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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Ahda who wrote (13413)	1/13/2002 5:41:14 PM
From: Stock Farmer	Respond to of 74559

Darleen, >>Seed money is what Dak is talking about. << No, actually, not exactly. Ongoing capital, from the public market. It seems you are missing the fact that these companies were taking out huge loans from the First Bank of Mostly Clueless all along. In amounts that began to regularly exceed earnings!!! Only because it isn't labeled "loan" they don't smell it. It doesn't show up on the balance sheet under "Short Term Liabilities" or even under "Long Term Liabilities". And I bet most folks wouldn't even think to look for it. For example (and only because I have the spreadsheet handy), Cisco Systems borrowed about 5 Billion dollars that nobody seems to even have even noticed, much less made a fuss about. Because it's been cleverly disguised as profit through the planet's most ingenious sleight of hand. Total outstanding? A staggering 20.5 Billion. Of which all but about 900 MM was raised since 1996. It all got rather goofy, with the sizes of these "loans" even bigger than the "profits" these companies were reporting. Cisco isn't alone. Check Qualcomm 2001 at 140 MM (vs a loss of 548 MM), SEBL 2000 at 601 MM (vs earnings of 123 MM) and so on. MSFT, INTC... they all play the game. Perfectly legal. No scam at all. It's all there laid out in black and white in the prospectus that we're supposed to read before we invest. Can't blame the companies if silly folks don't follow instruction and think they know what they are doing. At least that's the party line. Heck, the purpose of the market is to get individual shareholders to part with their capital. It's not an accident that the financial community labels the general investor as "Dumb Money". John