In order to resolve the current financial crisis, the government announced an $800B rescue package. Although it was announced on September 18, I believe that Secretary Paulson arrived at this conclusion on the same weekend that Bank of America (BAC) announced its purchase of Merrill Lynch (MER). This makes sense because to commit $50B in such turbulent times, BAC CEO Ken Lewis must have known something that others did not.

Now that the government has proposed the package on the floor, the Democratic- dominated Congress is having second thoughts. CNN has reported that a lot of taxpayers are against this deal and want the financial institutions to reap what they sow. Although this sounds just, the cost of justice will be huge. Think of it this way - you have been let down by both political parties but still you can't just wish them away. Similarly, these financial institutions are necessary.

In my post Microsoft a Dhandho investment I made a point that Microsoft (MSFT) should aggressively buyback its shares: "As for Microsoft, I believe this is an ideal time to repurchase their own shares and finance the Yahoo deal with debt if they must."

Circuit City (CC) CEO Philip J Schoonover has finally resigned. Here is a guy who took a reasonably profitable company, a company that Jim Collins described as great in his book 'Good to Great' and ran it to the ground. Under his stewardship, CC's share price plunged from $30 to $1.7.

While all this was happening, the CEO had no idea why, or what could be done to turn the company around. He tried desperately, like a guy who is drowning and doesn't know how to swim. For example, replacing senior employees with high school kids to cut costs was a particularly dark chapter in the history of Circuit City.

First of all, let me apologize for the hiatus. Let's just say that there were things that required my full time attention. Several extraordinary developments have taken place in past few days. In this post, I am going to discuss the purchase of Merrill Lynch (MER) by Bank of America (BAC) and its fall out on the BAC shareholders.

Gobbling up Merrill Lynch in a time when hell froze over on Wall Street just goes to show the confidence Ken Lewis has in his company. Merrill Lynch will prove strategically very important for Bank of America. Ken Lewis has dabbled with investment banking several times without success. After having his share of fun in investment banking, Ken Lewis decided to wash his hands of it. Merrill Lynch gives him the best chance ever to succeed in that area. This chance however comes with a price tag of 50B dollars. People everywhere are saying that Ken paid too much for MER when he could have picked MER for less than half that money in a day or two. Only time will tell how this deal will work for BAC but in short term, this deal may have grave consequences for the shareholders who rely on the income generated by the dividends.

As in politics, you can't have permanent friends or foes in business. Most of my readers know that I have been bearish on Microsoft (MSFT) shares these few months but I am changing my opinion temporarily.

The stock market works in mysterious ways and I would beg to differ from my friends who believe in efficient market theory. Despite the market increasingly becoming better at closing the gap of attractively priced securities, there is enough time for individual investors to take advantage of some of these mis-priced equities. People who bought Apple (AAPL) around 120 or Google (GOOG) around 420 know what I am talking about.

Microsoft's (MSFT) deadline for Yahoo (YHOO) has passed and the market is rife with speculation about the future of MicroHoo. In the past few weeks, Microsoft executives' browbeating about walking away from the deal has made many analysts estimate as much as a 60% chance of this deal not happening. I, however, believe this deal will close soon without a proxy fight.

Microsoft will not go hostile with their current offer. With a current offer that values Yahoo at about 29.5$ per share, Microsoft is bound to lose the proxy war because even large investors, such as Bill Miller, have declared that they want the price raised. Raising the price and then going to proxy fight seems totally stupid.

In the past few years for Microsoft (MSFT), Google (GOOG) has graduated from a minor irritation to fierce competition that is threatening the software giant's very relevance. Now Microsoft is baying for Google's blood. They want to take the fight to Google's footstep and they believe that Yahoo! (YHOO) will be their Achilles heel.

Every year Warren Buffet auctions a lunch date with him for charity. Last year this date fetched almost half a million dollars. If Mr. Buffet decides to do the same this year, I would suggest Steve Ballmer bids on it and wins it no matter what. Warren Buffet said, "If you give me 100 Billion dollars and tell me to take away the leadership position of Coke (KO), I will return the money. It cant be done." Similarly, 5 years ago if you had asked Mr. buffet the same question about Windows, he would have said the same thing. What applies for Coke and applied for Microsoft five years ago, applies for Google right now. No matter how much money you throw at it, you cant displace Google from its search leadership position.

Microsoft's (MSFT) latest investments (Facebook), acquisitions (aQuantive, Fast) and propositions for mergers (Yahoo!) inspired me to think about the role of management in public companies.

Managers and executives of a public company are paid by the shareholders of the company to provide the shareholder an expected rate of return on their investment. The best way to achieve this is to increase the intrinsic value of the company.

Among different asset classes, Wall Street frequently makes a difference between growth and value investing. For me, as an individual investor, the difference is irrelevant. For an investor to make money in a particular stock of a company, the company has to have growth. If the business of a company is not growing, you cannot make money in that stock barring special situations such as arbitrage. Furthermore if you don't purchase a growth company at the right price, chances are you that you will end up losing money.

Based on the above observations we must look for a "growth at value" approach. It is easier said than done. If you use any stock screener to find companies with PE/G ratio less than 1, you will find that most of these companies have limited future outlook due to changed market conditions. Some of these companies may in fact turn out to be stars but if you buy the top 15 companies, you will still probably not beat the market. Considering the efficiency of the market, there is a reason that these companies are priced so low.

What we do not understand we fear. This phenomenon applies to stocks with many "investors". People who will spend two hours deciding which shower curtain is the best value for money will buy a hot stock at the drop of the hat.

Last week, a friend of mine asked me whether he should buy VMware (VMW). My answer was an obvious no. He bought VMWare at 84 anyway. Here are his reasons: