>> they are paying tons of money to fund the stock options for the management, using shareholder's equity. <<
Richard - you're right to be puzzled , as in why do people keep paying a ridiculous price for this stock? As you can see , a lot of equity is departing through the stock-option drain , but in the new paradigm, the focus is on EPS growth , not on what the thing is worth at the end of the day. EPS can be manipulated in many ways (although I'm not saying it is at Dell, I haven't studied their financials) by many companies , and when the compensation-in-options is not included in the expenses , it gives you a really phony picture of what's going on.
The idiots buying the stocks are ignoring the money draining out , and paying attention only to the increasing "EPS" number as their guide. Dell is not the only example.
Whenever the party is over , a lot of people are going to look and feel very foolish with Dell at 70 times "earnings" in their portfolio. And , no it's not sustainable , but if more neophyte "investors" keep throwing all the money they can at these fantasies , the stock may stay high for a while longer, before the inevitable crash. |
