Albert Meyer

Yet Another Ternium Convert

Tenaris [TS] is Ternium's sister company. Both companies care about shareholders, rather than concentrating on inflating executive compensation packages - no stock options, no smoke-and-mirrors.

Baidu vs. Google: A Free Cash Flow Analysis

A belated reply, following the logic of “endoftheworld” above: During the period 1995 to 2007 Cisco spent virtually the entirety of its free cash flow to repurchase approximately 2 billion shares. During the same period, it issued 2 billion shares to employees. How did shareholders benefit? Zilch. You first inflate the share count and then you mop up the dilution.

Here’s the logic: when a company issues options IN LIEU OF CASH COMPENSATION and then buys back the stock issued as a consequence of the options program, it has merely paid cash compensation by means of a two-stage process. There are stock buybacks that shrink the pie (for example, if Berkshire were to repurchase stock) and stock buybacks that merely mop up dilution (for example, Cisco’s stock buybacks, for the most part)

Cisco’s employees contributed $15 billion through stock option exercises during the period under review. Hence, my calculation of free cash includes an adjustment that calculates the cost of repurchasing the stock issued to employees net of their contributions on exercise, to arrive at “unfettered free cash flow.”

By the way, the cost of mopping up (market value minus exercise price = discount at which stock issued to employees) is the very amount that companies claim as a tax deduction for stock-based compensation.

In summary: for a more reliable free cash flow number, adjust conventional free cash flow for the cost of mopping up stock option diluting.

The Best Trades Could Be the Ones Not Entered

You have not missed anything... PAYX is the superior company... revisit this story a year or two from now and long-term investors owning PAYX will be smiling... however, in the short-term anything is possible...

On Oct 29 11:48 AM money4eds wrote:

> You compare PAYX to ADP and state PAYX is over valued. PAYX has no
> debt, better current ratio, better return on equity. They also are
> expanding their service offerings. Higher insider ownership in PAYX.
> On paper it seems to be a better investment. What did I miss?

Baidu vs. Google: A Free Cash Flow Analysis

Oh wow... we had some spirited debates... I forgot my handle... something311, I think...


On Oct 28 10:37 AM Peter Mycroft Psaras wrote:

> Yes I am the same ;-)

Baidu vs. Google: A Free Cash Flow Analysis

Thanks... are you the same Mycroft who was active on the Coke Yahoo board in 1998?

How Did the Wage / Benefit Gap Between Public and Private Sectors Get So Huge?

Moon Kil Woong.

"Bush Jr. didn't "dump" hundreds of thousands of young Americans in a desert somewhere with no real mission." - Moon Kil Woong
("We have to protect the integrity of the United Nations," he said.")

The mission was to annex the oil fields of Iraq and payback Sadam for cheating his dad on an oil deal decades ago. US oil services companies (Cheney's buddies) were lining up to make billions.

Bush lied, our barve men and women died; and are still dying. Millions of Iraqi's are refugees, thousands innocent Iraqis died needlessly.

Track the cost of this disaster here:

costofwar.com/

U.S. Treasury Supply Continues

Thanks...

18 High Dividend Canadian Stocks

Precision Drilling suspended its dividend and using the cash to payoff debt after the Grey Wolf acquisition.

Remember Mark-to-Market?

"Fair-value" accounting isn't accounting at all; it's quarterly books valued at the prevailing hysteria/euphoria of traders.” Tack

Correct. Those in favor of "fair-value” accounting, approach it from a purely theoretical construct. For a market to produce fair values, it has to be transparent, liquid and deep. You can no doubt add more characteristics, without which one cannot trust or rely on the fair values produced. FASB failed to see that Mark-to-Make Believe was a doomsday device. The world is a better place without FASB and the SEC. Both bodies engender a false sense of security.

FASB is an enigma full of contradictions. The fair value of an employee stock option is the difference between the current market value and the strike price. Yet, FASB threw out the intrinsic value approach, which, take note, is the cost that companies deduct as stock-based compensation on their tax returns, and, instead, gave us a 280-page rule-book to calculate the cost of an employee stock options. That way, the obfuscation is so surreal that nobody bothers to question the whole system that essentially transfers wealth from hardworking Americans into the bank accounts of the executive elite who, in turn, bankrolled our members of Congress…. who, in turn, protect the system. Ask yourself the question: Where did the $470 million come from that Countrywide’s Mozilo banked after exercising his stock options? Mostly from people who invested in Index funds, because Countrywide was part of the S&P 500 and Nasdaq. Legalized theft. I could go on…

China Wants a Global Currency? Here's How

"The supply of mineable gold is too limited, and efforts to back up currency with gold would result in chronic shortages of liquidity and global deflation."

Please substantiate this with research. I've seen compelling research to the contrary. Refute this notion and support your assertion with substantive evidence. I'm neutral on this debate.

American Debt Falls for First Time Since 1954

Biden also said, during the VP debate, that we (you and me, taxpayers) should build more schools in Pakistan... The Financial Times reported last week that we gave Pakistan $5.5 billion and have promised another $1.5 billion per annum... regardless who is in power... both parties are bent on expanding our foreign empire (some put the cost at $1 trillion p.a. costofwar.com/)... and in the process bankrupting us here at home... this is a one-party state


On Sep 28 05:43 PM Jason Tillberg wrote:

> Reminds me of what Biden said back in July.. sic "if we don't spend,
> we go bankrupt."
>
> www.youtube.com/watch?...;feature=related<br...
>
> Debt based money system, he's right.

Outlandish CEO Pay: How to Fix the Problem

First, the IRS needs to withdraw the provision in the tax code that allows companies to deduct the discount at which they issue stock to employees. For years, companies have maintained that stock-based compensation was not an expense, but they have eagerly taken a huge tax deduction on that account in their tax returns.

Second, cash spent on buying back shares that were issued to employees in lieu of cash compensation should be reported in the operating section of the cash flow statement. If the IRS wants to grant companies a compensation deduction, then base it on these cash outflows. Cash outflows relating to stock repurchases should only be reported as a financing activity, i.e., an allocation of capital, once it has been shown that all dilution caused by stock-based compensation has been mopped up. Executives would have us believe that the stock-based compensation expense, as recognized in the income statement, is a non-cash expense. Cash spent on stock repurchases to combat dilution caused by stock-based compensation betrays this notion, and if properly disclosed as suggested above, would better inform shareholders of the true cost of share-based compensation.

Mutual fund, MIRZX, shuns companies that use stock-based compensation, unless used minimally, i.e., great companies like Telefonica, Nestle, Syngenta, TransCanada, StatOil, Tenaris, Southern Copper... to name a few.

The Sensationalist WSJ

I agree with you. The neocons have taken over at the WSJ.

costofwar.com/

ECB's Nowotny: No Dollar Shortage in Europe Anymore

"The first camp does not appear to recognize the significance of what appears to have been one of the Federal Reserve's most successful programs. The currency swap lines with foreign central banks. At their peak they amounted to nearly $650 bln... The media also appears to have lost sight of this..."

Perhaps ypu cold explain to those in the media and simpletons like me, how these swap lines were instituted and how they distort the normal flow of funds?

I was in the first camp, until I read this article, which is why I appreciate your contributions. A previous contribution, which highlighted the fact that part of the trade deficit is just US companies importing finished goods from their foreign-owned manufacturing plants, was a reminder of very imporant fact when people get all antsy about trade deficits. There is more than meets the eye, as also in the case with these swap lines, but not that obvious.

What’s My Payment?

Good article, thanks.

"The $10.5 trillion of mortgage debt will need to be paid down or written off over many years, before the housing market will reach equilibrium again"

Isn't this a little bit extreme? The collateral value of the $10.5 trillion of mortgage debt is $19 trillion, not so?

Total US household net worth is $53 trillion, not so?

Just trying to add another perspective, although there is nothing about your article that should make us proud, but then our government leads the way, not so? A healthcare program will add another $1 trillion to national debt over the next ten years - low-balling the estimate of course. Do they undertsand what the word "immoral" means.

The war was supposed to cost $80 billion... $908 billion and counting. This makes household debt fade into insignificance.

costofwar.com/