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There's all kinds of things wrong with what you said, but I'll focus on the off balance sheet asset claim. Sure, almost every company "hides" assets and liabil

There's all kinds of things wrong with what you said, but I'll focus on the off balance sheet asset claim. Sure, almost every company "hides" assets and liabilities off balance sheet because it's standard accounting practice. There's lots of rules about it and it's perfectly reasonable to do in many situations. For instance, securitized risk is held off balance sheet because it effectively isn't an asset, liability or risk to the company that securitized it anymore. (That's the whole point of securitizing risk.) It is in general not true that "nobody can see them", since stuff like this generally has to be declared in financial reports. Yeah, you can't see it... if you're a lazy investor who just reads the quarterly financial statements and thinks that constitutes responsible investing. There are some companies that try to cook the books and game the rules. Surprise. Whenever there are rules people will try to game them. All this tin-foil hat nonsense about "book cooking" as reported in "respected blogs" leading to the ruin of "almost every company" and the entire stock market seems too silly be true.

rada 16y ago
I think you are making some very valid arguments however I disagree with the principle of your position. 1. Status quo. Yes, it's standard accounting practice to move huge amounts of liabilities off the balance sheet. Yes, whenever there are rules, people will try to game them. So what? It's wrong, and the status quo doesn't make it less so. When people like me call it out, it's not because we were born yesterday and have somehow missed the big bad world in front of our collective face. It's because we recognize that complexity (as applied to this situation) is made up to maintain the above mentioned status quo. When I had my startup, I chose to book profits on a cash basis instead of an accrual basis because I felt it was the sane thing to do. Would it have been perfectly legal for me to choose the accrual basis? Of course. Would it make any sense to pretend that I've made thousands of dollars where I've made zero? I don't think so. I am not comparing myself to Cisco but I don't think it's right for Cisco to pretend that their fantom profits are real either. Lucent did that and they are now bankrupt. 2. Lazy investor. My apologies for the dramatic comparison, but the "lazy investor" argument is a bit like the rape victim argument. First you are going to say that the investors who do not pore over financial disclosure documents deserve being "misled" because they are lazy. Then you are going to say that the Nigerian scam victims deserve it because they are gullible. How long before you say that a young woman is "asking for it" when she goes to a bad neighborhood at night, alone? I am not saying you personally would subscribe to that argument of course, I am just pointing out that if you take that logic to its conclusion, only the strong survive, and that excludes all of us. It's no more realistic to keep up with miles and miles of financial disclosures and other assorted small print than to keep out of bad neighborhoods at all times. 3. Tinfoil hat nonsense. I am not the biggest authority on the stock market but is there not a clear consensus that the current devaluation was caused by the financial firms' failure to recognize mind-boggling amounts of liability on their balance sheets? Perhaps I am misunderstanding what you are trying to say but it seems to me your last point was that that's just a wacky conspiracy theory. What do you attribute the devaluation to then?
- bmm6o 16y ago
  > So what? It's wrong You're defining "wrong" to mean something other than "against the rules". If you can't get the rules changed, it doesn't matter what you wish they were. > First you are going to say that the investors who do not pore over financial disclosure documents deserve being "misled" because they are lazy I'm not the OP, but I wouldn't have said "lazy". However, intelligent investing takes time and skill that most people don't have. If you don't read the financial reports, why do you think you have enough information to decide whether to invest in a company? Reading WSJ headlines does not make an informed investor. The rest of your paragraph is a hyperbolic effort to put words in another's mouth.
  - rada 16y ago
    1. I was using the word "wrong" in its normal dictionary definition (http://dictionary.reference.com/browse/wrong http://dictionary.reference.com/browse/wrong). It is not right, good, or truthful to "shout" your profits/assets in big print on the main financial docs, while "whispering" your losses/liabilities in small print in supplemental documents. 2. If you can't get the rules changed, it doesn't matter what you wish they were. Are you serious? It matters very much. Public opinion changes both the rules and interpretation of the rules all the time, through voting, legislative action and general intellectual osmosis. Just this week, we got ourselves gay marriage and iPhone jailbreaking. I am especially surprised to see such an ultra conservative opinion on a hacker/startup community. 3. I totally agree with you that intelligent investing takes time and skill. I dedicate maybe a half hour of my workday to investing, and I would guess that your average investor doesn't spend even that much time. Yes, it is terribly inadequate. So what are you doing to do about that? We do not live in an ideal world - we do not have medical insurance only for those who exercise constantly, avoid stress, and never eat anything with sugar in it; or driver's licenses only for those with perfect vision; etc. The rules must work for the real world, not some hypothetical ideal. 3. The rest of your paragraph is a hyperbolic effort to put words in another's mouth. Actually, I explicitly refrained from putting words into op's mouth: "I am not saying you personally would subscribe to that argument of course". Sorry if that was unclear.
    - 16y ago

rada 16y ago

I think you are making some very valid arguments however I disagree with the principle of your position. 1. Status quo. Yes, it's standard accounting practice to move huge amounts of liabilities off the balance sheet. Yes, whenever there are rules, people will try to game them. So what? It's wrong, and the status quo doesn't make it less so. When people like me call it out, it's not because we were born yesterday and have somehow missed the big bad world in front of our collective face. It's because we recognize that complexity (as applied to this situation) is made up to maintain the above mentioned status quo. When I had my startup, I chose to book profits on a cash basis instead of an accrual basis because I felt it was the sane thing to do. Would it have been perfectly legal for me to choose the accrual basis? Of course. Would it make any sense to pretend that I've made thousands of dollars where I've made zero? I don't think so. I am not comparing myself to Cisco but I don't think it's right for Cisco to pretend that their fantom profits are real either. Lucent did that and they are now bankrupt. 2. Lazy investor. My apologies for the dramatic comparison, but the "lazy investor" argument is a bit like the rape victim argument. First you are going to say that the investors who do not pore over financial disclosure documents deserve being "misled" because they are lazy. Then you are going to say that the Nigerian scam victims deserve it because they are gullible. How long before you say that a young woman is "asking for it" when she goes to a bad neighborhood at night, alone? I am not saying you personally would subscribe to that argument of course, I am just pointing out that if you take that logic to its conclusion, only the strong survive, and that excludes all of us. It's no more realistic to keep up with miles and miles of financial disclosures and other assorted small print than to keep out of bad neighborhoods at all times. 3. Tinfoil hat nonsense. I am not the biggest authority on the stock market but is there not a clear consensus that the current devaluation was caused by the financial firms' failure to recognize mind-boggling amounts of liability on their balance sheets? Perhaps I am misunderstanding what you are trying to say but it seems to me your last point was that that's just a wacky conspiracy theory. What do you attribute the devaluation to then?

bmm6o 16y ago
> So what? It's wrong You're defining "wrong" to mean something other than "against the rules". If you can't get the rules changed, it doesn't matter what you wish they were. > First you are going to say that the investors who do not pore over financial disclosure documents deserve being "misled" because they are lazy I'm not the OP, but I wouldn't have said "lazy". However, intelligent investing takes time and skill that most people don't have. If you don't read the financial reports, why do you think you have enough information to decide whether to invest in a company? Reading WSJ headlines does not make an informed investor. The rest of your paragraph is a hyperbolic effort to put words in another's mouth.
- rada 16y ago
  1. I was using the word "wrong" in its normal dictionary definition (http://dictionary.reference.com/browse/wrong http://dictionary.reference.com/browse/wrong). It is not right, good, or truthful to "shout" your profits/assets in big print on the main financial docs, while "whispering" your losses/liabilities in small print in supplemental documents. 2. If you can't get the rules changed, it doesn't matter what you wish they were. Are you serious? It matters very much. Public opinion changes both the rules and interpretation of the rules all the time, through voting, legislative action and general intellectual osmosis. Just this week, we got ourselves gay marriage and iPhone jailbreaking. I am especially surprised to see such an ultra conservative opinion on a hacker/startup community. 3. I totally agree with you that intelligent investing takes time and skill. I dedicate maybe a half hour of my workday to investing, and I would guess that your average investor doesn't spend even that much time. Yes, it is terribly inadequate. So what are you doing to do about that? We do not live in an ideal world - we do not have medical insurance only for those who exercise constantly, avoid stress, and never eat anything with sugar in it; or driver's licenses only for those with perfect vision; etc. The rules must work for the real world, not some hypothetical ideal. 3. The rest of your paragraph is a hyperbolic effort to put words in another's mouth. Actually, I explicitly refrained from putting words into op's mouth: "I am not saying you personally would subscribe to that argument of course". Sorry if that was unclear.
  - 16y ago