The Crooked Casino Known as Wall Street - Richard Spohr, SATC
May 06, 2003
Last week the long-awaited $1.4 billion settlement
paid by Wall Street fraudmeisters was finally announced.
Not surprisingly, none of the 10 big Wall Street investment banks/brokerages pleaded guilty to anything.
Clearly, they were saying: "We're not guilty of anything. We have done no wrong. We are innocent as new-born lambs."
Yeah, right. Trouble is, these new-born lambs are in the business of shearing the sheep.
The fact is, these Wall Street crooks have absolutely no remorse or regrets for their deceitful, dishonest practices that have wiped out more than $8 trillion in investments of those who may have actually believed the recommendations from the conflicted, lying analysts.
Blodgett and Grubman may be gonzo, but there are thousands of other crooks in suits who are continuing to fleece the public.
These crooks - aided and abetted by the dishonest CEOs and number-massaging accouting firms - continue to present us with earnings numbers that are NOT TO BE BELIEVED.
The fact that corporations' fraudulant earnings reports can beat vastly lowered expectations shouldn't be surprising.
But my guess is that if they didn't fudge the numbers, they would fail to even beat the incredibly lowered earnings estimates.
Check out this brief comment from FinancialSense on the earnings numbers we see these days:
"The easiest way to think about the numbers you hear each day is that they are pro forma numbers. Pro forma numbers mean that something is missing and has been left out or omitted from earnings. Even on a day like today where companies such as P&G announced earnings that beat estimates, it was due to the exclusion of certain costs that P&G said that earnings would grow this quarter by 12 percent instead of 10 percent. The extra percent was due entirely to pro forma exclusions. A partial list of expenses left out in calculating pro forma profits is highlighted below.
* Goodwill impairment charges.
* Gains/losses from asset sales. They count them when
they are gains and exclude them when they are losses.
* Pension gains. They simply don’t exist but are
created through accounting assumptions.
* Employee stock option expense.
* Restructuring charges from plant closing and costs
associated with firing workers.
* Writedowns of depreciable of depreciable or amortizable
operating costs."
You get the picture. The numbers we get from the corporations are about as believable as the unemployment numbers we get from the U.S. Labor Department. In other words, they have no connection with reality.
Meanwhile, the market manipulation continues. The bulk of the action on the markets is from the Big Boys and speculative traders. There are few investors willing to put their money on the line in these fragile markets.
You see, even the average little investors (mom and pop, Joe -Sixpack and the mutual fund payroll contributors) can see that the U.S. and global economies are in the toilet.
The new jobless numbers are still horrendous and that the manufacturing industry in the U.S. is indeed a basket case.
They also see other grim economic fundamentals, such as:
-Record bankruptcies,
-Record federal budget deficits,
-A massive U.S. trade deficit,
-A rapidly declining greenback,
-High unemployment (the REAL level is at more than 10 percent),
-Debt levels in the U.S., which are now more than 300 percent of GDP,
-A housing bubble ready to pop,
-Ridiculous over-valuation of stocks, which are DOUBLE the
historical norm on the S&P and Dow,
-Paltry dividends in the 2 percent range,
-The worst budget crunch for local and state governments in 50 years,
-A feeble manufacturing sector, a dead airline industry and a dying
automobile industry.
-Massive underfunding of corporate pension plans,
-Kinky tech stocks like EBay, Yahoo and Amazon having P/E ratios that
would have been a warning sign when the Nasdaq was at 5,000.
-Continued overcapacity, no pricing power for corporations and
stalled business spending.
Personally, I still believe that this house of cards is going to come crashing down.
We have learned from history that stock market bubbles (U.S. in 1929 and Japan in 1989) take a long, long time to recover after the implosion. It took a quarter of a century for the Dow to recover to 1929 levels. Fourteen years after the Nikkei bubble burst, that exchange is still down more than 75 percent. Incidentally, real estate prices have also dropped 70 percent from those insane Japanese bubble peak days.
The manipulation of the markets will continue. The phoney earnings reports will continue. Alan Greenspan will continue to keep interest rates at four-decade lows in an attempt to pump the markets, since anyone who has actually saved money is being penalized in a big way.
Meanwhile, Greenie will continue to keep the greenback printing press running. Ninety percent of analysts' recommendations will be 'buys' and 'strong buys.' The financial media will be cheer- leading the markets ad infinitum.
These are the rules of the game in the crooked casino known as Wall Street.
