Last Saturday, I listened to a tech podcast where they said information was coming out about the "alleged" lies Fauci and his colleagues told during the COVID pandemic, and Congress was going to question Fauci about these allegations in two days. This is why the world stands condemned. Why was I hearing about these COVID/Fauci revelations on a tech podcast and not CNN, The NYTimes, or The Wall Street Journal? One of the biggest and most lethal coverups in modern history, and the media is focused on Trump and Diddy.
No one I spoke to knew that Fauci and his colleagues were being questioned by Congress, and that emails from Fauci’s colleagues discussed strategies to thwart Freedom of Information requests, ways to shield Fauci from getting his hands dirty, lies about the origin of COVID, financial kickbacks from grant recipients, and so many other things that would land most Americans in Guantanamo Bay. All this was going on, and I had to hear about it on a tech podcast. For this news to get so little attention in the press, let me know there’s a lot of fingernails with dirt under them, and mainstream media should not be trusted.
Fauci's hearing was interesting to watch because the Democrats fed him grapes and the Republicans flipped him on the grill. It’s always about the agenda in politics. Uncovering the truth is never a priority. That's why I only vote for Jesus.
“Thus says the Lord: “Cursed is the man who trusts in man and makes flesh his strength, whose heart turns away from the Lord.”
Jeremiah 17:5 ESV
The Fauci situation made me think about the manipulation that surrounds us in life, in the media, and of course, in the stock market. As investors, we need to put our detective hats on and investigate these companies and their financial statements, because they will manipulate us every chance they get. I see these companies use manipulation to get away with not paying shareholders a reasonable dividend, and they also use deception to inflate the perception of their stock.
This week I reread Financial Shenanigans: How to Detect Accounting Gimmicks and Frauds in Financial Reports 4th Edition by Howard Schilit, and it reminded me how slick these companies can get.
Examples from the Book
In 2006, Intel sold one of their businesses to Marvell Technology Group at a low price, and in return, Marvell had to buy wafers from Intel at an inflated price for two years. Intel structured this type of deal because they wanted to show higher recurring revenues to investors.
NVIDIA “might” not have been as duplicitous as Intel, but in 2016, they did a write-down of their inventory because they believed a new product cycle was going to make their old products obsolete. After writing down their inventory because it was supposed to be obsolete, they later sold some of it, and increased their margins by 70 basis points.
The book also warns investors about companies that always buy other companies because they use so many tricks to overstate the success of their acquisitions. Tricks such as telling the company they're buying to not collect their account receivables before the closing, so that after the closing, they can collect the receivables and show a strong inflow of cash. Or they might ask the company to pay off their accounts payables early, so after the closing, they'll have fewer liabilities to pay, which will increase their cash flow.
Reading the different examples in the book reminded me not to sleep on these companies. The CEOs might come off as nice and charming, but they are about making money at all costs. Howard Schilit said something in the book that is important for every investor to ingrain in their psyche. He said,
“In discussing our findings (and what led us to them), we often are asked how we spotted these shenanigans when others, evaluating the same documents, failed to see them. Is it that we work so much harder or are more clever than other analysts? We think not. Rather, we believe our success stems from starting with a very different mindset—a forensic one. This approach incorporates qualities of skepticism, curiosity, and humility and mixes them with a deep understanding of human behavior and principles of fair play.”
We cannot approach these financial documents with gullible mindsets. We must analyze these companies and try to find dead bodies. They're hidden somewhere, and it's our job to find them.
What I've Seen Personally
As much as I’m Team Intel, I noticed when they extended the useful life of their equipment from 5 to 8 years so they could reduce their depreciation expense. Intel said they extended the useful life of their machines because their new business model made the extension possible, but I don't think this was the real reason. They did it to reduce their depreciation expense by $4.2 billion.
Applied Materials also increased the useful life of their equipment from 5 to 8 years. Howard said investors should be careful when they see companies extend their equipment's useful life because successful companies don't lean on these gimmicks.
Companies are using all types of tricks to improve the appearance of their businesses. We need to remain vigilant and remember that these companies are not our friends.
If you decide to watch Fauci's hearing or read Howard Schilit's book, reach out to me so we can discuss them: ov@myinvestmentdreams.com
Stay strong, stay blessed, and God willing, I will see you next week.
Put no trust in a neighbor; have no confidence in a friend; guard the doors of your mouth from her who lies in your arms; for the son treats the father with contempt, the daughter rises up against her mother, the daughter-in-law against her mother-in-law; a man's enemies are the men of his own house. But as for me, I will look to the Lord; I will wait for the God of my salvation; my God will hear me.
Micah 7:5-7 ESV
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