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Politics : Stockman Scott's Political Debate Porch
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To: Jim Willie CB who wrote (2053)7/13/2002 2:54:54 PM
From: Cactus Jack  Read Replies (2) of 89467
 
JW,

The latest Mauldin letter (borrowed from CFZ):

Message 17731443

"The Earnings Road Just Got Steeper

Let's look at the list:

1. Pension assumptions must be made reasonable.
2. Accounting standards will become more conservative.
3. Options will likely be treated as an expense.
4. Boards of Directors will demand more open and conservative accounting.
5. Accountants and lawyers will be under serious pressure to justify any and all aggressive accounting and financing positions, with real consequences for being wrong.
6. CEOs and CFOs are now criminally liable for accounting misstatements.
7. Investors will increasingly be interested in true pictures of income and start ignoring EBITDA and other misleading "earnings" numbers.
8. Analysts will be under pressure to start making more accurate predictions.

Little of this will happen overnight. But as time goes on, it will begin to take effect. And what it means is that P/E ratios are going to suffer. And that is not the climate in which a bull market starts to take shape.

If analysts had told the truth about the last half of 2002, they would be projecting earnings which would show P/E ratios in the mid-40's rather than the 21 they now forecast. Since 21 would have been almost a record high just a few years ago, how comfortable do you think investors would feel if the best they could look forward to was more of the same?

The recent woes of the stock market would pale by comparison."

jpgill
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