Talk:Auction rate security

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Notes

cliffb - please do not remove the link to the RSTN. It is important that investors holdings these securities are able to educate themselves about the issues related to the securites. the RSTN and other secondary marketplaces are the prime places that exist in order to receive current information about security pricing. To date, the MSRB does not have a price information dissemination system for auction-rate securities. The secondary markets are an important source of this information. —Preceding unsigned comment added by 74.0.194.99 (talk) 19:54, 17 March 2008 (UTC)[reply]

I think we've got a happy balance. I am against the link being in the text of the article, but I think it is reasonable in an external links section. (Sorry it has taken me a bit to come around to this.) I tweaked the link a bit to be a bit more self descriptive. Also remember to sign your comments with four tilde's (~~~~).. —Cliffb (talk) 17:21, 21 March 2008 (UTC)[reply]

cliffb: re your last edit, I like "dead" rather than frozen. Something that is frozen can be thawed and come back to life. Not this market; its deadMwinog2777 (talk) 15:13, 6 April 2008 (UTC)[reply]

Mwinog:That is your opinion that it is dead, I went and looked at the New York Times article you cited, and in there I didn't see where someone called the market "dead". If anything there seem to be efforts to restart it, re: the secondary markets. Technically the market is still there, and the auctions still happen, they just fail because no one bids. —Cliffb (talk) 04:38, 7 April 2008 (UTC)[reply]

Valuation of Auction Rate Securities

Accounting Statement FAS 157 defines fair value, which under the new guideline, is typically referred to as “mark to market” accounting. With Auction Rate Securities no longer being liquid, public companies began to writedown their ARS holdings starting in the first quarter of 2008. Through May 31, 2008, 402 publicly traded companies have reported Auction Rate Securities on their books^[1]. As those 402, 185 have taken some level of impairment. However, there has been no ascertainable trend in the amount of writedowns taken. Firms have reported discounts ranging from 0-98% of par value^[2]. IncrediMail, Ltd. proved the most extreme example of this as they booked an impairment of 98% off face value for their ARS holdings, while Berkshire Hathaway took no impairment on their more than $3.5 billion of these securities. Some of the higher-profile writedowns include Bristol-Myers Squibb, 3M and US Airways. Citigroup took a $1.5 billion loss on their inventory of Auction Rate Securities.^[3]

Duke University Law School professor James Cox summed this discrepancy up: “I think some people act opportunistically, some people act optimistically and some people act fairly.”[4]

The valuation of Auction Rate Securities has proved especially difficult as Bank of America and other brokerage houses refuse to assign a value to their clients’ holdings. UBS AG has presented clients with several different values for ARS. Also, Interactive Data Real Time Services, a provider of independent pricing services for the investment industry, discontinued the pricing of approximately 1,100 student-loan Auction Rate Securities on May 5, 2008. —Preceding unsigned comment added by Southbound51 (talk • contribs) 20:17, 2 June 2008 (UTC)[reply]

References

"Auction-Rate Securities Give Firms Grief" WSJ.com May 27, 2008 ^[1]

"Companies split on taking ARS cash hit" Financial Week Magazine June 2, 2008 ^[2]

"Citigroup Plans to Sell $6 Billion of Hybrid Bonds" Bloomberg.com April 21, 2008 ^[3]

--Southbound51 (talk) 22:51, 2 June 2008 (UTC)[reply]

References

^ ^a ^b [1]
^ ^a ^b [2]
^ ^a ^b [3]

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