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To: TimF who wrote (158)	1/28/2003 12:03:38 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 445

Tim, But currency, counterfeit or otherwise is a bit different then a company's stock. If a company makes $100mil worth of counterfeit dollars it will depress the value of the dollar less (a lower percentage) then it will depress the value of its stock if it makes $100mil of new stock. For a company with a market cap of $1bil, $100bil increases the supply by 10%. It increases the supply of dollars by a negligible amount. Basically the counterfeiter steals the money from the rest of the country through inflation, but the inflation caused by $100mil is so little that it can be ignored most of the time. The "inflation" in stock supply however can be more serious for those effected because it is not spread around as much as the inflation caused by counterfeiters. This is all true, but the problem with expensing stock and option grants is that the inflated supply of stock is already helping to determine the market price of a share of stock. Whenever the market price of a share of stock fails to track share count dilution, whether it is the result of a stock split, or a stock or option grant, then this is the result of a valuation change. It is the claiming of an artificial compensation expense for stock or options which results in a double counting. When compensation is in the form of stock or options, this expense falls directly on the shareholder owners in the form of dilution. There is not only no need for an additional expense to be assigned to the company itself, but that assigning such an expense leads to extraordinarily illogical distortions. The real point of the counterfeit example is to demonstrate that the value of something to a receiver has little or nothing to do with the cost imposed on the giver. It is a common economic fallacy that exchanges are made when the counterparties agree on the value of the goods to be exchanged. Nothing could be further from the truth. All economic values are subjective. Exchanges are made when the counterparties have such an extreme disagreement on the value of the goods to be exchanged that they believe that no other possible exchange would be more advantageous to themselves. Regards, Don