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.
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The Stock Market Has Crashed?
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."
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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
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.
Here And There. . .
This Issue's Glossary of Terms:
We welcome your comments, questions, and observations.
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