Microsoft Acquires Yahoo

his is what the headline will read (1 year out)….

The question is; will it matter?

One plus one does not necessarily equal three in this equation.

Google is so woven into the very fabric of our society, and the literal dependency we have on them is hard to value in terms of dollars or monthly visits.

If we look purely at the numbers, it would appear that Yahoo PLUS Microsoft would clearly create a significant challenge for anyone to compete with, including Google.

However, Google has this simplicity and usefulness that seems to even grow more apparent at the thought of a combined Yahoo and Microsoft.

In fact, even during the midst of this ongoing posturing between Yahoo and Microsoft, Google hit the 141 million visit mark (April 2008), making it the number 1 website in the world.

When I think of this new MicroHoo (or Yahsoft) looming out there together, and a confusing, expensive mass of sort-of-relevant content and tools and sort-of-works-right software, it almost makes me shudder. I think less value, not more.

Despite the impressive statistics that drives Yahoo, and even though Microsoft has more money in the bank than they can even spend, they lack something Google has.

SIMPLE VALUE

The others are lacking the simplicity behind Google’s model, and even in the very thought of a combined Yahoo and Microsoft creates more anxiety in my mind, than value.

Google will grow quickly in this more social society

All companies involved obviously have substantial critical mass, and are each working to evolve as we use the Internet differently. Each have competitive advantages.

But in this lighter, more friendly social society, Google is the unifying force.

Yes, this soft spot in the global economy and a drop in advertising spends has chipped a way at their impressive growth.

In the end, however the very methodology that drives their search will mimic our very personalities.

As Yahoo and Microsoft grow more complex, Google becomes simply; more valuable.

Hey oil execs, can I borrow some money for gas?

Gas is up around $4 per gallon and the U.S. public is feeling the pain. With crude oil hitting $130 per barrel today, oil execs were called before a Senate Judiciary panel today.

Fearing that soaring prices could cause the economy to slip into a recession, the Senate is looking to the big oil companies for possible relief for American families. A recent report on CNN described the hearing:

The committee grilled executives from Exxon Mobil (XOM, Fortune 500), ConocoPhillips Co. (COP, Fortune 500), Shell Oil Co. (RDSA), Chevron (CVX, Fortune 500) and BP (BP) as to how their companies can in good conscience.

The executives said it did, and that they are doing all they can to bring new oil supplies to market, but that the fundamental reasons for the surge in oil prices are largely out of their control.

“We cannot change the world market,” said Robert Malone, chairman and president of BP America Inc. “Today’s high prices are linked to the failure both here and abroad to increase supplies, renewables and conservation.”

Malone’s remarks were echoed by John Hofmeister, president of Shell.

It is no secret demand is increasing, and supply is decreasing. I feel the pain of these CEOs, but this is the question – will the price of oil ever go down? Is there a fundamental issue that will keep oil prices going up and up?

We should of course be working on conserving oil, finding new sources and looking at renewables, but these things all take time. They are not going to happen this summer or even this year.

Afterall, they are still earning record profits. According to a report by Time:

But you just can’t keep Big Oil down. Trouncing analysts’ expectations Tuesday, BP and Royal Dutch Shell, Europe’s largest oil companies, delivered record profits for the first quarter of 2008. Anglo-Dutch firm Shell netted $7.78 billion in the first three months of this year, up 12% over the same period in 2007. Profits at rival BP, meanwhile, swelled by almost half to $6.59 billion. Shares in each firm climbed almost 5% on the news.

Perhaps they could loan us some of their profits while they help us, the American people, move to a less oil-dependent society.

I just need about $50 per week.

Carbon Credits – Trading on Global Warming

I was reading the Sunday paper this weekend and saw an interesting article on a group of Florida land-owners who are actually getting paid to produce trees.

In this case, the trees won’t be used for paper or for new homes, rather they are being raised for air.

Specifically, the trees are ‘leased’ by large carbon producers (for example energy companies) as a way for them to comply with The Kyoto Protocol, which allows for Carbon Credit Trading.

In essence, the large producers can offset their total Greenhouse Gas emissions by either paying a tax, or, as this article about Florida Landowners demonstrated, by paying for large tracts of carbon-scrubbing trees.

My reaction at first was (I wonder if I should be buying lots of cheap land with trees).

Obviously, the supply for clean air is diminishing and the demand is growing exponentially.

Like everything, there is a market for these credits and in fact, the going price has grown quite a bit over the last few months, from just under $2 in January 2008, to over $7.50 this May.

Thanks, Global Warming.
Sounds like a sure thing…. betting that our atmosphere is going to get more and more full of CO2, and that more and more trees are going to be cut down, seems like a sure thing.

Trading the Markets Around Pending Lehman News

Toward the end of July, I suggested that traders should be extremely suspicious of rallies in beleaguered financial stocks like Wachovia (ticker: WB), Citigroup (C), and Washington Mutual (WM), and look to sell or get short on strength. After hitting highs above $19, $22, and $6 respectively, those stocks now sit under $15, $19, and $3. I believe that was the right call to make, but I also believe the prudent thing to do now is to not overpress one’s good fortune. That’s why I believe the right move here is to tighten stops, be less aggressive, and focus on preserving (not growing) capital and living to trade another day.

Lehman (LEH) is facing equity death-spiral issues in that the stock is falling because they haven’t raised capital, but their ability to raise capital is impaired because of their low stock price. It’s a vicious cycle, and it’s difficult to break. But if the current variables in place remain constant – and that’s admittedly a huge if – Lehman will survive and could be the contrarian trade of the year. The trouble is that if either Lehman’s counterparties cut back on trading with it, or the Fed reduces the firm’s access to the borrowing window, Lehman could go down quickly. Of those two scenarios, the first is the far more likely cause, as the reasons for the Fed brokering the Bear Stearns-J.P. Morgan marriage all hold for Lehman as well. But on the first point: confidence in a financial institution is in many ways its currency, and the price of the common stock is in many ways a reflection of that confidence. So with each day Lehman’s share price falls, it becomes more and more likely that a chain reaction is set off involving a halt to deal flow, which would force Lehman to fire sale itself.

If Lehman’s stock price can find some support, it will buy time for the management team to pursue asset sales, restructuring, and capital infusions. If there were less stress in the capital markets, this wouldn’t be too difficult – Lehman does have a collection of very valuable assets – but that is not the world we’re in today, and every hour matters for Lehman right now. Given the imbalance between debt value ($370 billion) and market cap (under $3 billion), it’s likely that a reasonable offer for Lehman’s equity (say, $5/share) would be pushed through by debtholders buying up the common if they felt the acquirer would make good on the debt. Still, the volatility and uncertainty make this complete speculation, so recognize any stock or options plays here for what they are.

The impacts for the broader financial system are intriguing. It’s cliché, but true: the market hates uncertainty. Lehman has been one of the market’s concerns for months now, so a resolution to their status that minimizes additional stress and uncertainty would go a long way to shoring things up. A Fed agreement to backstop Lehman’s bad debt, as was done with Bear, accompanied by a bid for Lehman by a well-capitalized institution like Bank of America (BAC) would go a long way toward reassuring investors of the stability of the financial system. Should that happen, it would combine with the recent Fannie/Freddie takeover to suggest that the financial markets’ problem children can be dealt with, and could be enough to turn large institutions optimistic going into year end.