A Stock Rally on Accounting Errors?
It seems nothing can keep a bad market down. If this bounce goes much higher, we’re going to have to review the laws of financial gravity.
The Dow Jones Industrial Average rallied 115 points in yesterday’s session, bucking Friday’s loss of about the same amount. The S&P 500 and the NASDAQ were stronger still, ending the day up 1.25% and 1.4% respectively.
“What was the good news catalyst for all this optimism?” readers wonder. Glad you asked…
The surge in prices came as Citigroup Inc. – still “limping along” as The Wall Street Journal put it – posted a $7.6 billion net loss in the fourth quarter.
“The bulk of the fourth-quarter net loss stemmed from accounting charges related to Citigroup’s repayment of $20 billion of federal bailout funds late last year,” the WSJ reported. “But excluding that hit, the results still were lackluster. Revenue of $5.4 billion was down about 4% compared with a year earlier.”
The beleaguered giant also ’fessed-up to a series of “accounting errors” involving the way it valued its debt. (Apparently someone forgot to tell Citi that loans are only worth something if they are repaid.) Such figure fiddling led the bank to report a $101 million profit in the third quarter of ’09 when, actually, the company incurred a LOSS of $121 million. Two-hundred and twenty-two million beans seems like an awful lot of beans for a bean counter to misplace. But what’s a few decimal places between friends? We’re sure it was just an honest mistake. (Ahem… “cough”… “choke”…)
One could be forgiven for assuming that such flagrantly erroneous accounting – at a bank, of all places! – might inspire at least a temporary bout of investor caution. Not so fast, Jack. Citi shares ended the day up 3.6%, buoyed by the rising tide of collective, myopic euphoria.
Apparently uninterested by billions in bank losses, investors instead turned their attention the great state of Massachusetts, where the political circus sideshow was in full swing. We’re happy to report that, in the state’s race for senator, Republican Scott Brown took the seat previously held by that bloated “lion,” (lower-case “L”) Ted Kennedy. To be clear, we’re not pro-Brown…or pro-Republicrat…or pro-anything related to the whole charade. As far as we’re concerned, one thief is as bad as the other. That said, we’re all for seeing politicians lock horns in battle. We like watching them gouge at one another’s eyes, and we cheer extra loud for neck cranks, coat hangers and punches below the belt. Our hope is that, as long as they’re beating each other up, they’re less likely to meddle in the lives of honest, hardworking citizens.
In many ways, most politicians are not unlike most household pets: they are entirely dependent on handouts and, if not properly vaccinated and spayed/neutered, they have a tendency to multiply like rabid mongrels. And, when all is said and done, it is we owners who are left to clean up the mess they leave all over the public’s property. Pet owners are advised, therefore, to exercise control. Don’t let your politicians get too long on the leash and never, under any circumstances, forget who is the master of whom.