Down goes the Dow

agip,

Thanks for the kind comments and the respect is mutual.

I'll check out the article. Back when I was a young man 10 mile races or 15 kilometer races were the norm rather than a half marathon.

Have a good weekend.

Igy

I agree with agip that Igy has been generally polite and well mannered. Same for agip. It's a good idea for all of us to remember that there are some intelligent people reading this thread - and posting - and we shouldn't try to pull a fast one. The folks will notice and call BS.

Igy, I gave up the stylist years ago when I decided I decided to go short. Barbers are cheaper, faster, and get the job done. You're looking good, my friend.

POTO,

Thanks much appreciated compliment.

The barber I have actually became a client of mine several years ago. A nice lady, works long hours running her own shop. Today the cut was just a little short in back. She said, "I cut it a little short in the back, I shouldn't charge you." No way I would do that. I make sure I take care of her as an advisor and as a paid customer.

One thing is for sure my hair cuts are considerably cheaper than my wife's visit to a stylist. My son-in-law has a stylist. Not for my son or me. Macho thing perhaps.

Igy

I also agree with POTO here. But about all this GAAP/non-GAAP stuff, what is the premise here? Are you long SPY or something? If not, why do you care?

I have bought 4 stocks and shorted 4 this year (that's what long-short is). Did I care at all about the GAAP earnings quality of the 495 or so of the SP 500 that I did not own? Not at all.

Ghost of Igloi wrote:

LNKD, NOW, CRM, FIT, TWTR, GPRO, TSLA, DATA, SYSS.....

Pull their 8Ks and have a look for yourself rather than be led around by your nose ring.

Igy

I've seen nothing there to support your position. Please be more specific.

coach d,

I have been short the biotechnology and technology sectors in part because of the large number of companies that rely on non-GAAP accounting to pretty up their earnings.

I assume that your investment strategy focuses on technical indicators. I am a fundamental guy. As a technical guy you may look at LNKD and consider it a long, I on the other hand, may look at the accounting and consider it a short.

At this point in the market cycle you have a struggle between the technicals and the fundamentals. Technically the market may move higher on momentum and optimism but fundamentally earnings are falling and valuations are at the upper end. The opposing views make a market.

Igy

“Like Facebook, Twitter and other social technology companies, LinkedIn is investing in its growth and providing future value to its user base," said James Gellert, CEO of Rapid Ratings, a research and analytics firm. Gellert said LinkedIn is positioned to be stable. "This is another example of how companies in their early development are challenged by the quarterly assessment under the public market microscope.”

Wet,

Typical Wall Street gibberish for a company hemorraging millions of dollars in another attempt to support the fantasy of "trees to the sky" growth. If you are considering an investment in LNKD you should spend a liitle time on due dilligence. I would start with pulling the company 8k which you should be able to find with a Google search. You might also read Vince Rancanelli's skeptical analysis of the company in last week's Barrons. Or you can be a Muppet and buy the stock based on the hokum you cited.

Igy

Business Insider,

First off Henry Blodgett former owner of "Business Insider" would agree with my view. Secondly, examine the non-GAAP versus GAAP numbers for third quarter and yearly comparisons. If you still see nothing, then lastly, visit your local library and acquire a copy of Benjamin Graham's "Security Analysis." Read the book cover to cover and take copious notes. After the assignment, come back to me if you have serious specific questions.

Igy

Ghost of Igloi wrote:

Business Insider,

First off Henry Blodgett former owner of "Business Insider" would agree with my view. Secondly, examine the non-GAAP versus GAAP numbers for third quarter and yearly comparisons. If you still see nothing, then lastly, visit your local library and acquire a copy of Benjamin Graham's "Security Analysis." Read the book cover to cover and take copious notes. After the assignment, come back to me if you have serious specific questions.

Igy

Translation: you've got nothing. I thought as much.

Regarding restructuring costs, Bianco argues that anyone penalizing a company for taking these costs should also consider any longer term incremental benefits.

...it is worth keeping in mind that restructuring charges tend to produce future savings, so it is important to be consistent in treating them as costs or investments when modeling future earnings growth that includes restructuring savings. If a long-term earnings growth forecast does not include savings from restructurings then exclude such costs.

To reiterate, Bianco recognizes that adjusted earnings tend to overstate earnings. But he also believes GAAP earnings tend to understate earnings.

Davie,

GAAP = Generally Accepted Accounting Principles.

Enough said.

Igy

Actually that is not enough. There is a place for GAAP, but they are not without fault as explained above.

Davie,

There is a place for GAAP, oh so kind of you. Bianco's explanation is just Wall Street code for "there is never a reason not to buy stocks." The rationalization of non-GAAP accounting is taking place before your eyes.

Igy

Yours is a unique interpretation.

Davie,

I respectfully believe my interpretation is not unique and I included a link to a balanced view of the problem. Furthermore in a recent article the head of the Securities and Exchange Commission was questioned about the same topic. If I can find the link I will post it for you.

Non-GAAP accounting was emphasized and abused during the Technology Bubble years of the late 1990s and early 2000s. One only has to think Lucent Technology, Enron, or World Com. I see some of the same trends and others do as well. I listed several companies in an earlier post on this topic that have inflated their earnings thru non-GAAP as a matter of standard practice. The pressure to hit the numbers has also driven companies to take the short term approach of increasing stock buybacks to meet Street expectations. I happen to feel that many investors are lulled into thinking that is the way to run a business rather than a reflection of distortions of this era.

Hey, I wish you the best, I just don't believe any of this ends well.

Igy

Igy

Comment from SEC, Chair Mary Jo White:

Chair White observed that non-GAAP financial measures are used extensively by companies and analysts but can be a source of confusion. Chair White said that the use of non-GAAP measures deserves close attention to make sure that the rules are being followed and to ask

whether the rules are sufficient. She asked preparers to carefully consider the following questions when they use such measures:

•Why is the non-GAAP measure being used and how does it provide investors with useful

information?

•Are any non-GAAP measures being given greater prominence than the GAAP measures?

•Is the explanation of the non-GAAP measure and its usefulness to investors, accurate andcomplete rather than boilerplate?

•Are there appropriate controls over the calculation of the non-GAAP measure?

Igy Igy,

I do not dispute that there is potential for abuse with non-GAAP. It is also obvious that GAAP can present an incomplete and therefore misleading picture. Neither is perfect.

David

Davie,

Perhaps, but non-GAAP is open to abuse.

Igy