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Questions & Answers May-6-2008
By JD Bluefield | May 6, 2008
Over the last couple weeks I’ve been inundated with questions. “Where are stocks headed? What’s up with gas? What is your allocation in 401k/TSP? Why does Microsoft want Yahoo so badly?” The list goes on and on… Here are some answers to those questions:
Why does Microsoft (MSFT) want to buy Yahoo! (YHOO) so badly? It is very simple if you’re looking 5-10 years down the road, what does the future hold for MSFT? What does the future hold for MSFT’s core businesses? Well, MSFT sells operating systems and business and productivity software suite programs (word, excel, powerpoint, etc).
With people more astute with their use of the interenet, we’re moving away from selling software and programs on CD, disks and flash drives. The easiest cheapest way is to simply download it. Look at Apple’s Itunes. Netflicks is killed Blockbuster’s business model. Apple’s Itunes will leapfrog right over the both of them as it sets up connections with major studios.
Now take that idea and apply it to MSFT. Download Office? Hell no! Google has already taken it one step forward and skipped the whole installation process. With the speeding up of the internet, we’ll soon be able to just use online programs without even installing them. Just go to Google.com and click on “more”, then “even more”. Now take a look at “Google Docs”… this is what’s making MSFT S— their pants. You can now work your Excel spreadsheats, Powerpoint presentations and Word documents all online. It is all a “beta” version, but THIS is why MSFT neets Yahoo. MSFT needs the yahoo web presence to integrate these products with the web, and to you, before Google can.
Why is the government restricting me to two allocation changes per month in my TSP? As I’ve said before on Marketwatch, any restrictions on free movement is never good. In my opinion, it’s the Gov’s attempt to make the system more stable, perhaps in case of major downward movements in the market. You have to understand, there are billions of dollars in the TSP system, if things get crazy and everyone is allowed to bailout at once it will only exacerbate the problem ten-fold. But, if they can restrict you to two or less moves per month, they can hypothetically prevent a majority of people from jumping out of stocks (C, S and I funds), at least for a short while. What other reason would restricting movement accomplish? Less transaction and tracking costs? Yes, but why just two transactions? Nothing is arbitrary. Always have a questioning attitude.
Why is Chrysler offering discount gas cards? This is all about cash flow. Cerebus (the company that bought Chrysler) needs money to keep the company rolling. Truck sales are down over 22%. American car manufacturers need cash flow to stay afloat. That is why Jeep, Dodge, etc. offer the lifetime warranty on power train and now this gas card. They know they may lose money, but are desperate in the short term to keep car sales moving. Excerpt from Leftlane:
While the promotion is being offered in lieu of certain other rebates, additional bonus cash up to $3,000 is available on some vehicles — including the Chrysler PT Cruiser, Dodge Charger, Jeep Grand Cherokee, Dodge Dakota and Dodge Ram.
Those trucks need massive incentives right now to get them out the door. I love this slight of hand. I always think of Gilbert Gottfried and Eddy Murphy and in Beverly Hills Cop. In a nasal annoying voice, “what can I put in this hand to make you forget about what is in that hand?” In one hand there is a gas guzzler, oh, but look at this hand… $2.99 gas card.
Are we in a recession? Yes. Enough said.
Why is rice and grains going through the roof? Simple many food growers have been switching from whatever they were producing previously to producing corn. Why corn? Many companies are buying corn to produce ethanol to supplant the demand for gasoline. Check out Stockpile and Hoard for more info.
Now Thailand, the largest exporter of rice, is calling for an OPEC style “rice cartel”. Silly as it may sound, this may be a major movement to keep an eye on.
Rice prices have tripled this year, with Thailand’s benchmark 100% Grade B white rice soaring above $1,000 a ton for the first time last month, according to media reports. On the Chicago Mercantile Exchange, rough rice futures have surged over 95% in the last 12 months….
Vietnam is the world’s second largest rice exporter. India is the third-largest rice exporting country followed by the United States in fourth place. Asia accounts for about 90% of global rice consumption.
Put it this way, it will definitely suck to pay more for gas to drive around, but when there isn’t enough food and people will starve, that is when havoc will really break out. Again, I don’t think you need to rush out an clear out shelves to stockpile. Just grab an extra bag when things are on sale. They won’t be now of course, but once all the crazies pull their “4 bag limit”, there will be more than enough to go around.
What stocks do you invest in? I’m working on a monthly post on that. I’ll put on what I’m currently invested in, some of what I have invested in before, and what I’m looking at for the future. I always look at my current holding for reinvestment first. Unless there is something better, it makes more sense to go back to what I already own. For now, you can check out my About page and My Net Worth page.
Is the mortgage/banking/credit problem almost over? Not in the least. Just the newest bank to be affected… UBS of UK is cutting 5,500 jobs and $15B… and there are more fears with the BofA and CountryWide merger deal.
Topics: Investing |
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