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To: Mike Buckley who wrote (24158)	5/4/2000 1:13:00 AM
From: saukriver	Read Replies (1) \| Respond to of 54805

MSFT--Cash Drain from Put Warrant Obligations Mike, You said: If puts that have been sold are required to be listed as a liability, there will also be an asset (the value of the common stock) that will offset at leat part of the liability. If the value of the shares is lower than the strike price, the asset will be lower than the liability. Conversely, if the value of the shares is higher than the strike price, the asset will be greater than the liability. Agreed that this should not affect the balance sheet. But it seems to me that Microsoft has been taking in income from premium on selling put warrants. Looked brilliant as the stock rose. Now, with the share price down, there is a potential liability that will drain cash out. That changes the picture of how we view the company. We need to get an accountant into this discussion to explain to us if possible when the economic consequence of the cash outflow needs to be flagged for SHs. Like a judgment in a lawsuit, this potential hit changes the picture and must be disclosed. When? Two years before the expiry date? 4 months? 2 weeks? 1 day before the expiry date seems too late for the same reason that a company cannot wait until the judgment is entered to explain to SH the risk of the lawsuit. saukriver

To: Mike Buckley who wrote (24158)	5/4/2000 6:30:00 AM
From: IngotWeTrust	Read Replies (1) \| Respond to of 54805

Buckley sez: <<When a co. SELLS puts, it does so as part of a share buy-back program>> *au contraire* That is only ONE reason a company may indulge in that strategy. It is by FAR a total understatement of that particular strategy's employment by today's corporate boardroom occupants. Selling (writing puts) usually occurs in a 3:1 --if not more --puts to every call, and more often than not, the call portion of the "strategy" isn't even implemented, increasing exponentially the risk in writing puts. Guess the board "advisors" just never get around to executing that leg. However, this 3:1 strategy is rampantly used to finance the purchase of calls betting against their own stock's price appreciation for whatever reason management is hedging their bets--loss of market share, new product flop, ramp up problems, etc. It is a foolish and abused strategy, PLUS exposes managements ugly belly to Orange County type messes and Barings bank size demises, disquised as "takeovers" or "mergers" or my rav fav "restructuring." This type of derivative is usually carried out in near total secrecy, carried "off the books" and executed in the HUGE NY OTC market, by 'off the floor' flex option specialists interested in only one thing: transactional fee income, and delta neutral laying off of said bets by such foolish mgmt practices. But, hey, this is America, and capitalism never promised only genuises would PAY to PLAY corporate ROULETTE! Only when one of these derivs goes tremendously wrong, i.e., the share price of said co's stock going tremendously against said cutesy plotting and planning by boardroom neophytes...such as has happened in recent instances of LTCM, Tiger Funds, Quantum funds, --- (as I recall, Julian Robertson admitted dumping QCOM in the last 4 weeks in order to exit his hedgefund position-and QCOM is one of this thread's darling G*K holdings acc'd to recent snas survey), do such foolish exercises in 3:1 sold puts and their attendant financial folly become exposed. So, just "take a moment" to contemplate the compound effect of individual company management employing this strategy and the hedgefund/pension fund/mutual fund mgmt also utilizing this 3:1 or worse strategy, and you get an idea of the ticking timebomb in the belly of this market bubble...which is in essence a giant "collickly gas bubble in Simian balance sheets" currently AND going forward. Obviously, the moment said co's shareholders become informed, the lawsuits fly and that is only ONE of said company's problems going forward. The shareholder lawsuits resulting from this foolishness are yet to be filed on this recent buzzcut in share prices...[you pick the stock...and QCOM ranks right up there with the contenders!] Tracking and making managements accountable for unbridled put writing should be diligently pursued and made subject to the same financial reporting requirements as "insider buys and sells." The SEC has been extremely LAX on this subject of 3:1 (and worse) put writes strategy. I suspect until more "hedge fund" playgrounds of the rich and infamous collapse, and shareholders start to wise up and rise up, this abusive practice will continue unabated while uneducated folks such as yourself continue to profer explanations of usage primarily as a "share buyback" strategy by healthy companies. While I'm not denying some co's may engage in "put writes" for reasons you suggest, you, Buckley frankly are only scratching the surface of that much abused strategy in today's corporate culture. Care to modify your blanket statement re: put writes [implied "ONLY"] for share buyback programs? Your utterance quoted above and NOT taken out of context indicates makes you sir, QUITE MISTAKEN! ROTFLMAO!!!!!!!!!!!!!!!!!!