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Strategies & Market Trends : Waiting for the big Kahuna
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To: William H Huebl who wrote (56752)2/16/2002 5:43:33 PM
From: Skeet Shipman  Read Replies (1) of 94695
 
The Nasdaq is heading back DOWN!!!!

Steve Maich
Financial Post

Stock valuations, especially in the technology sector, may soon look even more stretched as the U.S. Congress moves to crack down on the shady accounting of stock options in financial statements.

The Ending Double Standards for Stock Options Act, co-sponsored by Michigan Democrat Carl Levin and Arizona Republican John McCain, was re-introduced in the Senate Wednesday. It aims to end a practice that critics say has allowed companies to artificially pump up profits and mislead investors for decades.

The options loophole may now be closing like a noose around the neck of the ailing tech sector, where the impact is expected to be especially severe.

Had the proposed rules been in place in 2000, as the tech craze reached its apex, pro-forma profits would have been as much as 60% lower, and cash flows posted by blue-chip tech firms would've been cut in half, Steve Milunovich, Merrill Lynch's top technology strategist, told clients on a conference call yesterday.

"This could make earnings look bad," he said. "We think this could hurt valuations of tech stocks. We already think they look somewhat expensive and this could make it look worse."
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