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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (64468)	9/11/2003 11:43:54 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77397

Hi Lizzie, you keep talking about stock options expense as if whenever they are expensed it is ALWAYS overcharging. Well, that's simply not true. Black Scholes expensing does overcharge in periods when there are massive stock price declines as in the last 3 years. But in the other 90% of time periods, the expense is very accurate. Then in periods of increasing stock prices like right now, Black Scholes can actually underestimate the expense to the company. But the point is that it is an expense that needs to be recorded. Not recording it all means that you are ignoring a cost of doing business.

To: Lizzie Tudor who wrote (64468)	9/11/2003 7:00:19 PM
From: Stock Farmer	Respond to of 77397

Hi Lizzie, I run silent when I'm too busy living in the real world to care about diversions like SI. The last few months have been quite the enjoyable ride, haven't they? Perfect timing. And today I have taken a pause for breath and to capture gains. So I have a few moments to divert towards SI again. As far as Cisco being over-valued? For long term returns, yes I think so. At least, I am booking greater returns elsewhere, so it's the same result in the end even though on an absolute basis Cisco increases in price. Investing is a relative science, not an absolute one. I still think the market is under systemic pressure to artificially inflate prices in the short term. Also that these systemic effects are in opposition to more dominant long-term requirements of risk-weighted return on investment. One very likely solution to which is a massive stealth inflation. This way all the folks who look only at the difference in price between purchase and sale can declare that they are shrewd investors, while using erosion of purchasing power as the mechanism by which the indicated real return on capital is accomplished. What good is it if your Cisco shares double in price if gasoline and bread (et. al.) also double in price? As for short term returns? Hey, that's anybody's guess, but it's wise to remember that the good market giveth and the good market taketh away. It will be interesting to see the point at which the market decides to take profit. As far as temporary workers versus full time workers? Yes, there is a difference and you make a good point about exclusion of contract staff from published figures. Also I do agree that options and wage inflation are linked. You wrote "It is just my opinion that overstating options "costs" leads to more offshoring.". The same logic that supports such an assertion also supports the opposite, namely that understating option costs leads to less offshoring. Or stating the general case, the direction in which US companies mis-state the cost of options creates an artificial supply/demand imbalance in the global labor market either towards or away from the US. If we under-state the cost, we shift the imbalance towards higher US employment. If we over-state the cost, we shift the imbalance towards higher foreign employment. Right? Furthermore, reflecting the cost as zero is the maximum that the cost can be understated. Consequently, the current practice of reflecting the cost of options as zero has the effect of creating the maximum possible supply/demand imbalance in the global labor pool. And following this further down the inference curve implies that it drives the US labor market to a higher price point than would ordinarily be sustainable in a free market (global) economy. The long-term consequences of this chain of logic should be obvious. John