Tendency of Earnings Estimates to Fall, Con't.

[Carl Remick]

>S&P 500's Earnings Are Seen Falling 9%
>In 1st Quarter, Worst Showing Since 1991
>By JON E. HILSENRATH and STEVE LIESMAN
>Staff Reporters of THE WALL STREET JOURNAL ...
>
>Murky Accounting
>
>While wages and debt are tangible problems investors can understand, more 
>murky are the accounting issues that may have boosted profits during the 
>1990s and can detract from them in the coming years. In the annual report 
>of Berkshire Hathaway Inc., billionaire investor Warren Buffett warns that 
>financial "shenanigans" played a role in the profit gains of the 1990s. He 
>says he has "observed many instances in which CEOs engaged in uneconomic 
>operating maneuvers so that they could meet earnings targets they had 
>announced."
>
>Consider Lucent Technologies Inc., which is the subject of an investigation 
>by the Securities and Exchange Commission into accounting irregularities. 
>The company has acknowledged it used a host of customer incentives, 
>one-time credits and practices like channel-stuffing, or shipping more 
>product to its dealers than demand warranted, in order to reach sales 
>targets. "It began with setting growth objectives that could not be 
>sustained," a contrite Henry Schacht, Lucent's CEO, told analysts in 
>December. The company has denied wrongdoing, and says it is cooperating 
>with the SEC probe.

Not to worry.  Consider Doug's soothing words of Feb. 4:  "Lenin ... said 
that company accounts were getting increasingly murky, in order to hide all 
kinds of self-dealing and other financial chicanery. While there are some 
exceptions, this is hardly an accurate description of the present, when 
'transparency' is all the rage."

Rage on, ye CPAs, rage on!

Carl
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