It has been quite awhile, almost a year now, since I last posted a topic on my blog. That being said, let me give a quick recap of what has happened.
Since October 2008, I wrote the CFA Level I Exam, and passed (!)....a little to my surprise. My wife, Michelle, was most kind and patient during the long study hours, which are not over in the least. If anything, the studying has really only begun. I will elaborate. Since October, I have increasingly confirmed that I am made for a finance-related position, preferably an analytical position and not sales. There is almost a distate for salespeople in general due to the typical lack of knowledge accompanying most sales positions. Analysts, whether they are credit analysts, financial analysts, performance analysts, etc. typically have a modicum of their role and what they are studying. Salespeople typically want to boost their numbers in order to obtain a commission. My experience in the mortgage industry showed me the lack of education, in general, among mortgage loan officers and (especially) real estate agents...in general. There are, a few, exceptions.
In June, I wrote the CFA Level II exam, and actually get the results tomorrow. This was extremely hard, for me at least. I am wary of my results, but hope to press on regardless of 'come what may'.
Additionally, work with Sitka Pacific has picked up nicely, and I am finally able to utilize what I have learned in the CFA coursework with the clients I serve. I utilize a cautious nature to my interactions with clients, which I believe most would find welcome in light of the typical nature of "investment advisors" with regards to the sales-like nature of the job. I'm more analytical that "sales"ish...even if that is a type of sales. :)
More importantly, my wife is expecting a boy (!) in December. We think we have a name for him. I hope I can get a good finance-related position where I can provide for my family, that weighs heavily.
Along those lines, I have been applying quite purposefully for a finance-related job. While this is preferrably in Seattle, we are open to moving wherever is necessary. Michelle is very encouraging in these respects, Proverbs 31!
I hope to comment more on the FRM material later...
Monday, August 17, 2009
Monday, October 6, 2008
Deferred Tax Liabilities
As I continue to study for the CFA Level I exam, I am seeing the concepts come alive in this global recession. Granted, it hasn't been 'declared' a recession, but those that know the signals realise it's a full blown recession, possibly a global one.
I'd like to flesh a few things out about Deferred Tax Liabilities.
I'm learning that fnancial analyzers should add continuous DTL's to equity. This assumes continued acquisition of assets, accumulating more DTL's, coupled with constant growth, assuming general inflation.
However, what does this mean?
Deferred Tax Liabilities are essentially taxes owed coming from the difference in taxable income reported to the IRS (tax return use) and pretax income reporting on Financial Statements (investor use).
Why is there a difference? There is a difference because firms may prefer to depreciate their equipment in an accelerated manner when reporting to the IRS. Why? This lowers taxable income, which lowers the tax! Conversely, firms may prefer to depreciate their equipment in a straight-line fashion, which comforts investors and 'smooths' earnings.
When this happens, a Deferred Tax Liability results.
Up until now, we've seen general inflation, market growth, and continued acquisition of products & equipment by corporations. As a result, these DTL's have been disregarded by financial analysts, and have been actually added to stockholder's equity! (eg treat this as the 'bottom line'). So, we practically went from a liability to your asset....interesting accounting move, eh?
Now, it makes sense, assuming efficient markets, and assuming the market is constantly going up.
What happens in a deflationary recession?
...We're about to find out.
What happens to the company's DTL's & balance sheet when Governments increase corporate tax rates in order to pay for deficit spending?
...We're about to find out.
What happens when companies cease their acquisition phase and actually reduce capacity and downsize?
....We're about to find out.
This is where the general principle of continuous DTL's falls apart, I believe. The problem is, no one has talked about it. Companies with large DTL's may find their share prices plumetting after these consequences take affect. This might be next year, or more likely, the year afterwards (taking into account potential increased corporate tax).
What's a financial guy to do? Well, if I was part of a company, I might recommend realising some of the DTL right now somehow. Granted, there may be other ways to offset the potentially increasing DTL, and I simply just don't know them right now. But, it would seem to be a potential issue, one that might merit discussion among financial officers. Balance sheets might appear to have too many liabilities, which could have an adverse affect on solvency ratios...not good at a time when credit is expensive for those with AAA ratings.
That's about all I know right now, future studies might result in me switching my views because of alternative accounting methods that allow further ways to offset increasing DTL's...but that remains to be seen.
I'd like to flesh a few things out about Deferred Tax Liabilities.
I'm learning that fnancial analyzers should add continuous DTL's to equity. This assumes continued acquisition of assets, accumulating more DTL's, coupled with constant growth, assuming general inflation.
However, what does this mean?
Deferred Tax Liabilities are essentially taxes owed coming from the difference in taxable income reported to the IRS (tax return use) and pretax income reporting on Financial Statements (investor use).
Why is there a difference? There is a difference because firms may prefer to depreciate their equipment in an accelerated manner when reporting to the IRS. Why? This lowers taxable income, which lowers the tax! Conversely, firms may prefer to depreciate their equipment in a straight-line fashion, which comforts investors and 'smooths' earnings.
When this happens, a Deferred Tax Liability results.
Up until now, we've seen general inflation, market growth, and continued acquisition of products & equipment by corporations. As a result, these DTL's have been disregarded by financial analysts, and have been actually added to stockholder's equity! (eg treat this as the 'bottom line'). So, we practically went from a liability to your asset....interesting accounting move, eh?
Now, it makes sense, assuming efficient markets, and assuming the market is constantly going up.
What happens in a deflationary recession?
...We're about to find out.
What happens to the company's DTL's & balance sheet when Governments increase corporate tax rates in order to pay for deficit spending?
...We're about to find out.
What happens when companies cease their acquisition phase and actually reduce capacity and downsize?
....We're about to find out.
This is where the general principle of continuous DTL's falls apart, I believe. The problem is, no one has talked about it. Companies with large DTL's may find their share prices plumetting after these consequences take affect. This might be next year, or more likely, the year afterwards (taking into account potential increased corporate tax).
What's a financial guy to do? Well, if I was part of a company, I might recommend realising some of the DTL right now somehow. Granted, there may be other ways to offset the potentially increasing DTL, and I simply just don't know them right now. But, it would seem to be a potential issue, one that might merit discussion among financial officers. Balance sheets might appear to have too many liabilities, which could have an adverse affect on solvency ratios...not good at a time when credit is expensive for those with AAA ratings.
That's about all I know right now, future studies might result in me switching my views because of alternative accounting methods that allow further ways to offset increasing DTL's...but that remains to be seen.
Friday, August 8, 2008
Red Flags for a Financial Analyst
As I study for my Level I CFA Exam, I'm reading Financial Statement Analysis by Fridson and Alvarez. Everything I've written below is learned from them, but in my own words...this helps me to understand the information better. Thanks for your patience!
If you're a financial analyst, ploughing through voluminous balance sheets, income & cashflow statements, then you're likely looking for a few handholds. You need to know the key signs of what will be either a positive or oftentimes (in this market) negative analysis report.
One of the red flags that oftentimes preceeds failure to meet future earnings are unrealistic sales increases in the current and/or prior quarters. Oftentimes, managers will incent higher-then-expected sales increases in order to meet a bonus (especially if the bonus is based off Earnings-per-Share rather than shareholder equity). Look for these at the end of the quarterly reporting period. This practice, however, must be 'paid for' in the future, which will likely depress sales, thus further depressing earnings.
Another telltale sign of a company that is on a downward slippery slope is a senior executive resigning. Consider Wachovia Bank's removal of CEO Thompson back in June. This was after several writedowns, due to their deteriorating Option-Arm portfolio (which continues to erode shareholder equity). Additionally, senior execs may resign due to the pressure from the Board to meet quarterly numbers...they may know that this "GAAP-allowable" bending of the numbers may be the straw that breaks the camel's back...so they resign.
Further, and a bit more obvious, is an earnings restatement. Companies oftentimes, as a result of an audit, investigation by the SEC, or new accounting rules will restate their previous earnings even though they deemed those earnings allowable under GAAP standards. What starts to be one inquisitive question by a financial analyst may end up in an entire slew of earnings restatements, thus further eroding shareholder equity.
This one should be obvious, but oftentimes, to investors, it is the reverse. Managers of companies that have been pinpointed by analysts as reporting erroneous figures will often lash back vehemently with a defensive, almost formulaic, statement. They will say their accounting conforms to GAAP, they are meeting their goals, and other various and sundry chants. Consider Freddie Mac's recent statement that they are "well capitalised" even while Treasury Secretary Hank Paulson was working to get Congressional approval to use taxpayers funds to keep Freddie's stock price up by buying as much stock as necessary...and 'unlimited' use of funds! But, some people really are that gullible! Maybe it comes from our motivational speaker culture, us looking in the mirror and telling ourselves we really are that good...
Additionally, when a company delays their earnings reports, that would probably be a good time to short them. Or, at least buy a put or two.
Also, management can play the red herring logical fallacy. They can point to an independent auditor's stamp of approval on their earnings reports. While that can be a check and balance, a savvy investor should not let that satiate them entirely.
Lastly, an increase in working capital can be a bane to a company, but not recognized as such by investors. For instance, if I'm a clothing manufacturer, and I produce a new line of clothing that simply falls flat on its face, chances are that I don't want to write if off and incur a huge loss that quarter, highly increasing the chance I'll miss my quarterly numbers. So, I keep it in inventory, thus delaying the final writeoff...which has to come sooner or later. It costs to keep the product in inventory, this cost is part of my working capital. Alternatively, I could extend credit to non-creditworthy borrowers and delay the amount of time required to collect, extend their payment periods, thus delaying eventual collection. (Freddie Mac just extended their foreclosure procedure from 4 months to 10 months...) As a result, I'm carrying these costs longer, which drains shareholder equity because of the increased working capital.
Those are just a few red flags that should be detected by a knowledge-hungry analyst...not just one who likes to plug in numbers, but one who likes to ask "WHY?".
If you're a financial analyst, ploughing through voluminous balance sheets, income & cashflow statements, then you're likely looking for a few handholds. You need to know the key signs of what will be either a positive or oftentimes (in this market) negative analysis report.
One of the red flags that oftentimes preceeds failure to meet future earnings are unrealistic sales increases in the current and/or prior quarters. Oftentimes, managers will incent higher-then-expected sales increases in order to meet a bonus (especially if the bonus is based off Earnings-per-Share rather than shareholder equity). Look for these at the end of the quarterly reporting period. This practice, however, must be 'paid for' in the future, which will likely depress sales, thus further depressing earnings.
Another telltale sign of a company that is on a downward slippery slope is a senior executive resigning. Consider Wachovia Bank's removal of CEO Thompson back in June. This was after several writedowns, due to their deteriorating Option-Arm portfolio (which continues to erode shareholder equity). Additionally, senior execs may resign due to the pressure from the Board to meet quarterly numbers...they may know that this "GAAP-allowable" bending of the numbers may be the straw that breaks the camel's back...so they resign.
Further, and a bit more obvious, is an earnings restatement. Companies oftentimes, as a result of an audit, investigation by the SEC, or new accounting rules will restate their previous earnings even though they deemed those earnings allowable under GAAP standards. What starts to be one inquisitive question by a financial analyst may end up in an entire slew of earnings restatements, thus further eroding shareholder equity.
This one should be obvious, but oftentimes, to investors, it is the reverse. Managers of companies that have been pinpointed by analysts as reporting erroneous figures will often lash back vehemently with a defensive, almost formulaic, statement. They will say their accounting conforms to GAAP, they are meeting their goals, and other various and sundry chants. Consider Freddie Mac's recent statement that they are "well capitalised" even while Treasury Secretary Hank Paulson was working to get Congressional approval to use taxpayers funds to keep Freddie's stock price up by buying as much stock as necessary...and 'unlimited' use of funds! But, some people really are that gullible! Maybe it comes from our motivational speaker culture, us looking in the mirror and telling ourselves we really are that good...
Additionally, when a company delays their earnings reports, that would probably be a good time to short them. Or, at least buy a put or two.
Also, management can play the red herring logical fallacy. They can point to an independent auditor's stamp of approval on their earnings reports. While that can be a check and balance, a savvy investor should not let that satiate them entirely.
Lastly, an increase in working capital can be a bane to a company, but not recognized as such by investors. For instance, if I'm a clothing manufacturer, and I produce a new line of clothing that simply falls flat on its face, chances are that I don't want to write if off and incur a huge loss that quarter, highly increasing the chance I'll miss my quarterly numbers. So, I keep it in inventory, thus delaying the final writeoff...which has to come sooner or later. It costs to keep the product in inventory, this cost is part of my working capital. Alternatively, I could extend credit to non-creditworthy borrowers and delay the amount of time required to collect, extend their payment periods, thus delaying eventual collection. (Freddie Mac just extended their foreclosure procedure from 4 months to 10 months...) As a result, I'm carrying these costs longer, which drains shareholder equity because of the increased working capital.
Those are just a few red flags that should be detected by a knowledge-hungry analyst...not just one who likes to plug in numbers, but one who likes to ask "WHY?".
Thursday, August 7, 2008
The affects of a credit market on an investor
In this short essay, I present the thesis that our current credit market increases the desire for short term capital gains over gains from income derived of the assets purchased.
What do I mean by this?
I mean that the availability of credit increases the desire for leverage, which further increases the desire to "do deals" and acquire gains from thoses deals. This incentive to 'do deals', I believe, trumps or greatly truncates the desire to purchase an investment and receive gains from the productivity of that asset (i.e. purchasing retail stores and receiving quarterly sales profits).
A credit market increases the highs and the lows of the natural business/economic cycle. In a credit market, there are more eligible buyers. Hence, that means there is more demand. If the supply is constant, and the demand increases, the price increases. This means that the seller receives more gain on the asset they're selling.
Without a credit market, the buyers have to pay cash, or find another manner of exchange. (Note--there is never a total absence of credit...the seller, in this case, could always issue seller financing) If this is the case, without credit, then buyers are fewer and prices are lower...and subject to fewer fluctuations.
Given the above, in a credit market, with more eligible buyers; the more increasing the supply of credit is, the more increasing the buyers (and price) are. That being said, that gives the buyers more of an incentive to "flip" the assets by purchasing it, reconfiguring the furniture, and then selling it again on the open market.
If the buyer purchases the asset in an expanding credit market, there is a solid chance that he doesn't have to do anything to the asset but simply hold on to it while the credit expands. As long as credit expands, buyers expand, and the price rises; this increases his short term capital gains. (This assumes many aspects about the business remain constant, routine maintenance on the asset is done, etc.)
This, therefore, I believe, incents 'doing deals'. There is not the incentive to buy an asset and hold on to it, while receiving income from the productivity of that asset.
As a result, dealmakers arise by the number. Middlemen emerge. Note the abundance of people hopping into the realtor, mortgage broker, title & escrow market during the housing boom in recent years. Now note the absence of such people as delinquincies rise, fears mount, and people look elsewhere for work.
If one were to understand these cycles in credit markets, they would be able to benefit from an expanding credit policy as well as a contracting one. In the expanding policy, they would acquire cash, and in the contracting one, they could just as easily buyback their old assets for likely a price less than they bought it for in the first, with part of the cash acquired from selling those assets to the ones they sold it to in the first place...and they would have cash leftover for other acquisitions depending on whether credit is contracting or expanding.
I know it's not that simple, but it is a simple paradigm.
What do I mean by this?
I mean that the availability of credit increases the desire for leverage, which further increases the desire to "do deals" and acquire gains from thoses deals. This incentive to 'do deals', I believe, trumps or greatly truncates the desire to purchase an investment and receive gains from the productivity of that asset (i.e. purchasing retail stores and receiving quarterly sales profits).
A credit market increases the highs and the lows of the natural business/economic cycle. In a credit market, there are more eligible buyers. Hence, that means there is more demand. If the supply is constant, and the demand increases, the price increases. This means that the seller receives more gain on the asset they're selling.
Without a credit market, the buyers have to pay cash, or find another manner of exchange. (Note--there is never a total absence of credit...the seller, in this case, could always issue seller financing) If this is the case, without credit, then buyers are fewer and prices are lower...and subject to fewer fluctuations.
Given the above, in a credit market, with more eligible buyers; the more increasing the supply of credit is, the more increasing the buyers (and price) are. That being said, that gives the buyers more of an incentive to "flip" the assets by purchasing it, reconfiguring the furniture, and then selling it again on the open market.
If the buyer purchases the asset in an expanding credit market, there is a solid chance that he doesn't have to do anything to the asset but simply hold on to it while the credit expands. As long as credit expands, buyers expand, and the price rises; this increases his short term capital gains. (This assumes many aspects about the business remain constant, routine maintenance on the asset is done, etc.)
This, therefore, I believe, incents 'doing deals'. There is not the incentive to buy an asset and hold on to it, while receiving income from the productivity of that asset.
As a result, dealmakers arise by the number. Middlemen emerge. Note the abundance of people hopping into the realtor, mortgage broker, title & escrow market during the housing boom in recent years. Now note the absence of such people as delinquincies rise, fears mount, and people look elsewhere for work.
If one were to understand these cycles in credit markets, they would be able to benefit from an expanding credit policy as well as a contracting one. In the expanding policy, they would acquire cash, and in the contracting one, they could just as easily buyback their old assets for likely a price less than they bought it for in the first, with part of the cash acquired from selling those assets to the ones they sold it to in the first place...and they would have cash leftover for other acquisitions depending on whether credit is contracting or expanding.
I know it's not that simple, but it is a simple paradigm.
Wednesday, August 6, 2008
Delaying the Bottom
"Any propping up of shaky propositions postpones liquidation and aggravates unsound conditions." -Murray Rothbard
- "President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac." -CNN Money
- "[Treasury Secretary] Paulson is pushing Congress to authorize the Treasury to purchase equity stakes in Fannie Mae and Freddie Mac, which account for about half of the $12 trillion mortgage market, and expand government-backed credit lines to them." -Bloomberg
"The ultimate result of shielding man from the effects of folly is to people the world with fools." -Herbert Spencer
- "The Federal Reserve extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still `fragile.' "-Bloomberg
- "The Federal Reserve extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still `fragile.' Emphasizing the dangers to the economy, the Fed said in its statement that a substantial easing of interest rates in recent months, 'combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.' " -New York Times
"[It is] the most michievous doctrine ever broached in the monetary or banking world in this country; viz. that is the proper function of the Bank of England to keep money available at all times to supply the demands of bankers who have rendered their own [illiquid] assets unavailable." former 19th Century governer, Bank of England
- The British monetary authorities plan to inject liquidity into the country's banks as they seek to restore health to financial institutions battered by the credit crisis...the Bank of England will exchange [liquid] government bonds for [illiquid] mortgage-backed securities...The central bank will hold the illiquid mortgage assets as collateral. -International Herald Tribune
- The actions by the Fed and other central banks are expected to help banks and brokerages temporarily swap their [illiquid] mortgage-backed securities for [liquid] Treasury debt and possibly unclog credit markets, say analysts. -AFP
I wonder what history has to say about our current mortgage crisis?
Monday, July 14, 2008
No one really believes the 'well capitalised' statement anymore
Today was a bad day for financials. So, what else is new, you ask?
WAMU came out with a statement, saying it's "well capitalised". Their stock took a 35% beating today....then rose 10% in extended trading hours after 4pm EST.
National City today said that they maintain one of the highest Tier 1 capital ratios among large banks. (Tier 1, by the way, is basically the cash value of all the company's stock put together) These comments were during the middle of the worst trading day for Nat City ever, with shares dipping down below their June 1984 levels, utlimately losing 15% on the day.
Just 2 months ago, Indymac Bancorp (which has since failed) was "well capitalised".
While the Fed didn't say Fannie Mae and Freddie Mac were 'well capitalised' last week (OFHEO did back in March), they did say they "support them at their current levels". Additionally, Freddie said their capital levels were "strong". Then, a couple days later, into the weekend (so traders couldn't immediately react) the Treasury Secretary Henry Paulson gave these two GSE's an unlimited line of credit to pay their obligations and meet reserve requirements, and sought authorisation from Congree to buy Fannie and Freddie stock, keeping it solvent.
So, the question is, who really believes whom anymore? I'm afraid that all these overstatements of "well capitalised" will affect the same event of the boy who cried wolf. Eventually, a bank will actually be well capitalised, but no one investor will believe them because they will grow accustomed to so much truth-spinning, etc.
What else is new, you ask? Well, who knows, WAMU might actually be well capitalised, but they won't benefit from their comments today. No one is going to believe any financial institution for now.
Those saying otherwise are largely naive, towing the company line and don't have the benefit of being able to think for themselves, or are looking for a sure profit backed by the taxpayer's dime.
WAMU came out with a statement, saying it's "well capitalised". Their stock took a 35% beating today....then rose 10% in extended trading hours after 4pm EST.
National City today said that they maintain one of the highest Tier 1 capital ratios among large banks. (Tier 1, by the way, is basically the cash value of all the company's stock put together) These comments were during the middle of the worst trading day for Nat City ever, with shares dipping down below their June 1984 levels, utlimately losing 15% on the day.
Just 2 months ago, Indymac Bancorp (which has since failed) was "well capitalised".
While the Fed didn't say Fannie Mae and Freddie Mac were 'well capitalised' last week (OFHEO did back in March), they did say they "support them at their current levels". Additionally, Freddie said their capital levels were "strong". Then, a couple days later, into the weekend (so traders couldn't immediately react) the Treasury Secretary Henry Paulson gave these two GSE's an unlimited line of credit to pay their obligations and meet reserve requirements, and sought authorisation from Congree to buy Fannie and Freddie stock, keeping it solvent.
So, the question is, who really believes whom anymore? I'm afraid that all these overstatements of "well capitalised" will affect the same event of the boy who cried wolf. Eventually, a bank will actually be well capitalised, but no one investor will believe them because they will grow accustomed to so much truth-spinning, etc.
What else is new, you ask? Well, who knows, WAMU might actually be well capitalised, but they won't benefit from their comments today. No one is going to believe any financial institution for now.
Those saying otherwise are largely naive, towing the company line and don't have the benefit of being able to think for themselves, or are looking for a sure profit backed by the taxpayer's dime.
Saturday, July 12, 2008
Indymac Bancorp fails. What next?
As many of you already know, and some have followed intensely throughout the week, Indymac Bancorp, headquartered out of Pasadena, CA fail yesterday evening and was received into the arms of the FDIC. There were approximately 1 billion in uninsured deposits, held by 10,000 customers. They will get approximately half back over the weekend, through an advance dividend. The FDIC is working hard to make sure insured deposits are mediated in a timely manner so customers have access to funds immediately.
First, Bear Sterns fails. That didn't affect the day to day activities of, say pulling money out of your ATM card. Now, Indymac fails due to the asinine loans they piled on top. Interestingly enough, Indymac was starting by the same man who founded Countrywide, Angelo Mozilo...the apple doesn't fall to far from the tree now, does it?
But seriously, what next?
I'm sure you've seen the rumours that Fannie Mae and Freddie Mac are insolvent (according to a Fed president's comments a few days ago). Of course, current regulators were quick to counteract these comments, but didn't Democrat Schumer out of New York say that he was 'concerned' about Indymac potentially failing due to their extremely poor lending standards? And, he was dead on target. But, after these comments, fed regulators were quick to tell the democrat to mind his own business, and basically quit trying to warn the public ahead of time.
Ultimately, look for Fanne and Freddie to get a huge accounting standards exemption, so they don't have to fully disclose the entirety of their mortgages on their balance sheet. If this doesn't happen, they will go the way of the Mac.
Additionally, Lehman will likely fail if it doesn't get a generous dosage of Sovereign Wealth Funding...or some more fed stimulization.
After that, it could be Wachovia, if they don't clean up their absurd Option Arm portfolio.
It's going to be bigger than we think, a longer and deeper prolonged pain due to our poor, greedy, and foolish lending practices. The fall will be prolonged and hard. Then, a new set of regulators and lenders will take the reins. Would to God that they actually concern themselves with the validity of their lending standards and the livelihood of their customers.
But we can only wait and watch. What do I know? I don't have any insignia behind my name, like CPA, MBA, JD, BS, etc...
First, Bear Sterns fails. That didn't affect the day to day activities of, say pulling money out of your ATM card. Now, Indymac fails due to the asinine loans they piled on top. Interestingly enough, Indymac was starting by the same man who founded Countrywide, Angelo Mozilo...the apple doesn't fall to far from the tree now, does it?
But seriously, what next?
I'm sure you've seen the rumours that Fannie Mae and Freddie Mac are insolvent (according to a Fed president's comments a few days ago). Of course, current regulators were quick to counteract these comments, but didn't Democrat Schumer out of New York say that he was 'concerned' about Indymac potentially failing due to their extremely poor lending standards? And, he was dead on target. But, after these comments, fed regulators were quick to tell the democrat to mind his own business, and basically quit trying to warn the public ahead of time.
Ultimately, look for Fanne and Freddie to get a huge accounting standards exemption, so they don't have to fully disclose the entirety of their mortgages on their balance sheet. If this doesn't happen, they will go the way of the Mac.
Additionally, Lehman will likely fail if it doesn't get a generous dosage of Sovereign Wealth Funding...or some more fed stimulization.
After that, it could be Wachovia, if they don't clean up their absurd Option Arm portfolio.
It's going to be bigger than we think, a longer and deeper prolonged pain due to our poor, greedy, and foolish lending practices. The fall will be prolonged and hard. Then, a new set of regulators and lenders will take the reins. Would to God that they actually concern themselves with the validity of their lending standards and the livelihood of their customers.
But we can only wait and watch. What do I know? I don't have any insignia behind my name, like CPA, MBA, JD, BS, etc...
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