GLG News by Exploration & Production Financial Statement Analysts

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Credit and Banking Meltdown - The Disruptive Effect of Politics on Financial Statement Presentation - The Nemesis of Finance

October 7, 2008

Analysis of:Politicians rail against fair value accounting | www.ft.com

As I  write this article the Senate has passed the $700bn bailout package. There is also general  unanimity to increase the limit upto which bank deposits are insured upto $250000. Yet all this only reflects the effect of  politics on the economy. There is also pressure to allow banks to measure financial assets by suspending the use of fair value and the SEC has indeed recently issued guidance in this regard. All this will not restore the credit markets and in this analysis I argue why in my opinion the present situation is just a beginning and a lot more needs to be done to restore confidence in credit and financial markets - most of  this needs to be done by the market participants themselves. 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Banking Crisis - A renewed role for the IMF - Will we have a renewed Bretton Woods System?

October 7, 2008

Analysis of:Another Top European Bank Falters | news.bbc.co.uk

The  present  banking crisis provides an opportunity for  the  Bretton Woods twins and  especially  the  IMF  to  prove their relevance in the 21st century. The past few years had seen the eclipse of  these  two institutions with reduced relevance. The new situation which resembles to a great extent that which  existed in the early parts of the last century with problems of flight of capital, wars, non-existent security etc. which  had  given rise to the  concept of  SDR's - these are rarely discussed these days. The problems of  balance of payments and trade are also not discussed in the same vein as they were say in the days of Alfred Marshall. In this analysis I take a look at why the banking crisis requires the IMF to work in tandem with governments and  Central Banks.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Fair Value - The Bankers Blame It for Their Woes - The Familiar Blame Game

September 29, 2008

Analysis of:ABA Levels New Blast at Fair Value | www.cfo.com

When the going gets tough deflect the blame. That's an age old tactic. The banks and the global financial system are in a mess. The mess has been created by "easy credit" and  now the bankers want to blame accounting rules and the concept of  fair value. This is like going back a 100 years in accounting. It is the  stratagem used by defenceless managements when their bluff has been called and exposed. In this analysis I examine why fair value should be used for measuring the value of assets especially in the case of financial instruments. I also  argue that it is not right for the banks to ask the regulators to tell them how to arrive at fair value. This is their job. Simply because their access to capital and their profitability is affected is no reason for using intrinsic value which is easy to manoeuvre.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting and Fair Value Considerations - Monetary Policy - Market Corrections - Financial Statements

September 22, 2008

Analysis of:Punctured Bubblenomics- Understanding the Shrinking Economy | www.nytimes.com

As I  look at the troubles facing the financial world and global economy as a bystander and a involved person (as  a  finance professional) I actually see  a  certain amount of  humor in the entire situation. Monetary policy during  the  last  few  years did not follow the basics which I learnt at college, accounting got embroiled in politics. The number of  esoteric instruments being invented were just too many. In several cases these instruments were designed to get around rules which would have brought out their fair value. Those who blame fair value should instead blame the managements of institutions which were always trying to outmaneuver the market instead of improving productivity and generating real wealth. In this analysis I look at these various conundrums from an accounting and earnings perspective.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Risk management in Troubled Times - Comparative anaysis at Merriyl and Lehman

September 22, 2008

Analysis of:Death and Near-Death Experiences on Wall St. | www.nytimes.com

The referred article is a great comparative  between the strategies followed by Merriyl and Lehman respectively. While Merriyl Lynch was constantly considering strategies to overcome the liquidity crisis, Lehman was basking in its past. Merriyl was considering the basic tenets of risk management, Lehman considered it had no risk. Merriyl carried out a regular effective SWOT analysis while Lehman did not consider it necessary. In this analysis I look at  the  basic tenets of  risk management. I  also argue that while we are going to see an improvement in the financial market confidence, yet the Federal Government policies are misguided and the number of threats for financial institutions far outweigh the positives.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Finance Manager - What Happens When the Going Gets Tough - Changing and Emerging Role

September 18, 2008

Analysis of:New AIG Chief Liddy has Finance in His Blood | www.cfo.com

The present banking crisis is once again bringing out the importance which prudent financial management plays in wealth creation and maintenance. Till  now it was profits, sales targets and gross billing which  was important. The growth and continuing existence of the organization was taken as given. This was both at the macro and micro level. A finance manager who urged caution or an auditor who had reservations on a financial statement was considered to be a unnecessary stumbling block. Now that honored names on the corporate scoreboard are collapsing the existence of  organizations is becoming more important. Concepts like internal controls, proper valuation of assets/liabilities and returns on investment are more important. In this analysis I take a look at this new emerging trend where finance is gaining importance in a tough environment.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

AIG - Northern Rock -Freddie - Fannie - Bear Stearns - A Look at Changing Times

September 17, 2008

Analysis of:Fed Tentatively Agrees to Provide $85bn to AIG | www.washingtonpost.com

The  Fed gets  more confused every  day.One day it  says  no  bailouts the next day it reverses course. The  latest being in the case of AIG which has virtually been nationalized. The  trend  of  Northern Rock (UK) and  then Bear Stearns, Freddie, Fannie and now AIG is completely straight forward. The only exception was in the case of Lehman which did not receive support. I wonder why? Yet the  present scenario is  one where the  Fed has said no more inflation control - liquidity and stability is more important. These are changing and financially confusing times. In this analysis I  look at  where this confusion is headed.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Global Financial Collapse - The Coming Revival? - Should We Expect More?

September 17, 2008

Analysis of:New York Allows AIG To Lend Itself Money | www.nytimes.com

The  talk is  as  if  Armageddon  has  arrived. A number of Institutions  have collapsed or are looking for lifelines. The situation is bad but not alarming.  Since  September 2006  I  have  been  arguing  in  these  columns  that  the  skyline was not bright and especially  so  since  March 2007 - much  against  the  considered  wisdom. The present  situation  to  my  mind  is  one  where  most  of  those  who  had  to collapse  have  done  so. The time has  come  to  pick up  the  pieces. The  authorities  should regulate  without interfering  with  market  forces. The  situation  is  only  bound  to be  brighter. I  reason  below  the  basis  for my  opinion.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Lehman Bros - The Problems with Banking - 100 Years Down the Line - No Solutions?

September 15, 2008

Analysis of:U.S Gives Banks Urgent Warning to Solve Crisis | www.nytimes.com

100 years since the panic of 1907 the banking system is looking for another white knight. In the meantime we have had the breakdown of  the  gold standard, the  breakdown of  bretton woods, the curse of inflation and stagflation yet there appears no permanent cure for recurring financial crisis. Yet the situation is not as bad as it  appears. The world has made great progress during this period with rising productivity levels. In  this analysis I look at this particular conundrum and  where we are possibly headed.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Lehman Bros and Systemic Problems in Financial Markets - Asset Values and Regulatory Responses

September 11, 2008

Analysis of:Wall Street's Fears on Lehman Bros Batter Markets | www.nytimes.com

The financial problems of Lehman point  to major system problems. In the context of support from the Fed, Lehman is  looking  at  a  loss  of  $3.9bn. Any  problem  which  is  based  on  the  substratum of  the  business can not  get  rectified unless  the  basic tenets  of  the  business change. While  Lehman has a chequered history of 150+ years yet  the  past  is not  a  indication  of  the  future  and  the  recent  collapse  of  Bear Stearns amply  bears  that  out.I look here at  how  the  problems  at  Lehman  are  indicative  of  systemic  problems  and  wil  have  a  impact  on  asset  values  in  the  context  of  confused  regulatory  response.

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