Posted on 04/05/2002 4:59:57 AM PST by an amused spectator
NEW YORK — As if investors needed more bad news, the greatest corporate confession of all time is about to begin.
Dozens of once-hyper-acquisitive companies are expected to admit publicly in coming days that they gambled and lost billions on big deals executed at the height of the bull market.
The final price tag could exceed $1 trillion.
"We are going to get confirmation that hundreds of billions of dollars in shareholder capital has been wasted or destroyed," says David Tice, manager of the Prudent Bear fund, which makes bets that certain stocks will fall.
"Wall Street will say don't worry about it, but shareholders should think again."
Most of the pain is expected to be unveiled with first-quarter earnings as companies are forced to take massive charges under new accounting for goodwill, the premium a buyer pays to acquire a target's assets.
Under the rules, companies are required to write down their goodwill immediately to reflect any permanent declines in value.
Under the old rules, they could write down goodwill gradually, over as many as 40 years.
Already, entertainment titan AOL Time Warner has said it would take a record $54 billion goodwill write-down as a reflection of "overall market declines" since its merger was announced two years ago.
Other major media companies have announced they will follow suit, including Clear Channel, with a $15 billion to $25 billion write-down, and Vivendi Universal, with a $12.3 billion to $13.2 billion write-down.
Struggling telecommunications companies have also warned shareholders about coming massive goodwill write-downs, including Qwest, with $20 billion to $30 billion, and WorldCom, $15 billion to $20 billion.
Some analysts estimate that before it's over, Corporate America could see more than $1 trillion in net worth evaporate. That could have a further chilling effect on a stock market and investors that badly need cheering up.
While companies and Wall Street analysts generally stress that goodwill write-downs are one-time, non-cash charges that have no impact on underlying operations or cash flow, many accounting experts argue they are significant — an admission that the investments companies once made are no longer worth as much. Moreover, a company with atrophied assets and a ballooning debt-to-asset ratio may find it harder to borrow.
Believing their own growth stories and enjoying high stock valuations that gave them pricey stock to swap for acquisitions, many companies engaged in an orgy of dealmaking.
Many of the prices paid now look excessive.
"The serial acquisitions many companies made are not going to generate the revenues they anticipated. That suggests management made some bad deals," says Lehman Bros. accounting expert Robert Willens.
Ronald Reagan, Jimmy Carter's opponent in the 1980 election, had nothing but contempt for the idea that Americans should reduce their consumption. He had nothing but disdain for the environmental movement. His optimism (he liked to proclaim it "morning in America," which he frequently described as a "shining city on a hill") made him a popular president among the masses.It became apparent in hindsight that what had seemed to be a mass frugality and environmental movement in the 1970s had been confined to middle- and upper-middle-class activists. By 1984, "big is better" bumper stickers began to displace those proclaiming "small is beautiful." Yuppies replaced hippies. U.S. News and World Report announced "the old less is more, down-with-materialism atmosphere...has been brushed aside. A flaunt-it-if-you-have-it style is rippling in concentric circles across the land." "Greed is good! Greed will save the U.S.A.!" proclaimed Gordon Gekko in the Academy Award- winning 1987 film, Wall Street. Lifestyles of the Rich and Famous, with host Robin Leach deliriously shouting about the "dreams money can buy," started, and became one of the most successful shows in the history of television.
"Reagonomics," the tax policies and "trickle down" theories of Reagan's economists, have been blamed for the massive redistribution of wealth that occurred in the U.S. in the 1980s. National columnist Richard Reeves wrote, "Nine out of ten people got screwed....The richest 10 percent of the nation got richer and paid fewer taxes. The middle class made less money and paid more taxes. The poor got poorer and there were more of them. The money was trickling up, not down." At the end of the Decade of Greed, as some have called it, 33 percent of all personal wealth in the nation was in the hands of 1 percent of its households.
History is still being made, and your guess about how this decade will be viewed by generations to come is as good as ours! Students and viewing party discussion groups, this is a good subject for an essay. Write your predictions for the rest of the 1990s. What name will our decade end up with?
Never mind, here's the link and original title (usatoday's search feature sucks):
IF the accounting firm handling the Enron debacle is getting hammered as it is?
Whadda ya suppose this administration's people are going to do to the Clintonistas responsible for the condition(s) conducive to the obscene feeding frenzy?
A feeding frenzy which up to just now, had been called, "The Greatest Economy this nation's ever witnessed" -- courtesy of The Greatest Criminal Enterprise the nation ever permitted to gain control?
Many of those people responsible for this boondoggle, btw, still remain employed in our goverment, at that!
Hell, I wonder if anyone will even frame the impending crash as it rightfully should.
What am I saying, anyway.
nawwwwwww...
Of course they won't even ask *The* question.
The Bush administration must know damned well what the gig is; and, that that gig is nearly up.
One can almost hear 'em all whistling past the graveyard, right now.
The United States is worried about frivolous law suits from developing countries against U.S. servicemen stationed around the world. The Bush administration has even asked the United Nations whether it could rescind Washington's signature from the treaty, signed by former U.S. President Bill Clinton at the end of his term.
In March/April 1999, they crossed 10,500 .... and today, three years later, they are STILL at that level. Three years of essentially zero growth.
Clinton's "best economy ever" is the second-biggest conn (after Social Security) that has ever been pushed on the American Public by the national press corpse.
I believe that it was Viacom, not Vivendi...
Of course the "clintoon/greenspan economy" was really the continuation of the Reagan/Volker economy. But blaming clintoon for this seems like a stretch. He had no more to do with the subject of this article, than he did with making the economy run well. The tax increase clintoon cites as the reason for the great economy is phoney rhetoric. The economy was already headed up when the 93 tax increase took effect.
Bashing clintoon here implies he was responsible for the growth. What we see in the economy is the natural cycle. No more no less. But hey, its as good a reason as any to bash the phoney.
I agree somewhat with your statement, however a drop in a companies equity could affect their credit rating which would make it more difficult to borrow money to conduct their day to day operations. This, I believe, is what could rattle the market.
THAT'S what they relied on to defeat the impeachment and his continued crimes: "How good a job is he doing as president?" (How do you like the economy? being often expressly stated and always implied) was the quesion: AND never "Is he fit to be president?"
Thus, the hypocrisy in his being "given credit" for an economy that WASN'T all that good is even more stunning.
PArticularly, as you point out, that the upswing he was riding BEGAN under Reagan, and the "bump" at the end of the Bush administration was equally exaggerated to elect Clinton the first time.
Did you notice that the economic news suddenly turned "rosey reporting" in mid-November '92 (giving him credit EVEN BEFORE he took office!), after the numbers actually starting to rise in mid-September '92.
A link to the article's in Post 22.
Yep, the diabolical thing about big media is they put out shorter and shorter soundbites, little in depth news, yet give many people the illusion they are well informed.
Indeed. It's like the gout. It hits you all at once with excruciating pain and then for five days it gets worse.
Or we can look at Dole this way: An addled old big-government fraud, who managed to survive and trade on a war wound, ended up being most proud of his work to saddle American taxpayers with food stamps and the American With Disabilities Act (i.e. the Lawyer's Permanent Income Act).
Several hundred billions of tax dollars wasted later, Dole tries to impose his big-government vision via his run for president.
I like my version better. "Public service", my butt. He's larded HUGE government onto our backs. It can be easily argued that, if Dole and McCain hadn't survived their wars, America would be better off.
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