There’s a big con going on in the stock market right now. Company earnings are falling and have been for some time but CEOs and CFOs are doing everything in their power to distract investors from this fact and tell a completely different story. The gap between earnings’ reality and the fantasy companies would have you believe is the now widest since 2008.

Why earnings are even worse than companies have been saying – Heard on the Street https://t.co/WYEM3FXo0x pic.twitter.com/Z5ZndhtdZr

— WSJ Markets (@WSJmarkets) February 24, 2016

A big part of the “pro-forma” adjustments to income that company managements like to make are so-called “one time” items like acquisition or restructuring costs. The trouble is there are a number of companies whose “one time” items recur every single quarter. 

“@AnalystWire: Aegis Maintains Buy on Valeant ($VRX); One-Time Items Don’t Reflect True Operations http://t.co/ACL4Gki4UD”

— Darcy Keith (@eyeonequities) October 31, 2013

For example, Valeant Pharmaceuticals (VRX) is what we would call a “serial acquirer.” Over the past several years they have rolled up so many other pharmaceutical companies that they have essentially made M&A their primary business. Yet they insist on treating the costs related to these activities as “one time” items that investors should ignore. Clearly in the case of Valeant, investors who have followed management’s lead here have been sold a bill of goods.

Valeant is to health care what New Century was to home mortgages in 2006 https://t.co/37pnfMNbML by @Peter_Atwater

— Jesse Felder (@jessefelder) November 12, 2015

Another popular adjustment managements like to make to earnings is to remove the cost of stock option grants. Perhaps the best example of this is Salesforce.com (CRM), who reported earnings last night. According to the rules of GAAP, the company lost $26 million last quarter. When you remove the cost of option grants ($159 million) along with various other items, the company would have you believe it actually “earned” $130 million.