Directors get all kinds of seminars. Some earn ISS credits, but none dig into the real meanings of the language boards hear, and what those words suggest.
“Short-term profits,” for example, is a phrase management uses when there aren't any.
A “technical default” is a default. “Non-recurring expenses” have a common and nasty habit: they recur. You'll hear, near the end of some quarters, that earnings were depressed by the strong dollar. You'll rarely be told that a weak dollar was the root cause of another quarter's windfall.
One Fortune 500 stock jumped recently. Supportive analysts noted that this company “raised capital for acquisitions by selling debt.” That's one way to say it. Or, they might have said that this outfit “destroyed their balance sheet by borrowing, so they could overpay for acquisitions.” And so they did, by the way.
When your CEO reports that they are dealing with “fair trade” items, ask if that's anything like price fixing. If that CEO reports the company is doing something “green,” be sure to find out what the added expense will be.
“Pro forma” was used in the bubble days and was Latin for “in your dreams.” “EBIDTA” should be “BFETWCRUWDGATHLIFTDWTCF.” Okay, maybe that's unwieldy, but it's an acronym for what the earnings would have been before “bothersome fixed expenses that we cannot reduce unless we declare bankruptcy, and therefore has little, if anything, to do with true cash flow.”
“Goodwill” isn't an asset. “Inventory” and “receivables” are not spendable for groceries so don't rank them up there with cash.
If you ever approve an “Office of the President,” and I hope you don't, you should simultaneously announce something like “A three-person committee now runs our business. Your board believes that having six hands on our corporate steering wheel will help us more safely navigate the twisting roads ahead.”
Half a dozen years ago, General Motors's annual report talked about the need for national healthcare before it mentioned cars or their business. Anybody who pondered this for three seconds should've realized the company wanted to offload their biggest expense, healthcare for retirees, onto the rest of us taxpayers. I don't blame them for trying. Let's just not get confused. This was no altruistic public position. (On Oct. 28, 2009, the wire services carried two separate stories: one announced that GM and Chrysler would get a third sack of cash from the Feds, this time $2.8 billion of it; the other article announced that GM and Chrysler dropped out of the top rankings by Consumer Reports. Ford moved up. Ford also announced profits that week. Ford got no bailout money. Oh, there is a healthcare bill being discussed in the Capitol.)
Starbucks has also pitched healthcare in their annual report. This, of course, was after they bragged about providing healthcare for all their retail employees. Apparently, as Starbucks grew, they started to notice that expense. Like GM, they thought it better that you and I pick up their obligations.
Wall Street, too, can turn a fast phrase. We get “corrections” and “adjustments” and “profit taking.” Each of those more accurately indicate that more than a few investors are strolling toward the exit.
One of the newest media phrases, “too big to fail,” probably translates fairly as “big enough to make lots of campaign donations to both parties and hire unbelievably expensive lobbyists.”
If I ever get a firm, tight and comprehensive insight into derivatives, their risks, costs and benefits — well, that could fill this page. I'm on it. â–
The author can be contacted at garysutton@san.rr.com..