AfterHour.20

• Mark-to-Market Accounting

Relaxing mark-to-market accounting rules has helped the market move higher yesterday and today. But I wondered what this change really changes. As far as I can see, this is nothing more than another form of temporary relief. In the near term, it will help the banks feel better about themselves. It'll make their balance sheet look better and they may feel confident enough to put the past behind them and move forward. However, in the long run, this changes nothing. Their debt assets were priced so low for a reason and this neglects that reason. Stock prices are no different. Is GM stock fairly priced at 2 dollars a share? Or is the 20 dollars per share price of a year ago, a more true price? I don't think anybody knows the answer to these questions because the value of a company fluctuates in an open market. But if there aren't buyers willing to pay a higher price than 2 dollars, all arguments to prove that the company is worth more becomes a moot point. You can do things like reverse split the stock and make it look bigger, perhaps better to some, but it changes nothing. And that's what I believe will happen with this changing of accounting rule. It will provide the market with a short term feeling of confidence but it may prove to be nothing more than a painkiller. In conclusion, short term great, long term not so great. This is no different than printing money and worrying about inflation later.