|
Thanks Britt for your link on the FASB article. These accounting firms have their strings pulled by the private industry which pay their bills and the new rules add little value the investor. Thanks Winston for your informative comments on the Black-Scholes option pricing formula which will be used to 'forcast' future expenses. It is a pleasure to participate on a link with such thoughtfull and analytical commentary. If anyone knew, or thought about, or cared, about how much money companies like MSFT (who I am not knocking by the way, but am questioning the value place on the stock by investors) are using to support the price and prevent dilution, and if even a portion of this money was expensed by the analyst looking to place an economic value on each share, the resulting EPS fall would be dramatic. The numbers posted by the companies should always be treated with a degree of scepticism. The accounting rules are structured in such a manner as to allow the companies a great deal of latatude in what it reports. One example of this is the allowance for companies to switch between FIFO and LIFO inventory valuation, which really came in handy during the inflationary enviroment when it was proposed by FASB (at the request of private industry). I am amazed that with all the high level analysis done on some of these firms, that there is not a greater emphasis on what are the true economic impacts of stock options. As far as the comment on buy backs being a form of dividends, the only time an investor should desire that a company pay out dividends, beyond the tax implications, is when that company can no longer find high return investments. This is why "growth"firms do not pay dividends. They maintain the cash to internally finance their rapid growth. One last point, if you were paid in stock options, there are ways to inflate the stock price (in the short run) which are self serving. Just spend a ton of cash on buybacks which don't get expensed or drive down your eps, and cash in baby. We are definetly living in times of irrational exuberance... |
