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Mark-to-market: Difference between revisions
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{{anat|isda|{{image|marky mark| | {{anat|isda|{{image|marky mark|png|}}}}The [[market value]] is the value of an [[asset]] by reference to its [[market price]] — ie what folks are prepared to pay for it at the particular point in time, rather than by assessing the value of the fundamental components of the asset. The latter involves ineffable wisdom, technical analysis and cojones of steel — and at times of stress is apt to make an owner feel aggreived at the world; the former is a bit like sticking something on eBay — hence, “[[Mark to market|marking-to-market]]” — and yields an instant answer if not necessarily gratification. | ||
Marking-to-market is a method of accounting to value an asset. In the absence of a better idea, it is to treat the value of something you have ''not'' sold as if you ''had'' sold it. Regular readers will not be surprised to hear that this can lead to confusion, disappointment and colossal regret. They may, however, be surprised to hear there have been many financial professionals — ones who, similarly, should not have be surprised to hear that — who, in fact, ''have'' been surprised to hear it, and have had the frights of their lives finding it out the hard way over the 30 years since mark-to-market accounting became ''de rigueur'' — re-popularising itself in the hands of accounting wizards like [[Jeff Skilling]] and [[Andrew Fastow]] in the 1990s, President Roosevelt having banned it, at the [[SEC|SEC’]]<nowiki/>s urging, as long ago as 1938. | Marking-to-market is a method of accounting to value an asset. In the absence of a better idea, it is to treat the value of something you have ''not'' sold as if you ''had'' sold it. Regular readers will not be surprised to hear that this can lead to confusion, disappointment and colossal regret. They may, however, be surprised to hear there have been many financial professionals — ones who, similarly, should not have be surprised to hear that — who, in fact, ''have'' been surprised to hear it, and have had the frights of their lives finding it out the hard way over the 30 years since mark-to-market accounting became ''de rigueur'' — re-popularising itself in the hands of accounting wizards like [[Jeff Skilling]] and [[Andrew Fastow]] in the 1990s, President Roosevelt having banned it, at the [[SEC|SEC’]]<nowiki/>s urging, as long ago as 1938. | ||
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But these values are generated on the assumption that, generally speaking, Londoners do not want to sell their homes, and that tiny fraction who do so so for reasons unrelated to their bearish view of the intrinsic value of their property - they are either trading up to a bigger house, trading down to a smaller one — in either case, net flat the London market itself — and a few are arriving, or leaving moving to retirement villages in Milton Keynes. But the net “view” expressed by these activities is more or less neutral. | But these values are generated on the assumption that, generally speaking, Londoners do not want to sell their homes, and that tiny fraction who do so so for reasons unrelated to their bearish view of the intrinsic value of their property - they are either trading up to a bigger house, trading down to a smaller one — in either case, net flat the London market itself — and a few are arriving, or leaving moving to retirement villages in Milton Keynes. But the net “view” expressed by these activities is more or less neutral. | ||
Now, what would be the mark-to-market view of the average North London property if all 1.5m owners decided to sell at the same time? We postulate quite a lot less than £824,540. | Now, what would be the mark-to-market view of the average North London property if all 1.5m owners decided to sell at the same time? We postulate, quite a lot less than £824,540. | ||
===Cost=== | ===Cost=== | ||