Martin is right about this point, THE MARKET KNOWS. It knows that our major financial institutions are INSOLVENT – they have marked to fantasy, they have played the shell game, they have transferred unserviceable debts onto the public rolls making them insolvent in return. Wave A down did NOT clear the DEBT, it is still there! The market knows!
Mark to fantasy accounting was one of the major contributors to the credit bubble. In 2007 FASB changed the rules back to mark-to-market. The reality hit the financials and drug the entire equity market down. Price to earnings shot to all time extreme highs because of this accounting (reality). Then, pressure mounted as the equities collapsed to reinstate mark-to-fantasy, it was reinstated and now price to earning fell right back down to a falsely marked level, yet even with accounting fraud P/E levels are still far above historic norms.
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