MM:
I've read a number of your posts and you seem to be a smart guy but this post was completely wrong. It did, predictably, appeal to the handful of closed-minded nutball new depressionists who hang around this thread.
>>those writeoffs aren't even included in the PEs. most of the PEs you hear about are just pro forma operating crap that excludes all the bad stuff going down on GAAP<<
Wrong. Wrong. Wrong. One of the largest single cause of write-offs occurring in 2001 resulted from FASB Statements 141 and 142 which eliminated the pooling of interests method of purchase accounting and required companies to test their goodwill for impairment and write it down where required. Many companies have found that their goodwill does not pass muster under FASB 142 and took the initiative to write it down in 2001. 2001 was a good year to take accelerated write-downs as earnings stunk anyway. These write-downs and all others taken by public companies reduced companies' GAAP earnings and as a result increased their PEs. Your statement that write-downs were taken on a pro forma basis but not on a GAAP basis is startlingly ignorant. There is no way that this can occur. If you disagree, provide just one example. As I have explained before, pro forma financial statements are nothing more than GAAP statements adjusted in ways that companies feel are significant and usually show their operating performance in a more favorable light. Your contention that PEs are calculated on a pro forma basis is also just plain dumb. Companies may choose to highlight their pro forma PEs, but all reputable rating and ranking services including Bloomberg, Dow Jones, you name it, report GAAP PEs for public companies. Some confusion does arise amongst those who have difficulty distinguishing between an income statement and a balance sheet because Warren Buffet and others take issue with the way GAAP earnings are currently calculated, but this has nothing whatsoever to do with pro forma financial reporting. Buffett's biggest issue, as I understand it, is with current FASB stock option accounting which does not require companies to expense the cost of those options, which would, of course, reduce earnings. This is purely a GAAP issue. |
