Re Level 1, 2, 3. Level One assets trade in active markets so you just need to get a price. Think stocks, currencies, Treasuries, commodities as examples. Level 2 don’t trade actively but can be priced readily in relationship to assets that trade actively. Corporate bonds are like that. Issues are specific (a GM bond that matures in ‘12 is different than the issue that matures in, say, ‘15). but they can be priced reliably based on parameters (coupon, maturity, duration, rating, etc).

Level 3 is priced without reference to observable inputs, or a rather distance relationship to them. It is called “mark to model” or less charitably, “mark to make believe”.

What’s a level 3 asset? Heck, what are levels 1 and 2? Is one “cash and cash equivalent”? Where do I find these fishy level 3 things on a balance sheet?

And, Yes, the giraffe is very adorable.

” . . . [N]o asset class security is priced for a recession.” Amen to that: the falling body of our economy is hung up on a ledge ’s all. I look at equities _rising_ into a recession with huge unrealized losses coming in-channel, and while I know this is a bear market run, the folly of it all makes the blood rush from the brain.