Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

SEC On Track To Adopt IVS: By-passing FASB, BIS, Congress And The Treasury?

Politics / Market Regulation Aug 21, 2009 - 12:23 AM GMT

By: Andrew_Butter


Tyler Durden can always be counted on to be first off the block with a juicy bit of news, so it was no surprise that he broke the story about SEC's recent effort to re-start the job that they apparently abandoned some-time in mid 2000, namely protecting investors who put their money into entities they regulate from fraud (

But the quip "the SEC is now officially an accountant", missed the point completely.

What the SEC is clearly concerned about is the likely level of failure of loans (in the future), and the likely decline in Collateral Value underlying those loans (in the future).

That's not accountancy, that's valuation. I though everyone had realized by now that accountants (and ratings agencies for that matter), don't know anything about valuation (, otherwise they would not have signed off the TBTF banks, plus Fannie and Freddie plus AIG as "going concerns" weeks before they collapsed. Valuation is about err...not doing that, which is something else completely.

Accountants get around their "blind spot" by going with either "book" (that's the best), or mark-to-market" (which is just a modified form of book that takes you up to yesterday), or of course the latest idea of FASB, "mark-to-fantasy", which is a system where a computer is employed to generate numbers at random and you pick the one you like.

Ah but one dreams of hiring an accountant with a "blind spot" - the bigger the better, that's what the words Big 4 are all about!

Tyler correctly points out that this might rather scuttle the cunning gambit of Congress to force FASB to allow "mark-to-fantasy" to be reported, plus the carefully designed un-stressful stress tests delivered with such "zeal" by the Treasury.

But that's beside the point, the interesting thing is that the wording and the intent of the letter might easily have been lifted from International Valuation Standards Application 2: Valuation for Secured Lending Purposes.

That's of course apart from the fact that they missed out some rather important points which are what makes IVS work (every time), and what makes Voodoo Valuation Standards fail (not all the time (thankfully), just sometimes). In particular, the distinction between Market Value and Other Than Market Value.

But no matter, it is a very positive step that they are finally "seeing the light" and somehow getting the point that if investors think they are likely to be fed a load of toxic rubbish instead of properly reported valuations, they tend to be a bit reluctant to invest.

Although one can't help but wondering though, why they persist in trying to re-invent the wheel, when clearly they don't really know what they are doing. Why not instead simply stipulate "all valuations of assets held by entities regulated by the SEC, should be done strictly according to International Valuation Standards"?

That would be much simpler, just write one line then go back to sleep. If they had done that in 2000 when IVS was first published, well they might not have been embarrassed by being rudely awoken from their extended snooze (and there wouldn't have been a credit crunch).

The danger of course is that without the “whole of IVS” being in place, and instead having a rather crude approximation, as HunterGLV pointed out the TBTF banks will just get a waiver and 3,000 smaller banks will fail (

One of these days they will get it right, I suppose.

By Andrew Butter

Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2009 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Andrew Butter Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules