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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (166789)	6/21/2002 4:15:44 PM
From: BelowTheCrowd	Read Replies (1) \| Respond to of 186894

a) Buffett has never said that the fraud at Enron and the others was specifically caused by options. He has made much more general statements about improper compensation and poor corporate governance. He has certainly indicated that options are a piece of the puzzle, and has stated there were many other problems too. b) Buffet points out that stock performance is generally out of the control of any individual employee and often out of the control of the company as well, as it depends on the mood of capital markets. As such he does question how they would motivate employees to do their particular jobs. (He would point out that company performance and stock performance often diverge, often for extended periods of time.) c) Buffett has stated often that he doesn't understand what factors create a long-term compeitive advantage in technology markets, which tend to be disruptive in nature. As such he does not invest in them.

To: Amy J who wrote (166789)	6/22/2002 11:02:12 AM
From: Jacques Newey	Read Replies (2) \| Respond to of 186894

Amy J, Re: "I've read a lot on his position going back to the early 90's too (and am not going to waste the time to dig it up) but his dislike for options expands way beyond what you mentioned." Buffett's dislike for options is, believe or not, in your best interest as a shareholder of INTC. It's a shame you can't see that. If you had understood what he was saying in the early 90's, you might not have maxed out your 401 (k)'s with INTC when it was it was selling at levels north of where it is now. Buffett saw this whole tech crash coming Amy. He understood what the ultimate consequence of high tech's accounting of options would be. He predicted the current crash like the plot of a 10 cent novel. Unfortunately, the story isn't over yet. The options accounting tragedy still has a few chapters left, and they won't make for happy reading. Here's a hint on how the rest of the story will unfold. Standard and Poor's has announced they will begin to calculate and report what they call the "core earnings" of companies in their indices. The new "core earnings" will reflect the true cost of options on earnings (i.e. options will be expensed). S&P agrees with Buffett on the accounting of options. They are apparently as clueless as Buffett is. Guess what. Core earnings (a more representative indicator of a company's true profits) will be significantly less than reported earnings for many companies that issue options. Cisco being a prime example. When the Mr.Market figures out that the E's in the already high P/E's are much smaller than he previously thought, then the P's will fall even further than they already have. The tragedy is that Amy J's of the world will have personally suffered from a set of circumstances that they thought they fully understood. "It ain't what we don't know that harms us. It's what we do know that ain't so."