Right, I understand they're not handing out options that allow employees to sell the shares at a certain price (puts?).

I'm still not sure if it works one of these ways though.

They aren't open market options as it were.

They are always issuances of new shares when the option is exercised and they aren't cash generating either, they are actually expenses. Buffett is a big proponent of 1) stock options for bonus' instead of cash and 2) classifying options as expenses on balance sheets.

Can you explain what that means/does?

Can you also clear something else up for me as well, specifically, why do they do stock options that way? For example, if you issue new shares and give someone calls on those shares, they're only going to buy them if the stock is higher than the exercise price, and the company will be stuck with the stocks otherwise. If on the other hand, the company issued stock and sold it for $100 to raise capital, they could probably turn around and buy calls on the open market for $5. This way, they'd generate $95, not be stuck with the shares in the case of a decreasing stock price, and still be giving employees the same incentive to work hard in the hopes that their stock options will be exercised.

Edit: Let me try to explain this one more time, through an example.

Two strategies (let's assume the market price would be $100 per share after the company issues the new 100 shares):
1) The company can issue 100 shares, hold on to them, and give employees a call option for $100.
2) The company can sell the shares for $100 and buy call options for $5 (on the market), and give these call options to their employees.

Cost benefit of two strategies:
1) If the stock increases, employee exercises option, company gets $10,000. If the stock decreases, employee does not exercise option, company is stuck with the stock.
2) If the stock increases, employee exercises option, company already got $10,000 - $500. If the stock decreases, employee does not exercise option, company already got $10,000 - $500.

Every once in a while, I come across the name of a private company that seems to have a very promising idea or business model. Are there any tracking wizards or news-watching bots that I can use to look for the company's name indicating that it may hold an IPO?

Are there other strategies one uses to look for a private company turning public?

There are probably SEC rules in place to prevent this as there would be an endless chain of scam companies beyond what already exist in the OTC markets.

Not all stock options are rights to purchase, some are just straight up "gifts" of shares.

I don't fully understand, please explain.

Yeah, that's what I figured. Maybe the term "stock options" doesn't always literally mean an option in the sense of a financial derivative.

I have a question about earnings numbers.

So, when earnings come out, several numbers are given. EPS, Revenue, GAAP EPS, etc. Why are both EPS and revenue given? Why are both numbers important? Isn't it enough to just give EPS? Why is revenue given? I guess a great EPS number could mean several things? Like great EPS could just be due to cost-cutting measures and not due to an increased demand of services. Is this the only reason why revenue is an important number? It gives an indication of services demanded?

Is GAAP revenue or GAAP EPS more important than the regular numbers?

How is EPS calculated? Is that just revenue/number of shares? I'll try looking this up on my own.

Specifically, I'm interested in GS numbers on 1/20/10. It blew out EPS at like 8.20 vs 5.20 estimates but its revenue fell slightly below estimates at like 9.64B vs 9.71B

So this seemed like the most appropriate place to put this question:

I had a contract written by a law firm three months ago and I was quoted by a partner that it would cost at *most* $500 to write. Another lawyer in the firm ended up writing the contract and three months after the fact they come back and send me a bill for an extra $300 over the $500 retainer I had placed.

The last email I had with them I asked how much was left on the retainer and they said $50 was left. Am I being screwed around with here? What do I do?

EPS is earnings per share. net income / outstanding shares.

In the example you give with Goldman Sachs, if I remember the one article its because of expenses having dropped. Therefore because EPS went up and revenue went down, it means operating margins increased which is a sign of efficiency which generally means a well oiled, efficient operating machine. It might be temporary though, so until next quarter, don't trust that the margins will remain.

cwar -

i'm no expert in this area, but my 2 cents......it sounds like you got an estimate and never got a definite bill for services rendered. maybe the final contract just cost more than original estimate?

i would just pay. not sure if it is common practice, but in the future i would try and get an actual price/bill rather than just an estimate before moving forward with the contract.

Which do you mean? OTC scams or SEC rules preventing a company from issuing options on its own issuance of shares?

I"m speculating on the SEC part, but it makes sense. OTC scams are pretty well documented since its completely unregulated.

Are there any bank accounts in Canada that would let you open up a US currency account and then let you withdraw from that account in United States?

Have you asked a bank?

I don't understand how you could pull off a scam? (I'm not saying there isn't one, just that one doesn't come to me when I think about it.) If a company issued and sold stock, and then bought calls on the market (as opposed to just issuing stock and writing the puts themselves), why would we have to worry about a scam?

Again, here's my idea:
Obviously, the company would prefer strategy one if the stock price on the exercise date is $95+. Likewise, they'd prefer strategy two if the stock price on the exercise date is less than $95. I think one could maybe even argue that they'd always prefer strategy two if they are risk averse (since they're guaranteed $9500 and don't have to worry about variance, were strategy two gets them at most $10,000, but there's a lot more downside).

one so far. It's a hassle to call all of them

Stock options are EXPENSES. Most companies do not categorize it as such however.

With stock options the shares are not created until they are exercised. In order to do what you're saying, the company has to dilute its shareholders AND make money at the same time under the auspices its doing something good for its employees (itself). This is kin to OTC scams where companies make stock offerings to the public in the hundreds of millions range for $.10c each kind of thing, diluting their shareholders and lining their pockets.

Maybe there aren't rules against it, but no investor is going to happily buy the stock when its getting nailed while rewarding the employee and the company.

Thank you for explaining that to me. I totally understand that, and it makes a bunch of sense to me. I wouldn't necessarily call it a scam, just bad business practice. For one thing, the company wants to remain credible to present and potential shareholders that they won't dilute their stock. Second, shareholders probably don't mind stock options as a way to line up employee incentives with shareholder interests, therefore, they don't mind having the stock be diluted a bit, if it comes from employees exercising their stock options due to a rising stock price (in other words, the company offers the options as an incentive, and those options will only be exercised if the stock price raises).

By the way, why does Buffet believe in stock options as opposed to cash bonuses? Is it mostly because it's a way of aligning employee incentives with shareholder interests?

http://en.wikipedia.org/wiki/Warren_..._stock_options

Hi,

I have a meeting with a financial advisor my bank has set me up with tomorrow, about potential investing since i have a big chunk of cash sitting in my bank being eaten away by inflation.

I wanna go in prepared and be well informed, so I'd love it if one of you guys could find time to jump on msn/aim with me sometime and fill me in on the basics, i'd tip you or give you a free hours poker coaching or something

PM me if you think you can help,
thx

Don't buy any mutual fund type products he's trying to sell you. Your 'advisor' will get rich on fees and you will be left with too little return. If I were you I'd check if Vanguard operates in the UK and let your advisor scam other people.

thx for the post, and cwar for the PM.

decided to postpone the meeting for now, hopefully pick the brains of 2p2 if poss and then hopefully not be such a fish at this.

if anyone has time to converse by PM's or aim/msn that would be much appreciated, thx

i'm not sure if this helps... but i'm a Canadian and i have a Canadian bank account in Canadian dollars. But about 6 years ago, i traveled to Thailand and all around south east asia... and i just took my debit card with me and took out money in the local currency from the ATM in countries like Thailand and Vietnam. and i'm pretty sure there wasn't a big fee for the currency exchange (there may not have been any fee). So i think if you open a canadian bank account and get a debit card, you can pretty much take out money anywhere in the world, and it will come out in the local currency from the ATM. I don't know anything about keeping your money in US dollars in a Canadian bank account, but my guess would be that it would be possible... i'm sure you could phone or e-mail and ask someone. But i don't see why you wouldn't want to just have a canadian bank account with canadian dollars in it... our currency is pretty groovy.

help with balance question.

50 years old..good pension. retiring in 3 to 5 years .The funds below are for buying a new house in about 3 years. I will use proceeds from existing house, plus funds below.

Funds

10% in a BMO Dividend Fund
10% in a BMO Asset Allocation Fund
20% in a BMO Equity Index Fund
60% cash

I currently use cash for short term trading.

Question, should I take x % of cash and put it in T-Bill or Bond funds for balance.

the % you have tied up in the house is pretty relevant

Let's say 170K in house (paid for), and 300K + in investments as noted above. RRSP and pension are seperate.

I have been pretty lucky (emphasize lucky) timing the market last 10 years. Got in and out at key times onthe two big swings. I have also been on the sidelines with cash and missed some good oportunities, though. Can't rely on luck and want to have a fairly conservative approach going into next 3 years or so. Right now I can't seem to think of anything better than "nowhere" with respect to the cash.

Thx in advance for any suggestions