32 Misinformation Schemes Used By Wall Street, Corporate America, & The Media
This is a collection of 32 tactics, instances, misnomers, immortal fake propaganda, and even wrong-doing cropping up ceaselessly on Wall Street, in the media, in press releases, in earnings reports, and in the broader nexus between Wall Street and the media.
All of them were pointed out by WOLF STREET commenters. I put them together and grouped some of them, and added some explanations in a few cases even when not needed. In no particular order:
#1: “The moronic statements regarding ‘money on the sidelines.’”
“That ‘money on the sidelines’ thing drives me nuts. I sit around wondering how captured financial commentators must be to even entertain such concepts on such a regular basis.”
“Money on the sidelines is immortal. It has been cited all my investing life, and it will still be cited long after I’m gone, to be passed proudly from generation to generation, no matter how often it gets debunked.”
“I found a coin on the sidewalk once. It must be the infamous sidelines money. Just a million coins more, and I will have enough to go on vacation.”
#2: “The claptrap surrounding earnings beats – after earnings targets have been quietly but drastically reduced.”
#3: “Forward earnings projections” to rationalize high stock prices. Everyone is doing it, even the Fed. Forward earnings projections are part of the great body of American fiction and get slashed as earnings-report dates get nearer so that the much-lowered projections can then be “beat” (see #2 above). This produces the absurd situation where forward P/E ratios are always far lower (currently 18.4 according to FactSet) than the actual P/E ratios (currently 24.6, highest since the Financial Crisis).
#4: “The revolving door between government and Wall Street – ‘the swamp.’” Drain it already.
#5: “The revolting door between government and Wall Street” – that would be one of Wolf’s infamous typos.
#6: “Exclusion of negative earnings from P/E calculations of broad indices.” The Russell 2000 does this. There are a large number of loss-making companies in the index. Excluding their negative earnings distorts earnings measures of the Russell 2000, such as the P/E ratio of the index. With losses included, the P/E ratio of the Russell 2000 would be about four times higher than the officially quoted P/E ratio without losses. It’s not a secret: FTSE Russell and iShares disclose that losses are excluded; but it’s the fake P/E ratio without losses that is being quoted all the time to rationalize high stock prices.
#7. “Bogus ‘Chinese Walls’ and other internal conflicts of interest.”
#8. “Arms-length Agreements” to describe veiled self-dealing.” Also see #7 above.
#9. “Mark-to-Fantasy accounting standards.” A common situation when an asset is valued on the balance sheet based on whatever (including wishful thinking) instead of market price because the market price would be too inconvenient.
#10. “‘Non-GAAP’ accounting metrics.” This might be fake income with all the bad stuff removed, producing a “non-GAAP” profit vs. a GAAP loss, a common feature in earnings reports by Corporate America. Or it might be homemade metrics that everyone has to pay attention to, while ignoring the GAAP accounting metrics.
In the same non-GAAP vein: “Use of EBITDA and subtracting all ‘nonrecurring items’” – which turn out to recur regularly.
#11: “GAAP accounting metrics…” ha, we knew that.
#12: “Debt-financed share buybacks” – a form of equity stripping.
#13: “Positive coverage of ‘share buy backs,’ ostensibly to enrich share ‘owners,’ but really to enrich share sellers and to recycle management stock options through the corporate treasury?”
In the same vein: “Mopping up overgenerous stock options by looting the treasury with share buybacks, described as “Returning Shareholder Value,” while never paying a dividend.”
https://wolfstreet.com/2020/01/14/32-misinformation-schemes-other-tactics-used-by-wall-street-corporate-america-the-media-as-pointed-out-hilariously-by-wolf-street-commenters/