FASB Close on 'Off-Balance' Sheet Change

Posted by Noah Rosenblatt on April 30, 2009 at 12.27 PM
"...The estimate is for $900 Billion in off-balance sheet assets in 2010, as the rule takes effect. I think it would be safe to say that this estimate is highly conservative, as were most estimates of the depth of the writedowns since the beginning of this debt deflation episode. If Citigroup had over $1Trln of these assets placed off-balance sheet in mystery entities, what do you think the rest had? Understand, that banks probably used excessive leverage to finance these assets!
How about $5.2 Trillion? Bloomberg's David Reilly discussed the threat in late March:
At the end of 2008, for example, off-balance-sheet assets at just the four biggest U.S. banks -- Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. -- were about $5.2 trillion, according to their 2008 annual filings.
Even if only a portion of those assets return to the banks - - as much as $1 trillion is one dark possibility -- it would take up lending capacity the government is trying to free. Whether these assets are "troubled" or "toxic," their return to bank balance sheets could slow efforts to get credit flowing again..."

Household debt by country - Ouch!

by Mish's Blog
"Canadians' household debt is about 140 per cent of disposable income, compared with about 150 per cent in Britain and almost 170 per cent in the United States. The level is about 90 per cent among the countries that use the euro.
Canada's consumer debt to GDP ratio is quite high but not as bad as in the US. However, 140% is much worse than in the Eurozone. The real measure of how bad things will get is the unemployment rate. I suggest things in Canada will get a lot worse, yet not as bad as in the US.

That said, I cannot avoid pointing out the complete silliness of the Bank of Canada's statement: 'On the whole, the country's banks and credit markets are as strong as could be expected amid the deepest global recession since the Second World War'."

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Mourning Our Money at SmartMoney.com

Mourning Our Money at SmartMoney.com: "Mourning Our Money
After last year’s market meltdown wiped away huge chunks of their savings, more investors have decided to seek professional help. Just not from a financial advisor.
Manhattan grief counselor Diana Nash, for one, typically sees clients who are struggling with the loss of someone close—a parent, a child, a spouse. But lately, she’s taken on a handful of clients who want help dealing with a different kind of loss: their gutted retirement account. Though months have passed since the market meltdown, they still can’t deal with the fact that their nest egg is fried. “Some of them can’t get out of bed,” says Nash.

In some cases employers are footing the bill. Ken LeBeau, director of employee-assistance programs for health care giant Cigna, says that since last fall, call volume grew 25 percent thanks to all the folks grappling with financial fears, while calls seeking immediate counseling rose 60 percent. “The sense of urgency increased dramatically,” he says. We all feel it to some degree. Unless you were already broke when the markets started crashing last fall, the economy has probably subjected you to a tiresome parade of unpleasant feelings.
In fact, the stages of grief, first identified by Elisabeth Kübler-Ross to describe the experiences of the terminally ill, apply rather neatly to folks who suffer major market losses. There’s the denial: refusing to open your account statement. Then there’s the anger, which explains the ongoing national temper tantrum aimed at targets like AIG and Bernie Madoff. And who among us hasn’t done a little mental bargaining? So maybe we won’t see the Dow at 14000 again in our lifetime—we’ll settle for keeping our"

What is next?

Imminent Crisis in Forex Markets?"Posted by Adam Kritzer...The problem that Rogers (and all other investors who are worried about currency debasement) faces is how to construct a viable strategy to protect yourself and/or exploit such an outcome. Rogers himself has admitted, “At the moment I have virtually no hedges…I’m trying to figure out what to do there.” The difficulty can be found in the inherent nature of currencies, whose values are derived relative to other currencies. While you can short the entire stock market or the entire bond market (via market indexes), you can’t short all currencies simultaneously- at least not yet.

Instead, you can pick one currency or a basket of currencies, that you believed is best protected from currency collapse and buy it against threatened currencies. But how do you deal with an environment when all currencies appears equally questionable- when all governments all loosening monetary policy and risking inflation? Really, the only answer is to invest in commodities that you think represent good stores of value, such as oil or gold, or the currencies that benefit when prices of such commodities are high. Naturally, the relationship between commodities and currencies is not cut-and-dried, and if the currency system were indeed beset by meltdown, it’s not clear to me that commodities would hold their value. But that’s fodder for another post…"