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Bearded One, excellent point on MSFT, but in this market the AMAZING happens almost daily. One point on MSFT and other large cap stocks that should be noted is the true economic effect of their generous stock option (employee) programs. This incentive to the employees has long been heralded as a source of inspiration and motivation for employees as they have a stake in the profitability/success of the company. What we see happening is a huge overhang of stocks. The compant (ie MSFT) conducts buyback programs, which investors traditionally herlad as good news. BUT the reason that these companies conduct the buyback is to prevent dilution. Also, this cost is not expensed the same way as wages. The effect is that we do not have wage inflation as wages are paid out in the form of elavated share prices which put the stock options in the money. This is a cost to the firm as they must buy back shares to prevent dilution. ALSO EPS are inflated as this cost is not expensed as wages. Back in Ben Franklins day, I believe he issued a hoax newsletter, proposing such a scheme, well, here we have it, and the hoax is on the shareholders (well, not yet but eventually this party will end with a massive hangover). Just ask yourself how much MSFT has spent on it's share buyback program, and are there any fewer shares on the market? Too much , and I don't think so... |
