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

To: jeffbas who wrote (16704)	3/31/2003 11:41:35 AM
From: Bob Rudd	Respond to of 78625

Jeffrey: Good points all. High debt is almost always a concomitant of corporate disaster - magnifying the impact of problems. Hidden covenants produce credit cliff conditions such that multilevel downgrades are triggered by events that wouldn't otherwise be life threatening. I warned about the potential for regulators to torpedo the business model less than a year ago by unfavorably impacting medicare reimbursement...although it appears that the impact of changes was less than reported in order to hide past sins. As to management issues, this has definitely moved up several notches on my priority list...especially since auditors seem incapable of detecting and revealing bad practices until after the chickens have be stolen, plucked and eaten. I'm looking forward to a $Billion judgement on Ernst from this even knowing shareholders probably won't get significant benefit. It's only by suffering harsh penalties that auditors will view the risk reward of uncovering and revealing problems in a more shareholder friendly manor. Juries almost always hold the auditors responsible for detecting fraud, so I think the chances are good that Ernst gets nailed.