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Ten companies now have more Level 3 assets than capital. Some of these companies WILL go bankrupt.
This Link is located in the Public Channel Housing Bubble and Bear Links.
 Posted by ian 1 year 317 days ago (minyanville.com).  Views: 682
Tags: housing bubble  banks  bear stearns  morgan stanley  merrill lynch
Related Tags: credit crisis  gold  wall street  peter schiff  inflation  economics  recession  
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): 191.56%
5) Lehman (LEH): 171.18%
6) Fannie Mae (FNM): 161.48%
7) Northwest Air (NWA): 142.02%
8) Citigroup (C): 125.06%
9) Prudential (PRU): 119.36%
10) Hartford (HIG): 108.52%

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ian said
1 year 189 days ago
 
update

127 days later, #1 (Bear) and #6 (Fannie) already went under (government bailouts).

#5 (Lehman) is days away from going under. #3 (Merrill) is probably a few weeks to a few months away from collapsing.
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