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Politics : Ask Michael Burke

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To: Ilaine who wrote (36079)	11/13/1998 11:47:00 AM
From: Mike M2	Read Replies (1) of 132070

CB, here is bubble stock compared with CBS #reply-6371762 I also posted a link recently comparing some bubble stocks with smokestack cos. I don't recall the date but Forbes ran an article about a study done by Andrew Smithers of London; he calculated the earnings of many companies if they had to expense the cost of esop on the income statement rather than reduce shareholder equity on the balance sheet. The cost is now disclosed in the footnotes. At the time of publication the PE on the S&P was 28 but would be 35 if options costs were expensed on the I/S. I have the article somewhere. Many profitable high tech companies would report losses if the esops were expensed on the I/S . I don't recall the impact on Dell but it was significant . In addition Dell uses a huge amount of it's cash flow to repurchases its own shares. In the old days companies would invest excess cash back into the business but now that bubble economics is in vogue management wants to have the share price rise as quickly as possible for the benefit of shareholders and their own stock options. Mike

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