JP Morgan’s (JPM) CEO talks about banking, mark-to-market accounting, compensation and regulation.
The speech:
Dimon is right when he talks about mark-to-market accounting. It is a good idea taken to the extreme and that always ends up being a bad idea. It’s widespread use for all assets type will (has) lead to insane valuation volatility. That leads to people like Berkshire’s (BRK.A) Warren Buffett liking it due to the “opportunity it presents us”. Meaning, mark-to-market produces the extreme pricing inefficiency Buffett enjoys so much.
That cannot be the goal of the system of any accounting methodology. It ought to seek to find the true value of the asset, not simply discount it to whatever the lowest seller will let something go for in times of distress. It, in its essence, is lazy accounting.
Q&A
Disclosure (“none” means no position):none
Visit the ValuePlays Bookstore for Great Investing Books