Standard Generally Accepted Accounting Principles (GAAP) are as porous as a sponge and as malleable as cooked spaghetti. However, Wall Street will never abandon, or even modify, the “accountant’s bible,” even though it offers the public no form of reliable accuracy. For example, TransDigm (TDG) reported earnings of 9.1% in 2017, but their TRUE earnings were 67%, due to the fact that $1.8 billion of “intangible assets” were placed in another category on the balance sheet, making the company appear far less efficient. Anyone privy to that discrepancy and purchasing stock that day in 2018, would own stock worth 102% more today. Atlassian (TEAM) had a similarly explained earnings discrepancy that amounted to 28%, after which the stock ran up 564%. Never heard of those companies? How about Netflix (NFLX)? They reported a return on assets of 1.8%, but $2.5 billion worth of “Research and Development” expenses were conveniently listed in another category. Placed in the “appropriate” category, the true return on assets was thirty-three times greater. Had you realized this, even as late as 2013, you could have been party to the stocks’ massive run up.
The problem here is that Netflix wasn’t LYING about its earnings, as the company explained it was forced to put the information into another category by GAAP, a system that allows for hundreds of such errors to accumulate in a company’s earnings statement year over year where market “corrections” are flushed out and accounted for over time. It’s been stated by many industry experts that in order to correct the Netflix report you may have to perform up to 130 different calculations on the balance sheet, which could take weeks. Another example of such misinformation is Ring Central (RNG), which reported a negative return on assets in 2016, 2017 and 2018. Properly adjusted, the report would have reflected gains of 11%, 13%, and 18% respectively. Yet between 2016 and 2018 the stock experienced a 742% gain for no obvious reason, as simple market corrections naturally occurred. Simply put however, there is no legitimate reason to trust information reported by public companies!
Most infuriating of all is to realize that whatever justification is presented, the simple fact of the matter is that people within the company know the truth and to believe that they’re not sharing that information with select outliers seems to me even more ludicrous than the use of GAAP in the first place. With this type of knowledge in hand, it would be very easy for practically anyone to put sizable money on such a stock as Ring and then (as long as you’re not getting caught red handed in a sting operation) nearly impossible to be detected as an inside trader. Meanwhile, Wall Street hums along “as usual,” leaving average investors to simply fend for themselves and hope for the best.
Wall Street is rigged and we know it. The government and Fed are making absolutely no secret about the fact that they are artificially manipulating our “free market” dollar value and very inefficiently I might add. The global and domestic economies have both entered a recessionary period. Unable to count on the government, except on adding to our $22 trillion national debt and unable to trust Wall Street any further than we can throw them, where can the average investor find a safe haven? History tells us very clearly that the obvious answer is gold, silver, and other physical precious metals. Today’s still low prices are just another reason to stock up on the world’s universal currencies and store of value. Don’t wait any longer, call the experts at American Bullion for professional assistance at (800) 653-GOLD (4653).