re: some chance that ignorance (including mine) may continue to prevail:
If companies are required to treat stock options as a current expense, then we will get an even bigger difference between GAAP and pro-forma numbers. Which won't change anything, as long as everyone continues to pay more attention to the pro forma "earnings".
When investors look up a company's PE ratio, they rarely calculate it themselves. Instead, they look it up in one of the many readily available online sources. And those sources never use GAAP earnings. The problem is not in the regulations and reporting. It's in the minds of investors, in their (continuing) willingness to suspend disbelief.
It's a codependant relationship. Investors want to believe in stocks, company management and brokers want to sell us stocks, we want to see good numbers, so they show us what we want to see. Even if they have to make it up.
The amazing thing is, how persistent this thinking is. The Bear Market lasted from April 2000 to September 2001, and investors never gave up. Just like consumers never stopped spending, when all historical precedents indicated consumers should have sharply cut back spending, precipitating a recession as severe as in 1973-4. That's what I was expecting, and it never happened. Are these signs of strength, or signs of foolishness? |
