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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (6088)	5/13/2002 11:20:55 PM
From: Enigma	Read Replies (2) \| Respond to of 33421

I wonder how employee stock options are expensed? The mechanics I mean.

To: John Pitera who wrote (6088)	5/14/2002 10:50:30 AM
From: Logain Ablar	Read Replies (2) \| Respond to of 33421

Hi John: On the S&P I think they will confluse the process. Its like they are trying to set the standard as to determine earnings. Last I checked it was FASB and the SEC who did this (and of course various companies with different versions of pro forma or ebidta). From an accounting perspective I disagree with S&P, not that the FASB footnote method is any great shakes. Tim

To: John Pitera who wrote (6088)	5/14/2002 9:59:26 PM
From: Dan Duchardt	Read Replies (2) \| Respond to of 33421

This means that the SPX is still twice the mean PE ratio of the SPX over the past 50 years which is 15-16. This causes me to ask something I have no idea how to answer: Will expensing stock options, with the resulting increase in P/E, create an "apples to apples" comparison with the historic norms, or are there so many other differences in accounting standards now, as compared to then, that such a comparison will always be inherently flawed? Dan

To: John Pitera who wrote (6088)	5/18/2002 7:22:31 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

Hi John... Just catching up on a few old postings I missed when I was lacking "connectivity".. I see the S&P is going to follow Bill Parishes advice and force companies to expense their options programs against earnings. That is practically a death knell for the largest technology companies such as MSFT, CSCO, INTC, and DELL... They have so many options outstanding, which will now likely be excercised due to the obvious pressure the stock price will come under, it may result in a domino effect. There are two likely scenarios I see for MSFT at the moment. A massive "distribution" run up to $70 over coming weeks (or maybe as low as $58-60) and then a roll over that carries it back back below the $50 level to $42 or so which would keep intact the channel it has established short-term. But a look at the monthly chart is more ominous. There was a pennant formation which was violated to the downside in recent months of trading: bigcharts.marketwatch.com Inevitably such pennant violation tend to resolve to further downside, which on that chart is pretty ugly. The low we saw in September could be setting up the lower range bracket for the monthly downtrend and that suggest MSFT could see $20 before the middle of next year. And there has been distinctive weakness in the trading as denoted by the monthly bollinger band envelopes. The stock has never been able to re-approach the upper bands on those BBs, but remained in a downtrend. The S&P ruling on options, combined with MSFT's heavy reliance upon them to employ a creative and productive workforce, combined with the lack of any significant (and accepted) software products suggest some rough sailing ahead for the flagship of the Nasdaq. But that doesn't mean that other stocks might not find more favor in the Nasdaq, such as semiconductors, hopefully mitigating the damage that MSFT's demise has on the overall index. We'll have to wait and see... Hawk