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Direxion Daily Financial Bull 3X ETF Message Board

  • rdmille7472 rdmille7472 Mar 7, 2009 10:05 AM Flag

    Toxic asset still has a value above "zero".

    I understand the toxic asset dilemma. However, what I cannot grasp is that so many of you are running around and basically conveying and devaluing all these bank’s toxic assets to zero…in attempts to justify the rapid declines and pressure on these banks.
    In most cases down 75-90% +- below there peak cap.

    Some observations:
    A.) The bank still owns the asset.
    B.) The asset still has a value.
    C.) Somebody still wants that asset.
    D.) Consequently, asset’s whole market dropped some -30% +-.
    E.) Holder’s of those toxic assets {Banks} Market Caps have dropped double to triple or more in some cases .
    F.) In most cases banks have more $ in their vaults then their current caps.
    G.) Over 90% of Americans are still current.
    H.) Financials stability and outlook today is much better then it looked late last year.

    Discernable Conclusion:
    There is still a market for these assets above a ‘zero’ value;
    …..Albeit at a discount to the initial note. However, not 90% discount to the initial values??????? How can any body justify these assets with a zero value?
    Or is this all one big timed and orchestrated conspiracy?

    Maybe some of the more financially savvy investors can shed some more light on this…

    Final thought:
    The market cannot show strength without the Finan’s collectively moving forward.
    I went long FAS & America Friday… I believe we are a resilient nation….and will recover stronger.

    Semper Fi

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • The government is trying to inflate its way out of the debt problem is the systemic problem conclusion as in Euro-zone that could develop as reckless spending continues, we'll see. Not a viable solution. Why not take a hit begin saving again. Invest in research, education, health care. Not hoping the old economy that is melting away will return (UI benefits, etc) It is not returning, entire industries will die and not return imo. New technology, new industries, automation, will lead to real growth some day. Nations preparing for this will flourish while those living in past will flounder. Time to get on board Obama, can't replace the private sector like this, like Bush's failed policy actually, not really a party line issue.

    • Not every loan defaults but the banks can't handle 8.1% unemployment and rising and what this will do to the new defaults and huge losses as the loans get called. More and more dilution and losses of the level 3 assets. Putting lipstick on the pig won't help here (m2m). Almost old news.

    • a=yes
      b=some do not[you do not hear the banks telling you what great assets they have
      what they have is deposits
      c=actually they do not. not for more than .25 on the dollar banks only have them written down to .57
      e=- 70-90%
      f= they don,t $$, they have deposits and reserves for the bad debt
      g=87% and dropping
      h=thats like saying i have a broken egg instead of i have no egg, better yes, improvement no
      some of the assets are worth zero you are going to have to except that fact
      add car loan, credit cards, and commercial loans to your housing loans and the number is MUCH higher. now leverage that times 30,
      losses expand. the losses have not peaked yet
      banks are saying jan and feb where good months for business but they are not saying loan portfolios have improved

    • accounting practices just create a mirage. as Buffet says, "when the tide goes out you find out who is swimming naked". the books can be altered to project whatever result is desired. obvously there is much pressure for corp officers to perform (mostly due to compensation and pressure from major shareholders). M2M was probably a good way to create transparency, however the desired effect was to hamstring financials. Removal of M2M will be a mirage but gives the banks more flxability to conduct business.
      As far as effect on the financials, I personally would sell the news and wait for a pullback to buy. Primarily the removal of the M2M signifies a step towards the current anti business policies proposed by Congress and the current administration. I'm not sure if Obama understands the close relationship between wall street and main street or maybe he does. his actions seem to represent he is attacking wall street to gain support from the average citizen. LT being anti-business is very the ST perhaps he gains the support to push through all his agenda. I epersonally can't se how the individual can prosper if business dowesn't prosper.
      I finally went long FAS on Friday and am up .30 on 7500. Monday should be interesting. I'm heavy oil and gold and a short treasury ETF. Hopefully things go my way next week and I get a substantial rebound. I felt better with my positions going into the weekend then I have for 3 months. Even if we get a substantial correction to the upside next week, I believe the markets will see these levels again and lower again.

    • their is no market for these "toxic assets" but it doesn't make them worthless, unless there was a 100% default rate. and we aren't close to that. Someone please tell me how a bank can be WELL CAPITALIZED and insolvent at the same time??

      • 3 Replies to mboss777
      • Let's assume i owned a house worth $200'000, no mortgage, $10 in my pockets, and no other asset or financial obligations at all.

        That would have me qualify as "well capitalized".

        In this example my liquidity is be exactly $10. Let's assume (just for examples sake) nobody would lend me anything, thus any expense above $10 would render me insolvent.

        There you have it: well capitalized and insolvent

      • I believe the answer is that one can look at the classes -- or levels -- of assets they hold.

        Their toxic papers based on m2m make them look inslovent.

        However their other holdings like deposits makes them look better than ever.

      • you are incorrect......there is a market for the toxic assets. the private money is willing at some point in time to buy up toxic assets. there are trillons of $ sitting on the sidelines....hedge fund managers, corp officers, old money, the new tech money, princes, middle east oil shieks, russian oil czars. As long as the sentiment is anti business, these people will sit onthe side lines. Obama needs these individuals and to date he is alienating these people. I believe this is part of his political agenda to gain all the support he can from middle america to push his agenda. he is making business the bad guy. the rich can afford to sit and wait him out and they are. they have more time and money then obama. there is a strong need for obama to reverse course and ally himself with business. the private money wll make huge $. they will step in and buy the assets at a discount, sit on the asets a few years, flush out the bad ones and the good ones will more then offset the bad. even and old car that doesn't run has value if even for the scrap value if you take out all the metals. you tow the car away at a cost of $25 and sell the metals for $200 or part it out for even more.

    • You are correct.

      The banks and therefore the accounting rule should be interested, tracking and valuing the loans performance. If loans are performing, leverage related to those loans should be unaffected. The home owner is still responsible for the loan regardless of what the home is now worth.

      This M2M rule seemed to be a good idea at the time but it has proven it's self a most distructive force.

      Time to pull the plug on M2M or tweek it to value the correct asset --- The Loan's Performance!


    • Hmmm.... Fox News Reports 93%+ Americans are current on mortgages... would that not equate to 93% of Banks assets are current? Therefore, even if toxic assets were valued at "zero" {which is false}... then, that would still convey a total asset value of 93% of the whole.

      where is the logic in the 90% declines?

    • Another thought, if some of the concerns for the banks holding these toxic assets are the taxable liabilities; Then rather then throw billions of dollars down the drain, why doesn’t the govt’ alleviate the pressure during these turbulent times until the asset can be re-negotiated. Basically alleviate the banks for any taxable liabilities on all toxic assets. Thus, allowing the banks to unload or leverage them as needed; However in a more responsible manner than past models.

    • The problem is the price they paid for it. Due to leveraging etc sometimes the asset is pennies to the dollar but banks often bought it at full price. The scams continue even now. 60 trillion dollar problem, no way can Obama bail everyone out on this disaster alone. Only getting worst with GM bk, massive unemployment and skyrocketing debt delinquencies (credit cards) Walk aways continue and now we have Eurozone in near worst shape if not worst than US...

      No light in sight here. Yikes.

      • 1 Reply to stockbuzzistherage
      • The interesting thing that sticks out to me… Is that with all the media coverage and fear triggered on the heard…Is, that these banks have being devalued as if 'all' their assets are toxic and valued at zero. Ludicrous! Furthermore, the forward looking returns are being calcualted and considered around the current down trend which is the same mistake made going in the other direction when you hit 14K levels on the DOW.
        I think we are witnessing the reciprocal of the irrational logic that occurs at and defines the market top. The world is not as bleak as media and many are conveying.
        XLF saw it's bottm Friday. Banks will start to take back the lead next week.

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