the transactions.
The Obama administration is now working on ideas to address that, which might entail a temporary suspension of certain accounting rules.
Of course the market loves it :) When you live in a world of fiction life is much easier.
Back to reality...
I don't like the price action right now in Jacobs Engineering Group (JEC) so I am going to close out the smallish position I have left (0.9%)
I could choose to trade this range up and down $38 to $42 but its tiring. In fact the whole market is tiring of late - making small trades, scalping this here or that there - waiting for "breaking news alerts". It's just not my thing - if you don't daytrade this market there is really no reason to be involved.
JEC now has major resistance at $42 - if it breaks over that level I'll get back long. But for now I'm more apt to short it once it gets there. I am selling in the mid $39s but the stock should have clear sailing to $42 if the market lifts. We have a loss in the long position that was offset by a successful short position a few weeks ago. So net net - we more or less made nothing with JEC.
As for the market, until we break out of this white noise range of 800-870 or so we are just being batted around by hedgies and daytraders. The "chosen ones" for this portion of your move is China & technology. And Morgan Stanley! (apparently whatever the government does to the banks, Goldman and Morgan will win - shocker) Whatever your conviction over the medium run, remember thesis rules the short run. The market wants to ignore bad news and look forward to the coming China led, semiconductor led recovery "in 6 months". This is about the 5th time in the past year we've had different combinations of sectors doing this same "recovery" trade. This time around it's tech and China. Away we go.p.s. I like the action in the fertilizer stocks.
No position
2 comments:
I might be a bit dim but, if the Feds buy the toxic assets at below market value, if that amount is also below book value won't the banks need to record that loss anyway, regardless of any accounting changes? After all, the sale is simply crystallising losses and effectively confirming the mark-to-market valuations.
Unless, of course, the law is changed to record any losses as profits anyway - that would certainly boost the market!!
lol @ your latter comment.
I agree - if the rules get in the way of pumping the economy and/or market up - change the rules. It works for most 3rd/2nd world Latin American countries - so why not us?
If the rule doesn't fit, you must acquit.
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