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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (12219)	12/28/2001 3:57:50 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 74559

Are companies, in a situation like those two, raw material for bankruptcy? Yes. But it seems to me that Amazon is walking a line closer to the grave. A great deal of recent focus is on pro-forma profitability. But unless employees are willing to work for pro-forma paychecks, they've got to end up turning a real profit before the cash runs out. As for LU and NT? They are in a mess of trouble. What's more painful for their CFOs perhaps is that they have been bested in a game of high-finance trickery. Their competitors have lines of credit into folks who will put up billions with only shares as collateral, which borrowings don't show up under the column "long-term-debt", but instead show up under "Additional Paid In Capital". If we reorganize the balance sheet to show Additional Paid In Capital under long-term debt owed to the bank-of-shareholders (terms unspecified), then an even larger host of technically insolvent concerns emerge. A whole host of Tech Gorillas hid a pyramid in the midst of their tornado, and then crouched behind this as they borrowed from the left pocket the coins to fill the right one. Now as the winds of the pro-forma tornado die, the pyramids are exposed and folks are pointing to these artifices. Which are merely subterfuge for the larger and more audacious sleight of hand. Layers within layers within layers. A very neat ploy. Perhaps one day folks will want to add up the money in both pockets, and find that in balance there is more missing than will be returned. The cool part is that it might even work! Why? I can only conclude that most investors are bright but clueless. Very few appeared to understand the very simple trick of pro-forma. The most foolish amongst the crew even continue to support the bubblicious PEG as a tech "valuation" metric. The buy-a-slice-at-any-price crowd still spout quotes and platitudes ad nauseum from Buffett and "The Millionaire Next Door" and are experts on a broad range of get-rich-quick pseudo-intellectual pablum... But given how long it has taken folks to turn from the pro-forma earnings line on the income statement to even glance with glazed-over eyes at the statement of cash flows... Well, hell may indeed freeze over before they learn to figure out a balance sheet. So the big bankruptcy? The table has already been set. It's just that nobody's figured it out yet. Seems to me that the current scrambling is to see who holds the minimum amount of bag. John.