Word: enronization
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...FINANCE AND ACCOUNTING H&R Block has been busy hiring 1,200 financial advisers and marketing staff members as it broadens its tax-preparing business. Financial-services firms continue to look for financial planners and asset managers. Despite their role at Enron and in other corporate scandals this year, accounting and auditing are especially attractive fields, expected to grow nearly 20% in the next decade...
...what statisticians call survivor bias: all the stocks in Siegel's pre-1871 index were winners, typically staying in business for at least 17 years. No flops such as canals or wooden turnpikes--just a couple of dozen profitable banks, insurers and railroads. Imagine calculating recent stock returns without Enron, Pets.com and Global Crossing. Would that give an accurate picture? Siegel says in his defense that survivor bias may overstate his 19th century numbers by "1 or 2 points." But Dimson, speaking for his research team, concludes that survivor bias is "highly significant" in the early U.S. data. Even among...
...investing strategy, buy and hold has never been more suspect. Giant companies now collapse in scandal, like Enron; fall woefully behind in technology, like Polaroid; succumb to litigation, like Halliburton (asbestos); or get whacked by overpriced deals, like AOL. Are there still stocks that you can throw in a drawer and sleep well for years? Or has investing got so hopelessly complicated that individuals shouldn't try to go it alone...
TIME: Greedy, deceitful managers like those at Enron pose a risk for buy-and-hold investors. How do you defend against dishonesty...
PILGRIM: The kind of problems we're talking about with Enron--at large companies--is a fairly recent development. But routine efforts to stretch the financial truth, particularly among small companies, have been going on for a long time. It gets down to basic honesty and integrity. Some managements have a strong sense of that, and others don't. Combine that with a flexible moral framework with stock options, and over a period of time the focus has increasingly shifted to how rich can you get, how fast? The ploy is to keep expectations rising. But at some point...