Wednesday, April 15, 2009

The Farce Behind Quarterly Earnings

My objection is with the fundamental formula, which has been the cornerstone of every capitalistic society:

Assets = Liabilities + Net Worth

In an overhyped, unregulated, free-for-all market the "Net Worth" can be manipulated by the "power players" - regulators, money changers, colluded interests such as Real Estate companies and property valuators, State/County tax assessors, etc. etc. It should be completely taken out from this calculation.

IMO, the new formula should be:

Assets = Liabilities-(outstanding interest rate for the period of the valuation)

The Assets usually are fixed (unless we're talking about appreciable assets such as antiques, etc.), but the Liability fluctuates depending on the prevailing interest rate or the outstanding balance. With the usury currently imposed on the consumers by the banks, this is a major sum that's really not accounted for.

I'm no accountant, but the old way of valuating one's Net Worth has gotten us in the jam we're in today. I'm open to all ideas.
About Goldman Sachs
Read the Article at HuffingtonPost

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