The original article on Stock Markets was written over three and a half years ago, and that of High Tech a year later, at which stage there was a slight revision of the first article written. However, events originally forecast to happen, have since taken place, which now dictates that both of these be revised. While remarks were then made in order to define the worth of shares as --- quote : " what price toilet paper," sad to say that remark was devastatingly true. It possibly may still apply today ---and if nothing is done to regulate the function of stock markets, may apply again in the future.

The underlying reason for splitting those articles into two entities, ( " Stock Markets " -- and " High Tech ") was the difference in the velocity of the rise in share prices, as those of High Tech took off into the " stratosphere. " Be that as it may, when the decision was made to both revise and amalgamate the two, we decided to alter the format of both. Where previously, specific companies and shares were mentioned, these will no longer appear here. What is desperately required today is an analysis of both the function of stock markets and the protection of investors.

Stock Markets have both their usefulness and their short - comings, and these are the areas we are going to explore. Unfortunately the" hype " created by the news media, be it from newspapers, periodicals, radio or television, distorts the functions and the relevance of investment into these markets. Governments are not immune from criticism in this respect, as they also exhort their citizens to invest into shares and bonds. Perhaps it is with this pervasive hype that one should start this " discussion."

A vast service industry has grown up with the express purpose of dealing with investment funds, so much so that apart from services provided by government and perhaps that of the writing of " software " for the computer industry, far outstrips any other service industry world - wide. Stock Brokers, Investment Bankers, Mutual funds and " financial consultants " and Investment Analysts " vie with each other for the investment funds of the public, Insurance companies and pension funds. The volume of available funds for investment are mind - boggling, far outstripping the total value of the G.D.P of most countries world - wide. One of the major problems in giving a balanced view of investment pitfalls, is that all the media involved in discussion and promotion of specific investment, are beholden to their advertisers, --- perhaps the VERY COMPANIES about which adverse comment may be required to be made. Adverse, or cautionary advise are bound to have an adverse effect on share price, antagonizing the very companies who spend millions on advertising in the media. But what of the millions of people who purchase those newspapers and periodicals, advertise therein and listen to the radio stations and watch specific TV. stations. Surely they too should expect to be warned of the pitfalls that relate to their investments. When this advise is forthcoming, it is invariably too late for anything to be done about it.

Have you ever watched the " business report " being read on television. When the reader of the day's report has someone sitting either beside them or opposite them, a question is brought up relating to either a request for comment on the day's trading figures, or to comment on specific companies whose shares have either been subject to a rapid increase or decrease in value. Without any hesitancy, the answers come back "pat"--- in great detail, as if being read from a script. Surely this leaves one with the impression that these questions and answers have had previous discussion before going " on the air. " Nothing wrong with that at times, but it does leave one at times with the feeling that this type of " discussion " may be open to question, as the possibility does exist that in some subtle way it can influence investors.

There is no way of getting around the fact that paramount to all who deal with other people's investment funds, are primarily driven by " self interest. " These remarks in no way impute that due care is not taken in protecting possible capital loss of the investment funds under their care. However, the fact exists that their livelihood is made from " other peoples money " and that in most cases is dependant on wringing out the best possible commissions and " cost charges " that relate to choice and manner in which these investments are placed and used. For example, there is little incentive for any stock broker to place a client's funds into one or two shares, and to" leave them there for the next 20 years !!" Even the presumption that these are fantastic companies, making continuous profits and paying excellent dividends, precludes any stock broker from making money from these investments. His livelihood stems from buying and selling shares --- not holding them for 5 -- 10 --- 15 or 20 years for clients. His overheads and expectations of a " good life " for himself and his family, dictates that there is little future in investing clients money in this manner.

To a large extent this also applies to many other sectors of the financial investment field. The anomaly arises from their use of the term " you have to invest long-term in the stock markets " in order to make money. What is implied, but not said, is that your investing must be continuous, and not that you invest -- then wait the required years to reap the hoped - for capital benefits. Which brings us to the other factor, ( other than hype ) which continually drives share prices.

The Daily Flow Of Funds : In order to understand the significance of this ; as to the fate of stock exchanges and the rise or fall in stock prices, we use the analogy of the horse racing track. If the totalisator board deducted 12.5% from all winning tickets, there could come a time when everyone at the track would walk away with empty pockets. If the gates were locked, and 40 or 50 races run, without fresh money entering the track, this would be the inevitable result. The same fate would apply to stock exchanges. If any government decreed that no fresh or new money could be invested on the stock exchange, and that sales could only be between those already invested in the market, prices would collapse --- or be driven to catastrophic levels. It is only the daily flow of new investment onto the markets that keeps " THE GAME " going. One uses those two words intentionally, for within the investment field, many of those who control the investment of other folks money, refer to it as such --- THE GAME !! A lot of irony in those two words --- at times !!

Thus the constant hourly and daily flow of money seeking investment, drives the prices of shares. It is a case of supply and demand. The greater the demand for specific shares, the higher that those prices will rise. Conversely, when there is no demand and sellers are "in the market," prices will fall. In many --- if not most instances, these price fluctuations have little or no basis in " economic fundamentals." Where companies either only publish quarterly, half - yearly or annual results, or at other times make " official interim announcements," there would be no valid economic reason to affect price fluctuations. However, comment or conjecture on the part of " outsiders " ( often referred to as analysts ), or for that matter the " news media, " could have dramatic effect at times. So it is vital to the functioning of stock markets, that this money flow keep coming. It is thus that this ---- IN CONJUNCTION WITH THE HYPE, that we are most concerned with.

EVERYTHING IN LIFE IS CYCLICAL. The weather is ; the seasons are. The phases of the moon ; the movement of our planetary system within it's relationship to stars and other galaxies. The rise and fall of the tides. So too is it with economies and " business." Nothing remains static. So when there is economic contraction ANYWHERE IN THE WORLD --- it will have some effect on all other economies. Some to a greater or lesser extent than others. No country can live in isolation to all others. So too is it with economic reliance upon one another in some way. Therefore we should expect that business's economic well-being will fluctuate as well, which consequently will be reflected by their share price and / or values.

This remark is highlighted, because quite often, price and share value are not the same economic criteria. In reality this may be the nub in determining whether any investment is made in specific shares. What is being said here, is that there has to be an intrinsic value placed upon a share in order to establish it's worth for investment purposes. Price at times may be only the minor factor in determining an investment. A guide it will always be. This factor results in the advice that investors diversify their investments, because while some sectors of the economy are down ; ( little or no growth or even contracting ), other sectors are expanding or proving to be more profitable. However, this so - called diversification can at times be taken too far, when purchasing shares in overseas markets where foreign currency strengths or weakness can be an added risk factor.

Besides individual companies or sectors being cyclical, the overall result at times, results in the whole economy slowing down. A slower growth in G.D.P being the result. At this stage one has to determine whether the economy as a whole is " taking a breather, " or is it destined to contract until such time as it is seen to be " in recession. " This is not to be confused with " the bursting of a bubble --- or bubbles, " for that is related to share values, and can be unrelated to the underlying strength of the economy. In other words, there are sound companies whose share price reflects their true value and underling economic strength. At this point, when Central Banks panic and try to stimulate an economy, things can be distorted, and the desired result not forthcoming. Stock markets react to these interest rate cuts by prices in shares rising. They either are under the impression that these cuts are a specific " rescue operation " of stock markets, or that the stimulation of consumer spending by cheaper " borrowed money " will result in companies being busier , with resultant better profitability. That is the theory !! However, forgotten is the fact that --- at whatever the price --- borrowed money has to be repaid. So one moment in time certain sectors of the economy are stimulated by this added expenditure of borrowed money, then contracts again while this is being repaid. Another fallacy is the overall expectation that all sectors of the economy will benefit by lowering interest rates, whereas it's effect is generally limited to only a few sectors at best.

The obverse effect of lowering interest rates seems to either have been forgotten or ignored. People living off fixed incomes derived from interest bearing investments, are unduly penalized, and consequently their spending power contracts, counteracting what was originally expected to be the result to this maneuver. There are other effects as well, as foreign owned investments flee the country, looking for higher returns elsewhere. This results in the sale of shares as well, and the repatriation of currencies, which in turn puts pressure on the value of the domestic currency. A chain reaction is then put into play as this happens, resulting in high adverse " balance of payments " distorting imports and exports , and the prices of those self - same goods and services.

The major underlying problem with stock markets, is the unrestricted accumulation of debt. It was the major reason for the unrealistic rise in share prices, and the growth of " merger - mania. " And finally this debt overhang was the major factor in the " bubbles bursting. " Until such time that debt can be regulated, the possibility will always exist that investors will be at risk in losing a major proportion of their capital worth. Stock market regulators and " government " are equally to blame for this situation.

CREDIT WORTHINESS : It somehow seems to be a misnomer to use the term " creditworthy, " when in actual fact the " question asked " is actually --- are you worthy of debt. Individuals requiring credit facilities from banks, are scrutinized to see what asset values there are to back the required debt and as well the cash flow requirements in order that the interest and capital redemption can be undertaken. Criteria exists when credit cards are issued, limiting their monthly monetary value use. So too should it have been for companies and countries. Everyone has a credit limit --- or should have !!

There are no simple solutions. It requires a lot of new laws being enacted. A lot of changes to the way in which stock exchanges operate. A lot of supervision of the conduct of not only stock exchanges, but to that of Boards of Directors, Accountancy practice, balance sheet oversight, the conduct of Mutual Funds, Financial Institutions, Banks, and changes to the Company's Act. What is disconcerting, is the fact that all of these institutions are lobbying for LESS REGULATION, and as well " self regulation " even where and when changes are made. However, the only insurance ( however slight ) that investors have, to protect or mitigate possible capital loss on stock markets, is the added enactment of new laws and regulations and the oversight of the conduct of all those who deal with " other peoples money. " There is a common expression used by those who decide where investments are placed. It is called " Risk Tolerance " --- or the " ability of the investor to withstand capital losses while gambling on the possibility of higher reward. " While all these new regulations may not GUARANTEE AGAINST CAPITAL LOSS --- it certainly will MITIGATE THE LOSSES that can occur. In other words all the required laws and regulations should lower your risk tolerance, by lowering the percentage possibility of capital losses. Someone who has a million " dollars" invested in shares or bonds could possibly tolerate losses of up to 25% in capital loss, whereas someone else who has 100,000 " dollars " --- all of it destined to go towards purchasing a pension, would have a far lower risk tolerance. So risk tolerance is related to both the circumstances of the investor, the reasons for the investments, and the assessment of the total monetary value that can be put at risk of possible loss.

Thus if a share is backed by "a net asset value " of ten " dollars " --- and one has purchased it at a price of $40, the risk factor is four times greater than if purchased at $10. However, if the debt load was 10% of net asset value of the company when the shares were purchased at $10, and the debt is now 50% of net asset value when purchased at $40, the risk factor of possible capital loss has been greatly altered. So when one talks of risk tolerance, one should also bear in mind that the debt load and the price paid could be of far greater importance. If a law were promulgated which limited the amount of debt to net asset value that public companies could " carry, " then the possible loss by investors would be immeasurably lessened.

Years ago banks required that any debt be covered " two - and - a - half - times. " In other words debt to be no more than 40% of the value of assets. Not only that, but a signed agreement allowed for the total assets or a major portion of these to be lodged as security for the debt. Where public companies accumulate debt, the directors may be forced to " secure " the debt, thus endangering the asset value of the company, to the possible detriment of shareholders. However when bonds are issued, there is no obligation to do so. However it is the shareholder or investor, that requires the protection when debt is taken on or accumulates. And the only protection he can possibly have; is the limitation placed by law that limits the percentage of debt that can be carried as reflected against net asset value.

So if banks and financial institutions require a margin of 40%, plus additional securities, surely shareholders who have NO SURETY, can only be protected if the debt load is limited to a far lower figure. We would advocate that this be no more than 20% of net asset value, but feel that shareholders may be prepared to compromise at a figure of 25 % !! Unless limitations are placed on debt, shareholders are destined to suffer capital losses with many companies whose shares are being purchased. The debt load factor is one of the many factors that determine " risk tolerance " criteria by those who advise on, or invest the public's money.

Mergers and acquisitions : Here especially the use of debt in order to procure the assets of other companies should be strictly controlled. New debt is often used in this context, and this should be either strictly controlled or not allowed at all. Where amalgamations are allowed to take place it should provide that the debt load of the two companies be lowered to the level provided for by law. As well, in determining any " share swap " as part of the deal , should be placed primarily on the differences in net asset values between the two companies, and have nothing to do with so - called " market capitalization prices. " ( Market quoted share price ).

Pension Funds. : This is being dealt with in relation to two factors. The first deals with the relationship to pension fund participation in share and / or bond investment in stock markets and the second concerns the relationship between companies and pension funds.

Pension funds have vast sums of money which requires to constantly be invested on behalf of members, both those who continue to contribute, as well as those already on retirement. Where these funds are placed and the income derived from placement, are of extreme importance to members, especially so to those who have a long expected period of time to retirement, for the more successful the investments are, the greater the amount available at retirement. Other than Government bonds or other types of guaranteed investments, all others are subject to some element of risk. And it is this element of risk that concerns us, only so far as it relates to investments made into the stock markets. It is not our function to define the risk element of any particular investment, but because most investments made in bonds or shares have a greater element of risk than may apply to other types of investment, one feels that a limitation in percentage of available capital for investment be placed on what may be invested into the stock markets. This is said purely to lower the risk factor, and for no other reason. If this is felt to be relevant, then it would either require that members place this limitation on those who control these funds, or it may need legislation defining the limits which has to be adhered to by all pension funds.

The second factor deals with who runs pension funds and how contributions are made. Pension funds are being run by " independent pension companies " while others are run by companies who deal specifically with contributions forthcoming from their employees and to the percentage the company gives to the fund as " their " contribution. Our primary concern is with the conduct of pension funds when administered by companies on behalf of their own employees. First of all, we think it wrong that companies be involved in the running of pension funds emanating from their own employees and their own contributions. For several reasons there is an element of " a conflict of interest " attached to this. Is the fund being administered SOLELY on behalf of it's members, or is there ANY element within which the company is gaining a benefit of any kind. There are companies who reflect the profits made by these pension funds as an addition to their " bottom line." In other words as part of the company's profitability. This is both wrong and misleading Two other factors occur as well. Many companies give, as their portion of contribution to the fund, company shares rather than a cash contribution. Additionally in many cases where this occurs, these shares have conditions attached to them, denoting where, when and how these may be sold. If this is allowable in law, then no conditions as to sale should be allowable; as when given to the pension fund ,all rights and title to these shares should pass at the same time.

Finally, the actual use of share - giving, should be questioned for a number of reasons. Contributions towards a pension are normally determined by actuaries to be a desirable factor equal to 10 % of gross earnings. What often happens is that a company arranges with it's workforce that say 6% of gross wages or salaries are deducted from wages, and the company in turn adds 4% of the gross value of wage or salary earned, as the value of their contribution. These proportions could of course be different to what is enunciated here. However, where given as cash, this can be reflected as a cost of labor, and thus deductible for tax purposes. however when given as company shares two factors are in dispute. The first relates to the fact that shares are " company assets " and thus when " given away " for whatever reason , diminishes the gross asset value of the company --- and thus are detrimental to all the shareholders ; whereas when given as cash, it does not diminish asset values. Another reason is that " cash "has a tangible value, whereas company shares lose or gain value on a daily basis. Another point is that with cash, these funds can be invested anywhere and in any manner, whereas company shares are not so. Finally there is the case where a company administering it's own pension fund, quite often lodges these funds as purchasing shares of their own company as a major investment factor, which quite often leads to a disastrous situation, were the company to go into liquidation or apply for bankruptcy protection. There are far too many imponderables here, and self administration should NEVER BE ALLOWED !! The use of company shares for this purpose is not desirable, and should also perhaps be not allowed.

Share Options : This was a gimmick mainly used within the " High Tech " industry, and rapidly taken up by other companies in other sectors as well. It has led to a lot of abuse and for other reasons as well, we are not in favor of this means of " payment "or " incentive " or as a " bonus."

It has led to many abuses and is again, as is the case with pension allotment, detrimental and unfair to shareholders. Staff of companies, no matter how valuable to the company --- are still STAFF !! Be they on the board of directors or otherwise. They are EMPLOYEES never - the - less. Any share option, pitched at a price lower than what may have been paid for by any shareholder, is an unfair advantage. Wrong in principal --- if not wrong in law !! They are always pitched well below " market value " --- and as such are questionable again in respect to both fairness to other shareholders as well as a loss in capital or asset value of company assets when exercised. Finally , if it is to be allowed. then the value of those shares should be " accounted for " in the balance sheet of the company. In actual fact, when an option is given, it is in reality a " lien "on those shares, and thus a lien on THAT VALUE attached to the share as reflected in " the option price. " All shares are participants to the assets of the company and their existence and values have always to be reflected as part of a companies assets, so it is incumbent on companies to reflect any differential in price and value to shares when these share options are exercised. Theoretically when " sold to the option holder at a discount to the ruling price, --- at that moment in time the company suffered a capital loss equal to the difference between the market price at that moment in time, and the price at which the option shares were " paid for. "

Accounting Practice : The news media have during the course of the whole of the year 2002 spent a great deal of time in discussing the shortcomings of accounting practice as seen in their business conduct as it specifically related to public companies whose shares were quoted on stock exchanges world - wide. It would be silly on our part to repeat all that has been found wrong with accounting practice, other than to make a few comments and at the same time few suggestions. One of the primary problems, or perhaps the primary reasons underlying the malfeasance of accounting, was the attempt to hide debt and thus hide losses, and as well ; when the need arose, to manipulate figures to give the impression that companies were being run profitably. One of the main factors to remember, is that generally speaking, accounting firms performed these maneuvers at the behest of either the Chief Financial Officer of the company, the Chief Executive Officer, or members of the Board of Directors. Again we get back to the " debt factor ", and had there been legislated control and oversight of this, 90% of what eventually happened --- may have never taken place !! Another point we must make in this respect, is that --- not ALL of these DEBT PROBLEMS have as yet surfaced. Once undertaken by accounting firms, it is logical to expect that --- to an extent it became " common practice " to utilize these self - same subterfuges on a fairly large number of occasions, if the need arose.

Thus there is still a large overhang of debt which has not as yet " been accounted for. " Banks and Financial Institutions have been slow in divulging the quantity and value of bad or non - performing debt. Writing off --- or writing down profits, for reasons we will not pursue here. The problem with the debt factor, is that it relates to " perceived " share value, so if it is vital, for whatever reason to maintain this perceived share value, then subterfuge will be used to either hide or delay debt existence. Which brings us to balance sheet oversight.

Balance Sheet Oversight : Governments are now busy legislating for the oversight of accounting practice, the formulation and perusal of balance sheets, and as well various functions undertaken by the committees who run Stock Exchanges. Everyone is crying out for LESS REGULATION, and where this is not proving effective, then advocating SELF REGULATION. Self regulation, sad to say has not been effective, or to perhaps be a little more kind --- not effective enough. As far as accounting practice is concerned, we offer the following. In every country there is an accounting body that licenses accountants to practice. We would put the onus on them to police their members. It has become very evident that lucrative fees are charged to public companies, so it would not be an onerous cost to members to have a special fee attached to their membership fees to enable this body to pay for staff whose sole purpose would be a forensic study of balance sheets before these are submitted to Exchange Committees. Purely using the expression of --- " setting a thief --- to catch a thief. " This is not said as a derogatory remark imputing malpractice, but who better to check on accountants, than the body who licenses them to practice their craft. In this manner, unfamiliar terms used in balance sheets can be queried, and the movement of asset values and liabilities to unfamiliar territory can as well be questioned. The final stamp of approval from this body obviates any other oversight, and that board, realizing it's responsibilities, will we feel sure do an excellent job of policing it's members.

Stock Exchange Committees : Governments have been looking to or are presently legislating that Stock Exchange Committees be regulated in order to overview their conduct and functions In many cases self regulation has not worked effectively or shall we say satisfactorily to all concerned. You cannot be " all things to all people ." The weakness of the system, is that around the World, these exchanges have been owned and run by the Stock Broking fraternity. So vested interests are involved. Any money making or money generating business is bound to have " self interest " as a primary objective, and this is where the problem arises. One cannot adequately and equally look after the interests of stock brokers, stock holders and company performance --- and that of it's directors. So in order to overcome this problem changes are required to both regulate the functions of exchanges and their committees, and as well circumscribe in law an adequate oversight of those functions.

As we see it, the life - blood that " keeps the game going "is not only that continuous flow of new money looking for investment, but the requirement that many more companies be enticed to " go public. " Not only are they needed to replace those who go into liquidation or are excluded from share sales or purchases because their share values have sunk too low, ( being delisted ), but new share offerings are needed as it is an extremely lucrative source of income required by those who underwrite initial public offerings. One has to keep in mind that Stock Exchanges and those who derive their livelihood therefrom, are not PHILANTHROPIC INSTITUTIONS. Many highly successful companies have been privately owned or family owned for decades without any desire at all to " go public." When they sometimes do, it is certainly not for philanthropic reasons ; that they want to share their wealth and good fortune with a million or more strangers. However, that is not our point, but it is just to point out that a successful business is not based on the fact that it has to be a publicly owned company.

Because of the variable interests involved in the running of stock exchanges, and the conflicting interests of those who participate therein, it is of great importance that rules of conduct and oversight of it's many functions be enacted. The greater the " regulation and oversight, " the greater the protection given to investors. AND THIS IS OUR PRIMARY CONCERN. So too should it be for all who participate in and make their livelihood on the stock market; for without the investor, none of that is possible.

So let us start with who and when companies shall be allowed to " go public. " The advent of the Technological Age and the spawning of thousands of companies involved in so - called " High Tech " was perhaps the greatest force in " changing the rules of the game. " It first of all spawned specific Stock Exchanges devoted practically entirely to devoting these types of companies to their " listment." Some went from a situation of starting within a family garage --- to being listed on a stock exchange within 12 months. No history of profitable trading. And even in the case where their existence exceeded 12 months, a couple of years of being unprofitable --- or having an accumulation of debt seemed to be no hindrance to acceptance for enlistment. We will deal with this aspect in two parts. The first is where established companies have a recorded history of both " existence " and profitability. We think that a minimum period of three years of existence and profitability is required before acceptance for an initial public offering and listment. However, where companies have been already funded by venture capital, a history of two years of trading and profitability is required to see how that capital injection was . In other words, this factor only " starts the clock ticking "and then the following three year period of trading clicks in. Why should those who have been given " venture capital " be penalized ? The answer is that in many cases this capital injection is specifically employed in order to hasten the process of an acceptance for an initial public offering, in order that those who have participated within the " venture capital club "---" can possibly make a fast buck" at the expense of those who participate in the eventual public offering. In other words, this proviso is an attempt to stop " window dressing."

There is also another manner in which stock exchange committees can protect shareholders, and that is to maintain share prices within a price range that has some fundamental reflection on " value " and " logic. " Companies are allowed what is called, " share splits, " which are done for several reasons. Where prices have dropped dramatically, and for a particular reason a company requires that the prices quoted be reflected at a higher price, an offer is made to exchange those shares for others denominated at a higher value. In other words to offer one new share at $2 for every two shares presently quoted as valued at $1. On the other hand where a share price has risen to $40, a company may offer to replace these with 2 shares at $20 each. Not that this is done as a denominated value, but in giving these shares of " two for one " held, it has increased the amount of shares in issue, thus diluting their value in relation to that percentage entitlement of the company's net asset value. However, this is done at the company's discretion, and as quite often happens, those share splits individually increase in value , were the company to still keep on functioning profitably. This is often done in order to make shares " more tradable, " AS AT LOWER PRICES THEY BECOME MORE AFFORDABLE AS A PURCHASE PRICE.

However, we would like this to be the prerogative of the stock exchange committee in this instance, and not at the discretion of the company ; and for a different reason. Where a share price has risen to a level that bears no relation to economic fundamentals, companies should be forced to dilute their value by an immediate issue of " free " shares, the ratio of dilution being decided upon by a given entrenched formula. In other words, were a Price / Earnings ratio of up to "15" be regarded as " a normally acceptable risk factor, " then the moment it went above this figure the company would be forced to dilute the shares on the market. In other words one new share for say every five to ten held would be a very slight dilution to bring it back to within that 1 / 15 bracket. In this instance the shareholder is given the option to sell those free shares and if either taking these funds out of the market or investing them elsewhere, has lowered their risk in relation to any possible future drop in price of their original share price paid.

There are a fair amount of companies who seldom --- if ever declare a dividend. And even when this does occur, it may be a miniscule portion of "the profit after tax " figure. It is not for us to pass adverse comment on this factor, as it is the prerogative of shareholders to either reject or accept this practice. However there is one factor that shareholders should be concerned with, when this is happening. If these withheld funds are being used as extra working capital enabling the company to expand by either increasing production, sales and profit, that's fine. Even to the extent that these funds are used to purchase other companies. What has to concern shareholders is if the debt load is increasing at a faster rate than the asset value, thus undermining share asset value; for many of these companies use this extra cash as collateral to take on a higher debt component. One should never ever forget that bonds are DEBT, and that if and when companies issue bonds, for whatever purpose, they are increasing their debt load, and this aspect should be policed by stock exchange committees, as well as shareholders.

Directors loans : It has become fairly common practice to allow members of the Board of Directors, ( or CEO's or other executives ) to borrow company money. This should not be allowed by law, and if it is to be allowed, then it shall be no larger than the value of one's annual salary, lent at the ruling rate of interest, and repayable within a very short time span. Additionally, if a company files for bankruptcy protection, all loans are immediately repayable, and as well all bonus's paid that year --- or in the preceding 12 months cancelled and / or returned, and all share options cancelled.

RESTRUCTURING : A term often used when companies get into financial difficulty. Here again we are concerned with shareholder value. Financial Institutions and Banks --- especially banks always feature largely in this respect. Going back to reasons why some companies " go public." In a number of instances, this is at the behest of banks with whom private companies have become over - involved in debt. In order for this debt to either be lowered or repaid in full, they are " asked " to go public --- and utilize the derived funds to lower or repay in full their outstanding debt. When applying to " restructure, " at a time they apply for bankruptcy protection, their obligations to financial institutions, should be carefully examined. Many of the so - called solutions such as the issue of bonds to repay specific debt, as well as swapping debt for a new issue of shares, are possibly to the detriment of existing shareholders.

Another factor that is either unfair --- or inhibits the ability of shareholders to mitigate against share loss, is the CAPITAL GAINS TAX. This tax locks investors into the stock market for longer periods that at times may endanger their capital growth value. What seems to have been forgotten is that share prices are " paper profits "and the anomaly arises where investors have to look forward to a drop in share prices in order to escape major capital gains taxes. It does seem rather silly to penalize wealth growth, when government is looking for higher consumer expenditures to keep the economy growing at a high growth rate.

It is not our function to advise investors where to place their investments. It is either their own decision, or that of financial advisers or share analysts. The problem with the system of advise, is the lack of responsibility. It is not that one expects that those who give the advise, be paid or penalized for their " sins " if the advise given happens to be " bad advise "--- but at least that there be a record of this fact, and an historical analysis as to why this particular advise was given. What we are suggesting is that either when the advice is given, that this be recorded, either in writing or on computer, defining the underlying reasoning for this choice. Where it is based on that of some senior analyst or " GURU, " that this be noted, together with the " Guru's " reasoning for his or her analysis. Where Mutual Funds are concerned, the sale or purchase of shares should be accompanied by some type of analysis as to the reasoning related to the action taken.

There is a Latin expression which says : CAVEAT EMPTOR !! Translated it says --- " Let the Buyer Beware. "

The cheapest form of borrowing --- is to issue shares. Loans from banks or financial institutions have to be repaid and provide for an interest cost factor. Bonds have to be repaid and provide for an interest payment. However shares provide for none of these. There is no obligation to repay, nor is there an interest charge, merely an obligation to pay a share of any dividend that might be forthcoming A share holder has but two options. To sell their shares at any stage --- or to hope for some small repayment of capital if and when the company has been liquidated, and there remains whatever remains there be --- after all debt has been accounted for. !!

Caveat Emptor !!

High Tech : For whatever reason, the Technology sector became the " darling " of the investing public. Whether it was from the volume of HYPE or the sheer volume of new companies " coming to the market " or flooding the consumer markets with a continuous flow of new products, is anyone's guess in hindsight. It certainly spurred the economic growth of the nations who were involved in it's productive output. It created millions of new jobs and untold wealth Yet it was in the end the biggest " Bubbles that Burst !!"

So what is it's future. It depends on what we do with it when economies start recovering from the present recession. If we continue shifting production from the countries who originally gave birth to this knowledge and subsequent productive output, into countries where there are lower wage costs, it will in the end have severe repercussions to job creation in the " West."

The problem with " Knowledge "--- is that it is universal. It may have it's birth in one place, but invariably it expands everywhere. The secrets of producing the atom bomb and the hydrogen bomb, are " secrets " no longer. How long one can expect " High Tech " to be the mainstay of Western economies is perhaps " in the lap of the gods. "

Caveat Emptor ---- Let the Buyer Beware. !!