Investors have always been manipulated by CFOs and CEOs. The existence of an “as-reported” and a “from operations” earnings speaks to this point in simplicity. Let’s face it, the CFO & CEO really know what’s going on since they run the business. Investors have to rely on reports and on accounting being legitimate.

With that said, we are now being gamed by the federal government as well. This year has seen a steady stream of economic data released that is later revised to be more negative. Analysts make their calls primarily on the initial report. Minor changes from previous reports don’t grab as much headline. Remember the bank stress tests i.e., how initially 2 failed, but it gradually drifted via controlled leaks to 11 failing?  We have also seen congress pressure the FASB organization into weakening accounting standards so that banks do not have to value their toxic assets at the price an investor is willing to pay for them.

As investors, we have to be aware that we are being played and do the best we can to get to the real information. We then have to allow for most of the masses to be played by this data and factor-in their herd response.