Writing Off What Should Have Been Written Off Long Ago

Time Warner (TWX) wrote down the value of many of its assets yesterday. The same has happened with many companies which own newspaper and TV assets. The trend is also moving to manufacturing and software firms.

Most corporations will present these "accounting actions" as non-cash charges, which means shareholders should ignore them and go back to being desperate about the economy and their disappearing portfolios. That would be a mistake.

According to The Wall Street Journal, "Investors may choose to look through such non-cash charges." Yes, the corporate party line.

Time Warner wrote down $25 billion in assets. It had carried some of its units on the books for too much money. The values of assets across most industries is falling. Too many companies carry a ton of " good will" on their books. It was always a bit of smoke and mirrors used to make assets look more valuable than they probably were. But, that bit of fun is over.

The write-downs are an acknowledgment that runs the length and breadth of the economy. American corporate assets are worth hundreds of billions of dollars lees than they were a year ago. There may be no cash involved, but the devaluing is real and it tells a real story.

What corporations once said was very valuable is moving into the valueless column. American assets are moving to fire sale levels, and there is no one to buy them. That means they are likely to keep falling.

Douglas A. McIntyre