Maybe it's the unusual weather in New York. Or some kind of bizarre karmic connection. Or, simply, an interesting coincidence. Whatever the case, today seemed to bring forth a collection of news articles that could only be characterized as a kind of phantasmagorical walk on the wild side of new age finance.

In the first report, "Goldman:Aug Level 3 Asset Value $72.05B, 7% of Total," Dow Jones Newswires reveals that there is less there than meets the eye when it comes to the balance sheet of one of the nation's leading investment banks.

Goldman Sachs Group Inc. said Wednesday the size of its level 3 assets at the end of third quarter increased to $72.05 billion from $54 billion at the end of the second quarter.

In terms of percentage, the New York-based investment bank's third-quarter level 3 assets amounted to 7% of the total assets, compared with about 6% at the end of the second quarter.

Level 3 assets are those that trade so infrequently that there is virtually no reliable market price for them, and valuations for these assets are based on management assumptions.

The credit crisis has sparked concerns about the value of some of the assets investment banks hold on their balance sheets. Investors and analysts have been especially worried about banks' exposure to turmoil in the mortgage market and recent trouble in the financing of big leveraged buyouts....

Some firms began breaking down their financial assets into three levels at the start of their current fiscal year, which began in December, when they adopted early a new accounting standard related to fair, or market, value measurement. All U.S. companies will have to begin using it for financial years starting after Nov. 15....

Goldman Sachs said level 2 assets at the end of third quarter amounted to $494.6 billion. There may be some market activity for level 2 assets but the valuations often depend on internal models. Assets in level 1 trade in active markets with readily available prices.

In other words, the value of 55 percent of Goldman's assets depends on "internal models" or "management assumptions," rather than market prices. I wonder if that played a role in the much better-than-expected quarterly results they reported recently?

In the next article, "Morgan Stanley Traders Lost $390 Million in One Day," Bloomberg details an issue with the risk-control systems used by another of the nation's leading Wall Street broker-dealers.

Morgan Stanley, the world's second- biggest securities firm, said its quantitative strategy traders lost $390 million during a single day in August as their computer models failed to account for "widespread" investor selling.

The company's traders lost money on 13 days during the quarter ended Aug. 31, the New York-based firm said in a quarterly regulatory filing today. "The largest loss days resulted from losses associated with quantitative strategies in early August 2007, when these strategies were adversely affected by widespread portfolio reductions," the company said.

Morgan Stanley said last month that the quantitative strategies group lost $480 million during the quarter after being caught off-guard when other investors sold securities to reduce borrowings. Separate areas of the equity sales and trading unit made up for the losses, enabling it to report $1.8 billion of revenue for the third quarter, up 16 percent from a year earlier.

The firm's quantitative trading group, like hedge funds run by Highbridge Capital Management LLC, Tykhe Capital LLC and Goldman Sachs Group Inc., uses mathematical models to pick investments.

Such "quant" models began posting steep losses in late July and early August as surging defaults on subprime mortgages triggered a crisis of confidence in credit markets. Stock-market declines followed. The funds were forced to sell more-liquid stock investments to raise cash and reduce debt.

The selling confounded the funds' computer models. Stocks that they anticipated would decline in price rose, and shares that they expected to rise instead fell.