Thursday, April 02, 2009

FASB Softens Rules On Mark-to-Market Accounting

The FASB finally voted to soften the mark-to-market accounting rules. Well, better late than never. The Board revised the rules to allow companies to use their judgment to a greater extent in determining the "fair value" of their assets. The board also made it easier for companies to avoid having to take impairment charges against earnings when they suffer losses on their investments, especially when there are fire-sale transactions in the market.

This is helping the bank index bounce, but the whole market is rallying this morning. Housing stocks are among the leaders, as are retailers and energy. So the rally is really broad-based, which is good to see.

Europe was up big this morning also after the ECB voted to cut rates .25% to 1.25%. This cut was actually smaller than expected, which is helping the Euro rally big time vs. the dollar.

Asian markets also soared overnight, on optimism that M2M would be relaxed here in the US. Hong Kong surged +7.4%, while Japan spiked +4.4%. The G20 leaders also decided that they will double the resources of the IMF to $500 billion, which can be used to support developing nations. I have heard that Eastern Europe is quite the mess right now.

Oil is higher today, rising to $52; but gold is lower, breaking below $900 level; the 10-year yield is higher to 2.76%; and the VIX is only -1.5% lower to 41.66. This is barely below the 200-day. I would have expected it to be lower on a big rally like today. A tad worrisome.

Trading comment: I have been trading a few stocks for short-term trades. I took profits on RIMM today ahead of earnings, and trimmed VMW on a big spike. I think stocks could pull back after RIMM reports, and possibly on tomorrow's jobs report.

I have not made any major etf trades lately. In my aggressive accounts, I am buying a hedge position in SDS in case a pullback does materialize. But bigger picture I would still look to use pullbacks to add more long exposure.

long VMW, SDS


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