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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area

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To: Ann Corrigan who wrote (3140)	3/3/2002 10:37:32 PM
From: Crossy	Read Replies (1) of 37387

Ann, thx for the kudos.. on accounting/Enron, I don'T think new regulations are a solution. On this important matter Briefing.com had a great series on accounting issues that points to the fact why the GAAP numbers are often not the ones investor should be looking at, what adjustments are often done and what types of pro-forma there are. Look what your Senat wants to do. By "disguising" their legislative agenda as an "accounting fix" they want to STRIP COMAPNIES of the cash flow (and tax rebates) that right now they are entitled to when employees convert options into shares. This was done historically to IMPROVE the connection btw. the employees, management and the business results of the underlying company. The Senate's plan - that's an agenda for sure, but it ain't a FIX. It is just a way to tax a tad more. Disgusting IMHO... Another thing to adress is that last year's FASB decision regarding goodwill (which I cannot sympathize with at all) set clear standards when to amortize goodwill: in principle never - that's the new rule. That's what TYCO always did (or liked to do) - actually this props up EPS. IF you follow this lead then you learn that the whole mess was created when the FASB prohibited the "pooling of interest" mergers that the high tech firms liked so much. No goodwill there - that's the way many high tech investors prefer. They should have left the pooling-option in place. It was a horrible thing to do IMHO and I honestly think it increased the depth of the NASDAQ plunge in 2001. Stupidity can be planned - you won't believe it.. Finally the SEC already HAS (!) new revenue recognition guidelines in place this year forth. This rule is going to make the cycles in the semi equipment industry (for example) a tad deeper but I think it's the right thing to do. Channel stuffing techniques won't work anymore in this context. So yes - my view is that apart some technicalities in corporate governance you won't need complete overhaul. However one should look EXACTLY on Enron's demise - which I think is just another bankruptcy (why was everyone concerned with Enron and not Winstar or ICGX ?? because of Industry, affiliation, size ??) AS it appears to me the enron problem was what was NOT INCLUDED in the balance sheets - namely risks and contingencies. I think this should lead to some new guidelines amounting to TOTAL CONSOLIDATION and at least a quantitative disclosure of all material derivative positions in the management report accompanying the financial statements. Finally I view most of the other "CASES" apart from Enron as mostly fabricated by a horde of bears conveniently hunting and spreading their fear and exploiting the gains. I saw this happen in many overblown plunge like TYC, PLMD, ETS. But unlike the politicians I don't cry, whine or call for new "ethics". I think I know how this business works and can only call for good judgement - for everyone oneself. Maybe the solution would be to get rid of the fixation on "guidance". I always detested this overreliance of the market on those quips in an effort to manage uncertainty - it seemed. Well maybe anyone knows now that for certainty it's only ok to move $$$ into money market funds or bonds. The economy always has a risk component associated with it. Investors need to learn. Companies to lead. More realism - that's what I would like to surface. Maybe we will get it once again.. rgrds CROSSY

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