Your confidence in the reliability of official numbers is inspiring, Doug. But I persist in believing that the glowing federal data regarding US economic health in recent years owe much to the principle of Garbage In, Garbage Out. See Gretchen Morgenson's column in the NY Times today, "Scandal's Ripple Effect: Earnings Under Threat," e.g.:
"'All of these mechanisms that were designed to present a company's financial condition in the best possible light are now going to meet a very much higher standard of review and disclosure,' said Jonathan Cohen, portfolio manager at JHC Capital in Greenwich, Conn., and former chief of software and Internet research at Merrill Lynch. 'Undoing these mechanisms is going to take air out of the dirigible that has been inflated over the course of many years.'"
One particular, long-simmering accounting controversy, of course, concerns the use of stock options. Conservative financial reporting regarding options would have produced a far different picture of 1990s' earnings vigor than the one we now have, as Morgenson notes:
"Because option grants have become so huge in recent years, changing the way companies account for them could put big pressure on earnings. According to Sanford Bernstein & Company, a brokerage firm in New York, the value of such grants at the nation's 2,000 largest companies rose to $162 billion in 2000 from $50 billion in 1997. Bernstein estimates that if the nation's 500 largest companies had deducted the cost of options from their revenue, their annual profit growth from 1995 to 2000 would have been 6 percent instead of the 9 percent that was reported."
[Full text: http://www.nytimes.com/2002/02/10/business/yourmoney/10WATC.html]
Carl
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