August 14 - Much Ado About Nothing
by Charles B. Carlson, CFA
Dow Theory Forecasts


It seems a lot of investors are looking to August 14 as an important day for the stock market.

As you probably know, August 14 is the deadline the Securities and Exchange Commission has given for most big companies' execs to certify their books.

The conventional wisdom is that all the bad stuff will be out prior to August 14 so that the "decks will be cleared" and instant credibility will be gained by corporate America.

Don't believe it.

Indeed, you shouldn't think that August 14 would be the end of the accounting chicanery, for several reasons.

First, the crooks will sign off on the veracity of the books and take their chances of not being caught. After all, that's what crooks do - act innocent until caught.

Second, a lot of the concerns about corporate accounting have nothing to do with fraud and everything to do with the looseness of GAAP accounting standards. Indeed, much of what has been called "accounting shenanigans" is actually permissible under GAAP, and companies looking to stretch GAAP to fit their needs will continue to do so even if they sign off on their finances.

Bottom line: Whether you are bearish or bullish, you shouldn't rest your opinion on the market on August 14. My guess is that the day will turn out to be a big non-event for the markets.

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