Sunday, November 30, 2008

Mark Cuban Switches to Offense

You were probably sleeping last night at 2:41 AM est so I don't blame you if you haven't gotten to Mark Cuban's latest blog post.

It seems he is working overtime to generally discredit the SEC at the same time that they are working furiously to prosecute him.

Cuban's Friday night reading list included the Office of Inspector General’s Report to Congress regarding the SEC, a report I didn't know existed and wouldn't know where to find without Google. In his post Cuban takes issue with two things in particular - lax trading rules for SEC employees that clearly traffic in material non-public information, and an alleged retaliatory investigation by SEC staffers.

He also takes issue with the fact that the SEC tried to slip the report out on the Friday after Thanksgiving when no one is paying attention. This whole thing has bacome an interesting case of "who's watching the watchers" and Cuban as the central figure ensures that the story will get more than enough attention in the press. This should be good.

Five Wonderful Days

No, I'm not talking about our Thanksgiving break.

It is generally accepted that during the depths of a bear market, most amateur market participants have ceased liking the market, moved past hating the market and are so worn out that they cease caring. In this environment, stocks can have breathtaking up moves with nobody seeming to notice.

In the five days ending Friday, the S&P 500 rose 19.1%. That's a big move and I haven't heard anyone outside of CNBC mention it. In fact, when I was having lunch yesterday a bartender who kind of knows what I do went out of his way to mention how bad the market is.

I'm not saying that the bottom is in. I am saying that long-term investors can't afford to miss too many 20% moves. Unfortunately, the next 10% is more likely down than up.

Up is still good.

The Bad News Is

That it is raining. No golf today. Edit: Freezing snow. Yikes.
The good news is that I will be able to delay putting up the Christmas lights for one more week.

Newspapers Win One for a Change

CBS' 60 Minutes has been promoting their expose on Internet gambling all week. The episode will run tonight.

The Washington Post this morning is running the same story.

I was surprised when I began reading the story - at first I assumed it was a large coincidence. I was somehow more surprised when I realized that the story had been done jointly and that 60 Minutes appears to have agreed to let the Post get the story out first.

"Unlike brick-and-mortar casinos that undergo rigorous security checks, many Internet gambling sites operate in a shadowy world of little regulation and even less enforcement, a joint investigation by The Washington Post and CBS's "60 Minutes" has found. Dozens of these sites are located in countries with no reporting requirements. The licensing agencies there essentially operate as pay-as-you-go boutiques, generating millions of dollars in fees while showing little interest in policing rogue sites. "

It's clear that scheduled TV is in the process of largely becoming something else. There are far fewer people tuning in weekly to watch the same thing at the same time. 60 Minutes is one such program, and I still look forward to it. That they agreed to be scooped by a "partner" is tough to comprehend.

Friday, November 28, 2008

Be Very Quiet

Quick check-in from Woodstock NY.

There isn't much going on from my vantage point. The scene from the 5:00 am opening of Macy's was not exactly frantic. The worst retail Christmas ever? I'm not sure but it's bad.

God bless everyone in Mumbai and those with friends and family there.

Wednesday, November 26, 2008

Happy Thanksgiving

Futures are down and nothing is going on. We get a bunch of economic news this morning which will be noisy and not-too-meaningful in the big picture.

I don't have much to say today. I'll be back over the weekend.

Enjoy the family and don't eat too much.

Tuesday, November 25, 2008

Put Me Down for $100k

Goldman Sachs is going to be the first of the big financials to offer three year bonds to investors that are 100% guaranteed by the Fed. According to WSJ, the bonds are going to yield 200 bp over like-dated treasuries. The U.S. govvy 10 year pays investors 3.22% today. you you can buy what is functionally the same piece of paper yielding 5.2% tomorrow.

That's a good deal. It's also possible that if you own enough, one of your kids can get a job at Goldman. Jim Altucher at Real Money pointed out yesterday that before yesterday's spike, Goldman preferred was yielding around 15%.

Lots of ways to skin a cat.

Good Thing AXA Isn't American

French insurance giant AXA today lowered its earnings forecast for 2008 and threw its previous long-term projections out the window.

"Chief Executive Officer Henri de Castries told shareholders in Paris today that the assumptions backing the 2012 profit goals ``have dramatically changed.'' The targets implied an 8 percent average annual increase in equity markets. For Axa to reach the goals, stock markets would have to surge 35 percent in 2009 and 2010..."

We're goiong to hear a lot more of that. Insurers and pension funds worldwide are going to have to revise their models as they see their 2008/09 results in tatters. Global equity markets could very well do 8%/year over the next 5 years but nobody is going to model it after what we've been through over the last 10.

AXA went on to add, "[we have] absolutely no need to raise funds...The company is under no pressure from the government or regulators to increase capital." If they were an American company, that statement would be a fool proof precursor to a large writedown and capital raise.

Monday, November 24, 2008

Order of Magnitude

An order of magnitude is an observation/measurement/approximation that one thing is about 10 times bigger than another thing. It's an exponential thing, so 2 orders of magnitude means that Thing A is about 100x better or bigger than Thing B. Not 2 times. Not 20 times. If Citigroup has $500 billion in crappy loans on its balance sheet, and Bank of America has $50 billion in crappy loans, Citi's crappy loan exposure is an order of magnitude greater than BofA's.

Order of magnitude is not a general observation about size. Consider the following financial media conversation:

Interviewer: How would you estimate Apple's exposure to the Circuit City bankruptcy?
Financial Professional: In terms of order of magnitude, Apple's Circuit Citty receivables are about $200 million.

That's just wrong. Saying "order of magnitude" rather than "size" or some other noun may sound more intelligent, but since it's totally incorrect, it's not.

Stop it.

The End of an Era

GM announced today that it is ending its marketing pact with Tiger Woods. I am fairly certain that this would have happened even of he wasn't on the DL given their shaky finances.

I can't really see Tiger driving a Toyota, though.

Whistling Past The Graveyard

I hope not.

Strong open for the markets, obviously.

Nobody seems to care whether every bank, not just Citi, needs billions of dollars of help. I wonder what the powers that be are not telling us.

Waylon Jennings, Commerce Secretary

The guy above (or to the left, depending on your monitor size) was mild-mannered New Mexico Governor Bill Richardson.
Clean-cut, earnest Democrat of Hispanic heritage. Slightly nerdy looking guy.

When nobody was looking and the winds of change were blowing in the great storm Obama, a stunning metamorphosis took place. He grew the hell-yeah country singer beard and voila; he is your new commerce secretary.
Well-played dude.

There is Still No Penalty

For writing stupid headlines. Especially online.

"Holiday flights will be jammed but on time"

That gem appears in the USA Today today. So many flights have been cancelled this year that the remaining few have a shot of reaching their destination on schedule. Wheeee.


The government is stepping in again with the next phase in the ongoing, not-quite-bailout of Citigroup.

Banks in trouble are a strange animal. Nobody thinks their money is unsafe once it gets into a bank, which is a good thing or else the runs on banks would be faster and more furious. It makes the required bailout steps like the one we are seeing today somewhat eerie, though.

I have been paying very close attention and I'm not sure what got so much worse over the last 2 months for Citi. If nobody is pinpointing an inflection point for Citi, should we assume that every bank needs similar help? Banks not named Citigroup are very quiet today.

If anyone else has some bad news to sneak out, today would be a good day to do it.

Sunday, November 23, 2008

Poker is Hard

Most people who have played much poker know that it is easy to learn how to play but very difficult to play at the highest level. Psychology, luck, fatigue, small sample size and other factors can all conspire against the above-average player.

I played a $27.50 buy-in tournament online Friday night and did well.

PokerStars Tournament #120443427, No Limit Hold'em

Buy-In: $25.00/$2.50

1845 players

Total Prize Pool: $46125.00

Tournament started - 2008/11/21 - 20:00:00 (ET)

Dear Braaak,

You finished the tournament in 7th place.

A $1,383.76 award has been credited to your Real Money account.

So that’s good right? 7th out of 1,854 players. Over $1,350 profit.

Aside from the fact that I played for over 7 hours and didn’t get to bed until 3:30, making me useless yesterday, it illuminates another aspect of poker that is very hard. It’s hard to make enough money playing poker to make it worthwhile.

If you just play for enjoyment, fine. If you want the money to make a difference, consider the following;

Assume you make $200,000 per year in your day job. In order to play poker at a high level you are going to have to devote a lot of time to it. Such a time commitment should come with it the opportunity to win a meaningful amount of money – let’s say $50,000 over the course of a year, even though there is no guarantee that you will be successful.
Three factors will weigh heavily against you in that quest for $50k - liquidity, opportunity and time. The first is liquidity. If your Return on Investment, or ROI is 20% (which is very good), you need to have $250,000 at risk over the course of the year (though not all at the same time) in order to win $50k on average.
Opportunity. If you win $50,000 next year, you will have succeeded in surrounding yourself with people who are willing and able to lose $50,000. The ability to play online has changed that dynamic but the concept still holds true. I play live and online and I have no intention of giving you any money.
Time is one thing that most successful people never have enough of. If you're good enough at your job to make $200,000, how many nights can your stay up til 3:30 and still perform at a high level?
Multi-tabling online and practing careful bankroll management will maximize your chances of reaching whatever your goal is, but it is far from easy. Be careful out there.

Let the Heavy Lifting Begin

In his national radio address yesterday, Obama gave a listeners a first look at a job creation program that the Washington Post described as "expansive" and "expensive".

"President-elect Barack Obama is developing a plan to create or preserve 2.5 million jobs over the next two years by spending billions of dollars to rebuild roads and bridges, modernize public schools, and construct wind farms and other alternative sources of energy. "

All are worthy uses of funds and I don't disagree with any of it. The real challenge, other than paying for it, is the enormity of the logistics - the plan equates to creating over 2,000 new jobs per day.
It's a long way to go.

What is Mark Cuban Thinking?

There are obviously lots of different people, and kinds of people in the world.

Some people don’t care about much at all. They just do their thing, confident in their own opinion or caring so little about others’ opinions that being right or wrong bears no consequence.

Some people are very afraid of being wrong, so work very hard at being right. Why be wrong when you can be right? Something bad might happen.

Some people have a long history of being right – making good decisions and being successful in a very public way. Maybe the idea of being wrong for all to see is too distasteful to imagine. Maybe the idea of being proven right despite very long odds and conventional wisdom is worth taking on considerable risk.

I was explaining the Mark Cuban situation to someone the other day and we got to the question of “why?”. Cuban is being charged with insider trading and he is going to fight it and fight it hard. He can afford to but it is going to be public and expensive. Cuban had opportunities every step of the way to not be in this situation. In fact, it’s possible that he is happy to be here.

Without rehashing every detail, some of the inflection points are as follows:

- Cuban could have refused to receive material non-public information from the CEO of a company in which he had an investment
- Cuban could have chosen not to sell stock
- Cuban could have chosen not to write about it in a public forum (his blog)
- Cuban could have quietly settled by now. $750k is small change for him
- When responding to the charges, Cuban could have kept mum rather than immediately turning it into a he said/he said circus

Lots of investors would like to see the laws around PIPE solicitation and insider trading cleaned up. Cuban seems hell bent on making himself the poster boy.

Saturday, November 22, 2008

Coinstar - A Good Idea

Coinstar may have the best business model ever. You give them $100, they give you $91 and change back. In case you haven't seen one, they have coin counting machines in grocery stores where you can dump your uncounted, unrolled coins, collect a voucher, and get real cash less the 8.9% vig.

This holiday season they are running a brilliant promotion that works for consumers and retailers. From now through December 7 if you change $40 in coins and accept a gift card rather than cash, they will charge no counting fee and ship you a bonus $10 gift card. Participating retailers include Starbucks, iTunes, Lowes and

Instead of getting $36.44 for your coins, you get gift cards totaling $50, or 37% more. Win win.

Friday, November 21, 2008

There. They Said It.

I haven't seen the note but Bloomberg is reporting that Goldman Sachs has gone to -5% GDP for 4Q (the one we're in) and 9% unemployment for 4Q 2009.

Consensus for 4Q GDP is around -3% and unemployment estimates are all over the place.

Estimates are just that, and expectations are hard to gauge. At this point and from this level it doesn't hurt to make sure hopes for a rosy economic backdrop are dashed and expectations are low and reasonable.

Don't bother feeling better about the futures being up.

Dell Does the Right Thing

Investors are generally happy to pay up for growth - whether they realize it or not. When growth is not acheivable, companies would be well-advised to focus on margins rather than stretching for top line.

It looks like that's what Dell did. Dell reported a pretty good quarter last night. It's not really a growth company right now or any more for that matter but that's OK.

By the way. HP and Dell were two of the better reporting performances of late. Neither has a balance sheet problem. Buy tech? That is not a recommendation. Just because there are certain stocks that arguably don't need to go down anymore, it doesn't mean that there is any reason that they will go up. While I am not taking the day off today, I'm going to avoid looking at screens if I can.


That's how much the S&P 500 is down year to date.

Citigroup, which has been backstopped by Treasury and therefore, according to conventional wisdom, should not be at risk of failing, is reportedly "looking at options." That's not-so-secret-code for trying to sell itself.

My problem with this market is the same as that of lots of people I've talked to. Earnings and in some cases the equity have lost all importance when considering whether to buy or sell the equity.

How could that possibly make sense?

The only important element for lots of names is the balance sheet. Note that I wrote "names" and not "equities." We're in a credit crisis-induced bear market. If a company has a balance sheet that you can't explain to a 6 year old, the stock is and has been trading like it's going to zero. I'm not complaining. With what happened to AIG, and Lehman and Bear, it's obvious that managements don't even get it. How could investors be better off?

Let's continue with the Citigroup example. Citi earned the following:

2005 $3.07
2006 $3.82
2007 $4.25

Granted with leverage coming down, earnings power is not going to be what it was, but the company has proven definitively that it can earn $3 without breaking a sweat. Is the stock trading at 1.5x normalized earnings? Wrong question. It doesn't matter.

If you work at a publicly-traded financial institution, please complete the following survey:

Our balance sheet is:
[ ] highly leveraged
[ ] a ponzi scheme
[ ] I have no idea

How To Get A Paid Vacation

Of course everyone knows that Obama has been a Crackberry freak and is going to have to relinquish it before he hits the White House. Apparently some Verizon employees decided to investigate and turned the situation into an impromptu vacation for themselves, according to the Washington Post.

"Verizon Wireless said last night that a number of its employees have "accessed and viewed" President-elect Barack Obama's personal cellphone account without authorization.
The company said all employees who accessed the account -- whether they were authorized to or not -- were immediately put on leave with pay. "

These poor people will probably end up getting fired but I'm not going to change my official unemployed estimate, which I have peaking just under 9% in 2H 09.

Thursday, November 20, 2008

Whooshy Crashy


I'm not unhappy that I missed the last hour today.

I've got some work to do.

News Flash

"Patrick, Cindy and Judy do not think that the auto makers should be bailed out. Raymond does, but with strings attached."

I guess what is happening is that CNBC is ratcheting up the amount of viewer email that they read on the air. I can't think of a more useless waste of time than televising random opinions from viewers bored or crazy enough to think that an anchor at or a viewer of CNBC would want their opinion.

The dumbing down continues.

Apple on Top, Here Comes RIMM

The USA Today is making a stand on something thought impossible only months ago - that Blackberry's new Storm will make a meaningful dent in the new and powerful iPhone franchise.

"Storm costs $200 with a two-year contract after a rebate, same as the smallest-capacity iPhone. It has a better camera, works as a tethered modem (for an extra fee) and has expandable memory, voice dialing, multimedia messaging, support for Bluetooth stereo, copy-and-paste functionality and other features missing in the iPhone."

It's hard to bet against cool which makes this premise a difficult one. RIMM has a big corporate installed base, some of which must be ready and waiting for something cool to compete with their friends' iPhone.

At $200 a copy, it's a big market.

Are We Having Fun Yet?

Asian markets are getting hammered following the lousy example set by the U.S. yesterday. One piece of good news is that stocks aren't going to zero. Another is that the world isn't coming to an end, which means that what is going on right now has to end. I'm not sure how but I can't wait.

Oil is down again. I don't think I need gas but I might buy some today just because it's so cheap.

Wednesday, November 19, 2008

This is Ridiculous

End of debate.

"Big Three CEOs Flew Private Jets to Plead for Public Funds"

"Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class."

You get the picture.

ABC News

Let's Hope This Spreads

I got a warm fuzzy reading this in today's Wall Street Journal:

A New Odd Couple: Google, P&G Swap Workers to Spur Innovation

"So far, about two-dozen staffers from the two companies have spent weeks dipping into each other's staff training programs and sitting in on meetings where business plans get hammered out.

P&G, the biggest advertising spender in the world, is waking up to the reality that the next generation of laundry-detergent, toilet-paper and skin-cream buyers now spends more time online than watching TV. Google craves a bigger slice of P&G's $8.7 billion annual ad pie as its own revenue growth slows."

The benefits of doing this, and thinking like this for that matter, should be obvious. Everybody and every company can learn something from a different point of view. Google and P&G are at the head of their classes, and they are trying to be better. Or steal secrets. Both are good.

It would be nice if some company, any company that makes money, invites some folks over from the Auto makers and shows them the ropes.

More News Is Bad News

Every time I read something about Sirius XM Radio it is negative.

That is kind of fitting in an ironic way because last night I typed SIRI into the search box on the top of this page and confirmed that everything I have written on the company has been negative.

With the stock at $0.20 and the 10Q delayed, there is obviously more trouble ahead.

If the chatter around this week is true, the crown jewel, that it's a great product that people love, is being jeopardized by the merger of the two networks. The following headline from Ars Technica, "Sirius, XM subscribers revolt over merger-induced changes" may be all you need to know.

This One Made Me Laugh

Check out the following title from a WSJ article:

"Yahoo Seeks Decisive Leader"

How will the board know if they see one? A decisive leader, that is. Until recently, maybe last month, they thought Jerry Yang was the guy for the job.

The company has been rudderless for a while. Could get worse before it gets better. The stock popped yesterday on the idea that the major roadblock to selling the company is now out of the way. Was Yang that powerful?

I guess Microsoft might step in here but I'd be willing to bet that the stock will be single digits if they wait til January.

Tuesday, November 18, 2008

This May Be a Big Deal

It probably is.

The Financial Times is reporting that John Paulson, the guy who is generally accepted to have made the biggest killing betting against the subprime credit market, is moving to the other side of the boat, going long distressed mortgages.

"According to Alpha Magazine, Mr Paulson made $3.7bn in 2007, reflecting the success of his strategy – begun in 2006 – of betting on a collapse of the subprime mortgage market. At the end of the third quarter of this year, his funds were up 15-25 per cent. His funds also made profits in October, his investors say."

That is fantastic. He is absolutely killing it. This next party is a little fishy, though:

"Mr Paulson, who has $36bn under management, was scheduled to hold a dinner and wine-tasting at New York’s Metropolitan Club on Monday night so that he could brief his investors on his plans."

If you run a $36 billion fund and have just embarked on a change in strategy, do you hold a cocktail party to tell people about it? I doubt this is playing out as described.

My Take on Mark Cuban

Tech Bubble billionaire, Dallas Mavericks owner, Chicago Cubs suitor, Blog Maverick founder and author, investor, agitator. Mark Cuban likes to get involved.

He didn't want to get involved in the PIPE offering being done by in 2004 and it will either cost him a lot of money or have long term negative effects on the PIPE market.

A PIPE is a Private Investment in Public Equity. If a public company wants to raise some quick cash and has some shares available for sale under an existing registration statement, they can place some without a new filing or expensive road show and offering. The problem is that such shares are typically offered at a meaningful discount to current market value and Cuban owned 6% of Mamma when he heard about the deal. Details here in WSJ.

Hundreds of people know about a PIPE when it is in the works. I'm not even sure how non-public it is. It has been years since I participated in a PIPE but if you are marketing one, don't call me. It is now officially way too much trouble.

Clusterstock is covering the anti-Bush conspiracy theory if you're interested.

I Smell a Rat - Barclays

Barclays is in the middle of some kind of high wire act and I'm not sure whether there is a net underneath. According to Reuters:

"The bank is raising funds privately rather than take cash from the UK government, unlike its rivals Royal Bank of Scotland, Lloyds TSB and HBOS. Those banks may take up to 37 billion pounds, which would leave the government as the major shareholder in each.

Barclays said it wants to maintain its commercial freedom by not resorting to state funds but critics said it would have been cheaper to make use of the government bailout."

Barclays is taking money from Middle East investors Qatar and Abu Dhabi, cancelling 2008 bonuses, putting all directors up for re-election next week and trying to digest the Lehman acquisition.

The problem is that some of the securities being offered to the Middle Eastern institutions pay 14% interest and current investors want a piece of the action. They are getting one to the tune of 500 million pounds of the offering, but they haven't gotten a good answer on why Barclays didn't just take the UK government money instead.

Monday, November 17, 2008

One Headline After Another

“If you are going through hell, keep going.”
Sir Winston Churchill

50,000 layoffs at Citi.

UBS follows Goldamn Sachs saying no to 2008 bonuses.

Paulson sticks a fork in the remaining TARP money.

Mark Cuban pinned with a very sketchy insider trading rap - I can't see how anything bad other than legal fees comes of this.

Late day sell off makes every remaining optimist jump out a window.

[edit] Jerry Yang is out at Yahoo. That may be good news.

Everybody's yacht is for sale according to WSJ.

I'm not linking to any of this malaise. If you can't find it you aren't even looking.

Is it bedtime yet?

America Loves Infamy - A Guest Post by the Cynic

The Cynic is a Wall Street guy I've known for about 15 years. We were chatting via IM this morning about the 2-way absurdity of Eliot Spitzer writing an Op Ed article this soon after the announcement that he would evade criminal charges, and the Washington Post agreeing to print it this weekend. The fabulous combo of I told you so and and here's how to fix it can be found here.

The Cynic's take:

On Hubris and the Incredible Shrinking Penalty Box

What is the required length of stay in the penalty box before a disgraced public figure is allowed a forum to opine on the direction of our country in a U.S. Newspaper? However ragriffic the Washington Post may be, is it really down to 6 months?

Eliot Spitzer is back and pontificating on what Obama should have the “wisdom and courage” to do with our economy. Unfortunately for all of us, the mistakes in his personal life prevent him from diving in and helping.

We have a fairly decent picture of what Spitzer is all about, so it is not surprising he would have the balls to come out and give advice to Obama or anyone for that matter, particularly using “wisdom and courage” as buzzwords.

Don’t the editors of the Post think there should be at least a 1 year moratorium before crime-stopping-crusaders-whilst-all-the-while-whoring-Governors should be allowed a forum to try and rehabilitate their careers? Aren’t there enough morally bankrupt narcissists in he public “service” sector they can drag out to write Op Ed pieces that haven’t within the past 6 months been googled alongside Alexandra Dupre 14 million times?

People deserve a second chance, even those as vindictive and petty as the former Governor, but in my opinion the Penalty Box is shrinking too fast.

-the Cynic.

One Positive, One Strange Conclusion

Bloomberg is reporting that insider buying of shares hit a multi-month high in October.

"CEOs, directors and other senior officers at New York Stock Exchange-listed companies purchased $1.37 billion worth of equities in October, according to Bethesda, Maryland-based research firm Washington Service. They snapped them up as the Standard & Poor's 500 Index fell 17 percent"

I would be willing to take that at face value - if insiders are betting with their own money that their stock is cheap, maybe it is.

Since this market is all about doubt, the article manages to find someone to throw cold water on the whole idea.

"Insider buying, a bullish signal for two decades, lost its prescience this year and now may be a harbinger of a retreat in shares because it signals overconfidence, according to Ben Silverman, director of research at, a stock tracking firm in Princeton, New Jersey."

I completely disagree. It is more likely that recent insider buys have been bad tells because this in the worst macro backdrop these execs have ever seen. I'm not seeing overconfidence at all, especially since Lehman crashed. The insider buys will be right again soon.

Holy Crap. Look at That President.

Obama looked great, sounded great and gave off a wonderful vibe last night on 60 Minutes.

If the most important qualities for a President are intelligence and eloquence, you Americans have done a wonderful job choosing a leader. And I really, really hope he is going to do great job. If the most important qualities are integrity, vision and dogged selfless determination, it is far too early to say since he hasn't done anything yet except get elected. I'm not saying or implying that he lacks any of these qualities. He just has sooo much heavy lifting to do in a really bad environment to get anything done.

It's so nice that the G20 leaders were able to vacation in Washington D.C. this past weekend. Is there a Nobu in D.C.?

I'm tired of all this auto bailout chatter.

It's absolutely no surprise that Japan is now also in a recession. Futures are indicating another down open for U.S. stocks.

Have a great week.

The Cool Kids Are Saving

The USA Today is really good at two things:
  • Stating the obvious in its articles
  • Finding average people to interview who perfectly back up the paper's point

In today's article "Americans are digging deep to save money" the paper trots out examples of folks who are selling old jewelry, carpooling for the first time and even feeding their kids less food. That's right, feeding their kids less. Say it ain't so.

It's true that lots of consumers are hurting. It's also true that if things pick up a bit, the most likely behavioral outcome will be for people to go right back to exactly what they were doing.

One concept that is getting more play this year, for the right reasons, is the Paradox of Thrift. The Paradox is a Keynesyian concept that illustrates that in a recession/depression, if everyone saves more, that will translate into less spending overall and more job losses, which will further hurt the economy. Coordinated savings increases can not happen in a weak economy.

Don't worry of you don't know what next year's earnings will be for your favorite retailer. Nobody else does either.

Sunday, November 16, 2008

Goldman Bonus News


There are a lot of pissed off people on Wall Street right now.


Obama's Team - A New Take

The chatter has been building this week that NJ Governor Jon Corzine is the front runner or close to it for the post of Treasury secretary in the Obama cabinet. As a New Jersey resident, even though I'd like to be rid of him, I don't think this makes much sense for the following reasons:

  • it is generally accepted that Corzine has done nothing positive for the NJ economy

  • there are already too many Goldman Sachs grads running around the treasury

The Boston Globe is reporting a strange twist - that Corzine is in the fray for the Secretary of State position that Hilary Clinton has her eyes on. I'm not sure that the Secretary of State ever actually does anything, so plugging the stately and wise-looking Corzine into that spot would be fine with me.

What's Under the Cover?


Click here.

It's Too Quiet at AIG

Uncle Sam has a lot of skin in the game with AIG. A lot.

We have committed $153 billion so far to unwinding the balance sheet. We own 79.9% of the equity. We haven't sold any assets or raised any private money to speak of.

The NY Post is reporting that Hank Greenberg is trying harder to get back in the mix. I was ready to snap dismiss this. Greenberg was AIG CEO until three years ago so hand a big hand in building the pyramid scheme that is their balance sheet. Of course he wants to be the white knight.

What the Post writes however has a lot of merit. Greenberg argues the structure if the U.S. efforts and offers some suggestions that will be taken seriously in the coming weeks:

"[Greenberg] was the quiet and effective force behind the government's recent move to slash the high interest rates on the emergency $85 billion loan needed to keep AIG afloat by 38 percent.

"They recognized that the restructuring they put in place was too punitive," Greenberg said in an interview at his office last week. "It was more harmful than good. You can't make an $85 billion loan at 14.5 percent plus own 79.9 percent equity of the company - and then essentially nationalize the company."

"You can't raise money from the private sector if the company is owned by the government," he said. "Obviously. Who the hell is going to invest? The sooner they can reduce the equity into a non-voting preferred, the better everyone will be. Then you can try to raise money and sell assets. But in the meantime, the government is running an insurance company.""

Saturday, November 15, 2008

Dare I Say It?

What do you say we tackle two of the timely and weighty issues of the day?

Oil at $145/barrel or over $4/gallon scared the living daylights out of U.S. consumers, politicians and Boone Pickens. The U.S. only produces 24% of the oil that it consumes. Of the other 76%, more than a little is imported from countries who aren't exactly in love with us.

President elect Obama is bound and determined to install some sort of health care system that promises "affordable, accessible health care for all Americans."

I have an idea that moves advances both issues in one fell swoop.
Merge with Canada.

Canada supplies over 10% of U.S. oil consumption. Merging with Canada would raise to over one third the percentage of demand that we can fulfill ourselves, with an option on finding more in the vast wilderness that is Northern Canada.

Canada has been a friendly neighbor for decades.

Canada has socialized health care. The U.S. could roll out the Canadian system nationwide in no time at all.

You can thank me later.

A Saturday Joke

The Seven Dwarfs go to the Vatican and because they are the Seven Dwarfs, they are immediately ushered in to see the Pope. Grumpy leads the pack.

"Grumpy, my son," says the Pope, "What can I do for you?"

Grumpy asks, "Excuse me your Excellency, but are there any dwarf nuns in Rome?"

The Pope wrinkles his brow at the odd question, thinks for a moment and answers, "No, Grumpy, there are no dwarf nuns in Rome ."

In the background, a few of the dwarfs start giggling. Grumpy turns around and glares, silencing them.

Grumpy turns back, "Your Worship, are there any dwarf nuns in all of Europe?"

The Pope, puzzled now, again thinks for a moment and then answers, "No, Grumpy, there are no dwarf nuns in Europe."

This time all of the other dwarfs burst into laughter. Once again, Grumpy turns around and silences them with an angry glare. Grumpy turns back and says, "Mr. Pope! Are there ANY dwarf nuns anywhere in the world?"

The Pope, really confused by the questions says, "I'm sorry, my son, there are no dwarf nuns anywhere in the world."

The other dwarfs collapse into a heap, rolling and laughing, pounding the floor, tears rolling down their cheeks, as they begin chanting. . .

"Grumpy screwed a penguin!"
"Grumpy screwed a penguin!"

Friday, November 14, 2008

Market Late

Today stunk.

Let's get stocks to a new low, retail sales to down 10% y/y for 4Q, unemployment to 10% and get on with it.

Enjoy the weekend.

Market Early

The early action has stocks bouncing from the opening lows. The retail sales number was bad but the headlines that is was worse than expected are probably incorrect. If you are expecting a robust retail environment this Christmas, good luck.

The layoff announcements this week alone have been staggering.

The bottom callers are going to have a field day if we finish up today.

More Very Unhealthy Action

Another such victory, and we are undone.

The market was up big yesterday, the futures are down big today...

Oil is playing nice but mostly or only because it's the new most-important-LEI.

The Euro is officially in a recession, and it's not even a country.

My guess is that stocks might be near a bottom but that it's not yet time for a bottom. I'd rather see stocks get boring than continue to have them scare the crap out of people.

What I want continues to not matter much.

Washington Yesterday

The House Committee on Oversight and Government Reform trotted in some very fine hedge fund managers yesterday to ask showy questions about some very populist topics. They apparently are demanding the following small things from the hedge funds, or at least asking why they hadn't thought of doing some of this before things melted down:
  • higher taxes
  • more disclosure
  • more regulation

Since things like the tax code don't change based on what happens in one meeting, the hedge funds boys kind of smiled and nodded and made nice and it was a pretty uneventful meeting.

The Wall Street Journal printed the following sentence today, which I find very ironic:

"[T]hey (the hedge fund managers) maintained that such funds, which cater to the wealthy and big investors such as pension funds, can play an important role in a recovery, lending money where banks won't and buying up toxic assets like mortgages that others won't touch."

These particular funds don't cater to anyone. They are the vehicle in which the boys who were under the gun yesterday can maximize their profits. I suspect that the important role that they will play will be making a killing buying up CDOs at some point, sooner rather than later.

I still like capitalism, though.

I am getting tired of the volatility.

Thursday, November 13, 2008

Tangible Lack of Progress

HUD, the Department of Housing and Urban Development, yesterday boldly attacked the thorny problem of lack of regulation of the mortgage origination business.

The good news is that they updated the guidelines in the Real Estate Settlement Procedures Act in an effort to limit some fees and protect borrowers from misleading docs or bait-and-switch tactics.

The bad news is that they also immediately admitted that they have no power to enforce the news rules.

The beat goes on.

The Next Bubble

Bubbles are bad. We just worked through a tech stock bubble, a commodities bubble and a housing bubble. All bad.

The most likely scenario for the U.S. economy is a recession that is deeper and longer than almost anyone was expecting 12 months ago. Interest rates are already frighteningly low. If in fact we do get the big bad version of recession, interest rates will probably stay at uber low levels for the next 4 - 8 quarters. For certain, we won't see higher rates until the banks are running like Swiss clocks or there is definite proof of inflation.

Over the next few months, some companies, hedge funds and consumers will regain their footing, and some new funds will be formed. Let's assume that by this time the banking system has normalized somewhat and banks are lending again.

Very low cost of capital + adequate access to capital = investment (sometimes including leverage, chasing returns and momentum investing).

Said another way, the money not satisfied with 2 - 6% returns is going to go somewhere. The easiest way to make a big pile of money in the next decade may be to identify where the next bubble is going to be, and get in early.

It doesn't even matter if it isn't a fantastic or well-grounded idea. The concept that house prices would never go down in value again sold like hot cakes 5 years ago. Oil at $200/barrel? Done. They aren't making any more of it.

Pick your poison - health care, alternative energy, growth stocks (again?). Actually, you can wait. After the market bottoms, the small cap growth and emerging growth investors will find it for you and announce it boldly on CNBC. Don't ask yourself whether you believe it, ask yourself whether others can get behind it. Momentum's strength comes from numbers and can grow exponentially at some points on the curve.

Get in line, get involved but remember to sell when everybody agrees that it is going to last forever.

This Should Be Good

Let me quote the NY Times:

"Legislators want to know what went wrong on Wall Street, where hedge funds often play a huge part....The five managers to testify before the House Committee on Oversight and Government Reform were selected because they each earned more than $1 billion in 2007."

And from Reuters:

"John Paulson, George Soros, Philip Falcone, James Simons and Kenneth Griffin were scheduled to testify at the House of Representatives Committee on Oversight and Government Reform about the role of hedge funds in financial markets and their regulatory and tax status."

The government has proven that it is clueless when it comes to regulating the complexities of the financial markets. Now, after the crap has hit the fan, they are going to "invite" a few guys to explain the whole thing to them. It is a pure grandstanding power play that the five invitees all made more than a billion last year.

What a message to send. See how powerful your government is? See how strong the system is? Even the billionaires must cower before Capitol Hill.

If you had a lot of money or power and knew nothing about math, you'd be better off hiring a 4th grade teacher to explain it to you than a nobel prize winner. These pols have it backwards.

Wednesday, November 12, 2008

LCD Price Fixing

Three Asian flat panel screen makers today agreed to settle a price-fixing suit going back to 2006. From

"Three of the largest makers of computer and video screens, Sharp Corp., LG Display Co. and Chunghwa Picture Tubes Ltd., pleaded guilty to criminal price-fixing charges and will pay fines totaling $585 million."

I'm old enough to remember when the idea of a flat screen, whether it was LCD or plasma, was a big deal if it could display anything other than ugly alphanumeric characters. I also remember as the price elasticity was kicking in, what a huge deal it was. The price of the display relative to the rest of the bill of materials was absolutely dictating the pace of the substitution effect.

If you were the first person in your office to ditch the CRT monitor and get a flat screen, you were big time.

If this is the first time you've heard about this story, don't be shocked about the fact that all three companies named are Asian. Every flat panel manufacturer is Asian. All of them.

No xenophobia opportunity here. In fact, the opposite may be true.

"LG Display, Taoyuan, Taiwan-based Chunghwa and others met several times from 2001 to 2006 in so-called ``crystal meetings'' to set prices on desktop-computer, laptop and television screens, said Assistant Attorney General Thomas Barnett, who heads the antitrust division." according to Bloomberg.

The WSJ article specifically names only three companies - all obviously American - Dell, Apple and Motorola as customers who were outwitted by the scheme to fix prices. I'm sure these fine organizations are mortified that they didn't figure it out sooner.
As an institutional investor, I managed at times investments in LG Display and all three of the named customers. More to come on the value, or lack of value, of meeting with managements of public companies soon, but probably not tomorrow since I'm in Philly all day.

Michael Lewis - Making Friends On Wall Street Since 1989

Michael Lewis has done some of the best Wall Street writing out there in the time that I've been paying attention.

His long short story here in Conde Nast Portfolio Magazine this week is outstanding, entitled "The End". It's fantastic, so if you haven't, click it and read it. I love the following paragraph:

"Now, obviously, [Oppenheimer Analyst] Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own."

Best (Buy) House, Bad Neighborhood

So much for the concept that a weak or going-out-of-business Circuit City is positive for Best Buy. The company today lowered estimates for the current year and predicted pronounced top line weakness.

“In 42 years of retailing, we’ve never seen such difficult times for the consumer,” Brian Dunn, president and chief operating officer, said in the statement. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.”

Best Buy has been and should continue to be an important indicator of the health of the high-end consumer. Man the life boats.

Active Management

Here's a guess. When the books are closed on 2008, a very hot topic will be whether it is a good idea to pay a mutual fund manager 1% or a hedge fund 2% (+20) to pick stocks for you.

Consider the following quote from screechy/whiny FundAlarm:

"80% of Vanguard’s 50 index funds and ETFs are leading their peers so far in 2008 (through 10/24). An astounding 97% of Vanguard’s index funds have above-average returns over the past five years."

Americans embracing low-cost passive investments would have serious implications for the investment management business.

Oil and China II

Oil is below $59/barrel, shrugging off last weekend's news of the massive China stimulus package, which was generally viewed as positive for crude.

Vibrant growth in China probably is the biggest source for incremental growth of demand for any commodity. The price of crude is telling a different story. Take your pick:

  • The market doesn't believe the size of the stimulus, or the time period in which it will be implemented
  • The market believes that this is not new spending, but a reiteration of prior plans
  • The global recession will be so deep it won't matter

AIG Headline - Strangely Optimistic

I saw the following headline last night and was touched by how optimistic it seems relative to how negative most people have become:

Will AIG Be Able to Repay Taxpayers?

Part of the problem is that most taxpayers and some of the media think that the money being used to dismantle AIG and the rest of the TARP money is just being thrown out the window. This article is the first mention I can remember of the fact that AIG has paid the U.S. government over $2 billion in interest already. The preferred stock that the Fed owns in the financials pays a 5% dividend for the first five years whereas the Fed can borrow 5-year money at 2.75%. That is a decent trade.

I'm not saying that the situation is good. It isn't and the size of the Fed's balance sheet is scary. Some things will end badly and AIG may be one of them. Some things will work out for the best, though. It is just oppressive how negative it has gotten.

Tuesday, November 11, 2008

Google Calendar

Is having a really bad week.

I have no idea what is going on with it. Almost every time that I try to modify an existing entry - change a meeting from today til next week etc. - it gets hung up then crashes my Internet explorer.

It may be time to go back to Outlook. I'm hoping they're a little distracted with the Gmail features upgrade that is going in this week and will work it out soon. One can hope.

Quote of the Day

If the market doesn't have enough going on to hold your interest, you may have noticed the Wall Street Journal interview of Jean Claude Van Damme yesterday. That sounds like a joke but isn't.

WSJ asked him about his recent film "JCVD" in which "Mr. Van Damme plays an action star past his prime (also named Jean-Claude Van Damme) who is making D-list films." That also sounds like a joke.

Van Damme commented, "The movie is not going to be successful, I don't think."

Is Starbucks Cheap?

"Valuation is a result, not a catalyst." Philip E. Laverson

Starbucks' stock has spent the last two years going from $38 to $10. They reported earnings last night. It's obvious that Starbucks' business model struggles in an economy as lousy as this one is. It's also unlikely that many people want to step in and buy broken stories here. But is the stock cheap?

The stock was $38, now it's $10. It's still a marquee franchise. Who would rather pay $38 than $10?

It's still not a buy in my opinion.

It's not cheap based on current earnings - they earned a dime in the quarter. Not cheap relative to its growth rate - they're not really growing any more. It might be cheap based on future earnings but in all likelihood we will need to see a much better economy to get there. If you are expecting a much better economy any time soon, there are easier fish to fry.

Monday, November 10, 2008


While I was having dinner, apparently American Express, which is not a bank, was granted permission by the Federal Reserve to become a bank holding company.

Too bad Circuit City and GM didn't think of that.

Since I'm not in 4th grade any more I can't imagine what it would be like to play a game for real where the rules keep changing.

Oil and China

Oil is trading up about 5% in the pre market off the China stimulus news. The trading in the commodity over the next few weeks should be interesting.

Since the peak oil has been trading as a proxy for global demand in general - and going lower. The China stimulus may give the financial players a reason to get involved again.

This Doesn't Make Sense

"The average Wall Street [Strategist] forecast calls for the S&P 500 to break out of a bear market and surge 20 percent to 1,118 by Dec. 31 -- more than twice as much as the biggest-ever advance to close out a year, according to data compiled by Bloomberg."

Hmmm. A lot of these estimates are probably stale. Big picture guys - strategists, economists - are reluctant to change their published forecasts too often, so are apt to sit on their hands in times of pronounced short-term volatility. If I were a strategist in print calling, at least implicitly, for a 20% rally in the next 7 weeks, I would be looking for a quiet spot to make another estimate cut. This could create a steady headwind into the close of the year.

Sunday, November 9, 2008

Sunday Night

The futures are trading up nicely as lots of folks including a small country called China and the new Chief of Staff of the soon-to-be Leader of the Free World used this weekend to promise stimulus up the wazoo.

Companies that export to China should be strong today, whether they be Asian names or not.

I've never seen global fiscal leaders work so hard together at anything. Let's get this done ASAP because this level of effort could cure cancer in no time.

Unemployment Blues - The Soundtrack Part III

This dude Eric Clapton can play guitar.

Once I lived the life of a millionaire,
Spent all my money, didn't have any cares.
Took all my friends out for a mighty good time,
Bought bootleg whisky, champagne and wine.
Then I began to fall so low,
Lost all my good friends,
Had nowhere to go.
If I get my hands on a dollar again,
I'm gonna hang on to it till that eagle grins.
Cause nobody knows you
When you're down and out.
In your pocket, not one penny,
And as for friends, you don't have any.
Nobody Knows You when You’re Down and Out.

Nobody Knows You When You’re Down and Out, Bessie Smith, 1923, covered by Clapton and lots of others

The Obama Economy

In an article titled, "Obama Will Need 18 Months to Turn Economy Around, Stiglitz Says" Columbia Professor and Nobel Laureate Joseph Stiglitz attempts to lay some groundwork for the "tax" portion of the next administration's "tax and spend" framework.

In arguing the obvious, that the economy is bad and will soon be Obama's problem, Stiglitz advocates "rolling back outgoing President George W. Bush's 2001 to 2003 tax cuts as well as taxing dividends and capital gains as ordinary income." He also warns against cutting taxes on high income Americans of course.

Hold on tight. The Good Ship America is sliding left.

TARP, Pelosi, Votes

The Washington Post and others are reporting that House Speaker Pelosi, after meeting with Ford and GM, have written a letter to Treasury urging them to give some TARP dollars to the auto industry.

This is so typical on many levels. Typical that there is money around and the auto industry is trying to get some. Typical that there is money to be given out and every politico wants a say in who it is given to.

TARP is the Troubled Asset Relief Program. The troubled assets in question are supposed to be mortgages, mortgage-back securities and credit default swaps. Not car companies.

Saturday, November 8, 2008

Unemployment Blues - The Soundtrack Part II

This entry may have been inspired by investment bankers, and comes from Coldplay, which is a stupid name for a band.

I used to rule the world
Seas would rise when I gave the word.
Now in the morning I sleep alone.
Sweep the streets I used to own.
I used to roll the dice.
Feel the fear in my enemy's eyes.
Listen as the crowd would sing,
"Now the old king is dead!
Long live the king!"
One minute I held the key,
Next the walls were closed on me.
And I discovered that my castles stand
Upon pillars of salt and pillars of sand

Viva La Vida, 2008

Unemployment Blues - The Soundtrack

The first entry comes courtesy of the master Bob Dylan

You've gone to the finest school all right, miss lonely
But you know you only used to get juiced in it.
And nobody has ever taught you how to live on the street
And now you find out you re gonna have to get used to it.
You said you'd never compromise
With the mystery tramp, but now you realize
Hes not selling any alibis. As you stare into the vacuum of his eyes
And ask him do you want to make a deal?

Like a Rolling Stone, 1965

Barron's and Consumer Spending

Michael Santoli, quite a good writer, starts off very well in Barron's this week with the title and question "Will Consumers Ever Spend Again?"

It's a good question. Spending and consumer confidence are at levels not seen in a long while. Unemployment is spiking. Americans for a long time have spent too much and saved too little. Is now, or when we come out of the recession that we are surely in, the time that spending will be uncool and saving the thing to do?

Santoli doesn't answer the question, but most Barron's articles don't answer a question unless the answer is, "Stocks are too expensive."

My bet is that the new status quo will be the old status quo. When U.S. consumers feel better, they will spend. They have for as long as I've been here...

Interesting Test

Ben Reitzes is the best computer hardware analyst in the world. He's now writing research at Barclay's since Lehman pulled the chute.

I haven't seen the report but Eric Savitz at Barron's online details Ben's estimate cuts on Apple - apparently all driven by economic weakness.

Ben is modeling iPhone units down big sequentially in the December quarter (5 million units vs. 6.2 in the September quarter). Down sequentially in the December quarter for any consumer-related product is bad, recession or not. Especially a hot one. Ben is also modeling down earnings for fiscal 2009. Ugh.

If earnings are down, it will be interesting to see whether the multiple gets crushed. If it does the stock probably won't work for a while. It's also possible that investors desperate for growth will look through the next few quarters.

Of course, earnings might not be down. Apple has been delivering for a while now.


There is nothing wrong with Obama tackling the nation's real issues before he officially gets into office.

You'd think by now I would be able to embed a video. Nope. Some popup blocker is blocking me.

It's awesome how nervous the interviewer was in that clip.

A Different Obama?

The New York Times today covers Obama's first press conference extensively. The following caught my attention:

"The session was limited to about 20 minutes, and Mr. Obama took nine questions. His answers were purposefully crisp — and, at times, laced with humor — and his presentation stood in contrast to previous news conferences, where he would often devote much more time to a question."

Is it possible that now that he's elected, he's going to be less engaging and more business-like? Less style and more substance? That would be nice. Of course it may just be that he's overwhelmed by the huge sticky mess that is the economy.

I'm hoping he starts a new trend - nobody wears a tie - ever. Not gonna happen.

2009 Golf Rules Changes


The USGA is contemplating sweeping rule changes scheduled to take effect sometime after January.

This is only a preview as a complete new rulebook is being written now. Here are a couple of basic changes:

Golfers with handicaps:
- below 10 will have their dues increase by 35%
- between 11 and 18 will see no increase in dues
- above 18 will play for free or get a check from the club for each round played

The Nassau $ amounts will be changed as follows:
-handicaps below 10 pay an additional $10
-between 11 and 18 - no change
-above 18 you will receive the total amount in the pot even if you do not play

The term “gimme putt” will be changed to “entitlement” and will be used as follows:
-handicaps below 10 - no entitlements
-handicaps above 11 to 17 - entitlements up to one putter length
-handicaps above 18 - if on green, no need to ever putt, just pick it up

The goal of these entitlements is to ensure that everyone’s final score is about the same.

In addition, a player will be limited to a max of one birdie and/or six pars per round. Any in excess must be given to those fellow players who have not yet made a birdie or par. Only after all players have received a birdie or par from the competent player can that Player begin to count his score again.

The concept of a "net score" will be used only for scoring those players with handicaps 18 and above. This is intended to "redistribute" the success of winning by making sure that in every competition the above 18 handicap players will post only net scores against every other player's gross score.

These new rules are intended to CHANGE the game of golf. Golf must be about FAIRNESS only; it should have nothing to do with ABILITY.

Friday, November 7, 2008

Jobs Data

The bad news is that the October unemployment rate went to 6.5% from 6.1% in September. One in 234 American workers filed a new unemployment claim in October. That's kind of scary.

The good news is that 93.5% of people who want to be working are working.

The Abyss

A little unauthorized quote from a Wall Street Tech Research Sales desk this morning:

"One thing that is painfully clear now -- upcoming December quarter results for Tech companies will be frightening. Most had assumed this, but the magnitude of the guide downs from bellwethers CSCO and from QCOM last night (each of whom had October vs. September quarter ends, therefore provided one more month of data) showed massive deceleration in the month of October. While the current month of November could easily get worse, the sobering forecasts we have just heard are actually GOOD things, and hopefully investors can use these opportunities to model out recession-like scenarios for all of their Tech coverage universe. Resetting the bar is a critical first step to establishing a floor in these stocks."

This is a big concept. Cisco and Qualcomm are very important companies. October was much worse than expected. November could be worse than October. Stocks can't bottom until buyers are focused on something other than trough earnings. In my opinion investors don't look past the trough until they understand how deep the trough is.

Down is bad but part of the process.

Well-Played, Microsoft

I had some mice in my garage this week so I put out traps. I caught a couple yesterday, including one that sadly wasn't dead yet. Yahoo probably feels a lot like that mouse.

Microsoft most likely was lucky to walk away from the Yahoo deal at $33. Yahoo was just greedy and stupid. This time around Microsoft seems to be playing it perfectly.

"We made an offer, we made another offer, and it was clear that Yahoo didn't want to sell the business to us and we moved on," Ballmer said. "We are not interested in going back and re-looking at an acquisition. I don't know why they would be either, frankly. They turned us down at $33 a share."

Yahoo will be a part of Microsoft at some point. They're just going to have to beg and squirm some more.