<<More "good news" like that and I am going to start stockpiling pencils for my future occupation. JDN>>
"future" occupation and "past" occupation as well - are you not a retired accountant?
especially for you JDN ...
... I am an avid reader ... and I also passionately believe what George Santayana once said, "those who can not remember the past are condemned to repeat it" ...
... recently, I read "The Great Crash, 1929" by John Kenneth Galbraith (1954), "A Short History of Financial Euphoria" by John Kenneth Galbraith (1990) and am now reading "The Money Game" by Adam Smith (1967) and "The Go-Go Years" by John Brooks (1973).
... while Jan went to the chiropractor tonight, I was reading "The Go-Go Years." A section about accounting in the 1960s jumped out at me in a profound way - and made me think of the technology bubble of the 1990s, now in the process of exploding.
"December, 1966, the Accounting Principles Board labored and finally delivered itself of a stiff opinion requiring that convertible debentures be accounted for partly as debt and partly as the equity into which they were, by definition, convertible. This overdue proviso hit directly at conglomerate bottom-line magic; the protests were so loud, so strident, and such powerful sources that the A.P.B. felt the need to back down and suspend its ruling. Considered morally, was not this as shocking an abdication of responsibility as if a judge, say, who had sentenced a Mafia member then reversed himself after having been threatened?"
This reminded me of three very serious accounting issues/abuses, which, when this stock market mess is finally over, will haunt technology investors, and more pointedly many of the most successful high-technology companies of the 1980s and 1990s.
1). mergers using 'pooling of interests' with a failure to depreciate 'good will' ...
2). stock options to employees within companies using the costs to unethically benefit the bottom line ...
3). stock buy-backs by companies to inflate earnings per share and at the same time stealing value from other stock holders ... in many cases paid for by creating corporate debt to pay for the buy-backs ...
I predict that these will be serious issues within government, regulatory authorities and corporate management as we try to figure out went wrong in the market crash of 2000-2001... and they are all moral issues that were allowed to slide by because we were in "the mother of all bull markets."
Next on my reading list are "Reminiscences of a Stock Operator" by Edwin Lefevre (fictionalized biography of Jesse Livermore) (1923) and "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay (1972)
Ken Wilson |
