Pete and others, when you get time take a look at this . Interesting reading.
<<The following are some excerpts from an article in this mornings locale bird cage carpet. In the investment Q&A colum the author is quoting from James Grants newsletter. I dont have a scanner
so I'll just hit the highlights. This may have been posted before by others, if so, ignore. It is interesting
reading and is what some of you have been saying for quite a while.
The article states that Grant is worried about consumer,corporate,Treasury,and international borrowing.
He also is concerned about the inflation of assets rather than the inflation of money, SLIGHT OF HAND
IN ACCOUNTING AND NEW ISSUES OF STOCK THAT SHOULD NOT HAVE BEEN CONCEIVED, LET ALONE BORN.
The meat of the article is this: Intel and Microsoft examples.
"At Microsoft, repurchase of shares to fill stock options absorbed a whopping 191.9 percent of net income
in the first quarter of this year. At Intel the figure was 60.5 percent. While both are the highest figures for any quarter in the last two years, the record shows that profits could be viewed as OVERSTATED at
both companies."
Again quoting from the article: "In 1995 Intel had net income of $3,566 million but spent $1,034 million on share repurchases; the expense isn't listed anywhere in its income statement. In 1996 the figures were
$5,157M in income but $1,302M on share repurchase. When you read that Intel is selling at a multiple of X times trailing earnings, the figure reflects stated income. Adjusted for share repurchases, the multiple could be construed as about 50 percent higher"
"Microsoft-- In its fiscal year 1996 ( ending June 30 ) the company had a net income of $2,195M but repurchased $1,261M shares. And in the 9 months ending March 31 the company had net income of
$2,397M but spent $3,069M for share repurchases. Selling at a multiple of stated earnings of 51, it could be argued that the shareholders are being deluded"
I guess that last paragraph explains why they were not buying back any stock last quarter (g)
Sorry to make this so long, but felt like it needed to be circulated around.
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