If I read one more mark-to-market screed, I'm going to spit. The gist: An accounting change called FASB 157 pushed companies to mark their balance sheet items to market, and that's generally a good thing. It means that we have some sense of what toxic paper, real estate, collectibles, etc., on companies' balance sheets are worth, as opposed to what companies say they are worth.

Trouble is, that only works when there is a market. And in the case of much of the wacky paper causing all the current problems among financial services companies, there was a market, and now there isn't. It is not, as some are alleging, that people bought stuff that never traded, and are now crying at the idea of pricing it. Instead, it is that these things used to trade, and now they don't, even if they will likely trade again in future. Forcing people to price to a market than once existed, now doesn't, and likely will again, is dumb and pig-headed.

Further, we have a negative feedback loop making things worse. Marking newly illiquid assets to a non-existent market makes companies less viable, which causes default swaps to go swooping higher, and that in turn can lead to downgrades by rating agencies. Following the bouncing ball, that can lead to companies failing, which causes less liquidity and lower prices, and so on and so on. You get the picture. It's dumb and artificial.

Let's not get rid of mark-to-market -- that would be stupid. But we can fix it to handle the real world better. How about, off the top of my head, making marked pricing smoothed over 2-3 quarters in temporarily locked markets? I'm open to other ideas, but I'm highly wary about over-orthodox applications of rules in an attempt to live up to some sort of inappropriate standard.

The total collapse of the venture-backed IPO market continues:

Venture-backed company exits continued to lag in the third quarter of 2008, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). There was just one venture-backed IPO in the quarter, and the tally of M&A exits as of the last day of the quarter came to a modest 58 transactions for the period. In the first three quarters of 2008, there have been just 6 IPOs of venture-backed companies, representing the lowest volume for the first three quarters of the year since 1977.

[via NVCA]

Will someone please talk me down off the ledge with respect to Wells Fargo? I don't understand why the bank is being treated with kid gloves through the current credit crisis. Yes, it is better capitalized than its failed mortgage drug-dealers, and yes, it didn't have as much exposure to some of the more deranged crap, like Option ARMs. And that's good.

But consider the issues. I have been spending an inordinate amount of time examining  Wells' origination geographies, the $24-billion in mortgage-related Level 3 assets, the historically low loan loss provisions, the construction loan portfolio, the exposure to a weakening consumer economy, etc. I just don't understand why so many people are seemingly so sanguine about WFC. Granted, issues there will happen in a different way and at a different speed, but that's not the same thing as saying that the company is adequately provisioned for problems ahead.

Another tip-off, at least for me: The company has yet to buy any of the broken banking assets on the market. While some might chalk that up to conservativism, I'm more concerned that it's a nervous company seeing a weakening balance sheet ahead and that it doesn't want to make larger commitments.

Can someone talk me down off the ledge here? Thanks.

Quote of the day comes from an ex- fund manager friend who has -- to his chagrin -- called this credit crisis right at pretty much every step of its awful way. He offered up this movie line to me today:

[realizing that the park is out of control]
Dr. Ian Malcolm: Boy, do I hate being right all the time!

   - Jurassic Park (1993)

Indeed.