Letter sent to Wall Street Journal

Wall Street Journal columnist, Holman W. Jenkins (Stock Option Fiends Revealed, August 30, 2006) placed Nobel Laureates and Warren Buffett at opposite ends of the stock option expensing debate. This detracted from what otherwise was a useful contribution to the niggling question of why companies readily expense stock-based compensation in their tax returns, but reluctantly so in their financial statements. The last time Mr. Buffett found himself in a room with Nobel Laureates representing Long-Term Capital Management, they stood cap-in-hand seeking a bailout. Investors would do well to stick to Mr. Buffett's "equivocation fallacy" - as characterized by Mr. Jenkins - that "If options aren't compensation, and compensation isn't an expense, what is it?"

Sincerely,

Albert J Meyer

In a recent article in the Wall Street Journal, Herb Greenberg discussed our firm's approach of avoiding companies loaded with stock options. The article notes:

Mr. Meyer focused on options long before they became a lightning rod in the market. In 2003, while at his own research firm, he penned a piece that argued eBay's real free cash flow was negative after deducting the amount needed for options-related purposes; it led to a Harvard Business School study. "I always start my research at the proxy statement," Mr. Meyer says. That's his first line of defense on companies to avoid; it's also how he finds companies he might want to buy.

Those with a subscription to the Wall Street Journal online, can read the full article HERE.

Albert Meyer, President of Bastiat Capital, discusses the true cost of stock options with host Spencer McGowan of Net Worth Radio on Dallas KLIF 570am.