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

To: AC Flyer who wrote (14675)	2/8/2002 11:40:28 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 74559

AC - So let me explain pro forma accounting for you.... Very good explanation. From a contrarian point of view, the near universal unpopularity of pfa almost guarantees that it is not only not negative, but that it must be a virtual necessity. As it is. Of course, as always, an honest management is vital no matter what the reporting method. If the starting point was something to do with the cause of the 1929 market crash, you don't necessarily need anything complicated at all to explain it. Assume that a company is simply an infinite series of constant positive cash flows of $1000 per year. Also assume that there is no inflation or deflation of either the money supply or goods prices. The present value of the infinite series of discounted cash flows is dependent on the discount rate. In particular, if we use a discount rate equal to an interest rate of 2.5%, the present value is $40K. If the interest rate goes up to 5%, the present value falls 50% to $20K. creativeacademics.com In other words, all we need to do to have a 50% market crash with all values absolutely fair is to transition from an interest rate environment that has been artificially depressed by the FED to 2.5% to one that has an interest rate of 5%. (numbers arbitrary) Regards, Don

To: AC Flyer who wrote (14675)	2/9/2002 12:07:29 AM
From: Moominoid	Respond to of 74559

Berkshire Hathway has been reporting pro forma accounts for years alongside the GAAP ones in its annual report.