World Monitor Mag WM_June 2018 web - Page 99

additional content Those in the business of detecting cognitive dissonance are seeking to understand how the judgment and integrity of company leaders can affect a company’s valuation over time. such as Business Intelligence Advisors in Boston, which is run by former Central Intelligence Agency investigators, are seeking to understand how the judgment and integrity of company leaders can affect a company’s valuation over time. Earlier this year, the CFA Institute, an international association for chartered financial analysts, published a book with the very self-explanatory title Lie Detection Guide: Theory and Practice for Investment Professionals. Laura Rittenhouse, who runs the consulting and training firm Rittenhouse Rankingsin New York, analyzes written messages, especially CEO shareholder letters, and ranks companies for wording that indicates candor and transparency versus what she euphemistically calls “balderdash.” Examples of balderdash include the phrase “in a dynamic operating environment characterized by unexpected events around the world,” which appeared in the annual letter of a large bank, and “we face stiff competition, but our future is within our control,” from Walmart’s 2016 annual report. (“When are there not unexpected events?” says Rittenhouse. “And no one’s future is completely under their control.”) Litman, a former Credit Suisse analyst, started Valens in the very rocky year of 2009. “We should have had our heads examined for launching a startup venture in the middle of the downturn,” he says. But Litman wanted to provide the kind of all-encompassing analysis that was mostly missing on Wall Street at the time. The firm has analyzed more than 20,000 earnings calls since its inception. In 2009 and 2010, it wasn’t hard to find executives from banking and other industries whose voices indicated tension when they said things were getting better. Three years ago, Valens researchers observed a lot of highly questionable markers in the earnings calls of oil exploration firms, which were then grappling with low prices and excess supply. Soon after, not at all to Litman’s surprise, the sector nearly collapsed. Take a statement like “we’re expanding at full steam.” If executives show a sense of discomfort uttering those words at a time when the macro factors indicate an economy in decline, then we might expect, when the economy is doing well, they’ll say the same thing with conviction. That is exactly what Litman has found in the last couple of years: The confidence markers are strong for most large companies. Still, the bull market hasn’t put balderdash-detection firms out of business. supported by EUROBAK 95 additional content Those in the business of detecting cognitive dissonance are seeking to understand how the judgment and integrity of company leaders can affect a company’s valuation over time. such as Business Intelligence Advisors in Boston, which is run by former Central Intelligence Agency investigators, are seeking to understand how the judgment and integrity of company leaders can affect a company’s valuation over time. Earlier this year, the CFA Institute, an international association for chartered financial analysts, published a book with the very self-explanatory title Lie Detection Guide: Theory and Practice for Investment Professionals. Laura Rittenhouse, who runs the consulting and training firm Rittenhouse Rankingsin New York, analyzes written messages, especially CEO shareholder letters, and ranks companies for wording that indicates candor and transparency versus what she euphemistically calls “balderdash.” Examples of balderdash include the phrase “in a dynamic operating environment characterized by unexpected events around the world,” which appeared in the annual letter of a large bank, and “we face stiff competition, but our future is within our control,” from Walmart’s 2016 annual report. (“When are there not unexpected events?” says Rittenhouse. “And no one’s future is completely under their control.”) said things were getting better. Three years ago, Valens researchers observed a lot of highly questionable markers in the earnings calls of o )Ʌѥɵ̰ݡݕɔѡ)ɅݥѠ܁ɥ́ፕ)丁MѕȰЁЁѼ)1ѵéɥ͔ѡ͕ѽȁɱ)͕)1ѵɵȁ ɕЁMե͔)ахѕÝѡٕ)ɽ啅ȁ七q]͡ձ)ٔȁ́ᅵ)չхٕɔѡ)ѡݹɸt̸ͅ )1ѵ݅ѕѼɽ٥ѡ)ͥͥ́ѡЁ݅)ѱ䁵ͥ]MɕЁЁѡ)ѥQɴ́镐ɔ)ѡɹ́́ͥ)́ѥ%䁅)݅ͻeЁɐѼᕍѥٕ́ɽ)ѡȁɥ́ݡ͔)ٽ́ѕѕͥݡѡQхѕЁqݗeɔ)Ёձѕt%)ᕍѥٕ́͡܁͕͔)͍Ёѕɥѡ͔ݽɑ́Ё)ѥݡѡɼѽ́є)䁥ѡݔ)Ёаݡѡ䁥)ݕѡeͅѡͅѡ)ݥѠ٥ѥQЁ́ᅍѱݡ)1ѵ́չѡЁ)啅Qɭ́ɔ)ɽȁЁɝ̸)MѥѡձɭЁͻeЁ)ɑ͠ѕѥɵ́Ё)̸ͥ)ѕUI= ,(