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Ten companies now have more Level 3 assets than capital. Some of these companies WILL go bankrupt.

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Level Three assets are the least liquid of the firms' trading assets and therefore are valued using what are called "unobservable inputs." Level Three assets include real estate, mortgage-backed securities, private equity investments and possibly even "undertakings of great advantage, but nobody to know what they are" (cf. South Sea Bubble). The three magic words that make an asset a Level 3 asset are "no observable inputs." What this means is that not only are they hard to price, but nearly impossible to sell. Ten companies now have more Level 3 assets than capital. In order they are (as a % of total shareholder equity): 1) Bear Stearns (BSC): 313.97% 2) Morgan Stanley (MS): 234.88% 3) Merrill Lynch (MER): 225.4% 4) Goldman Sachs (GS): ...

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