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Schwab pulling same stunt as CFC


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CUTTING THE APRON STRINGS

 

Fall street is letting the hedgies go asta la vista.

 

It will later pick the assets up at a severe (deleveraged) discount.

 

But thats what capitalism is all about.

 

 

Orica selling for $23 - might buy them back at a discount to what I sold them for.

 

A lot of hedgies were leveraged into Orica - betting on the private equity takeover of course - thinking they would all be all very clever front runners - but they could not predict or prevent the bond cliff - and it has all blown up in their faces.

So they have had to deleverage out of the stock at a loss.

 

Orica should merge it with Nobel.

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Jimbo

 

My interpretation of Capitolism is somewhat different: I see it through the precient eyes of its philospphical Godfather:Adam Smith..He famously said: Whenever and whereever three businessmen gather together, their first topic of discussion How can they organise a succesful monopoly..

 

From its inception (?) Capitolism as I see it has been one of the most delicate and complicated Ballets the world has ever created ---a ballet where at least ten percent of its participants are solely interested in sabotaging every one of its oppoaing partner's graceful movements...

 

How graceful the ascent of the candles chinese; how foolish and stumbling the decline (not to a bear)---the Croise of the 20, the 50 , and 200 dma--the meteoric swings and their breathtaking allure--their attracting destructive powers as well....

 

We know the production and power its capable of conceiving and accomplishing--unhappily, we also know it as the Heartbreak House of Capitolism, its self destructive moments with death and destruction in its wake...

 

 

Its As worthy of being, simultaneously, hated, respected, and worshipped as any primitive idol, ffrom say, Wotan to Kali, the god of death and destruction.

 

Taming the beast at moments like this, when all of the post-rampaging sequlae are about to begin, is as feckless as suggesting draining the Pacific....

 

But there it is now: The crippled giant, muscles bulging, biceps,triceps,pecs, appearing as if made of reinforced concrete, slowly treading up the stairs to its institutional hospice, ready for its bicentennial convalescent leave....

 

beardrech: :ph34r: :ph34r: Look, there we are: A pas de trois, you and me and a dance of three

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This just in from the ........You Ain't Seen Nothing Yet Dept.

 

How are the banks gonna avoid the bullet below?? It's a little long, so I have only posted some of it.....but the concepts are well worth understanding.? Bottomline is that if the firms that hold all this MBS, CDO, CLO, etc. crap have to mark it to market for 3Q earnings -- it's gonna be bad, real bad.

 

What are they gonna do?? Classify everthing as "Held-to-maturity", or just use boolsh!t "mark-to-model"

 

- Securities held-for-trading are reported at fair value. These are securities bought and held for the purpose of selling them in the short run. Unrealized gains and losses are included in earnings.

 

- Held-to-maturity securities are reported at amortized cost. These are debt securities that a company has the positive intent and ability to hold to maturity.

 

- Available-for-sale securities are reported at fair value. These are securities not classified in either of the above. Unrealized gains or losses are excluded from earnings and are reported as a separate component of shareholders? equity.

 

Full Text Here <---------

 

"A highly debated issue in the banking industry today, and one supported by the Securities and Exchange Commission (SEC), is centered around new accounting regulations that change the accounting valuation of securities for financial institutions. The most significant of the new Financial Accounting Standards Board (FASB) statements are FASB Statement No. 107, Disclosures About Fair Value of Financial Instruments, and FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities."

 

Banks were required to use market values for investment securities portfolios prior to 1938. This practice was abandoned because regulators became extremely concerned with mark-to-market's negative effect on banks' financial performance and investment decisions.(3) For instance, the argument at that time was "that this accounting standard would encourage banks to focus on long-run 'intrinsic' values and to eschew the pursuit of speculative market gains."(4) Market value accounting has been debated by financial statement users as well as the accounting profession since the 1970's and 1980's. One reason for the push toward market-value accounting was after the federal government had to take over several insolvent financial institutions which had portfolios that had sunk below stated book values. The unfortunate consequence of using historical cost accounting was well demonstrated after the savings and loan debacle.

 

To say that mark-to-market accounting is unpopular would be an understatement. Many argue that market value accounting is imprecise and does not provide comparable information. One reason market value accounting is considered inappropriate is argued by historical cost advocates who believe that mark-to-market accounting methods are irrelevant because they represent a liquidation value that in all likelihood will not be realized. Thomas Jones, Executive Vice President at Citibank, stated that "mark-to-market is a victory of liquidation accounting over going-concern accounting and doesn't necessarily reflect the underlying purpose of the assets. So I make the case that mark-to-market accounting is bad accounting, bad policy and bad precedent."(10)

 

It is also argued that the SEC has taken away the financial institutions' ability to take the profits of the securities when it is most useful or convenient for the institution, especially when their earnings need a little increase.

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Very interesting and certainly timely with the earnings coming up in October. However, the article is from 1995, so there are no new FASBs that deal with structured finance debt since FASB 115 and FASB 107. I suppose that it will continue to be up to financials to account for its debt as either mark-to-model; mark-to-market or cost basis.

 

It is going to be risky to continue to hold bankers through the end of August. Maybe a good short opportunity on KRE and RKH after this rally.

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http://www.bloomberg.com/apps/news?pid=new...id=aIOWGBzzWpNo

 

Subprime Mess Fueled by Crack Cocaine Accounting: Jonathan Weil

 

By Jonathan Weil

 

July 25 (Bloomberg) -- Back in 1998, as the subprime- lending industry imploded, critics blasted the loose rules that allowed profits to be booked under ``gain-on-sale'' accounting - - the financial world's equivalent of crack cocaine. While the rules got a few patches, they stayed largely intact, and most investors forgot the whole mess.

 

Nine years later, the subprime world is imploding again. One difference now: The folks who write U.S. accounting standards say they want to redo the rules, insisting that their desire predates the current debacle. Whatever the impetus, it's about time.

 

If you had to list the culprits for the subprime-mortgage mess, the Financial Accounting Standards Board would be a good place to start. Under its rules, lenders that sell blocks of loans to certain types of off-balance-sheet trusts are allowed to take the loans off their books and record immediate profits. Often, the gains are permitted even if the lenders still bear risks of losses on the loans, and even if they still hold influence over the trusts' activities.

 

That's not how it was supposed to work. In principle, under the Byzantine standard known as FASB Statement No. 140, lenders are supposed to surrender control of the loans before recognizing gains, and the lenders' interests in the trusts are supposed to be passive. In practice, however, the rules are so full of exceptions that the broad principles have little meaning.

 

``Our experience indicates that Statement 140 is broken,'' says Tom Linsmeier, who joined the Norwalk, Connecticut, board last year. ``What we need to do is take a fresh approach.''

 

Big Fix Needed

 

For now, the FASB is seeking another short-term fix by amending Statement 140. It could be a big one, though, aimed squarely at the securitization industry, which packages pools of loans into asset-backed securities and repackages them into exotica like collateralized debt obligations.

 

On May 30, the board said it will look hard at eliminating the concept of off-balance-sheet trusts -- called qualifying special purpose entities, or QSPEs -- from Statement 140 entirely. The likely effect: Lenders no longer could record sales on transfers of loans or other financial assets to securitization trusts in which they have continuing involvement.

 

Instead, the transactions would be treated as secured borrowings, and the assets would stay on the lender's balance sheet, though possibly in a way that would show the specific liabilities to which they're linked

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Link to Bloomberg Article

 

Caroline Baum is Richard Russell's favorite columnist.

 

Great article on the Great Depression impression made on Benny B.

 

The fact that Caroline is talking about the Great Depression and the failures that the FED played to magnify the depression is very telling.

 

Caroline is saying that Ben will not let it happen again.

 

Unfortunately he may not be able to stop it.

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The Depression as a result of the Feds failure is one story. It's the story Milton Freidman told and that story has become the conventional wisdom, but there are other stories. Too much bad debt mostly in the financial arena which couldn't have been pumped out of existence by the Fed and the banking system back in the day by fostering more bubbles.

 

Maybe Shtinker and company are right. A systematic readjustment will happen, not a systematic cleansing. At stake is the Credit Bubble portion of the Bear case, which come to think about it is the Bear case. If the Credit Bubble can deflate and not take the whole economy down with it then the Credit Bubble case will be mostly debunked. If the financial losses can be absorbed without a severe recession or stupendous increases in government deficits then the bears lose, as I see it.

 

I suppose another new round of Credit Bubbling should be considered a possiblity too but such is difficult to imagine. It should be fun to watch.

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NEXT:

 

http://home.businesswire.com/portal/site/g...907&newsLang=en

 

NEW YORK--(BUSINESS WIRE)--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) released supplemental disclosures today related to the composition and funding sources for its balance sheet. The Company provided a presentation containing additional information to its June 30, 2007 quarterly results, including expanded transparency on the credit quality of its mortgage and securities portfolios. This presentation can be found at https://investor.etrade.com. In addition, the Company stated that it has seen no material changes to date with respect to the availability, pricing or margin on its wholesale funding sources, including repurchase agreements. Management maintains that it does not believe that the current market capitalization accurately reflects the financial strength and performance of the business.

 

Selected highlights from the presentation include:

 

The Company?s $15.7 billion first lien mortgage portfolio is supported by high FICO scores, low Loan-to-Value ratios (LTV) and private mortgage insurance

All first lien mortgage loans with an 80% or higher LTV are protected by private mortgage insurance ( no mention of its significant 2nd liens)

$9.2 billion, or 74%, of its home equity portfolio is to borrowers with FICO scores of 700 and higher

$12.6 billion, or 99%, of mortgage-backed securities are rated AAA

97% of its Asset-backed Securities portfolio is rated investment grade

Consistent and growing base of retail customer cash

$10 billion in excess wholesale borrowing capacity from the Federal Home Loan Bank

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Billy in trouble?

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LM just retraced 50% of the gains from 2002.

 

Can we get a 50% retracement of the gains since 1992? I think we can.

 

If so, look for $71. That's also about a 50% nominal hairtrim from the top.

 

No biggie. LM was a 40+ bagger over the past 15 years. Time for a wee little giveback.

 

Anyone wanna guess when Billy Miller started in the business? Yep, 1982. Right at the bottom. He's only known a bool markit his whole career. No wonda he's always boolish. Why wouldn't he be?

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The party continues in OZ.

 

We are living and spending like drunken sailors.

 

But you have to wonder how much longer our luck will last.

 

I believe its just the tip of the iceberg here,once house prices start to correct, it is going to be plain fugly.

 

We haven't felt any pain in any of our asset classes up until a few weeks ago.

 

For the first time in years,our markets had a real sell off.

 

We were off the best part of 900 points from recent highs.

 

I am sure the ripple effects will be felt across the board in all asset classes going forward.Some serious wealth has evaporated in recent weeks.

 

Certain stocks are off 20 to 30% from recent highs.

 

RIO hit $105,low this week $79

 

MBL(Mac Bank) hit $100,low this week $64

 

Rams listed at $2.50 3 weeks ago,low this week .42c

 

Is this dude the luckiest guy around??

 

Ramming home a shrewd move

 

DO YOU believe in luck? How about $650 million worth of luck? John Kinghorn is the man behind RAMS Home Loans who sold the bulk of his stake in the company for $650 million, exactly two weeks before it crashed on the sharemarket.

 

RAMS floated at $2.50 ? and at one point last week hit 54 cents. Now Kinghorn is being tagged as "luckiest man in the market". After all, he's sitting on a monstrous pile of cash while investors face big losses and mortgage holders face more expensive home loans.

 

http://www.theage.com.au/news/business/ram...6857835945.html

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there may be a trade in here ??

 

http://www.lasvegasnow.com/Global/story.asp?S=6943263

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"That means by 2010, the [Las Vegas] valley will be short 64-million gallons of water a day."

 

Not sure what kind of a trade there is. Maybe if someone can invent a machine that can convert piss into drinking water, that would be a good bet. Plenty of piss in Las Vegas.

 

I think when the history books are written, many years hence, Las Vegas will be held up as the epitome of everything that was right and everything that was wrong with American culture in the 21st Century.

 

Las Vegas is the fastest-growing city in the U.S. And gambling is the fastest-growing industry.

 

The fact that we could build a city in the middle of a harsh desert with little water supply and nowhere near any population center and create a world-class destination with the best hotels and restaurants and attracting folks from all over the world is a miracle of sorts. It also reflects the pinnacle of "Booyah!" optimism.

 

But the fact that we would build such a place also reflects our belief in our supremacy over nature, that anything is possible if you throw enough money and technology at it, that resources are limitless and cheap and will always be so.

 

So in many ways, Las Vegas is a perfect reflection of what makes American great and what makes it so absurd.

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LeeWEE

 

Thank G** for history: I was just about to invest in a Restaurant -Casino Chain until I opened the prospectus and saw the name of the first two startups: Cafe Sodom and Nibbler's Gommorah

 

beardrech :ph34r: :ph34r: Theres something illusory about seeing an empty desert as a clean slate where we can start life anew....I mean something not everything--there are always Black swans lurking

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crazy,

 

i was an intern from jan to march this yea at the accounting department of a very large german-american car-maker,

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Got me stumped on that one! :lol: :lol: :lol:

 

 

The Bob Shtinker Saturday monolog:

 

Last time we got together the S&P was at 1433 now it is at 1445. So in the last two weeks the S&P has managed to tack on a little less than 1% with a lot of volatility along the way. Right now it is just 7% below the all time high of 1553.

 

The Fed went too far last year when they raised the federal funds rate to 5.25% in June of 2006. I have said many times they should have never have taken the federal funds rate to 5.25%. They took the discount rate for direct lending in the Fed window to 6.25%. That caused part of the problem with the housing sector, not all of the problem but part of it.

 

I carry no grief for anyone who took out a mortgage they couldn?t afford. I carry no grief for banks that put lipstick on the loans. I carry no grief for for speculators who piled up families in homes to afford the payments. But the Federal Reserve should have never taken the Federal Funds rates up to 5.25% and made things worse..

 

I said that the Federal Reserve should have cut the federal funds rate on the Aug 7th. I said that I thought they wouldn?t do it because I did not think they had a full understanding of the situation. I said that that they are wrong about their inflation paranoia. I said that Inflation is not the issue. I said that high energy prices are counter-inflationary. I said two weeks ago that I did not think the fed got it. Not only did they not cut the fed funds rate, they came out with a lame statement at the late meeting about inflation being their main priority.

 

Wouldn?t it be nice to see the Federal Reserve Chainman, Ben Bernanke, stop being the pretender? Wouldn?t it be nice to see Ben Bernanke, Obey Won Ben, climb down from his tower? Instead he came out with another statement that the Federal Reserve would  prioritize their concerns about inflation. What inflation? The key index? What is the key index? We have spoken about it many times on this show and it is one that the Federal Reserve holds in high regard? The PCI Core! The PCI Core rate is 1.9%! Not much inflation there. The CPI isn?t as good of an measure of inflation but it is the next best measure and it is at 2.2% year over and year and at a 6 months annualized rate of 2.0!. Yet until yesterday they held their erroneous view that their job was to fight inflation not the help the US economy. What inflation?

 

Well Friday the Federal Reserve saw the error of their ways. I have said it over and over that they had to cut their short terms rates. On Aug 17th they finally got the message, they cut the discount rate by 50 basis points down to 5.75%. The Fed funds rate is still at 5.25% but it is only a matter of time before they reduce the Federal Funds rates. They have now seen the errors of their ways! This is a de facto admission that they had to change their policy!

 

We had many moments of insanity this week? I won?t embarrass him, or the financial channel that put him on the air. But I saw myself a talking head telling America that their houses are worthless, that the stock of housing in the U.S. had no value! Can you imagine putting someone on national TV to say that houses have no value?

 

But that wasn?t the most bizarre event of the week. The most bizarre event of the week was a Fed Reserve Governor who made the most irresponsible statement I have ever heard from a Fed Reserve Governor. The Fed Reserve Governor of St. Louis said the only way the Federal Reserve would make an interest rates cut would be a calamity! And then less then 48 hours later they cut the federal discount rate by 50 basis points! There was no calamity! None at all! But there you had the statement out there. Unbelievable use of language by a Federal Reserve Governor. Now we have the discount window propped wide open. I don?t know any time when the window has been propped so wide open. Now banks can come and borrow and borrow and borrow as needed.

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This guy is full of two things. Crap, and himself. Sounds like he's just talking his book. A dangerous combination when your version of the facts is actually wishful fantasy.

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The Bob Shtinker Saturday monolog:

 

Last time we got together the S&P was at 1433 now it is at 1445. So in the last two weeks the S&P has managed to tack on a little less than 1% with a lot of volatility along the way. Right now it is just 7% below the all time high of 1553.

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:huh:

 

"Just 7%"?

 

"Just 7%"?

 

:huh:

 

Why don't we lop "just 7%" off your "Li'l Market Timer" and see what Mrs. Shtinker thinks of your portfolio holdings....

 

:o :o

 

:lol: :lol: :lol:

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Billy in trouble?

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LM just retraced 50% of the gains from 2002.

 

Can we get a 50% retracement of the gains since 1992? I think we can.

 

If so, look for $71. That's also about a 50% nominal hairtrim from the top.

 

No biggie. LM was a 40+ bagger over the past 15 years. Time for a wee little giveback.

 

Anyone wanna guess when Billy Miller started in the business? Yep, 1982. Right at the bottom. He's only known a bool markit his whole career. No wonda he's always boolish. Why wouldn't he be?

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Perhaps its time to reexamine the hidden components of those gorgouus sinusoidal waves we know as Dok's cycles..

 

Im sure we'd find what what Pavlov discovered years ago--A mr Miller,a perma-bool in the form of a drooling bell-responding incisor sharpening dog...

 

beardrech :ph34r: :ph34r: Hey you--get that Black Swan out of my aviary...No what?....No! No! I meant it when I said "Out"--Feed it to the Bears !!

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But that wasn?t the most bizarre event of the week. The most bizarre event of the week was a Fed Reserve Governor who made the most irresponsible statement I have ever heard from a Fed Reserve Governor. The Fed Reserve Governor of St. Louis said the only way the Federal Reserve would make an interest rates cut would be a calamity! And then less then 48 hours later they cut the federal discount rate by 50 basis points! There was no calamity! None at all! But there you had the statement out there. Unbelievable use of language by a Federal Reserve Governor. Now we have the discount window propped wide open. I don?t know any time when the window has been propped so wide open. Now banks can come and borrow and borrow and borrow as needed.

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What makes you think the Fed didn't discover an effing "calamity" you <calculating like a leper snake> little androgynous troll?

 

How's that puke QQQ call from way-back when going? Still underwater? Still verboten to discuss on your radio show?

 

You're an effing puke - go eat <something rich in bad cholesterol>.

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Meanwhile this thing keeps climbing into Outer Space, and the Summation Index is making all-time record lows.

 

I suppose this trend can continue indefinitely.....

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One toke over the line, sweet Jesus, one toke over the line.

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there may be a trade in here ??

 

http://www.lasvegasnow.com/Global/story.asp?S=6943263

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"That means by 2010, the [Las Vegas] valley will be short 64-million gallons of water a day."

 

Not sure what kind of a trade there is. Maybe if someone can invent a machine that can convert piss into drinking water, that would be a good bet. Plenty of piss in Las Vegas.

 

I think when the history books are written, many years hence, Las Vegas will be held up as the epitome of everything that was right and everything that was wrong with American culture in the 21st Century.

 

Las Vegas is the fastest-growing city in the U.S. And gambling is the fastest-growing industry.

 

The fact that we could build a city in the middle of a harsh desert with little water supply and nowhere near any population center and create a world-class destination with the best hotels and restaurants and attracting folks from all over the world is a miracle of sorts. It also reflects the pinnacle of "Booyah!" optimism.

 

But the fact that we would build such a place also reflects our belief in our supremacy over nature, that anything is possible if you throw enough money and technology at it, that resources are limitless and cheap and will always be so.

 

So in many ways, Las Vegas is a perfect reflection of what makes American great and what makes it so absurd.

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Lee

About the miracle of turning piss in to water, Remember this"

 

If you ever regress tot he point where you become, and for whatever reason:whether it be senility,or inspirational environmentalism,no matter, if for any reason you become reluctant to take a shower or bath even if its Saturday night, then please avail youurself of a film called "water works"....

 

Therin you will see the opening scene,the truth I swear to you, where our protagonist,on a dirty raft somewhere in mid-ocean is witnessed turning the handle of what apparently is a Samovar serving as a distillation unit that is converting urine into potable water...

 

We started out with Moses touching a rock for something potable and close the parenthesis of our history with piss into water..

 

There are as you well know many candidates for the the Worst Picture Ever Made and so complex has the genre evolved into that we are at the stage where we can sub-catagorise them, so vast is the field

 

But this picture, the most expensively made up to that time, not only is it rotten to its very aesthetic foundations, but its also a candidate for being examined by any health department within the proximity o f its showing

 

Exiting the theatre I had this desire to leap into a bath of clorox,to rid myself of all the filth I was subjected to.. Not porno, I mean real filth dirt, rust, armpits full of stench, mushrooms growing on testicles and other assorted grunge was displayed as never before......

 

Its a must see ..if nothing else, than to investigate how vast the sums of money Hollywood can occasionaly squander...

 

beardrech :ph34r: :ph34r: It was the only film in history where the audience was recycled.....the garbage on the screen serving as catalyst

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crazy,

 

i was an intern from jan to march this yea at the accounting department of a very large german-american car-maker, but i have to admit: I have no friggin clue about accounting!  :lol:

All the time i hear the term "IFRS" i have to vomit! The same goes for the term "SOX" or "SOA" a topic i had to do with 6 months last year at the same company, the good thing was i was sitting in the trading room in the treasury department at that time, all i did was talking to one of the traders all day and we did bet on things like "in the next 5 mins, will the DAX be higher or lower than right now?"  :lol: , from time to time i had to take part at meetings with all those - in america you would say Ivy League Schmucks - from KPMG, Deloitte, PWC and so on. Best thing was: One day after such a meeting my boss asked me: "Say Mr. Fox, was that guy gay???"  :lol:  :lol:  :lol:

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F of X

 

Did you know that Goethe thought that the greatest practical contribution made towards the advancement of Western Civilization was that of Lucio Pacciole: none other than the 15th century inventer of Double Entry Bookkeeping???

 

And furthermore,get this, Paccioli , so help me, set up the prnciple of marking to market.. And if memory serves me correctly he stated it in the following term: Always price your assets,within reason, at their LOWEST possible value, and your liabilities at their HIGHEST figure....No puffing and huffing.....

 

beardrech :ph34r: :ph34r: It seems that we are always teaching Fallstreet,an Old dog, old tricks...

 

And PS Thanx to Jorma and Crazy eight for the references---And Crazy could you give us a little more detail on defending your girlfriends CD and how you got the bank manager to fork it over--its another very very complicated anecdote in embro waiting to be developed--very important for measuring socities current temperatuure

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