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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 679.68

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Nov 26 4:00 PM EST

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To: Mike M2 who wrote (38869)	2/2/2000 3:46:00 PM
From: Haim R. Branisteanu	Read Replies (1) of 99985

Bill those statements are so true The "profit miracle" of the 1990s is nonsense. What kicked the stock market into high gear earlier in the decade was mainly the one-time effect of lower borrowing costs induced by a recklessly generous Fed. Profits have weakened since in absolute terms and egregiously relative to soaring share prices. The widespread use of stock options to compensate employees has caused corporate earnings to be grossly overstated, since the options reduce the amount of wages charged against profits. If properly accounted for, stock options would have lowered aggregate published profits by 56% in 1997 and 50% in 1998, according to figures Richebacher cites from Smithers & Co., a London-based research institute. Derivatives can insure individual market participants against risk, but not system as a whole. Ultimately they have spurred higher risk-taking through leverage, exposing the global financial system to the prospect of devastating failure. Haim

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