Don't Hold Your Breath for a Pop
By Herb Greenberg
02/07/2002 12:35
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Thursday thwack:
Bad news bears: Is there too much negativity in this market? Kinda feels that way, and I said as much Wednesday on the Columnist Conversation. I speculated that the mood was so gloomy that there was bound to be some kind of psychological pop in stock prices -- like the post-Sept. 11 spike. That prompted one very smart source, who had one of the great calls in recent years, to write:
"Nope -- no psychological pop (at least not a sustained one). The difference is that it is now 10-K season (when auditors rush to audit a company's results). For the first time ever, accountants are being tough on their clients, requiring more disclosure. Unfortunately, a lot of what was not disclosed before was not disclosed because it was bad or at least not good. Every company has moved to the edge of the gray area, and the accountants just moved the line this season.
"We have this risk until the last 10-K is filed. And on top of that, the ratings agencies moved their line. And Congress is in the process of moving theirs. This is a once-in-a-lifetime event.
"That is why we might not get a bounce -- every week, someone else will have to disclose for the next few weeks..."
He then added this point: "The amount of disclosure about actual business practices that could come out in the next few months could potentially result in more legislative action than the S&L crisis or the '29 crash -- and have a bigger impact on businesses than 9/11."
Thought-provoking, at the very least.
And let me mention, before you email me with a question: There really is no 10-K season. Filings are due at the SEC 90 days after the end of the fiscal year. So though the bulk of them will come by the end of March, they'll keep trickling out during the year as fiscal years end.
Also, when I posted those comments on the Columnist Conversation, I received a few emails from readers wondering why I let sources hide behind the veil of anonymity. The reason: Many of my sources work at firms that prohibit them from either talking to the press or getting their names in the press. The information, in general, stands on its own and is often too good to ignore just because it's anonymous.
I supposed I could just put the comments out there as if they were my own words, but that would be wrong. I'm plugged into some of the brightest brains on Wall Street, and my guess is you would prefer to hear what they say, names or no names. (That was the case Wednesday when one of my regular no-name contributors raised red flags about Cisco's CSCO relatively low book-to-bill ratio.)
Disclosure: How could companies avoid questions over disclosure of their immaterial acquisitions? Perhaps the SEC could require a single filing every quarter -- and certainly at year-end -- of the total number of unannounced deals if and when they become, in the aggregate, material. (Whatever material is!)
Fund follies: With so many funds stuffed to the gills with Enron ENRNQ and Sunbeam SOCNQ and Waste Management WMI and other companies that have stumbled big-time, here's what I don't get: If you're a fund manager, and you see stories by me or others quoting short-sellers -- or you see short-sellers with great histories such as Jim Chanos raising red flags in public -- why wouldn't you double up on your research? Many of these managers are very smart and know their way around a balance sheet and income statement -- and pride themselves on their independent analysis. That's Janus' whole shtick. I just don't get it. But from my personal experience, over and over again these guys get trapped in names on which there have been warnings.
Fund managers, I'd love to hear your comments on or off the record, if you dare! On would be preferable, but I do understand you may want to keep your day job.
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