muses of the moment

March 21, 2009

Companies allowed to lie (again)

 Today the Financial Accounting Standards Board proved they are completely without sense. The rules have changed again, beware investors (if there are any of you left). Companies can now pick a number, any number, that they think their assets are worth (toxic debt included) and put it on their balance sheet.

A snippet from Jonathan’s article:

This week, the Financial Accounting Standards Board unveiled what may be the dumbest, most bankrupt proposal in its 36-year history. If it stands, the FASB ought to change its name to the Fraudulent Accounting Standards Board. It’s that bad.

Here’s what the board is floating. Starting this quarter, U.S. companies would be allowed to report net-income figures that ignore severe, long-term price declines in securities they own. Not just debt securities, mind you, but even common stocks and other equities, too.

 Jonathan Weil’s excellent article on the new Accounting Rules.

What this means now and in the future:

  • All official balance sheets, if brokers were even reading them, are lies by law.
  • If global foreigner investors were buying stocks, they aren’t now. They have no idea how to judge the worth of a company.
  • Your 401K fund doesn’t have the information to invest wisely, even if they were inclined to do so.
  • You do not have the information to invest wisely.
  • Foreigners will buy tangible assets in the US Market like real estate, mining, and whole businesses, they will not invest in paper assets anymore.
  • Foreign investors will continue to buy paper assest (stocks) in other countries that have good accounting practices.
  • This law will seal the coffin on American stocks. Paper assets are DEAD, buy tangible assets like commodities and precious metals.
  • Any future movement up or down in the stocks of companies is purely from rumor, nothing else.

This goes way beyond banks hiding toxic debt on their balance sheets. This market just became a little less free.

Buy gold and silver. Your retirement will depend upon it.

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