Earnings season has always been a crapshoot largely because of the nature of our financial system. To whit, we have accountants whose jobs consist entirely of finding ways to minimize taxes and eek out profits from even the flimsiest of circumstances (financial firms have become masters of this).

Indeed, it's common practice for companies to prepare TWO tax statements, one that is released to the public and another that goes to the IRS. The IRS version usually features numerous tax dodges such as shifting revenues to tax havens/ off shore subsidiaries, as well as phony accounting charges and the like. Consider the below chart comparing individual income tax receipts (blue line) and corporate tax receipts (red line) for the last 50 years and tell me which group has an accounting department devoted to finding every tax loophole possible.

After the accountants get through with cooking the books, corporate earnings are then supposed to be accurately forecast by Wall Street analysts, most if not all of whom, work for firms that make millions performing mergers/ acquisitions/ IPOs and other investment banking deals with the very companies the analysts are supposed to be objectively covering.

We then have institutional investors who invest based on the analysts' views which are based on the accountants' voodoo (the institutions themselves usually have relationships with the analysts' firms as well). And then we have the public, whose funds are either invested with the institutions OR are whipsawed and destroyed by the institutions moves.

All of these moves have become exacerbated by the US's decision to abandon anything remotely resembling accurate accounting standards. Nowhere is this more evident that in the financials sector.

Most commentators were ecstatic that banks such as Goldman Sachs reported stellar 1Q09 earnings. They're equally thrilled that Goldman et al are so far producing strong results this quarter too (Goldman's 2Q09 results released yesterday beat expectations). However, no one seems to bother looking at where these earnings are coming from.

The banks' 1Q09 results were largely the result of accounting gimmicks, NOT actual money being made. The most obvious gimmick involved marking down debt and recording the mark down as a profit.

In laymen's terms, banks had issued bonds to investors (the banks get the investors' money, the investors get a bond with a certain yield).  These bonds have since fallen in value. So the bank is claiming that because it could repurchase the bonds at lower prices (pocketing the difference between the lower price and the initial higher price the investors paid), that these bonds could be recorded at a profit.

Take a moment to let that sink in... The banks DID NOT actually buyback the bonds (they couldn't even if they wanted to since they doesn't have the funds), so they're merely claiming that they COULD do this if they WANTED to.

Using this kind of logic, someone could claim that they made $3 million last year because technically they could rob every store they've ever spent money at during their lifetime in order to recoup their earnings. There's a word for this type of thinking; it's called insanity.

Aside from this, financial firms have posted profits based on all kinds of other accounting fraud including but not limited to: marking junk assets at super inflated levels, papering over real losses with one time charge-offs, and more.

Heck, even the alleged best of the bunch (Goldman Sachs) now openly admits that their trading programs can manipulate markets and that they received $13 billion in taxpayer money while hedging against their AIG exposure (essentially making the $13 billion a freebie that Goldman could play around with for a few months).

If those two items alone aren't enough proof that profits from banks and other financials are a load of bunk, consider that Goldman insiders sold nearly $700 million in stock at the SAME TIME they were receiving bailout money. If the guys inside the firm are cashing out while receiving OUR money, what does that say about the stability of their firm... not to mention the abject failure of the SEC to do anything resembling real regulation.

Bottomline: earnings, especially financials' earnings are a load of nonsense.

The fact that however many companies beat earnings estimates in 2Q09 is irrelevant. You might as well say 70% of companies beat an imaginary number. Anyone betting on a strong 3Q09 or 4Q09 is in for a REAL surprise.

I believe the market is set for another Crash. I've already prepared thousands of investors with a FREE Special Report detailing THREE investments that will explode when stocks start to collapse.

I call it Financial Crisis Round Two Survival Kit. These investments will not only protect your portfolio from the coming carnage, they'll also show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.

The opinions expressed here are those of the authors and do not necessarily reflect the positions of The International Business Times.