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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: milesofstyles who wrote (89561)	7/2/2002 12:48:30 AM
From: Smart_Money	Respond to of 99280

<<<<Goodwill amortization currently eats up over 50% of AOL earnings, and the current value of goodwill carried on its books is $127 billion (more than its current market cap). On Jan. 7, they did in fact say that because of the new rules, the company would take a charge of $40 to $60 billion to cover merger-related expenses. When this happens, earnings (after the big write off) will immediately double and the P/E ratio will be cut in half. Will the stock really be that much of a bargain compared to the past because of this change in a non-cash item? Of course not. This change in how goodwill is accounted for will probably not have much of an impact on analysts and investors who follow technology companies. They usually look at pro forma earnings, and pro forma earnings are already stated before such things as amortization of goodwill are taken into account. That may change a bit as investors now seem to be wary of all the pro forma accounting trickery since the Enron debacle. Still, investors shouldn't be surprised if year-over-year earnings comparisons suddenly look amazingly good in 2002 and, by P/E ratio standards, stocks suddenly look very cheap.>>>> Now we understand why they will bounce the stocks on earnings and make the shorts cover. Thank you for the article.

To: milesofstyles who wrote (89561)	7/2/2002 2:29:22 AM
From: 16yearcycle	Read Replies (3) \| Respond to of 99280

I think there are many of us who know and understand this change, which makes it all the more incredible that the market refused to rally ahead of the steady stream of good news that will be coming out for quite awhile. The fed model, which several of the true idiots here keep talking down, shows 18% undervalued right now, but its about 30% with the change. Guys like McAnus of B of A will be scrambling to get ahead of the curve at some point. Meanhwile, the market is totally controlled by ta right now, and guys who have been doing ta for 24 months and don't know any better. They will continue to be right on, until a new year high is made on the nasdaq on volume. It could be a long time. Just mo.

To: milesofstyles who wrote (89561)	7/2/2002 4:56:45 AM
From: LTK007	Read Replies (1) \| Respond to of 99280

Thanks miles.But my view is Chuck Hill head of First Call represents a company that is a calculating machine. The services are their income, they are not a brokerage nor a research company like Bernstein. And until proven otherwise, i hold they are calculating in the new factor, and unlike what Zeev said, they wouldn't understand amortization, i am sure they do, as First Call is NOT what one would categorize as stock analysis company. They are actually number crunchers. And i the most influential earnings estimate company in the U.S. Also, from this bit,<<This change will have a big impact on some companies. Take AOL Time Warner, for example. When they first announced the merger in February, 2000 they estimated goodwill would be $190 billion, and planned to write off $7.6 billion per year for 25 years. Under the new rules, they should instead write down any impairment in its market value. This should probably be the amount Time Warner stock dropped in the time between when the initial merger agreement was struck and the actual closing a year later.>> the overall effect may not be that great. As Abby Cohen, in December insisted it was going to be good year in stocks based on the new FASB rule, we can see how impressively bad her prediction has been ---and is another proof of Abby's superficiality, as Zeev says this new rule is just another BS bunch of phony number juggling. Max