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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: dougSF30 who wrote (155512)	4/10/2005 10:06:54 AM
From: DRBES	Read Replies (8) \| Respond to of 275872

To dougSF30, Petz, Joe Halada, Dan3, Pravin, Techie Guy, ixse, and anyone else who would like to comment. I believe that the following will prove to be one of my most significant posts: "One theme that I try to adhere to in my thinking is that some events are so much more important than others as to render the others relatively insignificant. An obvious point is that it is sometimes almost impossible to discern which ones are the important ones...until, of course, much later. Later, if not much later is about to be upon us. Two such items are the recent purchases/options exercises/options related sales by Morton Topfer (purchase only) and Hector Ruiz. finance.yahoo.com The Topfer purchase would seem to be very straightforward in its implications. Given his history, it is a relatively aggressive move and augers well for AMD's longer term future. The Ruiz transaction is far more subtle in its extraordinarily positive implications. Hector has a history of being very cunning, intelligent, cautious and successful in his corporate activities (do refer to his history at Motorola.) Most individuals, probably Hector included, are far more cautious in their personal financial activities than in their professional lives. However, at first blush, Hector's actions seem rash and do not seem to pass the "THAT SURE LOOKS STUPID" test. Of course, given what I know about Hector Ruiz, it does; I have just been missing something. What looks stupid about the move(s) is that it would appear to be a gratuitously early execution of options that expire in about eight years (evaporating that virtual non-insignificant value) in return for the privilege of paying income taxes on the realized gain (when you execute an option, tax law requires you to pay taxes as ordinary income on the then difference between the option price and the market value at that time of execution), actions that competent tax accountants tend to advise against. Why would Hector be doing that ? The only reason that I can come up with that is consistent with evaporating the virtual time value of the options, taking on the risk of the personal investment (Hector is probably well off but probably not wealthy enough easily write off this size investment.) and paying the income taxes resulting from the move(s); is that [1] Hector is extremely confident of AMD's relative future performance and [2] Hector expects to realize some substantial gains on the shares one or more years out and the taxes on capital gains are far more friendly than on ordinary income. The risk, however, is only justified if the gains are to be very substantial. Also, Hector is probably guessing that AMD's shares will probably not go much lower, ever. The lower the shares are, the less realized shares had to be sold in order to cover incurred income taxes. Okay, so he is not a terrific stock timing trader; but that is not a skill that he is paid for or, for that matter, that I would want in him. BTW, I continue to think that, that Peltier patent could be the basis of some breakthrough technology based on very localized cryogenic cooling of the substrate coupled with appropriate materials choices." This "appeal to authority" argument is the weakest of all legitimate logic arguments; but, given its underpinnings, it is compelling. Comments ?