Thursday, March 09, 2023 9:02:32 PM
The bezzle.
I suspect there will be many more financial shenanigans to be discovered. Not speaking of SIVB or even banks in particular, but just companies in general. Those of us old enough to have gone thru the internet bubble can remember the slow unfolding of discoveries. One day you wake up and read a company is doing something called "vendor financing" where it turns out they weren't selling products for cash, but were financing their customers. All this supposed revenue was in receivables. Sheesh, I didn't know that was going on. Then, oops, turns out it was rampant throughout the tech industry and a lot of the revenue would later be recanted. Then insiders were getting stock options hand over fist, but not expensing them in any way, vastly overstating earnings, leading to higher stock prices. You find one was doing it, then discover it was rampant. Then they'd own shares in companies coming public, purposely with a low float, the stock would skyrocket, and the gains on those shares would be counted as earnings. There was all sorts of shady, questionable stuff. It was boom times.
Good time for all of us to re-read John Kenneth Galbraith's description of what he referred to as "the bezzle" in his book The Great Crash 1929:
I suspect there will be many more financial shenanigans to be discovered. Not speaking of SIVB or even banks in particular, but just companies in general. Those of us old enough to have gone thru the internet bubble can remember the slow unfolding of discoveries. One day you wake up and read a company is doing something called "vendor financing" where it turns out they weren't selling products for cash, but were financing their customers. All this supposed revenue was in receivables. Sheesh, I didn't know that was going on. Then, oops, turns out it was rampant throughout the tech industry and a lot of the revenue would later be recanted. Then insiders were getting stock options hand over fist, but not expensing them in any way, vastly overstating earnings, leading to higher stock prices. You find one was doing it, then discover it was rampant. Then they'd own shares in companies coming public, purposely with a low float, the stock would skyrocket, and the gains on those shares would be counted as earnings. There was all sorts of shady, questionable stuff. It was boom times.
Good time for all of us to re-read John Kenneth Galbraith's description of what he referred to as "the bezzle" in his book The Great Crash 1929:
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