The weekly newsletter for everyone interested in barter--the world's most versatile business tool!

August 27, 2002

Written by Bob Meyer, Editor of BarterNews

SEC Rules On Capacity Trades

The Securities and Exchange Commission (SEC) has formally concluded that telecommunications companies acted improperly in booking revenues from capacity swap/barter deals.

Telecom companies would, for example, enter into an agreement to trade capacity with each side valued at $100 million. And even though the monetary value of the two deals was equivalent, each was treated in a separate transaction and it was never clear exactly how the monetary value of the swaps was determined.

The SEC ruling says that such exchanges shouldn't be considered revenues. The ruling means that some of the telecom companies will have to restate earnings, and brings down the curtain on a widely used industry accounting practice that inflated revenue for many of the telecoms.

The ruling stated that companies are still free to exchange telecom assets on a cashless, or barter, basis.

How many back issues of BarterNews have you read? Did you know that the cover of every issue ever published is found on our "Issues Page?" Click Here

Think The Stock Market Has Crashed?
Try Selling Your Stock Of Beanie Babies?

Perhaps the most egregious of the noncollectible collectibles, Beanie Babies were hyped as rare and valuable even as Ty Inc., the company behind them, produced them in the hundreds of thousands.

Beanie collectors inflated the market like 17th-century tulip traders. Peanut The Royal Blue Elephant was "retired" in 1995 and was soon worth more than $2,000...according to the Denver Post, it once fetched more than $4,000.

All Beanie Babies were discontinued at the end of 1999, but prices dropped nonetheless. Peanut, with a current price of $20, is not even hitting its reserve price on eBay today.

Responses To Jonathan Morris's comments of August 13th. . .

Kudos to Jonathon Morris, Bartercard Australia, regarding his comments on the subject of an exchange's money supply, came from Faye Alba of Barterpays!

Alba wrote, "Jonathon Morris's comments explaining why barter exchanges need to regulate credit lines and company spending was the best explanation of this subject, in summary form, I have ever read."

* * * * *

From:
Ray Antonelli
Focused Resources
Highland Heights, OH

I read Jonathon's comments August 13 (regarding an exchange's money supply that governs inflation within a trade exchange) with interest, and still think the marketplace sets the price for any currency AND any transaction.

For example, I build my own PCs. So it would be ludicrous for me to consider bartering for a PC at ANY inflated price. However, others may not have the skills but may have access to the barter dollars. Why stop them.

An item or service is only worth what a WILLING buyer and a willing seller agree to. In a perfect world anything would be available on barter at the usual prices. However, as an example, it's very unusual to find name brand electronics at all on barter let alone at an inflated trade price.

I don't claim to have all the answers but there must be a reason for this. Maybe by allowing certain high demand items like DVD players, A/V receivers, and the like to be sold at a multiple of their normal price is the only way to induce a client to barter some of these items for the benefit of the other members.

How many times have we all heard from business owners who dropped out of barter because they couldn't spend the bucks? I certainly have many times and I'm a relatively small player in the barter business. The more desirable items are available the more we can keep the clients happy traders.

Forgive my rambling but I believe an open dialog goes a long way towards finding solutions.

Looking Back A Year...August 28, 2001

Last year at this time we reported on the interesting parallel between the travel industry and the barter industry. The story focused on the debate over whether do-it-yourself services via the internet would be the way of the future or if full brokerage services would prevail. Check it out!

Another Perspective On August 20 Letter

As I read your Tuesday Report I had to grab hold of my chair at Reid Nunn's response to taking transaction fees in trade. I don't know the man but I have been around this business long enough to know that the only reason anyone would take their fees in all trade is if they couldn't collect them in cash.

As for his "other source of income" I hope it's enough to pay the taxes on the trade he's taking in!

Just a quick correction to Terry Brandfass' comments... It was 20/20 that did the report on Exchange Enterprises, followed by CNN doing reports on Barter Systems. That was the time when "it" hit the fan and the franchises started folding. What really hurt the barter industry was that they (the franchisers) were in fact the leaders of IRTA at the time. It was NATE and the independent trade exchanges that led the industry back to the respect we now enjoy and deserve.

Tom McDowell, Executive Director
National Association of Trade Exchanges (NATE)
Mentor, OH

Valuable Contacts For You. . .541 Barter Company Listings

Now available, listings of every barter company in the USA. Retailers, manufacturers, wholesalers, travel & media companies, you can move your products and services through these 541 barter companies. Listings include addresses plus phone, fax, e-mail and URL as available.

China's Incredible "Mental" Growth Promises Big Future

Just a few decades ago, between 1966 and 1976, Chairman Mao drove intellectuals into exile--or simply had them killed. How times have changed. A new Boston College report calculates that in 20 years China could be minting 400,000 graduate students a year, the same number as in the USA...the current world leader.

Ten years ago only China's top universities offered computer science degrees, now almost every university does...and the same goes for degrees in business, marketing, and human resources. On order to graduate from a Chinese college, students must demonstrate basic proficiency in English, the language of business.

Today, for most companies in China the real money is still on the cost, rather than the revenue side...considering its chip-designer wages are one-third to one-half of what is paid in Taiwan, and one-seventh to one-tenth of that paid in the United States!

China's Banking Industry Also Undergoing Big Change

China's membership in the World Trade Organization will see the once-closed banking industry being opened. Citibank is working on a 10% acquisition of the government-owned Pudong Development Bank, which would be a milestone for China's banking industry.

China's four biggest state banks are sitting on an estimated $500 billion in dud loans--equivalent to almost half the value of the country's annual economic output. These banks often suffer from political interference in their business operations, as well.

Though the banks remain flush with capital, thanks to Chinese individuals' prodigious savings, the state banks have acted as a drag on the economy by funneling money to nearly bankrupt state companies and denying capital to the smaller private businesses.

• The hotel industry's expected occupancy rate will be 59.5% this year according to PricewaterhouseCoopers...the lowest level in 75 years. Because business travel hasn't recovered as expected the industry is more dependent on leisure travelers.

  Even though discounting continues, consumers are still waiting until the last minute for reservations...forcing hotels to continue the trend. The survey found that one reason for postponement was concern about being away from home if the U.S. takes action against Iraq.

• The Bond Market Association reports that U.S. corporate debt nearly doubled in the past 5 years, to $3.9 trillion by the end of May 2002. In 1997 it was $2 trillion.

• In 2003, NASDAQ will phase out the OTCBB (Over The Counter Bulletin Board) and replace it with a new market called the Bulletin Board Exchange or BBX.

  According to NASDAQ, the BBX will "appeal to many of the same companies that are currently quoted on the OTCBB, but will be a higher quality market." Translation: A lot of companies that trade on the OTCBB won't be allowed to switch to the BBX.

  They'll be relegated to the so-called "Pink Sheets," the publicly traded market's lowest and least-liquid exchange, home to obscure and troubled companies that are thinly traded and have few or no assets. (In the past, the Pink Sheets have also been home to shady stock promoters and micro-cap fraudsters who exploit its illiquidity and lack of regulation to defraud unsophisticated investors.)

• The PGA's NEC World Golf Championship was held at Sahalee Golf Course near Seattle (WA) this past weekend. Barter company BizXchange acquired full trade cable-TV advertising preceding the tournament on ESPN and FOX. In exchange for the advertising BizXchange received club tickets for the championship that were offered to their members on trade.

• Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of our Home Page (right hand corner) to sign up!

• MacAndrews & Forbes Holding Inc. is a private holding company controlled by Ron Perelman. One of their holdings is Golden State Bancorp, a San Francisco bank in which Perelman owns 42.9 million shares (31.6%), which Citicorp is trying to acquire. Perelman has told Citigroup that payment for Golden State Bancorp should be paid in Citigroup shares, rather than cash.

  If the transaction goes down as suggested, Perelman would displace Sandy Weill as one of the largest individual owners of Citigroup shares, as Golden State shareholders would be entitled to a 1.1 ratio of stock.

• Starwood Hotels & Resorts Worldwide this month announced it has relaxed the criteria for granting corporate customers national account or global account status--the first among the major multi-brand hotel companies to do so.

  The move is seen as an inevitable acknowledgment of the effect the downturn in the economy, and subsequent cutbacks in corporate travel, have had on the U.S. lodging industry. Other large hotel companies are expected to follow Starwood's lead as the bid season for 2003 negotiated rates actively gets underway.

• Samir Husni, a professor of journalism at the University of Mississippi, is known as "Mr. Magazine." He reports that 700 magazines were started last year, adding to the 6,000 already available. (In 1980 there were 2,000 titles.)

  Husni contends the business is tougher today with the economy and advertising both having slowed down...and advertisers now insisting on shorter contracts, in some cases monthly versus yearly.

• One of the most desired clients within a trade exchange is a restaurant. The September issue of The Competitive Edge shows why restaurateurs in your community need the services of a trade exchange.

  The article includes pie charts showing costs for full service and limited service restaurants. Powerful material for your sales efforts. So, check out the hottest marketing tool in the industry...click here!

This Issue's Glossary of Terms:

Deficit Spending System:
An economic principle wherein a trade exchange "manufactures" trade dollars that are either not backed, or not sufficiently backed, with assets or credit worthiness to bring the system into balance. A balanced system is one where for every positive balance there is an equal amount of negative balance.

Discounter:
One who trades items at less than retail value for a variety of reasons, some of which are: (1) move excess inventory, (2) make goods more attractive to others, (3) broaden the trading inventory base.