Options Expensing Redux

Running up from the 02/10/03 low of 258 the SOX reached a high of 560 on 01/12/04, we are almost 2 years to the day on that high.

The SOX then ran downhill to 350 on 09/08/04. The SOX was at 413 on 10/28/05 then got swept up in the Santa Claus Rally to reach 527 today, only 33 points below the 04 high.

Too many analyst upgrades and "happy daze" industry reports are coming out on the Semis. FASB options expensing will take its effect during quarterly reporting which runs from Tues Jan 17th through Feb 18th.

The primary offenders, media and brown shoed Wall Street boyz will try and sweep this under the rug by releasing two sets of numbers.

One set of "pro forma" numbers which are traditionally used for "one off" items will be released, upon which they will hang their hats as the "real" number, please do not be fooled.

The other set of official GAAP numbers with the options expensed are the REAL numbers and as can be seen in the chart above, will drive down EPS into NEGATIVE territory for some companies.

We believe that some investors will be very disappointed and may take profits in this sector as well as others.