Xerox, WorldCom, Martha Stewart Downfalls Predicted in American Outlook

Indianapolis – American Outlook magazine, a quarterly publication of Hudson Institute, predicted the downfall of major corporations such as Xerox and WorldCom as long ago as 1999.

Xerox & WorldCom

In the fall of 1999, American Outlook published an essay written by Charles Parlato entitled, “The Profit Illusion Game: The U.S. stock market may be radically overvalued, for reasons you've never heard before.”

In that article, Parlato revealed that corporations like Xerox and WorldCom were using faulty accounting practices to boost stock prices. “The new tactics used by public corporations are unprecedented and massive accounting write-offs, which ultimately reduce book value, and unprecedented corporate stock buybacks,” Parlato wrote in 1999. “These tactics have enabled highly capitalized American corporations to manufacture (some analysts say ‘manage’) earnings and drive their stock prices ever higher while driving down their cost of capital.”

Parlato all but predicted the fall of these companies when he concluded that one of two things would happen: either a new consensus would rise acknowledging the deceptiveness of these valuation practices, or the affect of these companies’ inaccurate earnings would bring on a worldwide recession.

View this article in its entirety at:

http://www.americanoutlook.org/index.cfm?fuseaction=publication_details&id=1778

Martha Stewart

In the spring 2002 American Outlook Herbert London, president of Hudson Institute, wrote “Nor do I believe that Martha Stewart Enterprises can continue to be successful after she claimed, ‘I can bend steel with my mind. I can bend anything if I try hard enough.’ Ms. Stewart may learn the hard way that there are many unpleasant surprises in store for those who are egotistical enough to believe that they can reshape the world.”

London's article, “The Dangers of Hubris: Successful individuals and companies often doom themselves by believing their own hype” may be viewed in its entirety at:

http://www.americanoutlook.org/index.cfm?fuseaction=publication_details&id=1777&pubtype=DailyArticles



American Outlook is an innovative, nonpartisan, quarterly magazine published by Hudson Institute. It provides unique perspectives on the ideas, events, technologies, and people shaping today’s world. For full articles please visit www.hudson.org. Questions about American Outlook or Hudson Institute should be directed to Jennifer Butsch at jennifer@hudson.org.