Weekend Reading: March 30

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Good Sunday morning. Here are some articles and papers that caught my attention this week:

Wars, disease ... all we're missing is pestilence and we would have an unholy stock-market trifecta. Perhaps the current spate of second-guessing and revisionism -- everyone in the U.S. military is now seemingly claiming to have given Donald Rumsfeld strategy/headcount advice that he ignored -- will have to do. That bit of opportunism aside, are there useful parallels between this period and the prior Gulf War go-around in 1991?

An interesting New York Times piece argues those parallels exist -- and notes that Alan Greenspan was in charge both times. There are signs, for example, that weakness in the economy at that time is mirrored in the current economy, with the "soft patch" becoming softer and patchier, and with consumer confidence eroding and unemployment climbing.

Will that mean the end of Greenspan's tenure? The Times piece makes much of the more volatile recent relationship between Greenspan and the administration, with Greenspan criticizing the president's tax-cut plans, and with it likely that rate increases will come around the time of the 2004 presidential elections. The Daily Telegraph makes a similar argument, pointing out that weakness is growing, and it perhaps presages a new global recession.

On a less mopey note, a new paper intrigued me. It tests the idea that managerial accounting choices -- for example, earnings smoothing via accrual accounting -- is related to managerial futzing. In other words, is there any empirical evidence, writ large, that aggressive accounting is associated with companies that engage in chicanery, or managerial opportunism as opposed to shareholder-value maximization, as the academics here put it? The surprising answer: No.

While there are enough caveats and wiggles to provide full-employment for a high school debating team, the gist is that accounting choices don't seem to be a solid indicator of opportunism. Page Herb!

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Paul Kedrosky advises various hedge funds and private equity firms in the U.S. and Europe and serves as an adjunct professor at the University of California in San Diego. Formerly a high-ranked sell-side technology equity analyst, Kedrosky has also started various technology companies and worked in product management at Digital Equipment Corp. At time of publication, Kedrosky had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Kedrosky cannot provide investment advice or recommendations, he welcomes your feedback.