Hi Dorothy.
No, I didn't go fishing. I usually see my wife only during weekends so I leave all stocks-related work for Sunday afternoon after she leaves.
Hey, you really got hooked on Greenspan this weekend.
On redundancy, see his previous speech:
bog.frb.fed.us
and copy/paste of these two paragraphs in his new speech:
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Risk aversion accordingly rises dramatically and deliberative trading strategies are replaced by rising fear-induced disengagement. Yield spreads on relatively risky assets widen dramatically. In the more extreme manifestation, the inability to differentiate among degrees of risk drives trading strategies to ever more liquid instruments. Strategies become so tentative that traders want the capacity to reverse decisions at minimum cost. As a consequence, even among riskless assets, illiquidity premiums rise dramatically as investors seek the heavily traded "on-the-run" issues.
History tells us that sharp reversals in confidence happen abruptly, most often with little advance notice. They are self-reinforcing processes that can compress into a very short time period. Panic market reactions are characterized by a dramatic shift to maximize short term value, and are an extension of human behavior that manifests itself in all forms of human interaction--a set of responses that does not seem to have changed over the generations. I defy anyone to distinguish a speculative price pattern for 1999 from one for 1899 if the charts specify neither the dates nor the levels of the prices.
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You can find most of his speeches at:
woodrow.mpls.frb.fed.us
He likes to use jargons like “risk aversion”(preferring a less risky income source, for example bonds vs. stocks), “time preference”(used in models to calculate options pricing for currencies, stocks, etc).
He also likes twisting things:
“”””The value ascribed to any asset is a discounted value of future expected returns, even if no market participant consciously makes that calculation.”””””
Sort of saying that in our irrational exuberance, we are chasing after stocks without even caring to calculate their future potential.
His comments on stocks options and what should be expensed vs. capitalized has been discussed before. Some tech companies rely on their rich stock prices to hire talented individuals. If you go to work for CSCO, they give you a standard salary plus options to a few hundred shares of CSCO at ~1/3 stock price. That way you cost much less to CSCO, while within a year you can turn around and sell the stock and double your salary.
The issue about capitalized software costs, the way I think it works is that until a product is still in R&D phase, all purchased software is expensed. Once the product moves into production, software production costs are capitalized. Most companies, if they could, they would love to expense everything they buy. Why not? Think about it. Who likes to pay cash(or borrow money) and buy a computer today but be able to deduct only a portion of that cost this year and the rest within the next few years?
Re balance sheet, I know that top-line is what is reported at the top of the form as revenue and bottom line is what is reported at the bottom as earnings per share!!!!! Joking aside, a few months ago I saw a good book in Barnes & Noble but I don't remember its name. You may want to go over there and look.
Check these out too at AMZN:
amazon.com
Good Trading
Clint |
