Part 1

Much has been written about the impairment charges of Asta Funding yet little has been discussed that would lead me to believe that anyone knows what an impairment charge is exactly. Impairment charges are a direct result of standardizing accounting procedures across countries. A large portion of the Mark-To-Market rule came into existence through the Efficient Market Hypothesis (EMH). Without going into much detail regarding EMH, the Efficient Market Hypothesis states that market price equals value. For rational minded individuals this makes no sense. If you want to debate EMH, just for the record, I'm not interested. The subject bores me.

So what exactly is Mark-To-Market, aka. write-downs, non-cash items, or in the case of Asta Funding; its classified as impairments. An impairment charge is a charge that requires no cash outlay. It is an estimate (complete guess) as to what the company's future revenue from the said item will be. As Warren Buffett pointed out in his 2004 Annual Shareholder Letter: "Charlie and I not only don't know what our businesses will earn next year - we don't even know what they will earn next quarter. We are suspicious of those CEOs who regularly claim they do know the future."

Asta Funding runs a cash flow analysis in order to project the short term revenue they will produce. They do, as required by law, on a quarterly basis. The rule for Mark-to-Market stipulates that if the 'estimated' value of said assets are in shortage of the 'estimated' value of the assets when purchased, then a non-cash write-down must take place.

So, regardless if Asta Funding has up to 10 years to collect their receivables, which is often the case, if the 'projection' - 'complete guess', states that the value of their receivables has fallen, then they have state that it has fallen EVEN THOUGH this 'ghost charge' has nothing to do with actual cash; even if their intentions is to 'wait it out' for a more opportune time to collect which is often the case in the debt collection process. For many of you on this board, I understand that this procedure of writing down assets makes complete sense and given the fact that 90% of all investors lose money, I understand why this would make sense to you. But, for me, the 10% who make money consistently, this makes no sense.

For people who trust was is written in the financial statements of a company's quarterly and annual reports, what I'm writing will make no sense to you. But for those security analysts who know that the world doesn't operation efficiently by way of 'projections', 'estimates', or 'complete guesses' in the same way a tarot card reader often fails in predicting your future, this should make sense.