MS, Morgan Stanley, could this be called creative accounting

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Wouldn’t it be nice if all of had the luxury (if you can call it that) of having a loss, while conversely telling the world that we are ahead of the game.  Well that’s pretty much the case as a certain accounting rules allow companies to bend (at least as it’s perceived) their numbers.

Here’s how it plays out, certain companies can (based on these accounting rules) report profits, even when credit defaults are widening.  This is actually a fairly certain sign that the investing public is looking askance (read worried).  This is creative accounting at it’s best giving companies the ability (but certainly not the common sense) to buy back their own debt at a discount, and the difference is marked down as a gain. Hmmmm… pretty interesting accounting there.

Morgan Stanley’s Q2 earnings were marked as a net loss of $1.10 per share, compare that with last year’s numbers of $1.02 per share.

Truth be told most of these bank earning we’ve heard raves about, aren’t necessarily based on (or in) reality. Bank of America and Citigroup’s sold a lot of assets and of course by doing so was able to report stunning numbers. Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) also touched the stratosphere with an equity-raising shindig. Let’s not forget Morgan Stanley who is currently speaking of their losses which are tied to reclaimed investor confidence. "Reality," they say, "can be beaten with enough imagination."  It’s a long time since the movie "Wall Street" where "Greed Was Good", perhaps it’s time for the second installment.

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