'And this, too, shall pass away.'
<writing for Pakistani media>
Greetings fellow investors! I write with great sadness after the death of US journalist, Daniel Pearl in an act of barbarism that has no place in today’s society.The perpetrators of this crime have served only to tarnish Pakistan’s name without any identifiable objective. They exist for the sole reason to promote hate, encourage violence and perhaps worst of all commit these crimes in the name of Islam. Let the world know that these vermin do not represent the views held by the majority of Pakistani and I call to President Musharraf to bring those responsible to justice and toughen his act with regards to militant organisations. He would do well to quote from the US foreign policy, “ You’re either with us or without us”. The time has come for the militant organisations to make up their mind.
Before I turn my column into a current affairs page,let me return to the financial vagaries and intricacies of the world markets. This week my attention has returned to the perturbing situation that has been developing rapidly in the US markets, Enronitis! There is no need to dwell on the origin of this syndrome, since many of you already are familiar with the sequence of events, instead it is the consequences of this malaise that I wish to discuss today.
Since the debacle began, the markets have endured a roller-coaster week of sudden rallies and sharp sell-offs as investors struggle to gauge the depth of corporate accounting problems and the speed of a recovery in the US economy. Indeed the Nasdaq finished down for the fourth straight week as investors refuse to let down their guard! The fact that Enronitis has spread, albeit in its initial stages, to corporate heavyweights IBM and NVDA exacerbates the problem beyond the boundaries of reason and logic!
Calmer heads must prevail. The sky is not falling; the world is not coming to an end. We will survive this and prosper -- whatever Congress and the President intend to do. Nonetheless it is imperative to remind oneself that the current predicaments are neither unique nor unprecedented. Accounting scandals appear every decade or so and are very definitely short term.
To be sure, we are seeing some positive influences on corporate accounting practices. The deceit and arrogance shown by company executives, and the damage it caused, have enraged investors to an extent that the latter reached a breaking point. They are demanding more transparent accounting from corporations, and they're starting to get it. Already IBM, GE, Tyco have given in to investor pressure and promised greater disclosure to their shareholders and more explanations in accounting procedures.
Tyco, GE, and IBM have heard the howls, and to their credit are moving in the right direction. Things are starting to snowball, and, as individual investors, it's our job to keep the momentum going but not let this blind us to the big picture. Last week, private economists have suggested that recent manufacturing and retail numbers indicated that the present recession might be the mildest and shortest on record. With the economy beginning to step on the pedal, we must remind ourselves not to allow this sort of information to be shrouded into the background in order for us to concentrate on an accounting worries that frankly has exceeded its welcome. Even market analysts have been disseminating this fear! With the market coasting in a state of precariousness, every negative session in the last three weeks has been attributed to investors concern for corporate accounting practices, which assuming for the moment that the analysts are correct totally negates the theory of Market Efficiency! Preposterous!
Any tax expert or accounting savant, given enough motivation and time can create gaps out of the complex rules and regulations that are governed by law. The best we can do is to plug up those breaches until the day perfection arrives. Until then, we shall continue our journey and whenever we are faced with another setback like Enron, we will punish those responsible and rectify the problem while in the process take one step closer to our overall objective of creating an impregnable set of rules.
For those of you still in doubt, let me regale you with words of wisdom from Abraham Lincoln. His words befit this moment when many investors are still recovering from the Enron episode. Perhaps if anything, they can attain some solace and comfort in these immortal words.
“It is said an eastern monarch once charged his wise men to invent a sentence, to be ever in view, and which should be true and appropriate in all times and situations. They presented him with the words, 'And this, too, shall pass away.' How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction!”
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Iqbal Latif (Ike) |
