"We’ll (Berkshire Hathaway) never buy a company when the managers talk about EBITDA. There are more frauds talking about EBITDA. That term has never appeared in the annual reports of companies like Wal-Mart, General Electric, or Microsoft. The fraudsters are trying to con you or they’re trying to con themselves. Interest and taxes are real expenses. Depreciation is the worst kind of expense: You buy an asset first and then pay a deduction, and you don’t get the tax benefit until you start making money. We have found that many of the crooks look like crooks. They are usually people that tell you things that are too good to be true. They have a smell about them."
From 2002 Berkshire Hathaway Annual Report Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?
Second, unintelligible footnotes usually indicate untrustworthy management. If you can’t understand a footnote or other managerial explanation, it’s usually because the CEO doesn’t want you to. Enron’s descriptions of certain transactions still baffle me.
Finally, be suspicious of companies that trumpet earnings projections and growth expectations. Businesses seldom operate in a tranquil, no-surprise environment, and earnings simply don’t advance smoothly (except, of course, in the offering books of investment bankers).
Why Jim Cramer Says a Bank-Led Market Rally is 'Significant' Valerie Young Follow May 25, 2016 2:07 PM EDT The rally in financial markets on Wednesday, led by bank and technology stocks, is aÂ "significant moment," says TheStreet's Jim Cramer.Â
The S&P 500Â added 0.80%, theÂ Dow Jones Industrial Average popped 0.94%, and the Nasdaq rose 0.83%.Â
"We haven't had that kind of broad-based rally in ages," Cramer said, noting that biotech and health care stocks are gaining as well. "This is the possibility of a powerful" surge upward, he said.Â
The KBW Bank Index, used to track the performance of the banking sector, jumped 1.79%.Â
While Cramer said he's not sure why banks are rallying, he noted that investors may have a positiveÂ outlook on the industry, withÂ Bank of America's (BAC) Â win in a mortgage-fraud caseÂ trumping aÂ poor presentation at Wells Fargo's (WFC) Â annual investor day.Â
"This bank move went on nothing," he added.
A jury verdict againstÂ Charlotte, N.C.-based Bank of America in a mortgage fraud case linked to Countrywide Financial, a lender it acquired in the buildup to the financial crisis, was overturned by a federal appeals court on Monday. The rulingÂ could shield other banks from some litigation expenses related to the crisis.
At investor day, Wells Fargo's executives told investors that the bank is stillÂ struggling with regulatory issues, low interest rates, and loan losses related to the energy sector, which prompted the bank to lower its targeted return on assets to 1.4%, down from the highest range of 1.6% for the year.Â
Another factorÂ influencing the rally could be that crude oil has seen a jump after inventories showed a greater-than-expected decrease. West Texas Intermediate crude oil was up 0.76% to $48.99 a barrel.Â
Ultimately, Cramer said that the rally could be pushed higher if "Janet Yellen says the right thing" as the market prepares for a potential June interest rate hike. Minutes from the Federal Reserve monetary policy committee's most recent meeting, chaired by Yellen, showed members actively considering an increase next month, a move the market hadn't expected until later in the year.
"These are how real rallies start, on nothing," Cramer said. "And then we find out why."
Re price target I have not seen any signal yet to revise target when I last predicted the double bull, lol it's not even a proper term but it has happened. Even the graph shows a shape of a bulls horn. I am away on hols at mo so just look at markets when I'm in hotel room n family a sleep, well after markets have closed. When I'm back in UK I'll look at barc charts.
Picket with regards to Deb I'll have a look when at home. On basic fundamentals it looks interesting, for me the issue with Deb is you can't predict items like refunds they give out or how long they hold stock in warehouse for so hard one to call. Bhs closing should not be a factor as Deb compete with some strong online brands so their business model for me is outdated. But I'll have a look at them.
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