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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (1935)	10/6/2000 12:27:54 AM
From: Tom Kearney	Read Replies (1) \| Respond to of 57684

William - What I can't understand about this recession is why did Congress just authorize 300,000 more H1 visas for foreign high tech workers? ;->>>

To: Bill Harmond who wrote (1935)	10/8/2000 5:34:44 PM
From: Leeza Rodriguez	Read Replies (1) \| Respond to of 57684

William, I agree with the three observations you make (economy is strong, inventories are low, and the dollar is strong) . Additionally I believe that we are in the 3rd inning of this technology revolution. HOWEVER, having said that-- today I read the most frightening financial article that I have seen in a long time. The article examines the current practice that new economy companies have utilized with respect to issuing options. I have been aware of the practice, but seeing it in print somehow scares the daylights out of me.... In a nutshell: Options save companies money on payroll costs, aka the line item on 10Q expenses. These savings go to the bottom line, making earnings growth at many companies look artificially high. From the article: ' the trouble is , stock options work as a compensation device only when share prices are rising. When stocks plummet, the options become unexercisable and possibly worthless, and the construct starts to crumble.'.....'faced with he prospect of worthless stock options, new economy workers may begin to demand old economy cash from their employers. That would drive up corporate costs among technology companies-the biggest users of stocks options- at exactly the wrong moment, when their operations are slowing.' Furthermore, the article identifies a few of the blew chip companies and calculates their reduced earnings IF options were counted as costs. The results are disturbing. For example, Cisco earnings would be 24% lower . At the risk of sounding like Alan Abelson <g>, this could get exponentially ugly if the NAZ doesn't stabilize soon since some employees will simply start demanding a paycheck instead of options. A scary thought indeed. leeza rodriguez