Many companies beat their earnings expectations by lying about their earnings to the public.
By Daniel at 6 December, 2009, 11:00 pm
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First, they report their true earnings or losses to the SEC in order to fulfill their legal obligations. Which they call reported earnings. And which they try to sweep under the rug and hide from investors as quickly as possible.
And then they strip out of their reported figures all of their expenses and losses that they choose to call non-recurrent. And they report much better earnings to investors. Which they call operating earnings.
The media and the analysts go along with this corruption. And a lot of companies are getting away with lying to investors about their earnings. And they are so successful in their lying not because they are good at it. But because the media and the analysts are going a long with it and helping these companies to lie.
The so called Operating Earnings haven’t yet been invented during the Great Depression. They had only Reported Earnings at that time. And here is a chart that compares present-day earnings to those during the Great Depression.
The problem is that a lot of these companies have forgotten how to sell and market in a competitive environment. There is a big difference between selling in a credit bubble with vendor financing (customers playing with the house’s money) and getting people to part with their hard earned money. I am not talking about the financial industry which is always playing with the house money.
Advertising, marketing and sales have atrophied in most companies due to neglect. The idiot politicians were promoted to adv./mkt/sales managers during this time and they don’t have a clue as to how to generate real demand in a non-bubble environment.
- Nick
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