Some business jib jabs
Apr. 27th, 2005 01:38 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksAn interesting thing happened yesterday in the business world. PricewaterhouseCoopers refused to "sign off" the 2004 accounts of AIG. Their reasoning was simple. Under the new Sarbanes-Oxley laws in the US, and in the midst of Equitable Life sueing Ernst & Young "for not telling us that our company was in the shit", PwC have concluded that they would rather not go the way of Arthur Anderson, thank you very much.
The new laws in the US make the auditor potentially liable if it signs off accounts that later turn out to be incorrect. This legislation is a classic example of a knee-jerk reaction (to the bankruptcies of Enron and WorldCom and the fraud at Tyco) that creates more problems than it solves. And PwC (good on 'em) has put its head above the parapet.
You see, the problem with AIG's financial position is that it is so complicated that the true situation might not become clear for months, or even years. Since PwC can therefore say, quite honestly, that it cannot know AIG's real financial state, it cannot sign off on the figures. This means that AIG, one of the biggest companies in the US, cannot publish audited figures. Which, basically, brings the investment system in the US to some kind of crushing halt. And all because of legislators and lawyers.
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An interesting follow-up to the Phoenix affair. Apart from cheap cars being available at www.phoenix-cars.com (proprieter, one of the Phoenix 4) we also have the spectacle of Sir Digby Jones, head of the CBI, calling the behaviour of the Phoenix 4 "appalling". Now, it's bad enough when that kind of vitriol comes from Denis Skinner. But when the head of the Confederation Of British Industry joins in, you must surely know that you have overstepped the mark.
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It's election day next Thursday, and I have found out where I am going to vote. It's the Territorial Army Centre on Blackheath. This bereft building smack in the middle of nowhere has presumably been chosen with the explicit aim of achieving the lowest turnout in an urban polling office throughout the country. No bus stops nearby, and it's at the top of the hill. There are no residences within 200 yards. It's the kind of place that you can imagine being a polling office in Royston Vasey.
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Ulliott was on the Channel 5 poker a couple of nights ago. After he had come second to a Belfast player called Alex, who called an Ulliott raise with Q8, and promptly won, Ulliott said "a good player would have passed that Q8". What he means, of course, is that in the past, most players would have passed the Q8, which is why Ulliott has won so many tournaments. This time he got called. And, what will happen the next time Ulliott is in a similar position against the same player? How much more careful will he be with his raise? Quite a lot, I should think.
I found another marvellous quote from GPG's book. "Congratulations. Your calling days are over". Yes, they do write that.
When will these professionals realise that the last hand you play in a tournament is not the last hand you will play in all tournaments? People with a reputation for "I will call you if I think I am getting pot odds" will have reversed the situation on the old-style stealers. Because the stealers will now look for other victims, along the lines of burglars choosing easier houses to break into. Thus the guys with the "calling" reputation will be bluffed less, and they can fold more often in return.
Once again Fox's book and his theory of saddle points comes to the rescue. Every time I sit down some amateur who thinks he's a pro tells me that he will defend his blind vigorously -- which lasts precisely until I go all-in, and they then fold.
And Q8 heads up? It's a monster. Against Ulliott, it's a double-headed monster.
The new laws in the US make the auditor potentially liable if it signs off accounts that later turn out to be incorrect. This legislation is a classic example of a knee-jerk reaction (to the bankruptcies of Enron and WorldCom and the fraud at Tyco) that creates more problems than it solves. And PwC (good on 'em) has put its head above the parapet.
You see, the problem with AIG's financial position is that it is so complicated that the true situation might not become clear for months, or even years. Since PwC can therefore say, quite honestly, that it cannot know AIG's real financial state, it cannot sign off on the figures. This means that AIG, one of the biggest companies in the US, cannot publish audited figures. Which, basically, brings the investment system in the US to some kind of crushing halt. And all because of legislators and lawyers.
---
An interesting follow-up to the Phoenix affair. Apart from cheap cars being available at www.phoenix-cars.com (proprieter, one of the Phoenix 4) we also have the spectacle of Sir Digby Jones, head of the CBI, calling the behaviour of the Phoenix 4 "appalling". Now, it's bad enough when that kind of vitriol comes from Denis Skinner. But when the head of the Confederation Of British Industry joins in, you must surely know that you have overstepped the mark.
----
It's election day next Thursday, and I have found out where I am going to vote. It's the Territorial Army Centre on Blackheath. This bereft building smack in the middle of nowhere has presumably been chosen with the explicit aim of achieving the lowest turnout in an urban polling office throughout the country. No bus stops nearby, and it's at the top of the hill. There are no residences within 200 yards. It's the kind of place that you can imagine being a polling office in Royston Vasey.
-----
Ulliott was on the Channel 5 poker a couple of nights ago. After he had come second to a Belfast player called Alex, who called an Ulliott raise with Q8, and promptly won, Ulliott said "a good player would have passed that Q8". What he means, of course, is that in the past, most players would have passed the Q8, which is why Ulliott has won so many tournaments. This time he got called. And, what will happen the next time Ulliott is in a similar position against the same player? How much more careful will he be with his raise? Quite a lot, I should think.
I found another marvellous quote from GPG's book. "Congratulations. Your calling days are over". Yes, they do write that.
When will these professionals realise that the last hand you play in a tournament is not the last hand you will play in all tournaments? People with a reputation for "I will call you if I think I am getting pot odds" will have reversed the situation on the old-style stealers. Because the stealers will now look for other victims, along the lines of burglars choosing easier houses to break into. Thus the guys with the "calling" reputation will be bluffed less, and they can fold more often in return.
Once again Fox's book and his theory of saddle points comes to the rescue. Every time I sit down some amateur who thinks he's a pro tells me that he will defend his blind vigorously -- which lasts precisely until I go all-in, and they then fold.
And Q8 heads up? It's a monster. Against Ulliott, it's a double-headed monster.
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The new look
Date: 2005-04-27 03:15 pm (UTC)Yes, interesting development with PricewateringCobblers. My eyes usually glaze over at the business news, but even I get the gist of this.
The UK has made sure of zero chance of election turnout from me: I learned recently that you get no vote in the UK once you've been out of the country for 15 years, and I left 19 years ago.
I'm not really complaining about that: in the circumstances, it doesn't make a lot of sense for me to vote in UK elections. My complaint is that I don't get a vote in national elections anywhere. Seems to me that changing country within the EU should be like changing county within the UK: as soon as you stop voting in one place, you start in another.
I mean, hey, I pay taxes in Spain (really, I kid you not). If there were no taxation without representation, I'd be due a large refund...
Jonathan, near Barcelona
Re: The new look
Date: 2005-04-27 04:13 pm (UTC)Re: The new look
Date: 2005-04-27 06:23 pm (UTC)John W.
no subject
Date: 2005-04-27 03:32 pm (UTC)Polling Station: What's the matter with you? Left out of the house, left again at the garage, straight up Granville Park and you're (more or less) there. And a curious place it is too.
Q8: Which Fox? What book? Sounds interesting. I didn't see the hand, but atournament pro who comes second in a decent field and sucked out on (probably not that badly, I can't imagine Q8 being dominated by a tight-aggressive raising hand) and moans about missing first is probably chewing on sour grapes. The massive influx of half-dead money (like mine) can only be long-term good for these guys. The engorged fields probably mean fewer final tables (although they will produce bigger paydays) but probably more cash finishes. Could the poker "boom" be variance-reducing for the journeyman pro?
Several small single-topic posts might make it easier to comment on a specific subject, btw.
Mike
Which Fox?
Date: 2005-04-27 04:12 pm (UTC)The Fox book is Quit Work, Play Poker and Sleep Until Noon and was written more than 20 years ago. It's about five-card draw, is eccentrically written, is out of date, and is hard to get hold of outside the Gambler's Bookstore in Vegas (which is where I bought my copy) but it remains the greatest book on how to be a winner at poker ever written, bar none.
Next time in LV I am going to buy half a dozen copies to resell over here.
Re: Which Fox?
Date: 2005-04-27 04:24 pm (UTC)Jonathan, near Barcelona
Sarbanes Oxley
Date: 2005-04-27 04:19 pm (UTC)The idea was to stop auditors being lazy and "turning a blind eye", because it was the companies who were paying the bills. The unintended impact is to have any auditor who is unsure about a financial situation refuse to sign off the books. Now, with insurance and reinsurance, just one change in one assumption on a piece of long-tail business can make millions of dollars worth of difference. With life reinsurance it is worse, because you have to make mortality assumptions. So, is AIG (mainly in non-life stuff, but still complex) a billion dollars in the hole or eight billion dollars? To be frank, no-one can know, because you could logically come up with both numbers, depending on which accountant was looking at the figures and which actuary (the insurance version of an expert witness) was dealing with possible events. So, in effect, PwC is saying, "not only do we not know whether these figures are OK, but no-one can know".
Re: Sarbanes Oxley
Date: 2005-04-27 11:49 pm (UTC)I vaguely wondered about this when I first skimmed the stories (I won't pretend I invested any significant time, largely because I didn't). Perhaps with a misspent lifetime of looking for angles in board games it was something that automatically triggered "what ifs".
With the thin end of a possibly lengthy wedge firmly driven, what's the next step? Force the auditors to sign off while reserving the option to crucify them later? Allow some kind of cooling-off period (which of course increases risk). Repeal this half-baked legislation? (Not likely to happen before Dubya goes, I'd have thought.) None of it looks especially good for US equity holders. Which is probably not great news for the rest of us...
Interesting times.
Ulliott & ego
Date: 2005-04-28 06:59 am (UTC)Or is it that the top players feel threatened by the shake up in their cosy little game caused by the current Poker boom?
Geoff C - Accounts & Elections
Date: 2005-04-28 11:44 am (UTC)The Eq Life lawsuit is very relevant to the future of auditing. This is one of the world's worse professions, that is principally concerned with making money by having regulations that companies must comply with, without the companies gaining any real benefit. Fraudulent accounts can be cooked up fairly easily and are unlikely to be caught by modern auditors. If external auditors are there to protect the shareholders from the mendacity of the directors then they're unlikely to succeed.
Eq Life are now trying to say "we made a balls-up here and it's all your fault because you didn't spot it." I think Eq Life will probably win if it can be shown from Ernst & Young's papers that they were aware of any different opinions on Eq Life's accounts. But they are not responsible for the subsequent fall-out. Just because E&Y didn't do a great job should mean they get their audit fees for the work refunded, not that E&Y should be responsible for the whole of the £2B or whatever they are claiming.
I saw the Devilfish episode too (not been sleeping well). What made his grouse all the more unpalatable was that a few hands before he had been the winner of a hand where his opponent was ahead all the way and Ulliott, who should have folded, lucked out on the river. I would have thought one of the pre-requisites of being a long-term pro poker player was being philosophical about things, but then maybe it was all artificial grumpiness for the sake of the cameras.
For John W's info, I am sure he could have wangled a postal vote out of Nottingham by going on the electoral roll here. Not that a LibDem vote in urban Nottingham will achieve a great deal. And as for Palfers not being able to vote - I can't seriously think there is a political party in Britain that would have suited his views. Is there a social-liberal Libertarian party out there anywhere?
Re: Elections
Date: 2005-04-28 12:50 pm (UTC)-- Jonathan, near Barcelona
Re: Geoff C - Accounts & Elections
Date: 2005-04-28 03:24 pm (UTC)(a) I don't think Equitable Life will win, but your analysis of their case is spot on.
(b) I think that PwC are doing the right thing rather than wimping out or being cowardly. But, knowing (most) accountants, it's quite possible that your analysis is more correct.
Re: Geoff C - Accounts & Elections
Date: 2005-04-28 08:12 pm (UTC)Mind you, no-one would lend you a screwdriver based on qualified audit certs.