Weil on Finance: Naming the Auditors

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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Happy Monday, View fans. Here's a look at some of what I've been reading this morning.

Maybe someday soon regulators finally will make accounting firms name the people who audit their clients' books

Francine McKenna, who writes about auditing and accounting, has a good post about the need for naming the audit partners who sign off on companies' financial statements. The Public Company Accounting Oversight Board is set to unveil a long-delayed proposal next month to make the names public: "The global capital markets, not just current shareholders, need full disclosure of the engagement teams on all public issuers over time, and in a way that is accessible in general, not hidden in Edgar filings and PCAOB Forms," she writes. "We now know more about what the firms have been hiding. There are several recent examples of why investors and the capital markets need to know all the key people involved in a public company audit and their history of sanctions, disciplinary actions and litigation." And she lists some, including the audit partner at MF Global who missed problems at a bunch of other companies.

Yet another article about a bubble in the stock market

They just keep coming, don't they? Here's a story that seems almost like it was written to get under the skin of all those folks who say there's a bubble in news-media stories about stock-market bubbles. Nick Bolton of the New York Times says that if it looks like a bubble and floats like a bubble, well, you know: "For the average investor, there are reasons for caution. Since the dark days of 2008, the Nasdaq has risen more than 150 percent, twice as much as the old-school Dow industrials. Money has been pouring into social media stocks. As of Friday, Twitter had risen nearly 60 percent since it went public only a few weeks earlier. Once again, new "metrics" are being applied to justify stratospheric valuations. Twitter is losing money. A price-to-earnings ratio? There is no E in the P/E. But its stock is trading at 20-odd times the company's annual sales. Good enough." And there's more.

Capitalists around the world, rejoice

Over the weekend, Swiss voters rejected a measure that would have prohibited executives from earning more than 12 times as much as their companies' lowest-paid employees. So they figured out that this never would have worked. Good for them.

When are markets rational ?

Here's a thoughtful post about the debate over the efficient-markets theory by Michael Pettis, who writes a blog on Chinese financial markets: "To me, much of the argument about whether or not markets are efficient misses the point. There are conditions, it seems, under which markets seem to do a great job of managing risk, keeping the cost of capital reasonable, and allocating capital to its most productive use, and there are times when clearly this does not happen. The interesting question, in that case, becomes what are the conditions under which the former seems to occur."

And for the ECB's next trick, negative deposit rates?

It could happen, according to Ardo Hansson, a member of the European Central Bank's governing council.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Jonathan Weil at jweil16@bloomberg.net