Saturday, February 23, 2002

NASDAQ 100 Companies Report Combined Losses of over $82 Billion to the SEC While Reporting Profits of $19 Billion to Shareholders "Outgoing SEC Chief Economist Lynn Turner says pro forma earnings are effectively 'EBS' earnings-'Everything but the Bad Stuff.'" "Headline, pro forma earnings are used to calculate the earnings per share amounts (EPS) and price earnings ratios (PE) reported by popular services such as Thompson Financial / First Call and Yahoo Finance." " ... a few years ago, 'items' were large, one time only expenses ...  Now ... 'items' seem to have become the expenses companies must exclude in order to make earnings projections. Companies are now plagued with quarterly reoccurrences of 'non-recurring' items, which are plucked from expense numbers each quarter. It strains credulity to imagine that companies ... just happen to have the right amount of pro forma adjustments each and every quarter, and in widely varying amounts, to allow pro forma earnings to come in right in line or slightly ahead of earnings projections. ... If most NASDAQ companies followed Oracle's example and reported real earnings to the shareholders, causing their real PE's to drop to Oracle's level, how much of that $1.9 trillion [NASDQ market capitalization] is likely to vanish? ... in the long run, these types of deceptions have always ended badly- very badly. Sooner or later the SEC will be forced to fulfill its mission of preserving the integrity of financial reporting in this country and investors will be amazed at how much they've been duped in recent years." " ... a widespread and growing problem. ... The above data show that pro forma reporting is becoming the rule rather than the exception ... this now mostly deceptive reporting, policing abuses may involve a massive effort. These findings are a sad commentary on the state of financial reporting in the United States." ... [more] 2:56:49 PM    comment  []

Looking Askance at U.S. Auditors " ... the credibility of the Big Five is coming under attack. ... regulators from Milan to Moscow are giving the work of American auditors new scrutiny, and finding some of it wanting. Fuming investors are accusing auditors ... [of] turning a blind eye to mismanagement and corruption. ... auditors helped paint a veneer of legitimacy on dubious transactions that stripped away billions of dollars in assets from companies ... a slang name, tunneling. ... When an auditor does sound the alarm, a company's management can often find a rival willing to keep mum." ... [more] 1:36:16 PM    comment  []

The W Scenario " ... leaders have taken a modest improvement in economic indicators as proof that the economy is poised for full recovery. They could be right — but don't count on it." "The good news to date consists mainly of evidence not that things are getting better but that they are getting worse more slowly. New claims for unemployment insurance have fallen; that means fewer people are being laid off, but not that laid-off workers are finding new jobs. Industrial production has stabilized; that means that companies have worked off the excess inventory that led them to slash production in 2001, but not that demand for their products has increased." "We won't have a serious recovery until what economists call "final demand" shows substantial increases, and workers start being rehired. Where will that recovery come from?" " ... banks and financial markets, spooked by the Enron scandal, are reluctant to make the money available. The only clear force for recovery I see is the administration's military splurge." " ... three important forces that will place a drag on the economy. First is the impact of unemployment. ... [second] state and local governments are desperate; they will be slashing spending, laying off workers and even raising taxes ... Finally, there's line 47. ... they really weren't rebates. Instead, they were merely advances on future tax cuts. ... the psychological impact, as taxpayers realize that they've been misled ... the impact of these drags on the economy will be a recovery that is slow and generates so few jobs that it feels more like a continuing recession." "A few analysts ... think that we're headed for a "W- shaped" or "double-dip" recession, in which we have reached a bottom but not the bottom." ... [more] 10:14:54 AM    comment  []