Frank, a speech by Greenie on stock option accounting, is appended, along with recent news on the NY AG/MER case. What I think we have shaping up is election yr politics, that will be in effect this yr and then continual to build for for 04. Not positive for the markets.
We have a lot of people loosing money, and a few reaping large rewards. The in boys have to show the masses that the bad boys (now the out boys) are gonna get their due. The main in boys are GW and crew.
And who better than to lead the charge. The SEC and Harvey Pitt, who used to represent the bad boys. Put him and Spitzer from NY on the same team, and we got some good action coming up. This MER case is just the tip of the iceberg. Lawyers will be busy for a long time.
The animal is indeed feeding on itself.
MER Case. [2:10PM Merrill Lynch negotiations with NY AG hit a snag-- WSJ (MER) 43.21 +0.27: -- Update -- The Wall Street Journal is reporting that negotiations to settle an investigation by NY AG Eliot Spitzer into the research practices of MER hit a new snag in recent days over whether analysts at the firm can continue to accompany investment bankers and make pitches to win investment-banking deals from corporate clients; the latest obstacle could prolong the talks indefinitely, and in the end, could cause the AG to hold public hearings on the MER investigation as well as possibly charging the firm with violations of NY law over allegations that it misled investors with overly optimistic research.]
Public hearings, I'm all for em. Get on with it.
Greenies Speech on Stock Options Accounting.
federalreserve.gov
Excerpt:
.....One may argue that, because option grants are fully disclosed and their effect on earnings can, with some effort, be estimated reasonably well, financial markets in their collective wisdom see through the nature of any bookkeeping transactions. Hence, how expenses and profits are reported is of no significance, because nothing in the real world is altered. Cash flows, for example, are unaffected. The upshot of this reasoning is that stock prices should be unaffected by whether option grants are expensed or not. Clearly, most high-tech executives believe otherwise. How else does one explain their vociferous negative reaction to expensing if its only effect were to change the book profit reported to shareholders?
I fear they may be right. Indeed, most American businesspeople must believe expensing is more than bookkeeping. Current accounting rules encourage firms to expense option grants. However, only two of the S&P 500 firms reportedly chose to do so in the year 2000. If expensing does indeed matter, at least some of the unsustainable euphoria that surrounded dot-com investing at its peak may have been exacerbated by questionable reported earnings. ...... |
