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To: On the QT who wrote (81708)	11/21/1998 8:16:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

QT, I'm not sure what you are really asking. If you are questioning my veracity I suggest you speak to a CPA about how companies account for transactions involving their stock. This is not a question of what is valid for you, but a question of what accounting method would give a fair representation of the state of the business. This link was posted about six months ago concerning the abuses of employee stock options and the failure of the accounting system to adequately measure employee costs: forbes.com While I'm on the subject, I have a lot of problems with accounting standards that do not adequately account for business combinations. The creation of reserves for one-time merger expenses is a prime example. Another is the vast difference in accounting for a combination as a purchase or as a pooling of interest. Since the purpose of an accounting system is to fully and fairly reflect the state of the business I suggest that current accounting standards abet the creation of fictions by managers. I think a better picture might be obtained by publication of a corporations federal tax returns with footnotes noting areas where the company feels federal reporting distorts reality. Regarding PEG, the use of this metric is flawed for a variety of reasons, including, but not limited to its insensitivity to economic realities. For example, DCF theory states that when long-term interest rates fall stack prices should rise to reflect the greater present value of future cash flows. But the PEG metric is insensitive to interest rates. Therefore, I have taken a different tack. Instead of trying to decide whether a stock is misvalued in an absolute sense (an impossibility in my mind), I ask whether a stock is misvalued in a relative sense. PEG might be normalized with respect to a broad-based index such as the S&P500, or, as Jimleon (an occasional poster on this thread) has suggested, against a peer group like an index of computer manufacturers. Whether or not this approach has value remains to be seen. Remember, discordant PEG may be interpreted as meaning that the value of the base-line index is incorrect, and that the stock under consideration is properly valued. Ya pays yer money and ya takes yer cherce! TTFN, CTC