Readers Talk Back, May 2001

By TSC Readers ,

TheStreet.com publishes selected emails received by the publication and its staff members. To send an email intended for publication in this section, write to letters@thestreet.com and include your full name and city. Letters may be edited for length, style, clarity and accuracy.

Payable When-Able

Re:

Back to the Grind: Lucent Loan Customer Nears Collapse

Scott Moritz:

Many telco companies became "bankers" to their own customers. They supplied not only goods, but also money to buy those goods, without taking precautions for the customers' creditworthiness -- something a normal banker would do. Their sale was on consignment, rather than an outright sale that generates revenued profit. By reflecting such consignment sales as real sales, companies like

Lucent

(LU)

were booking revenue and profits excessively. This practice amplified their growth factor in earnings -- on which stock price usually depends. Most of such exercises in the telecom sector were aimed to boost the stock prices of respective companies, which created the bubble.

Such consignment sales allowed the customer to follow the policy of "Payable When-able" instead of payable when due. This is nothing unusual. Most of the trading companies fail when they try to fund their customers beyond their means.

It's amazing that big accounting firms auditing companies like Lucent didn't come out with their qualifying report during the last two years. It seems they were adopting a policy of appeasement to retain such valuable clients, by being passive participants in the companies' window dressing. It's time that auditors of such companies were also censured and publicly rebuked by the

SEC

.

--

Anil M. Selarka

(received 5/31)

Patent Prices

Re:

TiVo Leaps on Patents

TSC Staff:

The VCR is dead. Tivo is the new VCR for recording TV. There are no tapes, it's easy to use on screen listings and searches, it has intelligent recording features, etc. How much is the patent worth? I don't know, but how many TVs are there?

-- Richard Rooks

(received 5/25)

Show Me Inflation

Re:

Easing Continues, but Some Worry When Fed Tide Will Turn

Justin Lahart:

Diane Swonk

has been hopelessly wrong about the economy this year. She talks this way now as a way of softening the degree of error she has been under.

Your larger point is the one which is the most dangerous. Whenever the Fed eases, we get this sort of knee-jerk analysis that inflation will come back. The only thing that comes back is another misbegotten interest-rate cycle which causes the global economy to once again be threatened by the down side. Show me the inflation problems of the past 20 years and compare them with various stock market crashes and commodity collapses and their impact on markets.

We did not have an inflation problem last year and we sure as hell do not have one now. People are losing their jobs and their wealth and only an out-of-touch economist like Diane Swonk who wants to be named to the Fed would argue otherwise.

--Tom McIntyre

(received 5/18)

Diggin' Them Apples

Re:

Apple No Bargain as Crunch Time Nears

Tom Lepri:

I'm no financial expert, I'm a techie, but your piece on Apple seemed hostile and wrong-headed. But again, I'm no financial expert. I'm a techie.

My techie eyes see things that analyst eyes do not, or do not see what analyst eyes do. Remember the iMac? Analysts wrote it off for several reasons they thought were obvious. It became a best seller because they did not see the whole picture. A third of iMac sales still go to people who never owned a computer before.

Remember the iBook? Written off by analysts, it was also a best seller. The new model offers a price below $1,300 -- entry level, but no discount and some of the best specs for a portable in that price range -- not even close, in some cases.

Now, about sectors. Here you need to get your logic straight. You can't scatter your comments about the business sector, the education sector and the consumer sector and say they are all critical etc.

Consumer: yes, it is soft and yes, it is a significant part of Apple's market. You got it right.

Education: Apple was slipping, then made a critical error. This is not a 'basic' error; it is correctable.

Business: Not a single market, but a collection.

Portables: The TiBook is a big seller in this market -- not by accident or cute looks.

I'm not a financial expert. I make technology earn its living. Logic works for me, as does history.

--

David Meyer

(received 5/11)

Hold the Mayo

Re:

J.P. Morgan Gets Bumped to Sell as Mayo Clinic on Downgrading Continues

Eric Gillin:

I agree with your assessment of

Mike Mayo's

recent downgrades. But I think the real problem is worse than a mistimed call. Think about it.

Prudential Securities

gets out of the banking business and are now strictly a retail outfit and to show their independence, they actually have sell recommendations being issued by their analysts.

Normally I would commend any firm with the balls to issue a sell recommendation, but this one smells a bit. From what I can figure, Mike Mayo has been bearish on the banks for a while. He's probably feeling a bit cocky as he hasn't gotten his a** handed to him as badly as the rest of the world except, of course, for readers of

TheStreet.com

. But now, after 200 basis points of easing by the

Fed

and the prospect of more to follow, he issues another new sell on a bank. It is almost like he is trying to be the poster child for the new and improved Prudential, a company unswayed by the evils of investment banking clients. This smells like marketing to me. You watch, there will be some mention of his sell recommendations in the next series of ads by Prudential. The clients, of course, will be the ones to suffer.

--

Greg Kvaternik

(received 5/8)

What the Bear Sees

Re:

Why Bears Still See an Economy on the Skids

Jon Markman:

I am solidly in your camp with respect to your analysis on the market. I might add that I think there is a large generational impact to the economy coming with this slowdown -- the Baby Boomers are getting hammered with layoffs. Many of these older workers have hit their lifetime earning peaks. Once laid off they will lose benefits and may not be able to replace prior earning power. Boomers will shift

into a downgear and reduce spending, perhaps for years to come over this loss of wealth.

Fed

cuts are useless in the face of large-scale unemployment. Defaults at banks are yet to come on the scene. While I don't think it will be a 1929 scenario, I fear we have something more dramatic on our hands this time.

-- John Anderson

(received 5/5)

History Lesson

Re:

The Downside of the Tax-Cut Deal

Lee Barney:

Kudos for the all too brief interview with

Kenneth Thomas

. He is the first person I've seen in print who gives a far-reaching and realistic assessment of the likely effects of the

Bush

tax cut. I think Thomas is correct that the result of this boondoggle will be a return to deficits and therefore, predictably higher interest rates. Those in the market who are now lining up at the trough for what intuitively look to be rewarding gains have forgotten the lessons of history. High interest rates make for lower than average stock and housing market gains, all of which will erase the gift now being offered to our wealthiest and least needy. However, it will probably boost campaign treasure chests in the short run.

-- Peter Thom

(received 5/3)

Lee Barney:

Kenneth Thomas gave what sounds like the usual professor/academic response. He told you what happens in theory, never in actuality! You must realize that the government never works for anyone. The taxpayers continually provide the monetary fuel for these ridiculous spending programs, and receive nothing in return. Let the taxes be cut, and let us have some money in our pockets.

-- Charles Peck

(received 5/3)

Loading ...