REMINDER: ELEMENTARY CONSISTENCY IS NOT ONE OF THE SELL-SIDE’S STRONG SUITS
As predictable as the sunrise:
About 40 percent of earnings for the first nine months came from money taken from loss reserves as U.S. banks dip into their funds, at least temporarily, and mask a revenue squeeze.
“Don’t pay attention to the bottom line EPS numbers,” said Chris Kotowski, managing director of research at Oppenheimer & Co. in New York. “Reserve accounting distorts what’s reported as earnings. . . . .”
That’s funny. Back during the credit crunch, when the FASB’s crazy, pro-cyclical reserve-accounting rules helped devastate bank earnings, I don’t remember anybody saying, “Don’t pay attention to the bottom line EPS numbers. Reserve accounting distorts what’s reported as earnings” when companies reported their numbers. I remember people freaking out. . . . And yet now that those ridiculously high reserve additions are set to be undone, we’re supposed to ignore the reversals? Please. . . .
One Response to “REMINDER: ELEMENTARY CONSISTENCY IS NOT ONE OF THE SELL-SIDE’S STRONG SUITS”
Forecasting earnings ( especially the completely nutty idea of forecasting QUARTERLY earnings ) is Wall Street’s way of getting suckers to play at the casino. Quarterly and trailing twelve month earnings are ephemeral, unreliable and a waste of time.
Any analyst worth his/her salt ( and there aren’t any on the “sell side” and precious few on the “buy side” ) doesn’t worry or bother with that nonsense. Analysts and investors who know what they’re doing instead focus on the integrity of the balance sheet and the underlying “normalized” earning power. “Wall Street” and their hired henchmen in the media will never do that– for the simple reason that it’s not in their interest to do so. They’re in the business of trolling for fools.
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