Whitney Tilson’s email to investors discussing sunrise at LaGuardia; Q&A webinar we hosted; how did the big four auditors get $17 billion in revenue growth? not from auditing; to sue Goldman Sachs, you have to be willing to hang on-for a long, long time.
1) Greetings from LaGuardia, where there was a beautiful sunrise this morning. Susan (my wife), Katharine (my youngest 16-year-old daughter) I are headed to Banff for a week to celebrate my cousin's wedding on Saturday with the extended Tilson clan. It's gonna be EPIC!
2) Three dozen people joined our live webinar yesterday during which Glenn and I answered 20+ questions over two hours on: how to become a better investor, Facebook, China, resisting envy, how to tell whether you're a skilled investor or just lucky, consolidating industries (and the perils of highly acquisitive companies), the underperformance of value stocks and whether that will reverse, the process of finding stock ideas and then researching them, whether we consider macro factors and management guidance when investing, and many more. We’ve posted it on the Kase Learning YouTube channel here: https://youtu.be/j5VxqvhOgZQ (you can check out the many other videos posted on our channel and subscribe to it here: www.youtube.com/channel/UC7igQqc_-k3LWCeUGnpE7Cg).
use “VW10” for a discount
3) Talk about conflicts of interest! How Did the Big Four Auditors Get $17 Billion in Revenue Growth? Not From Auditing. Excerpt:
Audit firms have a tough job. Some critics think they shouldn’t have a second one.
For years, the Big Four accounting firms have pushed into consulting, seeking growth their core auditing businesses weren’t providing. Since 2012, the firms’ combined global revenue from consulting and other advisory work has risen 44%, compared with just 3% growth from auditing.
The result is that the bulk of the firms’ revenue now comes from consulting and advisory, $56 billion last year, compared to only $47 billion from auditing. Five years earlier, auditing pulled in roughly the same amount—$46 billion—while consulting and advisory’s haul was only $39 billion.
But that $17 billion growth in consulting and advisory revenue has come with concerns about the potential for conflicts of interest and loss of focus on auditing at the four firms, Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young and KPMG.
Last month, comments from a U.K. regulator revived an old debate: Should the Big Four be broken up, with corporate auditing separated from consulting? That would leave audits handled by separate firms that do nothing but that type of work.
4) A cover story of Bloomberg/Business Week from a few months ago on how hard it is for women on Wall St. to file harassment and/or discrimination claims (a topic of increasing interest to me, as my oldest daughter just graduated from college and is heading into the business world). To Sue Goldman Sachs, You Have to Be Willing to Hang On—For a Long, Long Time. Excerpt:
Cristina Chen-Oster’s fight against sex discrimination began in 2005. She just got her big break.
About seven months into the job, Chen-Oster’s team celebrated the promotion of one of the men who’d recruited her. The following account of what happened that night and its aftermath—much of which Goldman disputes—is derived from Bloomberg Businessweek’s interview with Chen-Oster and legal filings.
It started, she says, with dinner downtown, then moved to Scores, a strip club. She got bored and left. A co-worker insisted on walking her the few blocks to her boyfriend’s place. Upstairs, outside the apartment, he pinned her against a wall, kissing and groping her. Then, in the dry language of her complaint, he attempted to “engage in a sexual act.” She fought him off. The next morning, the co-worker pulled Chen-Oster aside, apologized, and asked her not to tell anyone. She was 26 and new to Goldman. She kept quiet.