That what happen when you are funded by leverage and debt.
Centro, ABS, Alco, BNB and MQG they all have a common theme
Exactly. There doesn't have to be a bottom (above 0) if the problem is insolvency.
This is from the US, but will affect Oz.
“Ten companies now have more level 3 assets than capital,” observes Marc Faber . “The three magic words that make an asset a level 3 asset are ‘no observable inputs.’ What this means is that not only are they hard to price, but nearly impossible to sell. Recently, there’s been such deterioration in all types of mortgages that more and more assets are finding their way into this category.”
You might guess what types of businesses are squirreling away level 3 assets, but the ratios to capital are a bit unnerving.
“In order, they are (as a % of total shareholder equity):
1. Bear Stearns: 313.97%
2. Morgan Stanley: 234.88%
3. Merrill Lynch: 225.4%
4. Goldman Sachs: 191.56%
5. Lehman: 171.18%
6. Fannie Mae: 161.48%
7. Northwest Air: 142.02%
8. Citigroup: 125.06%
9. Prudential: 119.36%
10. Hartford: 108.52%.”
And remember, this is only those level 3 assets ON the balance sheet. Many institutions have stacks of toxic mortgage, credit and other swaps currently in structured OFF-balance sheet vehicles.