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Thursdays With Story: Accounting for Change


To stay ahead, we must adapt.

"Let me tell you something my friend. Hope is a dangerous thing. Hope can drive a man insane."
Ellis Boyd "Red" Redding , Shawshank Redemption

Imagine it's April 14th and you're under the gun to file taxes.

You're freaking because you've spent billions of dollars on Christian Louboutin shoes, Frank Mueller watches, Brioni suits and, for good measure, a 1961 Ferrari California Spyder.

You don't have the money to pay for your personal special purpose entities and know that, if push came to shove, you would admit to the world that you're piss poor. How embarrassing!

As you sit at your kitchen table rubbing your forehead and wondering how you got yourself in this sad situation, you hear the distinct sound of horse hoofs clopping up your driveway. You look out the window and see your accountant wearing a white hat and a broad smile. A long piece of straw dangles from his mouth.

"Fear not," he says as he saunters his way for a morning up of Joe, "I just got word from the Financial Accounting Standards Board and you don't have to recognize those properties on your balance sheet until 2010!"

You breath a sigh of relief as you wink at your women, straighten your tie, affix your watch and make your way to your sweet ride. While you're still technically insolvent, you have another year to get your house in order before facing the fiddler.

A lot can happen in that time and you're hoping against hope that the world economy picks up such that you can properly account for years of financial engineering.

You turn the key in your racy red sports car, gun the engine, flip your sunglasses down and race towards Matador City. Perception is reality and as far as the world is concerned, you've got it all.

You find you're so excited that you can barely sit still or hold a thought in your head. It's the excitement only a free man can feel, a free man at the start of a long journey whose conclusion is uncertain.

You hope you can make it across the border.

You hope to see your friend and shake his hand.

You hope the Pacific is as blue as it has been in your dreams.

You hope.

Or, Put Another Way

The following insight was offered by Mr. Practical on this morning's Buzz & Banter:

"By now you should all know that the FASB "chickened" out in moving the implementation date of FAS 140 and FIN 46R from November 2008 to some later fictional date of expected implementation.

Minyans know these new rules would create better ground rules for banks and dealers in securitizing loans.

Specifically it would eliminate special purpose entities that banks used to keep assets like these off their balance sheets.

Effectively we would have learned just how much leverage banks really have.

Apparently keeping investors in the dark is better.

Shame on FASB.

I only bring this up to illustrate that as this deflationary bust unwinds, there's no political institution independent enough do what is right and to tell us the truth.

We're going to have to dig for yourself.

Random Thoughts

  • Keep in mind that it's month end. The flows won't be as vicious as quarter-end but there will still be unforeseen undercurrents into the close.

  • The most interesting action yesterday was that crude was up 3.6% and equities were higher. Indeed, the last equity gasp higher yesterday was likely the shorts scrambling to unwind their press.

  • Perception is reality on Wall Street. This, coupled with the potential psychology shift surrounding the FASB tact, is worth noting as we find our way.

  • I'm not in the "inverse correlation camp" between crude and stocks but the rest of the world is conditioned to believe it exists. It's one of the great trading myths in the marketplace.

  • Remember Minyans, S&P 1235 and BKX 60 are the "higher lows" with which to frame risk if you're in the "bull trend in a bear cycle" camp.

  • I'll never forget during my early years at Mother Morgan (MS) that John Mack added capacity into the downturn and terrifically positioned his firm for the other side of the bear phase. He's doing it again and it's certainly worth noting.

  • Note to Professors, Investors and Partners: If you've yet to get the wink on next Friday's Circle of Trust soiree in NYC, please gimme a ping.

  • For all ye faithful looking for a gaggle (for a most worthy cause), Thursday, December 4th is the Festivus for the rest of us!

  • Man, talk about a hot button issue! The Hanky Panky vibe was the #1 most read story on MarketWatch yesterday and the boards are en fuego.

  • Ditto Yahoo Finance, which hosted a video on a similar subject.

  • Jeezums, talk about societal acrimony-it's a good thing I'm not sensitive.

  • No really, I'm not. Why, do you think I am? Really? Why? What did I do?

  • Man, Wachovia (WB) trades well of late, eh?

  • Keep an eye on Deutsche Bank (DB) for the reaction to earning's news.

  • I said to Liz Claman late yesterday that if Exxon Mobil (XOM) traded to $85, it would be a fantastic spot for a defined risk short-side stab. Circle that level, if and when, on the heels of the widely expected "great" quarter.

  • TD-Ameritrade Minyans please login to our webcast this afternoon at 1:00 EST. Pep, Macke and I will be doing the trading thang online.

Answers I Really Wanna Know…

  • How can the pronunciation of the last two syllables of "Kansas" and "Arkansas" be so different?

  • Can we toss "fundies, technicals, structural and psychology" out the window and safely assume that trading these days is a big game of chicken?

  • How can you (I) be long Citigroup (C) (calls) overnight when it's all but assured it'll have a Merrillesque kitchen sink announcement?

  • Unless you're (I'm) willing to look past the announcement for a Merrillesque type of reaction to the news?

  • Or take a leap of faith that the FASB reprieve will benefit them by giving them until 2010 to get their books in order?

  • Perception is reality, right?

  • Is bocce one of the most underrated "sports" of all time?


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