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The Five Dumbest Things on Wall Street This Week

Earnings before acronyms...; Yahoo!'s lunch pail; bubbling up; hometown papering-over; Capitol Fill of it.

1. A Token of Our Sincere Abbreviation


Securities and Exchange Commission

recently made an important financial pronouncement. Unfortunately, it didn't explain how to pronounce it.

We at the Five Dumbest Things Research Lab are happy to say we have a solution. But first, let's backtrack a little and explain the problem.

TST Recommends

If you've been paying close attention to second-quarter conference calls these past few weeks, perhaps you've noticed that a crucial part of Wall Street life over the past few years is being shoved out the door: EBITDA.

Yes, EBITDA. Earnings before interest, taxes, depreciation and amortization -- that bottom-line yardstick much favored by many companies in many industries without, as judged by generally accepted accounting principles, actual earnings. EBITDA was the hero of profitless prosperity, enabling money-losers to print positive numbers instead of red ink.

But once the life of the party, EBITDA is now as popular as Sam Waksal is at an



board meeting.

And why? Well, we at the lab attribute its ostracism to a document issued last month by the SEC's corporate finance division.

See, on June 13, the SEC's corporate finance division publicly answered a question that no one had definitively answered after lo these many years, we're shocked to say. And that question was this: "How the heck are we supposed to define EBITDA?"

What was even more shocking was the SEC's answer. Essentially, it was this:

"Not the way that most of you companies have been defining it lo these many years".

From the makers of EBITDA

The SEC, you see, thinks that EBITDA is GAAP earnings before interest, taxes, etc. and etc. Meanwhile, since time immemorial, stalwarts such as

AOL Time Warner


had used "EBITDA" as a synonym for operating income before D&A. In other words, according to the SEC's definition, EBITDA would include nonoperating income or losses -- the "other" stuff. But EBITDA under common industry usage would exclude that.

Thus the rush among formerly EBITDA-crazed companies to start talking up a new yardstick: operating income before depreciation and amortization, tentatively abbreviated as O.I.B.D.A.

Thus the issue to which the research lab calls your attention. But now a new problem: How do you pronounce it? "Oyb-duh" is the obvious choice; we at the lab like the friendly sounding inclusion of the Yiddishism "oy."

But Wall Street execs don't seem happy with it. At a meeting with analysts Wednesday, AOL Time Warner CEO Dick Parsons said "oyb-duh" sounded "too New Yorky." He then offered tickets to the forthcoming Part III of the

Lord of the Rings

trilogy to anyone who could come up with better shorthand.

The next day, on



conference call, both CFO Rich Bressler and President Mel Karmazin sounded supportive of Parsons. "I was in favor of going with the non-GAAP term even if it meant Rich was going to jail," said Mel.

So here's our plan. Following up on Parsons' suggestion, we at the research lab hereby launch the second in our occasional series of reader contests: Come up with a better abbreviation for OIBDA, and a better way to say it. We, of course, have already taken a half-hearted stab at the task: "OPerating INcome, Forget About Depreciation and Amortization," or "OPINFADA" for short. But we know you can do better.

Send your entries to The winner, should we select one, is entitled to his or her choice of one of these three volumes in the research lab's library:

Handbook of Internet Stocks -- 1999 Edition


F'd Companies: Spectacular Dot-Com Flameouts

, by Philip J. Kaplan; or an autographed copy of

You Got Screwed!

, by our founder James J. Cramer.

2. Pack It In

No Free Lunch
Boo-hoo to Yahoo! giveaways

Speaking of Yiddishisms, the research lab received a tchotchke in the mail on Monday: A metal lunch pail, courtesy of



. The lunch pail, imprinted with the words "Yahoo! SiteBuilder," along with a miniature foam traffic cone, is accompanied by a press kit publicizing the company's Web site construction tool.

Uh oh. If ever there were an unscientific indicator that Internet stocks have gotten too bubbly, this is it.

It's our fervent belief that the size of knickknacks and other company giveaways that people hand out to reporters is directly proportional to frothiness in the market. How else to explain all the oversized stuff we received during the Great Bull Market -- stuff like our Hambrecht & Quist notebook computer backpack. Our AltaVista "Smart is Beautiful" umbrella. Our Excite@Home picnic blanket.

Big objects imply a lot of time, money and effort spent on mailing out what could have been sheets of paper in a press kit. Big objects are a sign of a belief in inexhaustible resources. Any tchotchke bigger than your fist, in our minds, is a negative indicator.

3. Don't Drink and Fly

Speaking of bubbly markets, now we have to contend with champagne toasts on quarterly conference calls.

Sort of.

As you may recall, last week we mused about

the propriety of analysts' congratulating a company on its quarterly conference call. This week, we've got no congratulations to talk about -- just champagne.

Yes, after

Alaska Airlines

(ALK) - Get Report

on Tuesday surprised on the upside to announce a profitable quarter -- no small achievement in the airline industry these days -- the first analyst to ask a question on the call didn't congratulate the company. Oh, no.

Instead, following the company's formal presentation -- and a short pause, during which listeners could hear someone on the management team pouring himself a drink in close proximity to a speaker phone -- this is how the conversation went:

Bubbly With Enthusiasm
Fulsome praise redux

    Analyst: Oh. Uh. Was that the champagne I heard just pouring?" Management: Laughter It's water... Analyst: OK. Chuckle Not yet -- not yet ready for the champagne, right? Management: No.

In other words, a noncongratulation congratulation. A way to say, "Congratulations on a great quarter, guys," in not those exact words.

Or maybe he really thought they were breaking out the champagne over at Alaska Air's corporate headquarters, where the conference call began at 8:30 a.m. local time. We called him to ask. "That's the most ridiculous question I ever heard in my life. That was a joke," he said.

4. Meet and Greet the Press

Which brings us to our next item.

As we mulled over the conference call "congratulations" issue this week, we began to doubt ourselves. We lab rats are sniping at analysts for congratulating companies because we think they should be objective. But, heck, if they've got a buy rating on a company, what's the point? Why pretend to be on the fence when you've publicly declared you're on the company's side?

Of course, once you start talking about financial reporters on conference calls instead of financial analysts, that whole argument falls apart. Reporters have to be objective -- especially in this post-


age, when the horrific consequences of journalistic cheerleading in the business press have become all too clear.

Yes, reporters are objective. Or so we thought, until we received a letter from Tammy Chase, a reporter at the

Chicago Sun-Times.

We quote, in part: "In my 12 years as a business journalist, I've been on many a call during which some suck-up journalist will congratulate a company for, as they love to say, improving shareholder value. Now, unless I'm a stockholder -- which I can't be if I'm covering a company for a newspaper -- why would I feel compelled to congratulate a CEO?"

We had no answer, of course -- partly because so few companies run conference calls at which members of the press can ask a question in the first place.

What provoked Chase's self-described rant was a Tuesday conference call in which

SBC Communications



EchoStar Communications

(DISH) - Get Report

announced an agreement under which San Antonio-based SBC will market EchoStar's direct broadcast satellite service.

We counted two awkward moments on the SBC/EchoStar call: a "congratulations, guys," from SBC's hometown

San Antonio Express-News

, and a "hello, gentlemen, congratulations on your partnership," from




reporter didn't respond to our email requesting congratulation ruminations. But the


reporter (we're withholding names this week out of professional courtesy, or maybe just out of fear of professional retribution) makes a few points in his own defense: one, "congratulations" isn't something he regularly says; two, the statement was his acknowledgment that SBC had been chasing the deal for some time; and three, it


his intent to comment on the merits of the deal as being a good deal for the company and/or its shareholders.

So be it. Every reporter asks stupid questions now and then. We -- see item No. 3 -- ought to know.

5. Retire When Ready, Gridley

Finally, we were not happy to read about the brouhaha in the House of Representatives late last week.

As reported in

The New York Times

, something akin to a fight broke out between Democrats and Republicans on the House Ways and Means Committee over some closely watched pension legislation.

Democrats complained the Republicans were forcing through last-minute changes to the bill without allowing the Democrats to scrutinize it. Republicans complained that one of the Democrats called one of them a "fruitcake" and a "little wimp." The Republican chairman asked the Capitol police to break up a meeting of the Democrats -- a move that he tearfully acknowledged later was an unfortunate departure from parliamentary procedure.

Uh, guys? Can we get your attention for a second? Uh, did it ever occur to you that you're no longer in fourth grade? That you're in Congress? And that perhaps millions of Americans' retirement is at stake here? You mind growing up for a change?

Of course, maybe our elected representatives don't quite understand the urgency of the issue -- living a retirement that doesn't involve dog food for dinner. After all, members of Congress qualify for a pension after a mere five years on the job, and current retirees are now collecting about $50,000 a year.

Not the Retiring Types
Kindergarten is in session

Here's our solution for the nation's retirement ills, based on an idea we heard 10 years ago about how to fix the health care system: Make Congress' retirement plan mirror the reality of the general public at large. So if, say, 5% of Americans are making the difficult choice between spending money on food and spending money on heat in their golden years, so would a randomly selected 5% of former congressmen.

Faster than you can say "


401(k)," our problems would be solved.

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