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Vol. 27, No. 4 • April, 2009

Now you can find this newsletter on the web, at Freeman-Spicer.com

Mark-to-Market . . . . . . . . . To most people, it’s an arcane accounting rule. But to bankers, its’ the whole ballgame: “mark to market” pricing is the practice of requiring banks to value their assets based on their current market value. Not what banks paid for those assets yesterday. Not what they could get for them in, say, a year or two when the financial industry has settled down. What they could get right now. Which is basically bubkes. Banks have been pleading for this requirement to be lifted since the credit crisis began, and last week they got their wish. Confused? Here are four things you need to know about “mark to market” in order to sound smart at a cocktail party.

1.         Banks say mark-to-market pricing cost them billions. When the housing bubble burst, the market for all those mortgage-backed securities vanished, leaving bank balance sheets larded with assets that no one wanted. So at the end of each quarter, banks had to write down billions of dollars of “toxic assets” - even though their value might’ve been artificially, and only temporarily, depressed. But if banks never intended to sell an asset in the current market, they reasoned, why should they be forced to value it as if they did?

2.         The key players: five big-shot accountants in Connecticut. Banks began lobbying Congress last year to do away with mark-to-market, arguing that they couldn’t lend because it had bled away so much capital. Congress in turn put the heat on the Financial Accounting Standards Board, a group of five über-accountants based in Connecticut who write all the rules. After months of pressure, including threats to take away it’s authority, the FASB caved and voted to loosen the rule.

3.         The new guidelines, and the fly in the ointment. Banks can now use “significant judgment” to value assets. Translation: they can stop assigning doomsday values to securities they think will have more value down the road. The hitch: some investors fear the rule change will help banks disguise their garbage, which was part of what got us into this mess in the first place.

4.         Bully for the banks, but will this actually work? It’ll help big banks like Citi recoup billions in losses. But it does little to solve the underlying problem: piles of troubled assets no one wants. And it might not help for long, because Treasury Secretary Tim Geithner plans to rebuild a market for the assets by handing private investors cheap credit so they can start buying them up. (Matthew Philips in Newsweek)

Walking Talking Seniors . . . . . . . . . A group of senior citizens were sitting around talking about their ailments. “My arms are so weak I can hardly hold this cup of coffee,” said one. “Yes, I know. My cataracts are so bad I can’t even see my coffee,” replied another. “It has gotten to where I cannot hear anything anymore.” said one, in the loudest voice of the group. “I can’t turn my head because of the arthritis in my neck,” said a third, to which several nodded weakly in agreement. “My blood pressure pills make me dizzy,” claimed another. “I can’t even remember what I’m doing half the time. I guess that’s the price we pay for getting old,” winced an old man, as he shook his head. Then there was a short moment of silence . . . . “Well, it’s not that bad,” said one woman cheerfully. “Thank the Lord we can all still drive.” (B. Levy)

What Could Be Next? . . . . . . . . First it was wobbly banks. Now it’s wobbly dolls. Russia’s latest candidate for a government bailout: Its Matryoshka dolls, the chubby, nesting figures that have been scooped up by generations of souvenir hunters since first appearing in 1890. (Matryoshka is the diminutive of an old Russian female name.) Slumping exports and sales to tourists have hurt the makers of the Matryoshki and other Russian handicrafts. The Moscow Times reports that the country’s largest maker of the handpainted dolls - the Khokhloma Painting Plant in the Nizhny Novgorod region - recently halved salaries after a 40% revenue slump. All told, some 240 Russian enterprises, employing 30,000 people, are involved in making the dolls and other traditional pieces. On March 13^th the government announced it will come to the rescue of the industry - by ordering more than $28 million worth of Matryoshki dolls, lacquer boxes, and wooden dishes and spoons. The Kremlin and its ministries plan for about $15 a set; it could be years before enough visiting dignitaries pass through to take all those dolls home. (Jason Bush in Moscow for BusinessWeek)

7 Tips For Clean Dishes . . . . . . . . . Family members who bicker over how to load the dishwasher should know that some procedures help ensure that dishes emerge safely and gunk-free:

1.         Load large items at the sides and back so they don’t block water and detergent from other dishes.

2.         Put the dirtier side of dishes toward the center of the machine.

3.         Don’t let dishes or utensils nest or rest side by side.

4.         Use the top rack for plastic and more delicate items.

5.         Rest glasses on prongs so they stay upright and don’t fill with water.

6.         Load silverware with handles down; knives with handles up. If there’s an open basket, mix spoons, forks and knives so they won’t stick together.

7.         Don’t machine-wash brass, bronze, cast iron, disposable plastic, gold-leaf china, or anything made of wood. (Consumer Reports)

How a Doodle Serves Your Noodle . . . . . . . Often viewed as a sign of a wandering mind, doodling may actually help us absorb information. In a study published in Applied Cognitive Psychology, Jackie Arndrade at Britain’s University of Plymouth played a rambling voice-mail message to 40 people, half of whom were given shapes to fill in as they listened. The result: The doodlers recalled 29% more of the message than those who just listened. Andreade says idle scribbling uses just enough cognitive bandwidth to prevent daydreaming, so it may help us stay focused. One boardroom doodler, retiring GM Vice-Chairman Bob Lutz, says he isn’t surprised by the finding. “I can look at old sketches done in meetings 40 years ago,” he says, “and experience sudden recall of the room, the table, the voices.” (Ellen Gibson in BusinessWeek)

“The human body has two ears and one mouth. To be good at selling, you must learn to use them in proportion.” Why are there two ears and only one mouth? . . . . . . . . . (Selling for Dummies)

“A ‘gimme’ can best be defined as an agreement between two golfers . . . neither of whom can putt very well.” (Pfeifer)

“Things may come to those who wait, but only the things left behind by those who hustle.” (Abraham Lincoln)

“There are no rewards or punishments - only consequences.” (William Inge)

What Won’t You Sacrifice? . . . . . . Even in a tough economy, there are some expenses you refuse to cut back on:

A Very Short Story . . . . . . .

Man Driving down road.

Woman driving up same road.

They pass each other.

The woman yells out the window, PIG!

Man yells back, BITCH!

Man rounds next curve.

Crashes into huge pig in middle of road and dies.

Thought For The Day: If only men would listen! (N. O’Brien)

America’s Top 10 Favorite Car Colors . . . . . Color is serious business for Dupont Automotive Systems. The results of their 2008 study attempts to analyze the mood of our country and how car color preference plays a role. The L.A. Times reports that this year, once again, white has dominated the car color world. According to Dupont, white car preference signals the transition time needed for truly “chromatic” colors like blue and green to surface. This is the second year in a row for white’s domination in the U.S., unseating Silver’s 7-year reign. On the rise for those who choose white are the selection of special effects or pigments that lend pearl or iridescent appearance to the coatings. Black came in second on the list, but a trend that started in Europe and is not prominent in the U.S. is the addition of metallic effects to black cars.

North America Overall: White = 20%, Black = 17%, Silver = 17%, Blue = 13%, Gray = 12%, Red = 11%, Beige / Brown = 5%, Green = 3%, Yellow / Gold = 2% and Other = 1%. (Starkweather)

Legal Meaning . . . . . Opinions vary widely on how explicitly to articulate discipline policy in an employee handbook. Many companies make the mistake of putting a formal “progressive discipline” policy in writing. Codifying that process can obligate you to do things you don’t always want to do - and can undermine your “at-will” status in the eyes of the court. A better option is to write a policy that avoids threats and that focuses on positive behaviors. As always, the tradeoff for this flexibility is a potentially weaker defense in the courtroom. Your feel for corporate culture will determine whether it’s a tradeoff worth making. (Inc.)

“The pessimist sees difficulty in every opportunity; the optimist sees opportunity in every difficulty.” (Winston Churchill)

In Microsoft Word 2007 - use Shrink One Page to fit a document that has over-run a page by a few lines - to make it fit on a single page.

Sincerely,                                                                                                                       

Edward C. Levy

President