Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Now Xerox?
Date: Fri, 28 Jun 2002 22:09:19 -0400
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Ernie, I agree in part, history does tend to repeat itself, so claims of =
somehow "this time it is different" has to be taken with a large grain =
of salt. On the other hand, times are indeed changing, just as they have =
for several hundred years. During my years as an active stock broker, I =
had clients in about 20 states, so got a lot of feedback on a very human =
level from all parts of the country. My assessment of sentiment, and =
"M", was influenced by that very subjective feedback. I regularly talked =
with all my clients, and often not about their holdings as much as their =
investment goals, risk tolerance, etc. I taught them to focus more on =
the overall performance of their portfolio than on individual stock =
performance. I also observed a steady erosion of the percentage of =
clients willing to invest in individual stocks while seeing a greater =
willingness to buy funds. Many people simply don't have the time to do =
the work that individual stocks take, preferring instead to leave =
management, and research, and decision making, up to the =
"professionals".=20
Even today I still have a lot of people asking me for advice on which =
funds they should buy, or whether they should hold the ones they already =
own. My answer is simple, and consistent, they need to determine their =
own investment goals, and risk tolerance, then select a class of funds =
that meet that criteria. I also remind them to always review fund =
performance over a 3 to 5 year period, nothing shorter. I know many =
people with substantial money in funds that have not looked at a chart =
of the DOW, or the S&P500, in over a year. They just keep adding to =
their funds regularly and don't worry about what the market is doing day =
to day, or weekly, or even monthly.
I also think investors that wish to be are better informed these days. =
Part of that is the internet, part is simply being more sophisticated in =
understanding investing. All of this contributes, in my opinion, to a =
higher percentage of "active" investors paying far less attention to the =
market's overall performance, and thus less affected by "fear".
- ----- Original Message -----=20
From: Hill, Ernie=20
To: 'canslim@lists.xmission.com'=20
Sent: Friday, June 28, 2002 6:47 PM
Subject: RE: [CANSLIM] Now Xerox?
Sam
=20
You, IMHO are of course right.
=20
The mantra of "this time it is different" to me is a little humorous. I =
can't help but smile as I write this (guess I am a little sadistic). =
History repeats itself because of human nature, and part of human nature =
is the arrogant idea that we some how have it all figure out better than =
those who preceded us. The psychology of freely traded markets will =
never change, and while I have no historical reference I am sure that in =
past investment bubbles there were plenty of people who believed "this =
time it is different".
=20
My reference to arrogance was not directed at any individual in this =
group, rather I was speaking of the mass psychology of the investment =
community that propelled our recently busted bubble.
=20
E=20
=20
- -----Original Message-----
From: Sam Funchess [mailto:sam5@mindspring.com]
Sent: Friday, June 28, 2002 4:26 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Now Xerox?
=20
Winston,=20
The way I read your statement is that, This time is different. We can =
not look to history to provide an accurate view of our current economic =
times. I ask, were you thinking the same thoughts in 1999 as the market =
was going ever higher? Was the speculation bubble any different then =
than any other time? I think the past 2 years has told us that this =
bubble was no different. It is always nice to think that this time is =
different but haw many times has it been? Sure our society has been =
trained to believe in the long term fund and that over time it will =
average out. I ask you, the fund managers are just as scared if not =
more so in today's current economic time. Who pay's the fund managers =
their large salary. It is you and whoever invests in their fund. If =
you have poor performance over several years, you have a large =
likelihood that your customers will leave. So you are fearful that you =
will not come close to the averages and lose your customers and =
therefore your job. The thirty something's like myself are in for the =
long haul. How about those investors that are in their 50's (what =
percentage of the population is 50 or older? A Large Percentage!) They =
have watched their portfolio shrink dramatically over the past couple of =
years and they will become scared enough to remove their cash from =
funds. When will that be? When fear has hit the market. Everybody, =
young and old, are still waiting for the market to continue its "normal =
upward movement" and at some point people will begin to question if the =
market is a good place to keep their investment or is it better to plow =
all their money into a larger house. Unless of course, the market =
begins its upward trend. Ask anybody you know that is older than 50 who =
has large mutual fund holdings if they have moved any of their money or =
if they intend to in the near future. Please let the group know your =
answer.=20
Your comment to the "The larger population of individuals will also =
contain a larger number of people who know no fear." This seems =
irrational at first sight as averages stay relatively the same. As the =
population grows, wouldn't it be reasonable to expect that the same =
percentage of risk takers will be born? Why would the larger population =
mean that there is a larger population of risk takers?=20
This being said, I think that anybody who believes "this time is =
different" is fooling themselves and being wishful. If you are a value =
investor for the long haul, you should be buying everything that you =
have researched and like at a maddening pace. Are you? Are you =
selling?=20
What is the general market tell you? I read and have read for the past =
2 years to be in cash. That is where I have been and am enjoying using =
my cash for other non-stock market investments. I have kept two =
investments in small portfolios only because I have been too lazy to =
remove them. i kick myself for being so lazy as I have lost a decent =
amount of money. Oh well. The market told me to get out and stay out =
for the time being.=20
Sam=20
Winston Little wrote:=20
"The market always climbs a wall of worry" is an old familiar saying. =
In 1965 only 10% of the population invested in the market.(Just over 50% =
of trading volume was by individuals)The participation grew to 60% of =
the population in April 2002 (either directly or through =
retirement/mutual funds). The volume due to individuals fell to under =
20%. Fund managers may not have the same fear as an individual (it is =
not HIS/HER money, but YOURS!)The larger population of individuals will =
also contain a larger number of people who know no fear.Thus I wonder if =
the exhibition of fear will be as large or severe as in the past. =20
- ----- Original Message -----
From: Sam Funchess
To: canslim@lists.xmission.com
Sent: Friday, June 28, 2002 3:36 PM
Subject: Re: [CANSLIM] Now Xerox?
Canslim Members,=20
Been a while since my last post.=20
With that being said, I think the "scandal's" are very good for the long =
term benefit of CANSLIMers and the market. Its been a while since I've =
read HTMMIS so I can't quote chapters or such, but I recall him talking =
a lot about the fear factor. We have not had the "Fear" in the market =
yet. I think that there is no sustainable upside to the market until =
the fear has hit the market.=20
Just my thoughts.=20
Sam=20
Katherine Malm wrote:=20
Here's some background on earnings from Briefing.com for those less =
familiar with EBITDA, etc. --Katherine PS Xerox's accounting woes go =
back *years*.... P-U....=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20
=20
The Earnings Confidence Problem - Part I
=20
25-Jun-02 14:18 ET
=20
=20
=20
[BRIEFING.COM - Robert V. Green] In the midst of the more =
scandalous market problems, the earnings confidence problem is not =
receiving the attention it should. Here is more on the topic. =20
The Market Problems
The current market suffers from the following ailments: =20
a.. Distrust of management - from excessive comp to outright =
fraud. Tyco is the best example. =20
b.. Distrust of accounting - Andersen =20
c.. Distrust of analysts - Blodgett =20
These three problems get all the press and attention. =20
But a deeper problem is afflicting the buy side - a growing =
concern about the validity of earnings reporting. =20
The Earnings Problem
Accounting rules have always been flexible enough to allow most =
companies a far amount of flexibility both in revenue recognition and =
expense recognition. Even when earnings reporting was somewhat =
standardized, some companies were criticized for how they recognized =
revenue and expense. =20
But in the last five years, the types of earnings that companies =
have driven Wall Street to focus upon have become questionable. =20
There are four different basic types of earnings today: =20
a.. GAAP earnings: Generally Accepted Accounting Principles - A =
standards board that publishes rules on how expenses should be booked. =
Generally, all types of expenses are deducted. =20
b.. As reported: Earnings excluding extraordinary items (as =
defined by GAAP), changes in accounting charges, charges related to =
discontinued operations (plant closings, etc.) =20
c.. Operating earnings: As reported earnings but excluding =
"one-time" charges which do not fit the GAAP definition of =
"extraordinary" =20
d.. Proforma earnings: Loosely defined "as if" analysis. =
Originally designed to provide comparison data for mergers. =20
GAAP accounting principles are guidelines for accountants, not =
investors. The GAAP standards are guidelines for how a company should =
keep its books, not how the company should report earnings. =20
For example, a basic principle behind GAAP is that revenue must be =
booked over the time period for which services and product are =
delivered. If a two year $200,000 contract is pre-paid in cash, up =
front, the entire $200,000 cannot be booked in the quarter in which the =
contract is signed. However, the revenue does not have to be booked as =
$25,000 per quarter for two years. A fair amount of flexibility, =
sometimes negotiated by auditors, is possible for how much of a contract =
can be booked in each quarter. =20
GAAP covers expenses as well as revenues, of course. =20
As reported earnings are the historical standard for earnings. =
Until the mid-eighties, in fact, there was little debate over how =
earnings should be reported as everyone used "as reported" earnings as a =
standard. For the most part, there was no difference between "as =
reported" earnings and any other methodology because one-time charges =
were not as common. Furthermore, companies did not actively seek, as =
they do today, to have certain expenses classified as "one-time." =20
Operating earnings are designed to allow comparisons between =
quarters and years for a company. One time charges in any quarter are =
excluded because these would distort the comparison. Operating earnings =
became important when it became clear that Wall Street would completely =
ignore any "one-time" charges, and focus solely on earnings growth. This =
provided a strong incentive for companies to classify large expenses as =
one-time charges. =20
An example of one company's aggressive attempt to get charges =
classified as one-time was Excite's 1997 $40 million marketing deal with =
Netscape. Now long forgotten, Excite paid Netscape up-front for a =
four-year deal to be the principal search engine at the Netscape web =
site. Excite tried to classify the entire $40 million payment as a =
one-time charge in a single quarter. By doing so, Excite was almost =
profitable. At Briefing we highlighted this event as an indicator of the =
times. The SEC later forced Excite to restate the payment as a four-year =
expense. But many, many companies were successful in getting major =
expense outlays classified as "one-time" which improved income =
statements. =20
The focus on operating expenses led to the development of the =
"EBITDA" concept, which is "Earnings Before Interest, Taxes, =
Depreciation, and Amortization." The EBITDA concept, which has to be =
calculated from the line items shown on an operating earnings report, =
was designed to show the basic business model of the company, without =
regard to cost-of-capital. If capital were free, then EBITDA would be =
earnings. =20
The focus on EBITDA has fallen from favor in recent times for one =
single reason: Interest. The interest payments on bonds, which are =
excluded from EBITDA calculations, has ruined many debt-ridden. =20
Only through focusing on EBITDA projections could a company like =
Exodus Communications raise so much debt that their interest payments =
exceeded their gross margin. That won't happen again for decades. =20
Pro-forma earnings are very hard to define today. The original =
purpose of pro-forma earnings calculations was to show the effects of a =
merger in a format that allowed a single income statement to combine =
only the operating models of each company, and exclude the actual costs =
of making the merger. =20
Under the pro-forma for merger guidelines, pro-forma calculations =
could only be used for one year, after which the company should start =
reporting as-reported earnings for the combined entities. =20
However, companies soon learned that as long as they made a new =
merger each year, they could continue reporting pro-forma earnings =
indefinitely. This "flexibility" in how earnings could be reported led =
to "pro-forma" meanings that were never intended, including stock option =
compensation expenses and R&D "in-progress" write-offs. =20
The Erosion of Earnings Confidence
The now long-departed CFO of Amazon.com, Joy Covey, was the unsung =
hero of bringing pro-forma earnings to the popularity they enjoyed. She =
did so by diverting attention away from standardized earnings reports. =20
Ms. Covey invented the concept of "EBITMA" which was defined =
"EBITDA plus marketing." She was successful in convincing Wall Street =
that marketing costs were equivalent to capital investment, a concept =
which looks ridiculous in retrospect. But in the early days of the =
internet, marketing and brand development was equated with capturing =
"territory" which, presumably, everyone thought could never be lost. =
(Tell that to investors in Excite.) =20
Nevertheless, Joy Covey was successful in convincing investors, =
particularly convertible bond investors, to focus on the EBITMA concept. =
It was a crucial element in selling the $2 billion in Amazon.com bonds =
that built the company. After all, if you ignore the interest payments =
on the bond, and you consider spending the bond principal on marketing =
as "not an expense," Amazon's income statement would look great!. =20
The problem, of course, is that bond holders don't care about =
earnings statements. They just care about the payments. The jury is =
still out on whether Amazon.com will eventually be able to pay the =
principal on their bonds. (See the Stock Brief of: 14-May-01 =
Amazon.com's Bond Problem.=20
After Joy Covey established the principle of EBITMA, internet =
companies began using all types of non-earnings related statistics to =
show growth. Page views, registered users, unique monthly visitors are =
just some of the meaningless examples that became popular. (Surely you =
remember.) =20
When "non-revenue statistics" becoming drivers of stock prices, =
(around 1998) pro-forma earnings increased in popularity. After all, a =
pro-forma income statement that showed some kind of earnings progress =
looked a lot more "real" than the phony statistics being coughed up by =
internet companies. =20
But when the bubble collapsed, everyone began questioning earnings =
quality. It didn't happen overnight, and it didn't happen all at once. =
But as a long, slow evolutionary force, earnings confidence has eroded, =
and is still present today. =20
The Aftermath
The evolution of earnings focus over the past 10 years has led us =
to today's situation: a basic lack of confidence in many companies =
income statements. =20
Amazon.com still reports earnings on a pro-forma basis. In their =
Q1 income statement, you can take your choice of earnings: =20
a.. Pro-forma: $25 million profit =20
b.. Operating: $2 million profit =20
c.. Net (as-reported): $(23) million loss =20
The earnings format you choose is not relevant, frankly. It is far =
more important to the stock value what format the guy next to you =
chooses.=20
After all, value to you is primarily determined by what someone =
else will pay, not by what you pay. =20
Even GE
Even solid companies like General Electric have come under =
scrutiny because of the extremely complex financial situations. =
Unraveling a GE earnings report has now become a major task. Where GE =
only had to beat earnings estimates by $0.01 each quarter to count on an =
ever increasing stock price, today that is not enough. =20
GE stock is down 50% in the last two years despite having only =
missed one earnings estimate in the last four years and having continual =
year-over-year growth in earnings averaging 15%. =20
This bears repeating: GE, as representative a stock as you can get =
of the overall economy, is down 50% since September 2000. During that =
time period, they have grown earnings at over 11% (year-to-year basis) =
and beat or met earnings estimates every quarter except one. The one =
shortfall was October 2001, the quarter of the Attack on America and GE =
was only one penny short. =20
Why can't GE get any respect? The only definable long-term culprit =
is a decline in confidence in GE's earnings numbers. During the same =
eight quarter time-period, GE revenue growth rate has been consistently =
falling. From a growth rate of 24% and 20% in 00Q1 and 00Q2, growth has =
steadily fallen, and even was negative for most of 2001. =20
Flat or declining revenue combined with continuing increasing =
earnings leads to only one conclusion: you can't keep this up forever. =
Eventually, GE will be unable to book the earnings number higher than =
previous years. When (if), that happens, GE stock will be further =
devastated. Until then, the slow erosion of confidence causes the stock =
price to decline. =20
GE is just one good example of how confidence in earnings numbers =
has been eroding over time since the bubble collapse. Until greater =
confidence in earnings numbers is established, you can expect further =
difficulties in the market overall. =20
Standard & Poors is now pushing for a standardized calculation for =
earnings reporting, called Core Earnings. We will have more on this =
concept in Part II of this story, to appear later this week. =20
Comments may be emailed to the author, Robert V. Green, at =
rvgreen@briefing.com
=20
- ----- Original Message -----
From: Winston Little
To: canslim@lists.xmission.com
Sent: Friday, June 28, 2002 9:47 AM
Subject: Re: [CANSLIM] Now Xerox?
They all used EBITDA.. which Warren Buffett in May said is the currency =
of a=20
crook ... they all have a smell about them.=20
- ----- Original Message -----=20
From: "Kelly Short" <kelly.short@neoris.com>=20
To: <canslim@lists.xmission.com>=20
Sent: Friday, June 28, 2002 9:46 AM=20
Subject: [CANSLIM] Now Xerox?=20
=20
Enron, WorldCom- nothing. Xerox off by $6B. (Yes- that's "B" as in boy!) =
Kelly=20
=20
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<DIV><FONT face=3DArial>Ernie, I agree in part, history does tend to =
repeat=20
itself, so claims of somehow "this time it is different" has to be taken =
with a=20
large grain of salt. On the other hand, times are indeed changing, just =
as they=20
have for several hundred years. During my years as an active stock =
broker, I had=20
clients in about 20 states, so got a lot of feedback on a very human =
level from=20
all parts of the country. My assessment of sentiment, and "M", was =
influenced by=20
that very subjective feedback. I regularly talked with all my clients, =
and often=20
not about their holdings as much as their investment goals, risk =
tolerance, etc.=20
I taught them to focus more on the overall performance of their =
portfolio than=20
on individual stock performance. I also observed a steady erosion of the =
percentage of clients willing to invest in individual stocks while =
seeing a=20
greater willingness to buy funds. Many people simply don't have the time =
to do=20
the work that individual stocks take, preferring instead to leave =
management,=20
and research, and decision making, up to the "professionals". =
</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Even today I still have a lot of people asking =
me for=20
advice on which funds they should buy, or whether they should hold the =
ones they=20
already own. My answer is simple, and consistent, they need to determine =
their=20
own investment goals, and risk tolerance, then select a class of funds =
that meet=20
that criteria. I also remind them to always review fund performance over =
a 3 to=20
5 year period, nothing shorter. I know many people with substantial =
money in=20
funds that have not looked at a chart of the DOW, or the S&P500, in =
over a=20
year. They just keep adding to their funds regularly and don't worry =
about what=20
the market is doing day to day, or weekly, or even monthly.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>I also think investors that wish to be are =
better informed=20
these days. Part of that is the internet, part is simply being more=20
sophisticated in understanding investing. All of this contributes, in my =
opinion, to a higher percentage of "active" investors paying far less =
attention=20
to the market's overall performance, and thus less affected by=20
"fear".</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV style=3D"FONT: 10pt arial">----- Original Message -----=20
<DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20
title=3DErnie.Hill@ElPaso.com =
href=3D"mailto:Ernie.Hill@ElPaso.com">Hill, Ernie</A>=20
</DIV>
<DIV><B>To:</B> <A title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:'canslim@lists.xmission.com'">'canslim@lists.xmission.com'=
</A>=20
</DIV>
<DIV><B>Sent:</B> Friday, June 28, 2002 6:47 PM</DIV>
<DIV><B>Subject:</B> RE: [CANSLIM] Now Xerox?</DIV></DIV>
<DIV><BR></DIV>
<DIV class=3DSection1>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt">Sam<o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt">You,=20
IMHO are of course right.<o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt">The=20
mantra of =93this time it is different=94 to me is a little humorous. I =
can=92t help=20
but smile as I write this (guess I am a little sadistic). History =
repeats itself=20
because of human nature, and part of human nature is the arrogant idea =
that we=20
some how have it all figure out better than those who preceded us. The=20
psychology of freely traded markets will never change, and while I have =
no=20
historical reference I am sure that in past investment bubbles there =
were plenty=20
of people who believed =93this time it is=20
different=94.<o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt">My=20
reference to arrogance was not directed at any individual in this group, =
rather=20
I was speaking of the mass psychology of the investment community that =
propelled=20
our recently busted bubble.<o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt">E=20
<o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal><SPAN class=3DEmailStyle18><FONT face=3DArial =
color=3Dblue=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial; =
mso-bidi-font-size: 12.0pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></SPAN></P>
<P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3DTahoma =
color=3Dblack=20
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Tahoma">-----Original=20
Message-----<BR><B><SPAN style=3D"FONT-WEIGHT: bold">From:</SPAN></B> =
Sam Funchess=20
[mailto:sam5@mindspring.com]<BR><B><SPAN=20
style=3D"FONT-WEIGHT: bold">Sent:</SPAN></B> Friday, June 28, 2002 4:26=20
PM<BR><B><SPAN style=3D"FONT-WEIGHT: bold">To:</SPAN></B>=20
canslim@lists.xmission.com<BR><B><SPAN=20
style=3D"FONT-WEIGHT: bold">Subject:</SPAN></B> Re: [CANSLIM] Now=20
Xerox?</SPAN></FONT></P>
<P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt"><![if =
!supportEmptyParas]><![endif]> <o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
color=3Dblack size=3D3><SPAN style=3D"FONT-SIZE: 12pt; COLOR: =
black">Winston,=20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times New Roman" =
color=3Dblack=20
size=3D3><SPAN style=3D"FONT-SIZE: 12pt; COLOR: black">The way I read =
your statement=20
is that, This time is different. We can not look to history to =
provide an=20
accurate view of our current economic times. I ask, were you =
thinking the=20
same thoughts in 1999 as the market was going ever higher? Was the =
speculation bubble any different then than any other time? I think =
the=20
past 2 years has told us that this bubble was no different. It is =
always=20
nice to think that this time is different but haw many times has it =
been? =20
Sure our society has been trained to believe in the long term fund and =
that over=20
time it will average out. I ask you, the fund managers are just as =
scared=20
if not more so in today's current economic time. Who pay's the =
fund=20
managers their large salary. It is you and whoever invests in =
their=20
fund. If you have poor performance over several years, you have a =
large=20
likelihood that your customers will leave. So you are fearful that =
you=20
will not come close to the averages and lose your customers and =
therefore your=20
job. The thirty something's like myself are in for the long =
haul. =20
How about those investors that are in their 50's (what percentage of the =
population is 50 or older? A Large Percentage!) They have =
watched=20
their portfolio shrink dramatically over the past couple of years and =
they will=20
become scared enough to remove their cash from funds. When will =
that=20
be? When fear has hit the market. Everybody, young and old, =
are=20
still waiting for the market to continue its "normal upward movement" =
and at=20
some point people will begin to question if the market is a good place =
to keep=20
their investment or is it better to plow all their money into a larger=20
house. Unless of course, the market begins its upward trend. =
Ask=20
anybody you know that is older than 50 who has large mutual fund =
holdings if=20
they have moved any of their money or if they intend to in the near=20
future. Please let the group know your answer. <BR><BR>Your =
comment to the=20
"</SPAN></FONT><FONT color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black">The larger population of =
individuals will=20
also contain a larger number of people who know no fear." This seems =
irrational=20
at first sight as averages stay relatively the same. As the =
population=20
grows, wouldn't it be reasonable to expect that the same percentage of =
risk=20
takers will be born? Why would the larger population mean that =
there is a=20
larger population of risk takers?</SPAN></FONT><FONT color=3Dblack><SPAN =
style=3D"COLOR: black"> </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times New Roman" =
color=3Dblack=20
size=3D3><SPAN style=3D"FONT-SIZE: 12pt; COLOR: black">This being said, =
I think that=20
anybody who believes "this time is different" is fooling themselves and =
being=20
wishful. If you are a value investor for the long haul, you should =
be=20
buying everything that you have researched and like at a maddening =
pace. =20
Are you? Are you selling? </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times New Roman" =
color=3Dblack=20
size=3D3><SPAN style=3D"FONT-SIZE: 12pt; COLOR: black">What is the =
general market=20
tell you? I read and have read for the past 2 years to be in =
cash. =20
That is where I have been and am enjoying using my cash for other =
non-stock=20
market investments. I have kept two investments in small =
portfolios only=20
because I have been too lazy to remove them. i kick myself for =
being so=20
lazy as I have lost a decent amount of money. Oh well. The =
market=20
told me to get out and stay out for the time being. </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times New Roman" =
color=3Dblack=20
size=3D3><SPAN style=3D"FONT-SIZE: 12pt; COLOR: black">Sam <BR>Winston =
Little wrote:=20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"MARGIN-LEFT: 1in; MARGIN-RIGHT: 0.5in; mso-margin-top-alt: =
auto; mso-margin-bottom-alt: auto"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black"> </SPAN></FONT><FONT =
color=3Dblack=20
size=3D2><SPAN style=3D"FONT-SIZE: 10pt; COLOR: black">"The market =
always climbs a=20
wall of worry" is an old familiar saying.</SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black"> </SPAN></FONT><FONT color=3Dblack =
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black">In 1965 only 10% of the =
population=20
invested in the market.(Just over 50% of trading volume was by =
individuals)The=20
participation grew to 60% of the population in April 2002 (either =
directly or=20
through retirement/mutual funds). The volume due to individuals fell to =
under=20
20%.</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black"> </SPAN></FONT><FONT color=3Dblack =
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black">Fund managers may not have the =
same fear=20
as an individual (it is not HIS/HER money, but YOURS!)The larger =
population of=20
individuals will also contain a larger number of people who know no =
fear.Thus I=20
wonder if the exhibition of fear will be as large or severe as in the=20
past.</SPAN></FONT><FONT color=3Dblack><SPAN style=3D"COLOR: =
black"> =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<DIV=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: black =
1.5pt solid; PADDING-TOP: 0in; BORDER-BOTTOM: medium none">
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial">----- =
Original Message=20
- -----</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; BACKGROUND: #e4e4e4; PADDING-BOTTOM: =
0in; MARGIN-LEFT: 75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: =
0.5in; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: =
auto; mso-margin-bottom-alt: auto; mso-border-left-alt: solid black =
1.5pt; mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">
<DIV style=3D"font-color: black">From:</SPAN></FONT></B><FONT =
face=3DArial=20
color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> <A=20
title=3Dsam5@mindspring.com href=3D"mailto:sam5@mindspring.com">Sam=20
Funchess</A></SPAN></FONT></DIV><FONT face=3DArial color=3Dblack =
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT>
<P></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">To:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> <A=20
title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</SPAN></FONT><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">Sent:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> Friday, =
June 28, 2002=20
3:36 PM</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">Subject:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> Re: =
[CANSLIM] Now=20
Xerox?</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black"> Canslim Members, =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Been a while since my last post. =
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">With that being said, I think =
the=20
"scandal's" are very good for the long term benefit of CANSLIMers and =
the=20
market. Its been a while since I've read HTMMIS so I can't quote =
chapters=20
or such, but I recall him talking a lot about the fear factor. We =
have not=20
had the "Fear" in the market yet. I think that there is no =
sustainable=20
upside to the market until the fear has hit the market. =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Just my thoughts. =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Sam </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Katherine Malm wrote: =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></DIV>
<DIV=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: black =
1.5pt solid; PADDING-TOP: 0in; BORDER-BOTTOM: medium none">
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
111.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Here's some background on =
earnings from=20
Briefing.com for those less familiar with EBITDA, etc. --Katherine PS =
Xerox's=20
accounting woes go back *years*.... =
P-U....=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></DIV>
<TABLE=20
style=3D"MARGIN-LEFT: 111.75pt; WIDTH: 100%; mso-padding-alt: 3.0pt =
3.0pt 3.0pt 3.0pt; mso-cellspacing: 0in"=20
cellSpacing=3D0 cellPadding=3D0 width=3D"100%" border=3D0>
<TBODY>
<TR>
<TD=20
style=3D"PADDING-RIGHT: 3pt; PADDING-LEFT: 3pt; PADDING-BOTTOM: 3pt; =
PADDING-TOP: 3pt">
<P class=3DMsoNormal style=3D"MARGIN-BOTTOM: 12pt; TEXT-ALIGN: =
center"=20
align=3Dcenter><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black"><BR=20
style=3D"mso-special-character: line-break"><![if =
!supportLineBreakNewLine]><BR=20
style=3D"mso-special-character: =
line-break"><![endif]></SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></TD></TR>
<TR>
<TD=20
style=3D"PADDING-RIGHT: 3pt; PADDING-LEFT: 3pt; PADDING-BOTTOM: 3pt; =
PADDING-TOP: 3pt">
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The Earnings Confidence =
Problem -=20
Part I</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></TD></TR>
<TR>
<TD=20
style=3D"PADDING-RIGHT: 3pt; PADDING-LEFT: 3pt; PADDING-BOTTOM: 3pt; =
PADDING-TOP: 3pt">
<P class=3DMsoNormal><B><FONT face=3DVerdana color=3Dblack =
size=3D1><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 7.5pt; COLOR: black; =
FONT-FAMILY: Verdana">25-Jun-02=20
14:18 ET</SPAN></FONT></B><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></TD></TR>
<TR style=3D"HEIGHT: 6pt" height=3D8>
<TD=20
style=3D"PADDING-RIGHT: 3pt; PADDING-LEFT: 3pt; PADDING-BOTTOM: 3pt; =
PADDING-TOP: 3pt; HEIGHT: 6pt"=20
height=3D8>
<P class=3DMsoNormal><![if =
!supportEmptyParas]><![endif]> <FONT=20
face=3D"Times New Roman" color=3Dblack size=3D1><SPAN=20
style=3D"FONT-SIZE: 6pt; COLOR: black; mso-bidi-font-size: 12.0pt; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P></TD></TR>
<TR>
<TD=20
style=3D"PADDING-RIGHT: 3pt; PADDING-LEFT: 3pt; PADDING-BOTTOM: 3pt; =
PADDING-TOP: 3pt">
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">[BRIEFING.COM - Robert V. =
Green] In=20
the midst of the more scandalous market problems, the earnings =
confidence=20
problem is not receiving the attention it should. Here is more on =
the=20
topic. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<H3><B><FONT face=3D"Times New Roman" color=3Dblack size=3D4><SPAN =
style=3D"FONT-SIZE: 13.5pt; COLOR: black">The Market=20
Problems</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></B></H3>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The current market suffers =
from the=20
following ailments: </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<UL type=3Ddisc>
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l1 level1 lfo1; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Distrust of management - =
from=20
excessive comp to outright fraud. Tyco is the best=20
example. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l1 level1 lfo1; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Distrust of accounting - =
Andersen </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l1 level1 lfo1; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Distrust of analysts -=20
Blodgett </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
</LI></UL>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">These three problems get =
all the=20
press and attention. </SPAN></FONT><FONT color=3Dblack><SPAN =
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">But a deeper problem is =
afflicting=20
the buy side - a growing concern about the validity of earnings=20
reporting. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<H3><B><FONT face=3D"Times New Roman" color=3Dblack size=3D4><SPAN =
style=3D"FONT-SIZE: 13.5pt; COLOR: black">The Earnings=20
Problem</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></B></H3>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Accounting rules have =
always been=20
flexible enough to allow most companies a far amount of =
flexibility both=20
in revenue recognition and expense recognition. Even when earnings =
reporting was somewhat standardized, some companies were =
criticized for=20
how they recognized revenue and expense. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">But in the last five =
years, the=20
<I><SPAN style=3D"FONT-STYLE: italic">types</SPAN></I> of earnings =
that=20
companies have driven Wall Street to focus upon have become=20
questionable. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">There are four different =
basic types=20
of earnings today: </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<UL type=3Ddisc>
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l2 level1 lfo2; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">GAAP earnings: Generally =
Accepted=20
Accounting Principles - A standards board that publishes rules =
on how=20
expenses should be booked. Generally, all types of expenses are=20
deducted. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l2 level1 lfo2; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">As reported: Earnings =
excluding=20
extraordinary items (as defined by GAAP), changes in accounting =
charges,=20
charges related to discontinued operations (plant closings,=20
etc.) </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l2 level1 lfo2; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Operating earnings: As =
reported=20
earnings but excluding "one-time" charges which do not fit the =
GAAP=20
definition of "extraordinary" </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l2 level1 lfo2; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Proforma earnings: =
Loosely defined=20
"as if" analysis. Originally designed to provide comparison data =
for=20
mergers. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
</LI></UL>
<P class=3DMsoNormal><B><FONT face=3D"Times New Roman" =
color=3Dblack=20
size=3D3><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 12pt; COLOR: =
black">GAAP</SPAN></FONT></B><FONT=20
color=3Dblack><SPAN style=3D"COLOR: black"> accounting principles =
are=20
guidelines for accountants, not investors. The GAAP standards are=20
guidelines for how a company should keep its books, not how the =
company=20
should report earnings. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">For example, a basic =
principle=20
behind GAAP is that revenue must be booked over the time period =
for which=20
services and product are delivered. If a two year $200,000 =
contract is=20
pre-paid in cash, up front, the entire $200,000 cannot be booked =
in the=20
quarter in which the contract is signed. However, the revenue does =
not=20
have to be booked as $25,000 per quarter for two years. A fair =
amount of=20
flexibility, sometimes negotiated by auditors, is possible for how =
much of=20
a contract can be booked in each quarter. =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">GAAP covers expenses as =
well as=20
revenues, of course. </SPAN></FONT><FONT color=3Dblack><SPAN =
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><B><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 12pt; COLOR: black">As=20
reported</SPAN></FONT></B><FONT color=3Dblack><SPAN =
style=3D"COLOR: black">=20
earnings are the historical standard for earnings. Until the =
mid-eighties,=20
in fact, there was little debate over how earnings should be =
reported as=20
everyone used "as reported" earnings as a standard. For the most =
part,=20
there was no difference between "as reported" earnings and any =
other=20
methodology because one-time charges were not as common. =
Furthermore,=20
companies did not actively seek, as they do today, to have certain =
expenses classified as "one-time." </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><B><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 12pt; COLOR: =
black">Operating=20
earnings</SPAN></FONT></B><FONT color=3Dblack><SPAN =
style=3D"COLOR: black">=20
are designed to allow comparisons between quarters and years for a =
company. One time charges in any quarter are excluded because =
these would=20
distort the comparison. Operating earnings became important when =
it became=20
clear that Wall Street would completely ignore any "one-time" =
charges, and=20
focus solely on earnings growth. This provided a strong incentive =
for=20
companies to classify large expenses as one-time charges. =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">An example of one =
company's=20
aggressive attempt to get charges classified as one-time was =
Excite's 1997=20
$40 million marketing deal with Netscape. Now long forgotten, =
Excite paid=20
Netscape up-front for a four-year deal to be the principal search =
engine=20
at the Netscape web site. Excite tried to classify the entire $40 =
million=20
payment as a one-time charge in a single quarter. By doing so, =
Excite was=20
almost profitable. At Briefing we highlighted this event as an =
indicator=20
of the times. The SEC later forced Excite to restate the payment =
as a=20
four-year expense. But many, many companies were successful in =
getting=20
major expense outlays classified as "one-time" which improved =
income=20
statements. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The focus on operating =
expenses led=20
to the development of the "EBITDA" concept, which is "Earnings =
Before=20
Interest, Taxes, Depreciation, and Amortization." The EBITDA =
concept,=20
which has to be calculated from the line items shown on an =
operating=20
earnings report, was designed to show the basic business model of =
the=20
company, without regard to cost-of-capital. If capital were free, =
then=20
EBITDA would be earnings. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The focus on EBITDA has =
fallen from=20
favor in recent times for one single reason: <I><SPAN=20
style=3D"FONT-STYLE: italic">Interest.</SPAN></I> The interest =
payments on=20
bonds, which are excluded from EBITDA calculations, has ruined =
many=20
debt-ridden. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Only through focusing on =
EBITDA=20
projections could a company like Exodus Communications raise so =
much debt=20
that their interest payments exceeded their gross margin. That =
won't=20
happen again for decades. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><B><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 12pt; COLOR: =
black">Pro-forma=20
earnings</SPAN></FONT></B><FONT color=3Dblack><SPAN =
style=3D"COLOR: black">=20
are very hard to define today. The original purpose of pro-forma =
earnings=20
calculations was to show the effects of a merger in a format that =
allowed=20
a single income statement to combine only the operating models of =
each=20
company, and exclude the actual costs of making the merger. =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Under the pro-forma for =
merger=20
guidelines, pro-forma calculations could only be used for one =
year, after=20
which the company should start reporting as-reported earnings for =
the=20
combined entities. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">However, companies soon =
learned that=20
as long as they made a new merger each year, they could continue =
reporting=20
pro-forma earnings indefinitely. This "flexibility" in how =
earnings could=20
be reported led to "pro-forma" meanings that were never intended,=20
including stock option compensation expenses and R&D =
"in-progress"=20
write-offs. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<H3><B><FONT face=3D"Times New Roman" color=3Dblack size=3D4><SPAN =
style=3D"FONT-SIZE: 13.5pt; COLOR: black">The Erosion of Earnings=20
Confidence</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></B></H3>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The now long-departed CFO =
of=20
Amazon.com, Joy Covey, was the unsung hero of bringing pro-forma =
earnings=20
to the popularity they enjoyed. She did so by diverting attention =
away=20
from standardized earnings reports. </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Ms. Covey invented the =
concept of=20
"EBITMA" which was defined "EBITDA plus marketing." She was =
successful in=20
convincing Wall Street that <I><SPAN style=3D"FONT-STYLE: =
italic">marketing=20
costs were equivalent to capital investment,</SPAN></I> a concept =
which=20
looks ridiculous in retrospect. But in the early days of the =
internet,=20
marketing and brand development was equated with capturing =
"territory"=20
which, presumably, everyone thought could never be lost. (Tell =
that to=20
investors in Excite.) </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Nevertheless, Joy Covey =
was=20
successful in convincing investors, particularly convertible bond=20
investors, to focus on the EBITMA concept. It was a crucial =
element in=20
selling the $2 billion in Amazon.com bonds that built the company. =
After=20
all, if you ignore the interest payments on the bond, and you =
consider=20
spending the bond principal on marketing as "not an expense," =
Amazon's=20
income statement would look great!. </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The problem, of course, is =
that bond=20
holders don't care about earnings statements. They just care about =
the=20
payments. The jury is still out on whether Amazon.com will =
eventually be=20
able to pay the principal on their bonds. (See the Stock Brief of: =
<A=20
=
href=3D"http://www.briefing.com/scripts/sub/stocks/PowerAnchor.asp?varArt=
icleID=3DSB20010514082806rvgreen">14-May-01=20
Amazon.com's Bond Problem.</A> </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">After Joy Covey =
established the=20
principle of EBITMA, internet companies began using all types of=20
non-earnings related statistics to show growth. Page views, =
registered=20
users, unique monthly visitors are just some of the meaningless =
examples=20
that became popular. (Surely you remember.) =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">When "non-revenue =
statistics"=20
becoming drivers of stock prices, (around 1998) pro-forma earnings =
increased in popularity. After all, a pro-forma income statement =
that=20
showed <I><SPAN style=3D"FONT-STYLE: italic">some kind of=20
earnings</SPAN></I> progress looked a lot more "real" than the =
phony=20
statistics being coughed up by internet companies. =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">But when the bubble =
collapsed,=20
<I><SPAN style=3D"FONT-STYLE: italic">everyone </SPAN></I>began =
questioning=20
earnings quality. It didn't happen overnight, and it didn't happen =
all at=20
once. But as a long, slow evolutionary force, earnings confidence =
has=20
eroded, and is still present today. </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<H3><B><FONT face=3D"Times New Roman" color=3Dblack size=3D4><SPAN =
style=3D"FONT-SIZE: 13.5pt; COLOR: black">The =
Aftermath</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></B></H3>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The evolution of earnings =
focus over=20
the past 10 years has led us to today's situation: a basic lack of =
confidence in many companies income statements. =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Amazon.com still reports =
earnings on=20
a pro-forma basis. In their Q1 income statement, you can take your =
choice=20
of earnings: </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<UL type=3Ddisc>
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l0 level1 lfo3; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Pro-forma: $25 million=20
profit </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l0 level1 lfo3; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Operating: $2 million=20
profit </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
<LI class=3DMsoNormal=20
style=3D"mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; =
mso-list: l0 level1 lfo3; tab-stops: list .5in"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Net (as-reported): $(23) =
million=20
loss </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT>=20
</LI></UL>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">The earnings format =
<I><SPAN=20
style=3D"FONT-STYLE: italic">you choose</SPAN></I> is not =
relevant, frankly.=20
It is far more important to the stock value what format <I><SPAN=20
style=3D"FONT-STYLE: italic">the guy next to you =
chooses.</SPAN></I>=20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">After all, value <I><SPAN=20
style=3D"FONT-STYLE: italic">to you</SPAN></I> is primarily =
determined by=20
what someone else will pay, not by what you pay. =
</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<H3><B><FONT face=3D"Times New Roman" color=3Dblack size=3D4><SPAN =
style=3D"FONT-SIZE: 13.5pt; COLOR: black">Even =
GE</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></B></H3>
<P class=3DMsoNormal><FONT face=3D"Times New Roman" color=3Dblack =
size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Even solid companies like =
General=20
Electric have come under scrutiny because of the extremely complex =
financial situations. Unraveling a GE earnings report has now =
become a=20
major task. Where GE only had to beat earnings estimates by $0.01 =
each=20
quarter to count on an ever increasing stock price, today that is =
not=20
enough. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><I><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black; FONT-STYLE: italic">GE =
stock is down=20
50% in the last two years despite having only missed one earnings =
estimate=20
in the last four years and having continual year-over-year growth =
in=20
earnings averaging 15%. </SPAN></FONT></I><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black"> </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">This bears repeating: GE, =
as=20
representative a stock as you can get of the overall economy, is =
down 50%=20
since September 2000. During that time period, they have grown =
earnings at=20
over 11% (year-to-year basis) and beat or met earnings estimates =
every=20
quarter except one. The one shortfall was October 2001, the =
quarter of the=20
Attack on America and GE was only one penny short. =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Why can't GE get any =
respect? The=20
only definable long-term culprit is a decline in confidence in =
GE's=20
earnings numbers. During the same eight quarter time-period, GE =
revenue=20
growth rate has been consistently falling. From a growth rate of =
24% and=20
20% in 00Q1 and 00Q2, growth has steadily fallen, and even was =
negative=20
for most of 2001. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Flat or declining revenue =
combined=20
with continuing increasing earnings leads to only one conclusion: =
<I><SPAN=20
style=3D"FONT-STYLE: italic">you can't keep this up forever.=20
</SPAN></I>Eventually, GE will be unable to book the earnings =
number=20
higher than previous years. When (if), that happens, GE stock will =
be=20
further devastated. Until then, the slow erosion of confidence =
causes the=20
stock price to decline. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">GE is just one good =
example of how=20
confidence in earnings numbers has been eroding over time since =
the bubble=20
collapse. Until greater confidence in earnings numbers is =
established, you=20
can expect further difficulties in the market overall. =20
</SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Standard & Poors is =
now pushing=20
for a standardized calculation for earnings reporting, called Core =
Earnings. We will have more on this concept in Part II of this =
story, to=20
appear later this week. </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P><FONT face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Comments may be emailed to =
the=20
author, Robert V. Green, at <A=20
=
href=3D"mailto:rvgreen@briefing.com">rvgreen@briefing.com</A></SPAN></FON=
T><!--(RVG)--><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></TD></TR></TBODY></TABLE>
<DIV=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: black =
1.5pt solid; PADDING-TOP: 0in; BORDER-BOTTOM: medium none">
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial">----- =
Original Message=20
- -----</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; BACKGROUND: #e4e4e4; PADDING-BOTTOM: =
0in; MARGIN-LEFT: 115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; =
PADDING-TOP: 0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">
<DIV style=3D"font-color: black">From:</SPAN></FONT></B><FONT =
face=3DArial=20
color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> <A=20
title=3Dwlittle1@peoplepc.com =
href=3D"mailto:wlittle1@peoplepc.com">Winston=20
Little</A></SPAN></FONT></DIV><FONT face=3DArial color=3Dblack =
size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT>
<P></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">To:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> <A=20
title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</SPAN></FONT><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">Sent:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> Friday, =
June 28, 2002=20
9:47 AM</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: =
Arial">Subject:</SPAN></FONT></B><FONT=20
face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial"> Re: =
[CANSLIM] Now=20
Xerox?</SPAN></FONT><FONT face=3DArial color=3Dblack size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Arial; =
mso-color-alt: windowtext"><o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black"> They all used EBITDA.. =
which Warren=20
Buffett in May said is the currency of a <BR>crook ... they all have a =
smell=20
about them. </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">----- Original Message ----- =
<BR>From:=20
"Kelly Short" <<A=20
href=3D"mailto:kelly.short@neoris.com">kelly.short@neoris.com</A>> =
<BR>To:=20
<<A=20
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
>=20
<BR>Sent: Friday, June 28, 2002 9:46 AM <BR>Subject: [CANSLIM] Now =
Xerox?=20
<BR> </SPAN></FONT><FONT color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Enron, WorldCom- nothing. Xerox =
off by=20
$6B. (Yes- that's "B" as in boy!) </SPAN></FONT><FONT =
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P>
<P=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
115.5pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 1in; PADDING-TOP: 0in; =
BORDER-BOTTOM: medium none; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">Kelly =
<BR> </SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></DIV>
<DIV=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: black =
1.5pt solid; PADDING-TOP: 0in; BORDER-BOTTOM: medium none">
<P class=3DMsoNormal=20
style=3D"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: =
medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: =
75.75pt; BORDER-LEFT: medium none; MARGIN-RIGHT: 0.5in; PADDING-TOP: =
0in; BORDER-BOTTOM: medium none; mso-margin-top-alt: auto; =
mso-margin-bottom-alt: auto; mso-border-left-alt: solid black 1.5pt; =
mso-padding-alt: 0in 0in 0in 4.0pt"><FONT=20
face=3D"Times New Roman" color=3Dblack size=3D3><SPAN=20
style=3D"FONT-SIZE: 12pt; COLOR: black">- -To subscribe/unsubscribe, =
email=20
"majordomo@xmission.com" -In the email body, write "subscribe canslim" =
or=20
- -"unsubscribe canslim". Do not use quotes in your =
email.</SPAN></FONT><FONT=20
color=3Dblack><SPAN=20
style=3D"COLOR: black; mso-color-alt: =
windowtext"><o:p></o:p></SPAN></FONT></P></DIV></DIV><CODE><FONT=20
size=3D3><BR><BR>********************************************************=
**********<BR>This=20
email and any files transmitted with it from the ElPaso <BR>Corporation =
are=20
confidential and intended solely for the <BR>use of the individual or =
entity to=20
whom they are addressed. <BR>If you have received this email in error =
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notify the=20
<BR>sender.<BR>**********************************************************=
********<BR></FONT></CODE>-=20
- -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the email =
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write "subscribe canslim" or -"unsubscribe canslim". Do not use quotes =
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email.</BODY></HTML>
- ------=_NextPart_000_017A_01C21EF0.731C6420--
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- -In the email body, write "subscribe canslim" or
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