Accounting & Financial Analysis News by GLG Council Members
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
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Chinese Stimulus Package Will Result in Massive Bad Loans
April 13, 2009
Financial Times: Beijing to tighten controls on credit | www.ft.com
The Chinese government's stimulus package has resulted in three quarters of a trillion dollars worth of loans in the first quarter alone. The speed and destination of these loans will result in massive write off further weakening the Chinese financial system
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This level of debt will destroy this nation and perhaps cascade to the rest of the world.
April 5, 2009
The President is keeping score. | online.wsj.com
1. The equivalent of 27 trillion dollars circulates world wide. 2. The current U. S. Debt is: $11,124,519,301,253.21 as of 3 April, 2009. 3. This means in five years the debt will be $22,249,038,602,506.42 4. If tripled it becomes: $33,373,557,903,759.63 5. This does not include the unfunded mandates of all social programs, and other U. S. entitlement programs.
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Are ICBC’s Chairman Predictions about China’s Economy Correct?
April 3, 2009
ICBC Chairman Upbeat About China Economy | online.wsj.com
ICBC's Chairman's statements about Chinese consumer spending, the level of bad loans, the prospects for real estate growth in China are wrong.
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The same people who can't get the DMV to work now want to manage GM.
April 1, 2009
GM Bankruptcy in the works. | news.yahoo.com
1. Govenment has never, will never, and cannot correctly run a business. Business and government are two mutually exclusive things. 2. GM is mismanaged, but the bankruptcy of this company is not the answer. GM management is not the issue. What is the issue is the constant belief that good times will last forever. 3. Analysis by interested parties. No one should ever trust an analyst who is paid by, or for, the company being analyzed. 4. Lawyers are no good at mathematics.
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Executive abuse of working capital is a worldwide fraud issue.
March 31, 2009
Working capital diversion | economictimes.indiatimes.com
1. Diversion of capital is a common abuse among senior executives. This is especially true among privately held companies. 2. “What’s mine is mine and what’s here is mine, too” is an overriding attitude. 3. Without personal risk on these obligations, one may be at their mercy for completion. They have little mercy and enforcement has its risks.
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Corporate Gatekeepers in Indian Context
March 31, 2009
Working capital diversion | economictimes.indiatimes.com
This article raises a very serious issue of diversion & misuse of public funds and bank funds for personal purposes by several promoters in India. This issue has to been as a sub text in the overall context of poor corporate governance and unethical corporate gate keepers in India.
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MTM- May Strangulate World Economic Growth
March 23, 2009
SEC won't suspend mark to market - source | money.cnn.com
Mark To Market(MTM) basis for valuation of INVESTMENTS made by BANKS shall distort published accounts of the Banks, may Strangulate World Economic Growth particularly in periods when GROWTH is needed. Financial Institutions\Investment Banks\Pension Funds and BANKS make longterm investments in shares/stocks/govt. securities for long term growth benefits. Requiring them by law to value these investments at MTM principles regularly at weekly\ monthly\quarterly\yearly intervals is just like calling upon their managements to become market participants like speculators\hedge funds\derivative operators or BROKERS in CDS. BANKS are trustees of PUBLIC DEPOSITS. This is the perception of the PUBLIC . Unfortunately some banks mixed up the domain of their operations because of poor regulation or deliberate oversight by the REGULATORS.The need of the hour is Strict Surveillance, not making rules that kill the GOOSE that laid the GOLDEN EGGS that is-BANKS, Institutions of Growth
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MtM accounting provides one side results
March 20, 2009
SEC won't suspend mark to market - source | money.cnn.com
Mark-to-market (MtM) accounting while useful information for investors as a reference to future valuation and expected streams of cash flows, creates financial reports that are expected to provide in today's dollars all of the future value of the firms net worth. Given the numerous variables, including what discount rate to use in present valuation along with market price forecasts that exceed the tenor of liquid commodity futures, allows for mismanagement of the firms books. Its readily apparent that MtM has allowed many folks to be rewarded today for the all of the future cash profits, regardless of the time period. What is not considered in MtM is the present value of all the risk that the firm has undertaken. Stress testing scenarios that provide a 20% or more probability of occurrence should be used to net against the firms MtM valuation. To report the one side of the risk to return ration as an asset and basis of bonus is bad financial management.
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Analysts and Investors Can Ignore WF Chief's Call to Stress Cash Flow Over Value
March 16, 2009
FASB Moves Toward Giving Banks More Flexibility on Fair Value by Ian Katz, Bloomberg | www.bloomberg.com
FASB responded ASAP to the demand by the House Financial Services Committee last Thrusday for immediate action to provide bankers relief from Mark to Market accounting. FASB has proposed guidance to allow banks to separate Credit risk from Liquidity risk in order to attenuate writedowns they might otherwise have to take on hard-to-value financial assets. An avowed purpose of the proposal is to close some of the gap between industry capital as stated by the regulators, which investors do not trust, and Tangible Net Equity, which banks contend entails an excessively severe markdown of assets banks claim they can hold to maturity. However, banks may not have sufficient capital, unless it is supplied by the government, to continue to hold these assets.
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March 16, 2009
AIG Executives receive bonus | www.cnn.com
-Contractual bonuses should not have been a surprise. - We are a country that needs to abide by rule of law (whether it is good or bad). - The media does a disservice by not explaining the story within context. It is more interesting to say "AIG paid billions in bonus from TARP money" rather that "AIG agreed to honor its obligations".
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