Month: July 2002

Managing earnings by accounting for options

— More Than Zero explores some of the implications of expensing stock options: Another amazing facet of the public debate on this topic is that no pundit I’ve seen has considered what happens after the options have been expensed and they expire (as they sometimes do). Let’s imagine we have expensed $25 million of options … Continue reading “Managing earnings by accounting for options”

— More Than Zero explores some of the implications of expensing stock options:

Another amazing facet of the public debate on this topic is that no pundit I’ve seen has considered what happens after the options have been expensed and they expire (as they sometimes do). Let’s imagine we have expensed $25 million of options and given them to our CEO. The option term has expired, the options were worthless. Now we get to take the expense back (the books don’t balance if you don’t!). Companies could have a lot of fun with that by issuing a series of complex, long-dated deep out-of-the money options with impossible employment contingencies in order to create a reserve during flush times. Talk about managed earnings!

So expensing options creates the opportunity for more shenanigans than it forestalls. Sticking to real expenses and real earnings is the best route, no matter what Jimmy Warren Buffett has to say about it.

Where’s the beef?

— The Mercury News jumps on the latest trend in eating, the return of grass-fed beef to the United States: In the United States, grass feeding was the norm until the end of World War II, when gunpowder plants were converted into nitrogen fertilizer plants. The fertilizer was then applied to cornfields in the Midwest, … Continue reading “Where’s the beef?”

— The Mercury News jumps on the latest trend in eating, the return of grass-fed beef to the United States:

In the United States, grass feeding was the norm until the end of World War II, when gunpowder plants were converted into nitrogen fertilizer plants. The fertilizer was then applied to cornfields in the Midwest, tripling production and sending commodities markets into a tailspin, says Ernest Phinney, general manager of Western Grasslands Beef, a cooperative of six Northern California family ranchers.


After grain prices crashed, fertilizer companies began to offer farmers subsidies to use their fertilizers to grow corn. Eventually, corn replaced grass as the feed of choice for steers in their last months before slaughter because it was cheaper and it bulked up the animals more quickly — adding as much as three pounds a day, compared to grass’ one pound.


In the past few years, there has been a resurgence in grass feeding among some California ranchers who are trying to preserve their way of life by producing a more artisanal product, one that they argue is also more sustainable because cattle are eating what is natural to them, unlike corn, which is more difficult to digest and often leads to ailments that require antibiotics. Even so, less than 1 percent of the 30 million cattle raised for meat annually in the United States is primarily grass-fed, says the National Cattlemen’s Beef Association.

The story’s also been covered in the Chronicle and in the Santa Rosa Press Democrat. The appeal is pretty easy to see: beef that’s lower in cholesterol than chicken or fish, and high in healthy stuff like omega 3 fatty acids and conjugated linoleic acid, or CLA, both of which are thought to help fight cancer. And the animals aren’t over-dosed with antibiotics in feed lots, or subjected to months of diarrhea from eating a grain diet that their digestive systems can’t really handle. So order some grass-fed beef, from Marin Sun Farms like we do, or another local producer, and invite some vegetarians over for a barbecue. When they turn down the offer of juicy steaks, tell them it’s healthier than tofu, because it is. And watch them squirm.

Seriously, we just got our second annual order of artisan beef, this one a quarter of a grass-fed Angus/Hereford cross from Marin, after last year’s quarter of a Longhorn from Minnasoooda. Longhorns are too lean naturally to feed exclusively on grass, so we went for the local beef this year to get the higher Omega-3 and such. The fat from a grass-fed steer is yellow from all the beta carotene in their diet, and the meat has a more intense beefy flavor. Cooking requires some adjustment, unless you’re used to dry-aged prime beef, but properly-done steaks, stews, and chili are tender enough to eat with no hardship. And the beefs are trained to come when they’re called. My gratitude to the beef god for the steer who gave up his young life that we and three others may eat great curry for another year.

Flirting with bankruptcy

hasn’t stopped Salon from selling subscriptions to services it probably won’t be around long enough to provide. The latest is a blog hosting service, provided in concert with the charming Dave Winer, a guy who’s been blogging almost as long as I have. The first Salon blog is Scott Rosenberg’s Links & Comment, by the … Continue reading “Flirting with bankruptcy”

hasn’t stopped Salon from selling subscriptions to services it probably won’t be around long enough to provide. The latest is a blog hosting service, provided in concert with the charming Dave Winer, a guy who’s been blogging almost as long as I have. The first Salon blog is Scott Rosenberg’s Links & Comment, by the Salon managing editor, who writes:

Blogs have become an Internet trend story — probably because there are so few other Internet trends right now, and most of those are too depressing to dwell on. Trend stories work best when reporters can drum up some conflict. Thus we have the War between the Bloggers and the Journalists.

Rosenberg understands trends. He engineered Salon’s acquisition of The Well, an on-line cult founded and shaped by refugees of Stephen Gaskin’s The Farm cult in Tennessee. Rosenberg has been a member of The Well since 1990, according to Katie Hafner’s account of the bizarre shenanigans that have taken place among the Wellberts for lo these many years.

Like Gaskin, Winer is a powerful and polarizing figure, and Rosenberg loves to bask in the glow of such people. Unlike Gaskin, the Well’s spiritual founder, Winer doesn’t seem to have too many nefarious plans, bastard children, kidnapped children, or suicidal corpses lying around him, so the worst aspect of the Winer/Wellbert partnership is what happens to subscribers when Salon finally goes out of business, which many suspect will happen in a few weeks. Presumably they can continue blogging on Winer’s iron, but Salon hasn’t clarified this to their potential customers.

Incidentally, I tried The Well for a few weeks, but they banned me for being a cult-buster, and banned my wife, a long-term member, for being married to me. Strange group, the Wellberts. Some of them are blogging now, but they don’t get much traffic, fortunately.

Double incidentally, I recommend Katie Hafner’s book The Well to anyone interested in the dynamics and power-relationships characteristic of cults.

Alexa foolishness

— The latest Alexa rankings put this site ahead of all the other warblogs except Sullivan, Reynolds, and Kaus, which is absurd, and ahead of all the tech blogs except Winer and Kottke, equally unlikely. Update, 7/25/02: I’m now ahead of Kottke, so world domination is within my grasp.

— The latest Alexa rankings put this site ahead of all the other warblogs except Sullivan, Reynolds, and Kaus, which is absurd, and ahead of all the tech blogs except Winer and Kottke, equally unlikely.


Update, 7/25/02: I’m now ahead of Kottke, so world domination is within my grasp.

SF Chron on blogs

— Your latest old media take on blogs is at Just Another Cultural Co-Op? / Blogging hits the mainstream, for better or worse. “People mostly compare their favorite bloggers to the boring and predictable columnists on the op-ed pages,” says Matt Welch, one of the writers behind LA Examiner. “It sheds light on what newspapers … Continue reading “SF Chron on blogs”

— Your latest old media take on blogs is at Just Another Cultural Co-Op? / Blogging hits the mainstream, for better or worse.

“People mostly compare their favorite bloggers to the boring and predictable columnists on the op-ed pages,” says Matt Welch, one of the writers behind LA Examiner. “It sheds light on what newspapers have gotten progressively worse at doing: giving readers lively and relevant personalities to read and interact with.”

They quote Matt Welch, Ken Layne, Billy the Quick, and some other folks. It’s pretty much a “just the facts, ma’am” piece, but it does highlight the personality vacuum in big media that created the need for blogs.

Patio Pundit

— Patio Pundit Martin Devon is one of the more interesting sources of RoboPundit summaries, and a regular read who’s not too wedded to an ideology to see the truth. He said some nice things about me the other day regarding my former activism on behalf of divorced dads and kids, and in the course … Continue reading “Patio Pundit”

— Patio Pundit Martin Devon is one of the more interesting sources of RoboPundit summaries, and a regular read who’s not too wedded to an ideology to see the truth. He said some nice things about me the other day regarding my former activism on behalf of divorced dads and kids, and in the course of it speculated:

I’ll tell you what, if a legislator decides to take up the banner on behalf of divorced dads and their kids they’d had far more support than most people realize.

There have been a couple in the California legislature, first Sen. Chuck Calderon, former chairman of the Judiciary Committee, and then Asm. Rod Wright, former chairman of Utilities and Commerce. Both men are Democrats, and both found their political careers harmed by their support for dads, children, and civil rights.


The other side, lead by some fairly open anti-male activists, such as lesbian rights crusader Sheila Kuehl, really aren’t satisfied with winning the debates and passing their laws — they’re vengeful. Stories that support this are abundant, and I can post some if anybody’s interested, and the victims of these vendettas haven’t always been male legislators. Fathers’ rights is something you advocate at your own risk in California, but the tide is slowly turning.

Kinsley on corporate reforms

— Pinko liberal commie Marxist Michael Kinsley isn’t fooled by the Washington circus around stock options: In short the abuses these reforms address, if anything, drove stock prices up, but what really bothers people is that they came back down again. Politicians promising to solve that problem are making the same mistake they purport to … Continue reading “Kinsley on corporate reforms”

— Pinko liberal commie Marxist Michael Kinsley isn’t fooled by the Washington circus around stock options:

In short the abuses these reforms address, if anything, drove stock prices up, but what really bothers people is that they came back down again. Politicians promising to solve that problem are making the same mistake they purport to correct: grabbing a short-term advantage that will cost them dearly in the longer run.

So why is Kinsley so clear when Great Authorities Greenspan and Buffett (Warren, not Jimmy) are so confused? Kaus has one answer, and I have another: Greenspan is a political animal, who knows which way the wind is blowing, and Buffett has similar predilections for different reasons: he has to explain why Berkshire Hathaway, his pricey holding company, bit the big one throughout the Tech Bubble. He was robbed by cheating CEOs, of course.

Give me a break: even the most ardent proponents of draconian accounting for stock options don’t really believe this issue has squat to do with restoring investor faith in the market.

Expensing options

— The Indepundit: Stock Options Revisited isn’t done with options yet, hauling out big guns Greenspan and Buffett (Warren, not Jimmy) on behalf of expensing them. Buffett says: 1) If options aren’t a form of compensation, what are they? 2) If compensation isn’t an expense, what is it? 3) And if expenses shouldn’t go into … Continue reading “Expensing options”

— The Indepundit: Stock Options Revisited isn’t done with options yet, hauling out big guns Greenspan and Buffett (Warren, not Jimmy) on behalf of expensing them. Buffett says:

1) If options aren’t a form of compensation, what are they?
2) If compensation isn’t an expense, what is it?
3) And if expenses shouldn’t go into the calculation of earnings, where in the world should they go?

So let’s answer Buffett, who was kind enough to take a break from buying the wired infrastructure of the Internet (while the world goes wireless) to help us out with this weighty question. Options aren’t a form of compensation, they’re an investment. People forego compensation for options, in many cases by making a direct choice, as I did on my last job where I was offered either a higher salary and an option for a certain number of shares, or a lower salary and an option for more shares. By choosing a compensation package that combines cash and options, we invest in the company. Companies don’t have to account on their balance sheets for the profits and losses shareholders make buying and selling shares, so why should they account for options?

One reason: the company has granted options for more shares than it holds in reserve to satisfy options. In this case, the company has to buy shares on the market when options are exercised. So this sort of a transaction certainly is an expense, and it probably should be reported.

But what if the company has sufficient shares in reserve to satisfy outstanding options? Should the paper value of these shares be reported as an asset, or as income to the corporation? We don’t know if options against such shares will ever be exercised, esp. if the options are underwater for some period of time.

So the question of how to account for options and how to account for shares held in reserve is a bit complicated, and until the proponents of expensing options can say how they want it handled, we don’t have much of a debate — it’s like every other issue in politics, where the parties generally agree on abstract principles, such as justice and freedom, but disagree on how to put such principles into action. We wouldn’t be having this debate, however, if the government hadn’t already passed a salary cap law. Options are a work-around for that law, and a messy one at best.

Evil communist Ted Barlow also weighs in on options, but no link to a particualr post since he’s a Blogspotter and his archive is hosed like all the rest of them. (p. s. – anyone who doesn’t like stock options is a an Evil Communist, by definition.)