Wake up … let’s call it fraud
Never in the history information was so freely available …
and never was it so stubbornly denied and ignored …
Everybody can be aware of the situation …
but nobody seems to care about, what is going on …
The financial industry became too big … not too big to fail …
as it finally will … but as big as to regulate itself … incredible …
As I get a lot of mails … and to be honest …
as I am a trader … I am too busy to answer them all …
Therefore … I will make myself as clear as possible …
IMHO … the financial system is a trainwreck!!!
ALL BANKS (under fair pricing) ARE BANKRUPT!!!
But … as the FED tries to hide it … I call it FRAUD!!!
Am I sure? YES, I am !!!
And … between you and me … as they leverage up to over 40:1
it is easier than ever to go belly up 
Here comes, why …
Banks divide their assets into 3 classes … (here the explanations, as used by Merill Lynch)
- Level 1 … Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, listed derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations).
Usually, Wall St. “finest” have not more than 25% of their assets in Level 1 assets. THis class is known as “mark to market”.
- Level 2 … Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets (for example, restricted stock);
b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (examples include certain residential and commercial mortgage related assets, including loans, securities and derivatives).
The far majority of assets is Level 2 … but !!! as you can already see … it is harder to value and prone to errors and “intended mistakes”.
This asset class is named “mark to matrix”.
And now the famous …
- Level 3 … Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain private equity investments, certain residential and commercial mortgage related assets (including loans, securities and derivatives), and long-dated or complex derivatives including certain foreign exchange options and long dated options on gas and power).
Between 10 to 20% of assets, but rising … known as “mark to model” or just “mark to fantasy”.
I especially like an expression, used by Goldman Sachs (I know, that they meant different stuff, using it) ALICE-in-WONDERLAND-ACCOUNTING 
And now have a look …
Level 3 assets at most companies are by far higher than their CAPITAL!!!
The “late Bear Stearns” had more than 3-times its capital “invested” in Level 3 assets … now you know, why they were wiped out that quickly …
Number 2 and 3 on the “infamous list” are … Morgan Stanley and Merill Lynch …
both more than 2 times its capital in Level 3 assets …
BE AWARE, that out of Chicago, we heard rumours, that Merill could be the next victim of hybris …
Goldman Sachs … the Masters of the Universe 
and Lehman follow …
with ratios close to 2 to 1 … and
BE AWARE … less than 1 yuear ago, Goldman had 54bln$ in Level 3 assets, now they are close to 100 bln!!! Is that sound??? NOPE
And the list goes on …
And whatever they tell you about … SUBPRIME is OVER …
Remember …
we have still the following Level 3 problems … at least them …
- Mortgages other than subprime mortgages
- Securitized credit card obligations
- Leveraged buyout bridge loans
- Asset backed commercial paper
- Complex derivatives contracts
- Credit Default Swaps
Additionally, we still face the inevitable bond insurer melt down …
So … sorry for bothering you with old facts … hopefully you are still scared as hell
Why do I write it (again) ?
I want to be sure, that you know … 100% sure …
Now you know the reason, why I did not continue with my trading strategy blog … as the only sound strategy is … exploit ANY market weakness … know, that the market is HIGH RISK for long positions and try to avoid the manipulation bumps …
Take care!!!
Tags: accounting, FED, financials, fraud, Goldman Sachs, Lehman, Level 3, manipulation, Merill Lynch, Morgan Stanley, strategy
