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I think Microsoft and Yahoo! must have underestimated how popular Google was. They also underestimated how long Google’s popularity would last. It must have been very painful for Microsoft CEO Steve Ballmer to watch Google’s share price do nothing but go up while he was sure to be thinking that either Microsoft would catch up or Google would falter.

Ballmer, for all his enthusiasm, did not follow the trend and he’s waited too long to do something. This type of thinking is the bane of making decisions based purely on fundamentals.

When you’ve lost as much ground to Google as Microsoft and Yahoo! have, the pain of watching Google anymore becomes unbearable. Eventually you capitulate and affect an act of desperation, in the classic sense, like Microsoft has just done. In this case one laggard, MSFT, has decided to acquire another laggard, YHOO, in order to better compete with Google.

Mr. Softy has offered a 62% premium over Yahoo’s closing price before the deal was announced. Without question, this is an act of desperation. They will spin it as “cleverly priced.”

True to form, Yahoo is officially “evaluating” the offer. They didn’t have a plan ready if such an offer was made. From a trading perspective, when the market gives you such a gain so fast (62% overnight) you take it and don’t look back. [That means you delete YHOO from your screen and forget regret about not catching the last fifty cents. Time to move on.]

Staying on this path of “evaluating” is more about the representing the collective egos of the key executives and not the best interests of the shareholders. That’s an emotional concern, not a financial one.

Within the last few days, YHOO stock was putting in 4-year Lows. That means before this announcement, Longs were selling and Short Sellers controlled the financial “line of scrimmage.” MSFT had a good Q4 chart-wise, but it’s choppy.

MSFT has offered $44.6 B for YHOO which has everyone talking. This is more “hostile takeover” than “merger” or “unsolicited offer.” This is a bad use of their money, regardless of how much cash MSFT has on its books. But, when someone is in fear, as MSFT is, they don’t act rationally regardless of how intellectually smart they are.

According to Yahoo! Finance, Google’s market cap was approximately $161B as of yesterday’s close. The share price had been as high as $747 per share and recently has been trading $200 lower off that high.

MSFT offered $44.6 B for 100% of YHOO – a company that is faltering and doesn’t seem to have a clear direction. Google on the other hand, although volatile, is the undisputed leader in the space. The amount MSFT is paying for YHOO is approximately 1/4 the value of Google.

The better trade would have been to acquire 25% of Google. Here’s the math: it’s better to own 25% of the clear winner that 100% of the C+ student…students who rarely evolve into A+ Students.

Buy “winners,” they usually continue to win. That’s how Trend Followers make huge gains.

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Dr. Phil’s involvement with re-hospitalized B.S. artist was to pump ratings for him and his show. I’m not sure that it was a pure publicity stunt, but his goal from the start was to scoop his competish and get some free press.

All his pleadings aside today, which may be heart-felt, did not explain his true aim…increased ratings and exposure.

On this one though, he’s “all hat and no cattle.”

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In an effort to right his ailing baby, Starbucks (NASDAQ: SBUX) honcho Howard Schultz said “…the scent of the warm sandwiches interferes with the coffee aroma in our stores.” I thought they’d do something more material – like start serving better coffee.

But no, Howie’s still not getting it. It’s not the sandwiches nor the breakfast deallies he’s begun to serve. It’s the horrible coffee and the bitter aftertaste. Peet’s makes good coffee, Starbucks makes good lattes. Starbucks is a coffee store, start with serving better coffee.

I’ve always thought that Starbucks served horrible, acidic coffee so that consumers would almost be forced to buy higher profit margin beverages, such as lattes and the frozen drinks. And don’t tell me about having “a Starbucks experience” either please – it’s not sex.

Like a GARP Value Investor, I want to buy my coffee in a CARP manner – Coffee At a Reasonable Price. Cutting coffee prices at the register to $1 is still too expensive for the coffee Starbucks serves. I’d bid $0.70 for a cup of coffee there. No, wait, I couldn’t even do that until they change the coffee. It just tastes too damn burnt.

And since I’m on a roll, when the Barista asks, “Leave room for milk?” that says to me “how much do you need to dilute this crap before you jam in your favorite sweetener, whatever the color of the packet is.”

After changing the coffee, Starbucks could give us incentives to drink the coffee too, like the MTA does in New York City when you buy a Transit Card. If we put $20 on the damn card, give us $22 worth of coffee. That’s the type of experience I’d like to have at a Starbucks.

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The Fed cut rates today by 50 bps (basis points) or 1/2 of 1%. The Fed lowered what’s known as the “Fed Funds rate” to 3%. This is the interest rate banks pay one another for overnight loans. The AP reported that it’s at the lowest level since spring 2005. The Fed also lowered what’s knows as “the Discount Rate” to 3.50%. This rate is the interest the Fed charges banks on loans that the Fed itself makes to them.

This is the second Fed Funds rate cut in as many weeks – the last cut was an “emergency rate cut” of 75 bps or 3/4 of 1%. Adding it all up, you’re looking at a decline of 1.50% in key lending rates.

A “Basis Point,” as it is called, equals .01 of 1% (or one-hundreth of 1%). Financial-types use the term because it’s easier to discuss interest rates this way. So, if your mortgage rate gets readjusted from 7.25% to 7.55 %, you can say that your interest has gone up .3% or 30 bps (pronounced “bips”). From the example above, you could say that the Fed has lowered rates 1.50% or 150 “bips.”

What does these consecutive rate cuts mean for you? Nothing, you’re still screwed basically. Most likely, neither your mortgage, your student loans, your car payment, nor your credit card rates, or any other type of money you’ve borrowed will become cheaper as a result of the Federal Reserve’s recent activity. Only new activity will most likely be affected.

In case you haven’t stopped reading in utter disgust, the interest you receive in your savings account is probably going down, as will CD and Bond rates in the near future.

Ugh, what’s next – higher gas prices?

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The Honorable Rudolph W. Giuliani has bowed out of the race for President and has quickly endorsed Senator John McCain for the post. “John McCain is the most qualified candidate to be the next commander in chief of the United States,” Giuliani said. “He’s an American hero,” Hizzoner said from Simi Valley, CA today.

After the endorsement, Rudy left hurriedly for Chicago where he began his new career as a CME Floor Trader in the Eurodollar pit. Below is a shot of America’s Mayor bidding up Eurodollars after today’s Fed rate cut.


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