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February 19, 2002

Fundamental Shift Taking Place Globally

A boom in the service industry by poor countries around the world has immense implications. It will lift hundreds of thousands of people out of poverty, cut costs for companies that ride the phenomenon, and cut profits of companies that don't. Driving the change is communication--powerful fiber optics that link the world.

Services (from call centers to offshore software coding and maintenance) will dwarf previous waves of globalization because services account for 60% to 70% of global gross domestic product.

This growing service trade boom will create significant wealth in the Third World, making the world a richer and safer place in the days ahead. Safer, because stable economies provide meaningful work for those who might otherwise turn to terrorism in their frustration...as reported last week in CIA Director George Tenet's statements.


Reciprocal Transactions Played Huge Role In Telecom Industry

Billions Of Aggregate Swaps Traded Among The Telecoms

The major telecom pioneers used barter repeatedly in the building of their networks. Called capacity swaps, it was a normal part of doing business. In fact, a lot of companies deliberately put more fiber and ducts in than they needed when they were building, because they knew they could use it in swaps.

And it's happening globally. Sweden's Telia traded capacity for equipment with Lucent last year. Global Crossing and Qwest traded fiber with one another--GX trading pieces of network in Asia and South America in exchange for North American capacity.

The problem wasn't the bartering of excess capacity, but rather in the way in which it is accounted for by the company. In short, the acquired "swap" in the bartered exchange (for the one given up) should be booked as an operating expense, not a capital expense.

When done properly, it becomes an exchange of assets, and under such an exchange. A company can't book any extra revenue except to the extent that the value of the asset it sells is greater than the value of the asset it buys.


Here And There. . .

  • Kosmont Co., a Los Angeles real estate consulting firm, has published a new cost-of-doing-business survey. One statistic we found most interesting was the cost to do business in Washington (DC)... which levies the highest taxes and fees on businesses among 20 selected major U.S. cities.

    The report showed that in the District of Columbia a general office with $10 million in annual revenue would pay $698,000 in business taxes, compared to San Diego which imposes one of the lowest tax rates at $625! What an incredible difference, eh!

  • Hotelreservations.com and businesstravel.com have advertising available on their web sites, payable at $300 per month on ITEX.

  • Chris Sweis of Ibart was honored by Cigar Smoker Magazine at the 4th Annual Big Man Dinner at Mike Ditka's restaurant in Chicago. According to the press release received, the award is reserved for Chicago's most successful and innovative entrepreneurial business leader. Sweis is the founder of Ibart along with others: Dean Hnilica, Dan Grisko, Chris Nudo, Harold Rice, and Kelly Collins.

  • Now, more than ever, promoting barter will pay off. Trade exchange owners looking for a proven way to motivate their client base and stimulate more trading activity can obtain a copy of the 16-year-old, proven, informational marketing tool: The Competitive Edge newsletter.

    The Competitive Edge is designed to be mailed to clients and prospects because research among the exchange owners shows that only a third of their members receive e-mail. Now available in PDF (Acrobat) format.

    E-mail bmeyer@barternews.com for a sample copy and details. (Be sure to include your complete mailing address and phone number in your e-mail.)

  • Ray Bastarache has been named to replace Steeve Croteau on BarterNet Corporation's Board of Directors.

  • Five of the country's major hotel chains are working together to launch a new venture--Hotel Distribution System. The company was formed by Hilton Hotels, Hyatt, Marriott International, Six Continents Hotels, and Starwood Hotels & Resorts Worldwide...along with Pegasus Solutions which will provide the technology making the rooms available on several web sites.

  • In case you've wondered, the total loss in the dot-com bubble is put at $4 trillion, according to The Wall Street Journal.

  • The Enron problem resulted from trying to manipulate its balance sheet, employing a security devised by Goldman Sachs, that, depending on who is looking, can be treated as either debt or equity.* These securities called Monthly Income Preferred Shares (MIPS) were not unique to Enron.

    Almost $200 billion of these MIPS, whose existence is solely to circumvent the unequal deductibility of interest and dividends, are currently outstanding among corporate America.

    *(When Enron reported to the IRS, MIPS would be referred to as debt and Enron could deduct an interest expense. But for rating agencies and shareholders, MIPS were referred to as equity.)

  • The National Federation of Independent Business, a lobbying group located in the District of Columbia, says its members are adding inventory...a crucial sign that an economic recovery could be gaining steam.



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