Looking for your perspective on the corporate scandals

[Shiz]

I am in the middle of this every day and almost 100% of the people I talk to are also finance types. The journalists have the facts but miss the issues, really, and the politicians are morons.

What is your view/perspective/outlook on the Enron/Worldcom/ImClone scandals? How have they changed your view of the stock market as a reasonable way to build a nestegg?

The politicians decry the analysts and bankers as greedy when it was the politicians who changed the laws in 1977 that pushed analysts into banking. During yesterdays Greenspan testimony and last week's Worldcom circus in the House, politicians were making hay about how Worldcom has 2 sets of books, one for taxes and one for SEC reporting. Not once did any of these idiots acknowledge that they are the ones that created the disparity.

How does it smell/look to the un-Wall Streeters?

[Asharad]

I laugh (well, not really) everytime I see some stockholder demanding an accurate accounting of the company they own stock in's business practices.

No, you don't. Joe Stockholder generally knows sweet FA about how the companies they invest in run, or even really anything about business in general.

Look, I own a little company. While we don't do anything illegal, anyplace we can slant our accounting practices in our favor without breaking the law we do it. Every company in the world does it.

And if the company you are invested in is doing well, the last thing you want is anyone screwing with that.

[Biaxin]

Hey,

I agree that business leaders and politicians have walked hand in hand into this mess. Pointing fingers, while enjoyable, doesn't really get to the root of the problem.

I haven't lost faith in the stock market, or in investing as a means of providing for the future. I have lost considerable faith in the ethics of business, particularly at the high end - the big multi-nationals and the politicians that support them. Fortunately, I believe that most companies and their leadership are balanced and sensible enough to know that the best way for everyone to succeed is for everyone to play the straight game.

If you play the bull, you get the horn. The principals of Enron, et al, have played the bull and they need to get the horn, in a big way. Pour l'encourager de l'outre.

[Sagar]

I still think the stock market is a viable vehicle for long term capital gain - in general. It always has and always will be legalized gambling, but I do think that a well diversified portfolio will make more money over time with stocks.

About corporate accounting, that can be a problem with businesses that do not stress integrity and maintain a culture of accountability. One investigator into accounting irregularites (corporate fraud) said that only once have they ever found a senior officer advocating illegal activity. All the rest of the time, the fraud grew out of a culture that allowed fudging a bit to make the numbers. (and that fudging grew bigger and bigger and bigger).

I work for one of the biggest multinationals - General Electric. In some ways, we have an advantage in that we are such a public company, we can't ever afford to cut corners. Its amazing how a little scandal cuts into light bulb and refrigerator sales. For the entire 20 years I've been here, they have pounded into us - Do it right, be above reproach. They routinely ditch managers who make the numbers but have questionable business approaches. And the senior business people seem to have a good grasp of what is possible in a given business / market and take great joy in chewing up managers that go in with unrealistic business plans.

Its been painful to watch our stock suffer from Enronitis, but I feel comfident, given all my experiences with the company and with the business segments I have been involved in, that their numbers are real and the earnings are strong and that, eventually, the stock will go back up.

[Aananla]

If I had money to invest right now I would in a heart beat.

The scandals haven't made me lose faith in big corporations, but it has made me aware of how flighty the average investor can be. They analyze Greenspan to death, and if he twitches or blinks its a mad rush sell.

It's kind of like watching a flock of birds when the lead bird takes a dive, they all take a dive. Maybe lemmings would be a better example...

[Lycos]

Well, back in May, I came into some extra cash, and I put most of it into my mutual funds. I don't want to pull out the cash that I have right now, but these huge dips make it hard for you to see an end in sight some days. I guess the media hype over a bad day doesn't help the perception that the market is actually recovering. It is very tempting to yank some money before I lose more.

Plus, Americans on a whole could careless on how a company runs itself more than how much money it is going to make them. So many people look at the quarterly reports to identify which stock they are going to buy. There is a huge pressure to make yourself look good with creative accounting. And when I say "creative accounting", I mean the legal means to massage your numbers.

Accounting is a very difficult process. I know some basic principals, and depending on the business you are in, it is hard to pin down your expenses and your assests in nice neat little tangible columns.

But fraud is fraud, and upper executives should not be able to do things that the other stockholders or workers do not have access to do. Loans for higher ups - BAH! Selling stock when others can't - BAH! Defrauding investors by cooking the books - they should go to jail and all of their personal assests should be liquidated and returned to those who were defrauded.

I still have faith in America, and I have faith in our free market system. It just goes to show that private industry cannot self-regulate themselves, and a little government oversight helps. It won't solve these problems, but they help prevent them.[/b]

[Darnieq]

I honestly see these "scandals" as a sort of awakening for people who felt the ministers and priests that run these companies were something more than they really are.

I really am surprised that people are surprised though. It's the same surprise that everyone had when the artificially inflated .com industry was exposed for what it was, and followed with a relative collapse.

I haven't lost faith in the Market, but then as others do, I only pay attention annually when I look at my 401(k) accounts (my wife's and mine), our Life Insurance and Mutual Funds. The rises and falls come from what I niavely considered the kid-in-a-candy-store mentality.

They get alot of candy and eat it. They end up getting sick and throwing it up. They realize that probably wasn't a good idea. A month later they forgot it wasn't a good idea.

Except in this case it's corporations and new business opportunities and which seems to happen every decade or so.

[Greebo]

If I had money to invest right now I would in a heart beat.
I second that. The market was well overdue for a correction. Maybe after this all smooths out, investors will pay attention to things like P/E ratios and earning potentials, again.

Every now and then our economy forgets that stocks != business. Stocks should be bought because of the company behind it, not because of the current trend of the stock.

A few bad apples, like Tyco, Enron, Worldcom, may scare the market down some, but that just opens the window to get some great bargains that will be worth a bundle in another 10 - 20 years for retirement.
...
if I had the $ to invest... :evil:

(*still waiting for Delgren to hire me as his hospital's CIO for big buks so I can be a wheeler dealer*)

[DinbinFanfoom]

I second that. The market was well overdue for a correction. Maybe after this all smooths out, investors will pay attention to things like P/E ratios and earning potentials, again.That's my take too. Hopefully this will "resynch" things nicely...

[Draknor]

I think the market needs psychotherapy and some prozac. It's way too neurotic.

The recent developments haven't shaken my faith in the market. I'm a long-term investor, so in the end I believe I'll come out ahead.