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Summary: What Might Those Quarterly Earnings Mean?
Review: New York Times business reporter Alex Berenson has written a book that every investor should read. "The Number" traces the history of Wall Street trends, bubbles, busts, and the accounting fashions that accompanied them from the 1920s to the present day. He explains how the cult of The Number was born, making quarterly earnings reports the last word on any company's health, and how this facilitated the chicanery at Enron, Tyco, and the scandalously large paydays for incompetent corporate executives that have made headlines across the nation in recent years. "The Number"'s primary focus is actually on the evolution of accounting practices over the past 80 years. Berenson asserts that a disintegration of standards and an increase in conflicts of interest in the accounting profession prevent potential and current shareholders from understanding any company's health or its stock's true value. In other words, accounting slight of hand is such that it would take a detective to figure out if a company is making money or losing it. In explaining how and why, "The Number" gives us a fascinating, very readable history of the numbers and the people behind the trends since this nation first went crazy over the stock market in the 1920s. Mr. Berenson definitely has a viewpoint. He is in favor of stricter regulation for the accounting industry, perhaps more than is necessary or practical. But he makes some good points. And "The Number"'s chronicle of how things are on Wall Street and how they got that way is invaluable for any investor. Alex Berenson's writing is interesting, easy for anyone to understand, and his insights are essential to understanding what quarterly earnings reports do and don't mean, whether they be for big corporations that are the backbone of our economy, or little ones that may make or break your nest egg.
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Summary: Interpretive Accounting... A History
Review: This book takes the reader from the early days of the stock market to the recent scandals of corporate giants such as Enron and Tyco while weaving a common thread of accounting manipulation and political influence (or the lack thereof) of the SEC.Mr. Berenson explains in detail how pressures from a myriad of sources created an environment where investors only focused on earnings, aka "The Number" and how corporate leadership bent the rules to give the investors what they wanted (and helped themselves along the way). This is an enlightening book if you want to learn a little more on the motivation for all those "restated earnings" we all have heard about in the market recently.
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