Microsoft (MSFT) market capitalization back to 1997 level

MSFT market capitalization is currently at less than $148 billion.

According to this article from the New York Times dated June 1997, the market capitalization of Microsoft at that time was $142.8 billion:

"But Microsoft's closing share price yesterday was still a remarkable 45 times estimated fiscal year 1997 earnings of $2.63 a share, giving the company a market capitalization of $142.8 billion."

And a few months later it went above the current $148 billion.

The big difference is that the earnings are today much higher. Of course the earnings in the next 2/3 years might not stay at 2007/2008 high level, but the future still looks good for Microsoft in my opinion.

My take on the US housing plan

I am no expert but what I can see is:
- taxpayers will have more to pay,
example here:
"the government and Investment Bank share the cost of further reducing the interest rate so that the Family C’s monthly debt-to-income level is lowered to 31%"

- I do not see specific details on how the government will implement this plan so that speculators will not benefit from it.
The example sheet has three examples, all leading to a refinancing. There is no example of how the plan will handle someone who would not deserve to be helped by tax payers.

So the general idea seems kind (to help families facing difficulties), but what if half the money goes from the pockets of "reasonable" families (taxpers who did not buy houses) to "irresponsible" people who were gambling in the housing market?

The white house housing plan debate

The plan seems to be here.


Here is a link to the White House reaction to Rick Santelli´s rant.

Also interesting is this reaction:

I guess we will all have to make up our mind.

Can´t trust anybody these days.

Excellent interview from Chris Whalen

You can check it out here.

First time I see him in interview and he is very clear on what needs to happen and the extent of the potential losses as Citigroup, Bank of America, Wells Fargo/Wachovia, and JP Morgan.

His idea of receivership "a la WaMu" sounds good and realistic. It is the first time I hear someone who is realistic about the situation, and offers a clear path. Of course it´s a painful path, inclduing for bond holders: this 50% haircut on Citigroup bond holders, that will raise some fear to the bond holders. But it´s this or the american taxpayers take the costs.

The Wells Fargo case

I find the case of Wells Fargo (WFC) very interesting.



Yesterday we learned that Warren Buffet has been selling 0.1% of his stake in WFC.
Check it here.
Berkshire Hathaway stake in WFC decreased "to 290,244,868 shares from 290,407,668 shares".



Why sell 0.1% of his stake? It is such a small stake.
Is Warren Buffet currently trying to sell more of his shares?




It will be interesting to hear more on this from Warren Buffet.



Also at least four people, who's opinion I value quite a lot as well, being seriously doubtful or simply bearish or short on WFC:
- Mish (Shedlock)
- Reggie Middleton
- Nouriel Roubini
- Bennet Sedacca



Mish: here




Nouriel Roubini: here

"Today Citi and Bank of America clearly look like near-insolvent and ready to be taken over but JPMorgan and Wells Fargo do not yet. But with the sharp rise in delinquencies and charge-off rates that we are experiencing now on mortgages, commercial real estate and consumer credit in a matter of six to twelve months even JPMorgan and Wells will likely look as near-insolvent (as suggested by Chris Whalen, one of the leading independent analysts of the banking system)."



Bennet Sedacca: here

As Bennet Sedacca pointed out: "Alt-A is likely our next very big problem, which could pose a large problem for Wells Fargo (WFC) which inhaled $130 billion of Alt-A from Wachovia."





Disclosure: short WFC

Could it be that the banks "supported" this rally?

The rally of the last 4/5 days seemed to have "priced in" a lot more good news than it got today from the US Treasury.

Could it be that the banks "supported" this rally because they thought the Obama administration would be too scared to disappoint the market?

Sugar still going up

Silently, sugar is going up since a few weeks.

Sugar is up 17% over the last 12 months according to ft.com. See it here.

So much for all those who call the end of the commodities bull market.

How much damage can Ken Lewis still do?

Article and video interview of Bank of America CEO here.

Ken Lewis offers no mea culpa for overpaying for Merrill Lynch.

What was the rush to buy it at that price the interviewer asked. Oh, other people wanted to buy it ! Great.

And worse: he states he will not need more TARP money.

How long will he stay CEO ?

How much damage can he still do to BoA shareholder´s and taxpayers?

He did not see anything coming. How is he supposed the know the next problems?

Obama about to disappoint (me)

All the bad apples are rising:
- zombie financials: JPM, BAC, WFC, C, etc.
- and overbuilders: TOL, LEN, HOV, PHM, etc.

All these stocks are up 10 to 20% today.

If these are the companies who will benefit from the US administration stimulus, then it is really disappointing.

Bad economics as Jim Rogers would put it.

This would be supporting two industries that have inflated and led us to this mess. These industries benefited during the boom and can now afford lobbyists, and strong political backup it seems.

Not only these folks have their pockets full, they will now keep their jobs even longer.

I recommend Mike Morgan´s post. He seems even more disgusted than I am.

Ambrose Evans-Pritchard and the US homebuilders stocks

In this article, Ambrose Evans-Pritchard uses some weak reasoning:

But it is telling that the shares of builders D.R. Horton, Toll Brothers, and Lennar have begun to rally. The ITB builders share index has risen 45pc from its nadir in December.

I would argue that the ITB went up more than 45% at least two times in 2008:
- from 11Jan08 to 01Feb08,
- from 11Jul08 to 19Sep08.



What did it prove? Nothing.

Let's not try to learn information from what these stocks do. This is reasoning backwards.

The market is just moody, and the market can be wrong.

Oil left per person in the world - 1950 to 2036

Great interview of Meredith Whitney

A great interview.
As usual, Meredith Whitney is very clear and makes a lot of sense.

Includes a very good (because simple) explanation of the shadow banking system.

Citigroup and Bank of America shareholders, beware

Citigroup is down 48% year to date.
Bank of America is down 66% year to date.



Speculators are betting on the US government soon taking action on those two companies and wiping shareholders.
Beware. This smells like what happened to Fannie and Freddie beginning September 2008.
Why would anybody keep shares of those companies today is beyond me.



Once again this temporary situation is disgusting, with speculators who can basically short the stocks and wait that the government wipes out the equity.



Will the government take over any other company ?
JPM and GS seem to hold.
WFC stock has suffered a lot since the beginning of the year. Though it´s hard to imagine that Wells Fargo would be taken over by the government. This is Warren Buffet´s turf.



And how many times are we going to see this scenario again ?