An article yesterday says ‘Wall Street rallies on mark-to-market easing’ on Thursday after FASB - the U.S. Federal Accounting Standards Board that sets U.S. accounting standards - agreed to give banks more flexibility in applying mark-to-market accounting to their toxic assets. The same article says “Optimism was also boosted as leaders of the G20 nations agreed to put an additional trillion dollars into the ailing global economy through extra funding for groups like the IMF”.

Please take the time to read the last two of my prior posts on Mark-to-Market accounting. I consider the reaction of the stock markets to the aforementioned news – if indeed that has contributed to the U.S. market indexes rising yesterday morning – as truly ludicrous. Not only will this change make the financial statements that will be produced by the banks going forward less reliable in my opinion, it is not earnings and book value – which are the only things this change results in – that ultimately determine share value. It is after-tax discretionary cash flow that dictates value in the end. This is something that not all stock analysts seem to focus on. If they did, accounting changes that simply enable manipulation of numbers would be disregarded by Wall Street.

A ‘Money and Markets’ article today titled ‘Mark to Market Madness … Geithner Plan Shenanigans … the Economy … and More’ is as negative on the Mark-to-Market changes as I am.

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