The Number by Alex Berenson Book Review Essay

This kind of intense emphasis has been positioned on quarterly earnings as indication of a company’s success simply by everyone from analysts to executives that ethics possess for the most part recently been thrown out the window, sacrificed to the crucial number, i actually. e. income per share.

This is the theory in Alex Berenson’s publication “The Number: How the Drive for Quarterly Earnings Damaged Wall Street and Corporate America. ” This amount has become component to a game to be played, a figure to be manipulated – beat the quantity and Wall Street all but tosses a march, miss it and a company’s stock may be left behind. Take into account the offers that management have to the fatigue number and one can find plenty of reasons to manage earnings.

Inside the first a part of “The Number” Berenson chronologically covers a brief history of the wall street game from the Crash of 1929, the reform efforts with the 1930’s, the later regulatory efforts to ascertain standards for accountants and increase monetary disclosure, to the 1970’s if the end of fixed commissions for broker agents also supposed the end of investment research, which was the origin of knowledge to get investors regarding the companies by which they were trading. The second component then usually takes the reader up to and throughout the 1990’s, when ever stock options started to be the method of payment for professionals and when the quantity became the most crucial aspect of the quarterly financial reports.

Berenson also prospects the reader throughout the resulting situations of fraudulence and accounting sleight of hand if he discusses companies like Lucent, Enron, Tyco, WorldCom and Green Forest Financial. Additionally , in this part of the book this individual discusses accounting firms, particularly the Big Ten, and the intro of value competition included in this as well as the modification they made out of accounting businesses to assistance organizations, causing them to sacrifice independence for money. Part two ends with all the bust that followed the late 1990’s and the tiny steps that had been then used by the government and Wall Street to create change in the wake of these bust.

Berenson ends the book using a warning to investors to “know where to find the truth in back of the numbers” (p. 225) but laments in the afterword that inside the years since the book was written nothing has changed, that investors remain unaware and blindly investing in companies in which they know nothing regarding beyond their reported quantities. Having virtually no stock market encounter, I was extremely interested in a brief history that was laid out in the book, plus the way that the stock market offers morphed via what it began as to what it is today.

The Number” is a great primer, masterfully written, providing the average Joe background and fundamentals about the stock market to help viewers begin to form their own thoughts independently instead of only applying Wall Street study. The footnotes of the book give wonderful information, tips and nuggets of wisdom in the process – very similar to the way the fact that footnotes of financial statements can be quite informative. This is a great book to use to get your feet moist on the stock exchange and companies today. The point of watch that Berenson has from this book is that the market should be more seriously regulated, that regulatory companies should split down harder on accountancy firm, and that prosecuting and jailing offenders is a only approach to stop awful behavior.

While I agree with this time of view, I likewise believe that it is going to always be a continuing battle. The earth is in continuous change – people, politicians, technology, businesses, etc . – and the regulatory agencies will have to be proactive, expecting not only all those changes but the methods that individuals could possibly use to defraud others, and they’ll need to put rules in place to keep all of them in check. This will be considerably more difficult presented the global course companies are charging towards – a company might have two or three several types of reporting requirements depending on the countries in which it’s located.

This kind of creates a lot more potential for making misleading data. In reading this article book apparently the U. S. federal government has been reactive – firms have been made and rules have been exceeded after the particles has settled on huge ripoffs by buyers and misconducts by accounting firms. While I agree that stronger governance is needed, I actually maintain that Berenson didn’t place enough importance on the fact that our traditions today is definitely demoralized and riddled with greed, which I imagine should you can put burden upon individual buyers to be educated and really know what they’re performing with their cash.

Mention ought to be given also to the investor’s own avarice and the fact that they’re willingly giving their money to firms about which they know next to nothing. I realize which the stock market is usually New York, not really Mayberry, which with all of the businesses and with the information and with the extremely fast speed that the community moves in today that it’s difficult to “know” a company, nonetheless it seems very irresponsible to me to trust someone with my funds based only on a number. I believe that each investors must be armed with all the information as possible, and that they should realize the potential risks they’re taking and not blame someone else for own deficiency of knowledge.

There will always be someone to choose from with a new way to take advantage of other folks, and the only thing that you can do is to make an effort to protect themselves against that. While “The Number” did a great job recapping the history in the stock market and company America, I would personally have enjoyed to have seen more detail to get investors today and the certain things they must do to guard themselves. Basically the only suggestions Berenson gives is once again “to understand how to find the fact behind the numbers” (p. 225), nevertheless he doesn’t map out how to find those facts.

Despite that, this guide served to boost my opinion that I’m in charge of my own activities, and that My spouse and i can’t fault someone else for decisions that we make. Do i need to decide to head out on my own and invest in the stock market, I’ll know the risk, collect as much details as I can, take council from someone I trust who I know is genuine, and comply with my predatory instincts – trading long-term having a reputable organization that has values in which In my opinion. Until in that case my funds will stay below my mattress where I realize it’s secure.