Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (14802)	7/12/2002 2:59:45 AM
From: Madharry	Respond to of 78627

It does seem strange that so many of the problems are Arthur Anderson but there must have been several different people involved in the various audits. I am more concerned about the lack of appropriate corporate governance than the quality of the accounting. What reasonable board of directors authorizes a company to lend over $400MM to any excutive secured by company stock. This is just bad business practice and I feel exactly the same way about repricing options , and giving executives bonusses when the stock of the company crater and they write off billions of dollars of assets which they overpaid for. Unfortunately we have rewarded CEO s in the past several years for creating companies , taking on debt and creating revenues, not for generating profits or creating viable economic entities. There have not been any penalties for covering up bad news until the last possible moment , or offering misleading projections to the investing public. I think that shareholders will have to end up appointing a board of directors that is completely independent of management. This is not the first time that there has been devastation caused by faulty accounting standards coupled with a downturn in the economy. The other problem is all of the investment banks/major brokerage houses floated hundreds of ipos- the vast majority of whom have already failed or are teetering.. there has to be some responsibility for a creditable financial company to do some due dilligence and not just do a deal because they can make 6% on it. Right now out of hundred of ipo-s it looks like AOL ebay and yahoo are survivors. and there have been some horrible looking deals along the way. Most of the ipos brought out by MOrgan Stanley Merill Lynch and Goldman have faired poorly. So experience had now taught us that we cant rely on the brokerage house we cant rely on the investment banks we cant rely on company information and we cant rely on financial statements. Not much is left.

To: James Clarke who wrote (14802)	7/12/2002 5:40:40 AM
From: Mark Marcellus	Respond to of 78627

J. K. Galbraith describes the phenomenon in his book on the '29 crash: “In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. there is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s businesses and banks. This inventory—it should perhaps be called the bezzle—amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.”

To: James Clarke who wrote (14802)	7/14/2002 11:41:29 PM
From: TimbaBear	Read Replies (1) \| Respond to of 78627

James Clarke That was an excellent post. I agree with everything you said. I, too, feel that neither the accounting scandals, nor the market drops are anywhere near being done. This is not a good time to be fully invested (or on margin, even). When this has run its course those with money left to employ will reap the outsized returns. By the time this correction is over, I suspect there will be a lot of value on sale and too few players, perhaps, to drive it up very quickly. TimbaBear