By Dan Ferris in the S&A Digest:

Even beleaguered Ford Motors has found it easy to "make" money once again. It reported a $2.3 billion second-quarter profit, even though it also reported burning through a billion dollars in cash. To legally report such an extraordinary result, all Ford had to do was say restructuring a debt was the equivalent of making a few billion dollars by selling cars.

A corporate debt restructuring is like when you tell the bank you're broke and can't pay your mortgage. If it's feeling generous, it'll let you pay less. Ford's bank told it to pay less, and it counted the difference as earnings… legally. That's what modern accounting practice gets you. It's a wonder anyone believes anything reported by a public company anymore.

It may count as net income to accountants, but I bet you can't pay dividends or build new car plants out of debt restructuring. I bet it's real different from actually selling cars. And I bet, too, Ford didn't really make any profit at all last quarter. It's all an accounting game, and Ford is still bleeding badly.

Crux note: Dan Ferris has recommended shorting two financial stocks in Extreme Value that will get absolutely crushed from the fallout in commercial real estate. To learn more about Extreme Value, click here...

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