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Yeah, Looks Good To Me....(Goodwill)

There is an interesting article from el WSJ being passed around via web lists today and it involves this discussion of the Goodwill, and the fact that apparently at some companies, the value of said obscure item outweighs the value of the rest of the company in general. Here's a link to the article, I'm sure it can be found somewhere in its complete form, I don't have a WSJ subscription though so.....one could read the synopsis at one of the kind of summarizing "must know news lists" on this very site.

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http://online.wsj.com/article/SB10000872396390444042704577587302625535444.html

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Either way, while some may find this worrying, I find this to be somewhat hilarious. Hilarious in its simple genius. Market commentators will often decry the opacity of finance. As though its some arcane art that requires membership in a coven to fully understand it. Other describe psychopaths and their seeming infiltration of said field, and hence how news like this is the product of some twisted intellect.

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Regardless of these prescriptions, this is arguably very simple and funny. How do you make your company seem more valuable than it really is? Say that patents are worth more than they really are, simply by making up some higher rate of return number? That's an option. Pretending that you just purchased the fountain of youth, and recently discovered the fabled El Dorado, that's another option. How about just making a sort of very subjective value much larger? Sounds right.

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It can be argued, and proven that one didn't find El Dorado, or the fountain of youth, but really intangible values captured in "good-will" are subjectivity at its finest. "These workers are well trained, there's a lot of human capital synergies going on here, lets add another couple million to goodwill". Why not? I'm sure the tech bubble was the greatest boon to goodwill the world has ever known. Every vote preceding election day is a display of incredible levels of goodwill.

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Though goodwill is often seen as some sort of value one didn't have to pay for, that was received when buying a company, etc. It could be argued that goodwill is really, goodwill that investors show to companies that jack it up. Goodwill is a value which has to be taken with a large sack of salt, and even though some companies management are undoubtedly subscribers to the "buy or die" growth mentality,(which could lead to stacking copious amount of goodwill through very active acquisition activity) to have Goodwill dwarf the value of the operations element of that same company, is kind of funny in a way.