Thursday, July 05, 2007
A Post I Now Do not Have to Write
by Ken Houghton
It was going to be a discussion of price versus value, and the danger to market players and makers of having to choose between (1) still being able to "mark to model," (2) taking the exposure of marking their portfolios at one price and their custodial holdings at another, or (3) remarking everything based on the benchmark trading levels established in the collateral selloffs.
Note especially that none of the above options requires the underlying assets to be foreclosed or defaulted; the question is one of price, not value.
Fortunately, I am lazy and the reason no one wants to use option 2 or 3 is becoming clear, as noted at Mish's:
As I noted at Felix Salmon's place, it takes more than a week to hire a Jeffrey Lane.
While I desperately hope I'm wrong, it looks more and more as if any legitimate investigation of the no-longer-planned Everquest IPO would produce results to make Arthur Anderson's relationship with Enron look positively arm's-length.
I was thinking about a long response to Brad's comment when I quoted Dr. DeLong here:
The "As long as..." is there for a reason. If defaults trigger foreclosures and if dumping foreclosed houses onto the real estate market triggers a steep price decline in the underlying, we're in big trouble. If not, not, IMHO...
It was going to be a discussion of price versus value, and the danger to market players and makers of having to choose between (1) still being able to "mark to model," (2) taking the exposure of marking their portfolios at one price and their custodial holdings at another, or (3) remarking everything based on the benchmark trading levels established in the collateral selloffs.
Note especially that none of the above options requires the underlying assets to be foreclosed or defaulted; the question is one of price, not value.
Fortunately, I am lazy and the reason no one wants to use option 2 or 3 is becoming clear, as noted at Mish's:
The situation is so bleak that Bear Stearns' asset management group is suspending redemptions at the onetime $642 million fund—meaning investors have no choice but to sit on their losses. And that's got some hopping mad.
An investor in Europe, who didn't want to be identified, says he's been trying to get his money out of the hedge fund since February.
He's particularly incensed that on a June 8 conference call the fund's managers set up to discuss performance, Bear Stearns officials refused to field investors' questions. "They specifically said they weren't taking any questions," says the investor. "They didn't want to say anything."
A Bear Stearns spokesman declined to comment.
As I noted at Felix Salmon's place, it takes more than a week to hire a Jeffrey Lane.
While I desperately hope I'm wrong, it looks more and more as if any legitimate investigation of the no-longer-planned Everquest IPO would produce results to make Arthur Anderson's relationship with Enron look positively arm's-length.
Labels: corporate malfeasance, Moral Hazard, mortgage, Regulation, subprime, The Old Firm
