Will mistrust of securities suggest demand for wealth held in physical gold and silver?
"ANYONE WHO HAS SLOGGED THROUGH THE legalese of a thick Securities and Exchange Commission filing knows the devil is often in the footnotes or the appendix. A good rule of thumb, particularly for adverse corporate information, is that the further back in the report, the more important the information. The urge to skip sections of a 100-page 10K is a strong one, but you do so at your peril.
Now that most regulatory filings are easily searchable on the Internet, investors can troll through the documents for key phrases suggesting something could be amiss -- let's call them dirty words.
Barron's has come up with a list of key words that should set off alarm bells. Our list isn't exhaustive, but the appearance of these phrases in a filing indicates the company might be trying to put its best face on a bad situation, or worse, obfuscating its financial condition.
We received help from two experts: Howard Schilit, a 25-year veteran forensic accountant and the author of the forthcoming third edition of Financial Shenanigans, and David Trainer, president of New Constructs, an independent research outfit in Nashville, Tenn. New Constructs puts out a monthly roll call of Most Attractive and Most Dangerous stocks, based on companies whose profits and valuations are understated or overstated by accounting metrics. The potential shenanigans that these key words address are divided into four main areas: corporate governance, earnings, cash flow and company-generated metrics."