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  • ARM Holdings: Buyout Rumor Fuels Lucrative Short Opportunity [View article]
    If Intel is perceived as being aligned with Microsoft in this space, it will only further hinder adoption of its products and increase the perception that it is hopelessly far behind everyone else. All the cool kids use Android; that's where you need to be. Windows Phone 8 and Surface aren't going to capture a large share of the market.
    Nov 28, 2012. 11:07 PM | Likes Like |Link to Comment
  • The president and Congress have heard the public's anger over the fiscal cliff impasse and will likely find a resolution, says Dennis Gartman. We're starting to see some Senators begin to cave on their "no new taxes" pledge; they understand how serious the circumstances are. The markets are already beginning to react positively to what's coming out of Washington, so any further progress could mean a strong rally for U.S. equities. (Video[View news story]
    I'm very familiar with the entire situation, thanks. There's no bluster here; just read the documents and you will understand what I'm saying. It's tremendously frustrating right now that the Republican party is irrelevant, because the Democrats do not represent what most Americans want. The approach I suggest would be a step for them to become relevant again. The only alternative is to drum up more support for the Libertarians, which hasn't really been working over the past few decades. We need a useful alternative and we don't have one today.

    The "more votes for Congress" thing is pointless. First of all, only the House is relevant; the Senate has a different role and does not have the House's power with respect to appropriations. Second, there are 435 roughly equal districts and the people in a majority of those districts chose Republicans. Redistricting is a normal feature of the system and its effects are a deliberate and desirable aspect of it; without redistricting, depopulated regions would hold undue sway. Your statement is equivalent to saying that the Democrats would surely have won the House if only Democratic voters had the right to more votes per person than Republican voters. Hard to disagree with that assertion, but it's not how the system works nor should it be. Since the only sensible reason to vote for a Republican is to cut spending and keep taxes from increasing, and the House's role in appropriations is well understood, we can safely infer that the American people clearly and strongly rejected the President's reckless spending plans.

    If the Democrats want to allow taxes to rise, the House should shut down the government. Not for a few weeks or as a negotiating tactic but for 2 years as a strategic decision. Because you can't spend a dime without the House's approval. After 2 years, we'll have a built-in referendum on that approach. The news cycle can't sustain constant bombardment on a single issue for 2 years, and after a month or two without the media reinforcing the message that they can't live without a massive federal government, the people will realise that they actually don't miss it much at all. And when the no-government bloc wins the referendum election in a landslide, we'll have 2 solid years of data on exactly what was and was not missed to inform a complete reboot of the federal government's role in American life.

    That's the take it or leave it situation, and the fact that all this noise is being made about it indicates that the President's advisors, at least, understand the situation very clearly. It is their hand that is weak, not the House's, and they know it. If the Republican Party wants to be relevant again, they need to push that advantage for all it's worth. On the face of it, it's a high-risk strategy, but the reality is that if the Republicans support tax increases and huge deficits, there's really no reason for their party to exist at all, and certainly no reason for anyone to vote for them. Democrats can jack up taxes and spend like drunken sailors just as well, and they tend to do it without spewing obnoxious nonsense about their religious views, pseudoscientific claptrap about gynaecology, or glowing praise of incompetent officials. Without fiscal policy as a differentiator, the Republicans are without purpose. So their choices are to take a stand on this issue and use the few powers they can exercise to do it, or disband their party and scatter. One of these choices has upside. The right answer is obvious. And it happens to be the one we desperately need someone to step up and insist upon.
    Nov 28, 2012. 10:36 AM | Likes Like |Link to Comment
  • The president and Congress have heard the public's anger over the fiscal cliff impasse and will likely find a resolution, says Dennis Gartman. We're starting to see some Senators begin to cave on their "no new taxes" pledge; they understand how serious the circumstances are. The markets are already beginning to react positively to what's coming out of Washington, so any further progress could mean a strong rally for U.S. equities. (Video[View news story]
    This is why a massive -- 50% or more -- reduction in federal spending needs to be combined with a radical shift in monetary policy. Eliminating QE by an amendment to the Fed's charter plus an interest rate floor equal to the previous year's change in CPI-U plus 100bp would be a reasonable place to start. Replacing the dollar with gold units would be much better but seems too much to ask right now.

    Over the 100 years from 1820 to 1920, the United States went from trivial afterthought to dominant global power. We need to dance with the one we brought -- and that's solid money, tiny government, and hard work. The dance is almost over, and we've spent plenty of time with flashy girls of no substance who have since flitted off with others, leaving us more than a little angry and disappointed. They promised so much for nothing, and delivered so little. But the band hasn't left yet, and neither has our date.
    Nov 28, 2012. 12:25 AM | Likes Like |Link to Comment
  • The president and Congress have heard the public's anger over the fiscal cliff impasse and will likely find a resolution, says Dennis Gartman. We're starting to see some Senators begin to cave on their "no new taxes" pledge; they understand how serious the circumstances are. The markets are already beginning to react positively to what's coming out of Washington, so any further progress could mean a strong rally for U.S. equities. (Video[View news story]
    The important things for all Republican members of the House to understand are that:

    (a) they have absolute control of spending. Regardless of what's in the budget, funds cannot be appropriated without their initiative. The House should construct its own budget and make it clear that that's the most that will be appropriated regardless of what the President requests or the Senate approves.

    (b) No Republican who votes to increase taxes will make it out of his next primary, which as a reminder is about 18 months away. Period. Absolutely no exceptions.

    And really at the end of the day, that's all anyone needs to know. The House has the Constitution on its side, and its power is absolute. This is all much ado about nothing, because the people have already spoken by electing their Representatives. If the Democrats don't like it, they're welcome to try again in 2 years. Until then, the House leadership can, should, and must make it clear that they will not under any circumstances appropriate funds in excess of revenue, nor will they approve any tax increases. As a sop to Democrats, they can choose what gets cut. This is actually very simple if the House leadership appreciates and understands the power they have. This is not an imperial dictatorship and the President actually has very little power to spend money. All he can do is veto spending bills. If he's unhappy about this, he needs to be told publicly that if he wanted to spend money, he should have run for a House seat instead.
    Nov 27, 2012. 09:55 PM | 4 Likes Like |Link to Comment
  • The all-too-brief, conciliatory effort to find some middle-ground over the "fiscal cliff" issue may be disappearing in Washington already. Stalemate appears to be re-emerging over a big obstacle. Team Obama wants a gargantuan $1.6T tax hike and to eliminate a number of tax deductions over the next ten years in an effort to boost revenue and finance a bigger government. Spending cuts don't even appear on the radar at this juncture, which could well be a deal-breaker. [View news story]
    And picked up a majority, which is why this isn't an issue. Oh, wait... actually, it turns out that a majority of districts chose otherwise. Maybe they just didn't like Mitt.
    Nov 21, 2012. 09:41 PM | Likes Like |Link to Comment
  • The all-too-brief, conciliatory effort to find some middle-ground over the "fiscal cliff" issue may be disappearing in Washington already. Stalemate appears to be re-emerging over a big obstacle. Team Obama wants a gargantuan $1.6T tax hike and to eliminate a number of tax deductions over the next ten years in an effort to boost revenue and finance a bigger government. Spending cuts don't even appear on the radar at this juncture, which could well be a deal-breaker. [View news story]
    Mr. Obama needs to be reminded that he's not the only person who just won an election. So too did all 435 members of the House, whose constitutional responsibilities explicitly include appropriations.
    Nov 21, 2012. 07:02 PM | 7 Likes Like |Link to Comment
  • Intel's Dividend Safe, Even If It Seems Too Good To Be True [View article]
    I own Intel and agree that it's not going away, nor will its dividend. But I stopped reading at the suggestion that Itanic sales will be "re-ignited". If I thought the future of my Intel dividends depended in any way on Itanic, I would dump the shares in a nanosecond for whatever I could get and be thankful for every penny. The existence of those CPUs is like the Microsoft Zune, a running gag that continues to exist only as a gift to comedians and lawyers; it's not taken seriously and so far as I can tell, no one actually buys them. They'll go away completely with HP, which probably isn't that far off.
    Nov 20, 2012. 10:14 AM | Likes Like |Link to Comment
  • Higher capital gains rates looming in the wings are making it easy for investors to sell equities for a profit - but that move's not for everyone, Jason Zweig notes: Most of the time, the longer you can keep the taxman away, the better. As always, it's all about your investment horizon. If you're getting 8% a year, the capital gains rate doesn't top 23.8% and you're in for five years, you may as well hold, one analyst says. [View news story]
    Moreover, changes in the capital gains tax rate mean exactly nothing if your plan did not already include selling your holdings.
    Nov 18, 2012. 03:16 PM | 2 Likes Like |Link to Comment
  • Higher capital gains rates looming in the wings are making it easy for investors to sell equities for a profit - but that move's not for everyone, Jason Zweig notes: Most of the time, the longer you can keep the taxman away, the better. As always, it's all about your investment horizon. If you're getting 8% a year, the capital gains rate doesn't top 23.8% and you're in for five years, you may as well hold, one analyst says. [View news story]
    The problem with selling stocks is that after you've sold your stocks, you still have the same problem you had before you bought them.
    Nov 17, 2012. 11:41 AM | Likes Like |Link to Comment
  • If Windows 8 is going to give the PC industry a much-needed lift, Microsoft (MSFT) has some convincing to do. Though 6 out of 10 respondents to a U.S. poll done by antivirus software firm Avast said they're aware of Windows 8, only 9% said they would speed up plans to buy a PC because of it, and 74% said they'll probably stick with what they have. Moreover, about a third of Windows users ready to buy a PC said they plan to switch to an Apple (AAPL) product. [View news story]
    "the end of American enterprise as we know it", really? Nothing like a little hyperbole, but let's take this apart.

    First of all, I'm talking about the end of Windows and the PC. You seem to assume I mean that they will be replaced by something that looks exactly like Windows on PCs but is made by Apple instead. Nothing could be further from the truth. In the new world, applications run in, and data is stored in, data centres, and accessed and visualised on an array of devices ranging from mobile phones to conference room projectors. It's a 3-piece industry right now. Apple has a strong position in end-user devices; they have no presence in the data centre and not much more in applications. I don't see that changing. Those applications will perform many of the same functions that the software you're describing today, all desktop-bound, performs. Unfortunately, the need to handle mail, make slide decks, and run financial models isn't going away. What will go away is the bulk of this work that's currently chained to expensive Windows licenses, cumbersome desktop PCs, and bloated IT departments. Whether Microsoft's continued relevance in each of these application spaces goes away or not remains to be seen, and is largely in Microsoft's hands. Let's take them one at a time.

    Access is not an "enterprise product" at all. It's the tool people use when their tiny business outgrows a trivial mail merge. It lacks the sophistication of a real database, provides no mechanism for shared access to data, and doesn't scale beyond one or two people passing the database file back and forth. And that's pushing it. The only people who are using Access are abusing it and would be better off with something else. Most likely it's being used for some application that can be replaced by a SaaS offering with much lower risk of data corruption and a lot less wasted time, that can be paid for out of petty cash.

    Powerpoint is still used. Like Excel, the people who like it tend to know what they're doing and also tend to dislike other tools even if they are functionally identical simply because they're accustomed to things working exactly as they do. These two utilities are Microsoft's most important franchises, although they don't know it. A large fraction of the Excel and Powerpoint user bases would gladly pay $1000 a seat for them. Wall Street alone would probably be good for a billion in revenue, and it's all margin. Of course, you don't need Windows to use either one -- the same software is offered for Macs, and at some point Microsoft will have to choose between keeping this business by making Office365 the product people actually want, and losing it to someone else. My guess is that they figure it out. 20 years from now, Excel might be the only Microsoft product kids have ever heard of.

    I don't know anyone who has anything good to say about Outlook. It's a mail client, and a bad one. Of course, while mail is still important, it's nowhere near as important to many companies as it once was, and these days most people either read their mail on a mobile device or wish they could. The Exchange/Outlook calendaring functionality is available for peanuts from Google. And yes, it's "good enough"; I know plenty of senior executives who rely on it every day. Outlook won't be missed, nor will its horrible partner in crime Exchange. Together these pieces of garbage probably occupy half of a typical IT department's time, energy, and budget.

    AD covers a lot of ground. Most of its functionality exists only to solve the problem of having lots of Windows machines and users that have to be managed. If you don't have that, AD looks a lot less interesting (so how do you manage the other stuff? Great question, and if you're just joining us here in 2012 you should know that this is the most important challenge before corporate IT departments right now, because "that other stuff" *is already here anyway*). Without that gargantuan infrastructure to manage, there are plenty of lighter weight solutions, ranging from a simply DIY LDAP service to various SaaS offerings that will be more than adequate replacements for the old rolodex. Depending on the direction you choose to take, you might find them integrated with chat/messaging, mail, calendar, and a nice little regulatory compliance features bow on top of the whole package. There's a reason Microsoft bought Yammer. And Skype. At least someone up in Redmond is awake.

    I don't know what you're waiting for; your colleagues in the IT industry certainly aren't. If Microsoft were smart, they'd squeeze loyal Excel and Powerpoint customers for every last dime they can. They're locked in and they like it, the perfect kind of customer for a dying company to exploit. As for the rest of this stuff, you can't seriously tell me anyone would miss it. And it won't be the end of the world for anyone but Microsoft. It requires IT departments to retool themselves, a challenge they'll be up to because the economics of PCs and Windows don't work. If today's CIO can't figure out how to make a thinner, lighter, and more mobile IT system work, he'll be replaced by one who can. The model is changing, and there's not going to be much need for Windows in the new model. Given Microsoft's current trajectory, other players are going to hack away at each of the franchises you mentioned with varying degrees of success until what's left is a business selling spreadsheet software to bankers' interns. That's not the only way this can end, though; clearly there some people there who do understand what's happening and are trying to position the company to make it happen. Sinofsky's ouster strongly suggests that there is an understanding that the company needs to move beyond Windows. If they can do that, they'll survive. But Windows is headed for the boneyard either way.
    Nov 17, 2012. 02:42 AM | 4 Likes Like |Link to Comment
  • If Windows 8 is going to give the PC industry a much-needed lift, Microsoft (MSFT) has some convincing to do. Though 6 out of 10 respondents to a U.S. poll done by antivirus software firm Avast said they're aware of Windows 8, only 9% said they would speed up plans to buy a PC because of it, and 74% said they'll probably stick with what they have. Moreover, about a third of Windows users ready to buy a PC said they plan to switch to an Apple (AAPL) product. [View news story]
    While Windows won't suddenly disappear overnight, even the biggest, slowest, most incompetent bureaucracy on the planet can figure out a way to transition away from it over the 10-year extended support lifetime of their existing products. The first step's a no-brainer: require CIO approval for any new Windows projects, Windows 8 upgrades, or system purchases with Windows 8 installed. You can figure out where things go from there. Depending on the company and the application, you'll see some combination of BYOD, Macs, existing tablet products, fixed-location thin clients and terminals, and occasionally non-Windows desktops. Windows exists in the data centre mainly for two general classes of applications: legacy software products, usually bespoke or heavily customised, and the support of a larger Windows desktop environment. Neither of those applications will make a lot of sense to keep running, so what little Windows is left there will be replaced by Unix or SaaS. There will undoubtedly be many companies that don't eliminate Windows entirely but reduce their usage of it to applications they must have that are not available any other way, but the number of such applications has been in decline for years and will continue to decline as Windows loses market share.

    Microsoft made a huge blunder: they gave people a reason to notice that no one actually needs Windows any more. No one liked PCs anyway, including corporate IT shops, but the prevailing perception was that there's nothing else. The decisions they've made around Windows 8 and the press coverage it has received as a result have gotten people to start wondering whether they need a PC at all, and just how much they could do with some combination of other things. The results aren't surprising: the PC user experience sucks, Windows is expensive, and desktop IT is a massive money pit; there are better ways to get work done. None of this is really news, but this moment has a lot in common with Wile E. Coyote finally noticing that he ran past the edge of the cliff quite some time ago and dropping like a rock. Windows has been superfluous for several years now, but it took a PR disaster for people to notice. I think it's safe to say they're noticing now. The PC will be gone as a mainstream product within 3 years, and Windows with it. It will live on as a low-volume niche product for corporate stragglers, engineers, and specialty applications, but it won't be a leading source of revenue for huge players like it was in the past. The next decade will be owned by data centres and mobile. Intel is strong in one, weak in the other; Microsoft has nothing of substance to offer either one. It's unclear why Microsoft needs to be in business in 2020.
    Nov 16, 2012. 10:30 PM | 3 Likes Like |Link to Comment
  • The "world has changed" moment of the week is Japan opposition party leader Shinzo Abe's call for "unlimited easing" by the Bank of Japan. Abe is likely the country's next PM after current PM Noda dissolved parliament and called a snap election. Tokyo +2.2% overnight adds to a 1.9% gain on the back of Abe's comments the day before. [View news story]
    Just as in the US, the yen has declined quite a lot relative to globally traded goods. The Japanese are paying a lot more yen for food and oil than they did in 1992, even though the JCPI hasn't changed at all. That means something else must have gotten cheaper, and that something else is Japanese goods and services. And the more local the good, the cheaper it's become, led by real estate. So it's a case of everything you have becoming cheaper and everything you need becoming more expensive. It's exactly what's happening in the US, and for all the same reasons: too much debt, and too much money printing aimed at inflating away that debt. At the root of it all are too many loans for too much money backed by things that weren't worth nearly as much as people borrowed to buy them. In both the US and Japan, the law provides various effective means of resolving that situation, but in both countries the powers that be have declined to utilise them. So instead we have QE-infinity and massive government deficits and a horde of zombie banks holding bad assets. There's nothing magical or surprising about any of this.
    Nov 16, 2012. 01:50 PM | 5 Likes Like |Link to Comment
  • The "world has changed" moment of the week is Japan opposition party leader Shinzo Abe's call for "unlimited easing" by the Bank of Japan. Abe is likely the country's next PM after current PM Noda dissolved parliament and called a snap election. Tokyo +2.2% overnight adds to a 1.9% gain on the back of Abe's comments the day before. [View news story]
    There is no deflation. See the data for yourself at http://bit.ly/U4ij4E. The overall price level as measured by the government has been within +/-2.5% of the same level for the last 20 years.
    Nov 16, 2012. 01:15 PM | Likes Like |Link to Comment
  • Intel: The No-Nonsense Reason It's Down [View article]
    Senior managers are compensated with options that have extremely long expiration periods, typically 10 years but sometimes 7. They get these options ATM at issue and for free. Then they are given roles in deciding whether the company should issue dividends or buy back shares. And you suggest that I go buy 20 calls a little more than 2 years out for $3 apiece? Why should I? I already own the stock; the money they'd be giving you to get lost so that they can employ their massive leverage to their own benefit is MINE already.

    Again, if you don't want dividends there are plenty of companies out there that don't and won't pay them. Also, just a tip: your broker is ripping you off if you're not getting dividend reinvestment for free. And your tax man is committing malpractice if he has you paying more tax on qualified dividends than on long-term capital gains. They've been the same capped rate for quite a while now. And finally, we working stiffs have IRAs that make the entire tax issue moot; if you've ever worked for a living, I'd suggest looking into them as you may have funds eligible for rollover into one. If the only way for you to think like an investor is to operate on a tax-deferred basis, then you desperately need an IRA. But get a new broker first.
    Nov 15, 2012. 10:10 AM | 7 Likes Like |Link to Comment
  • Intel: The No-Nonsense Reason It's Down [View article]
    If they announce buybacks instead of a dividend increase I will sell my shares. Buybacks help senior managers and ex-shareholders at the expense of continuing shareholders. It's the clearest message they can send: sell your shares; you're not wanted. Pay your shareholders with dividends. It's been that way since the corporation as a concept came into existence and has been that way through every imaginable type of tax regime.

    If you don't want dividends, there are plenty of other companies for you to own. I'd suggest that you sell your INTC and buy one of them instead. Of course, your strategy of selling dividend growers and buying non-dividend-payers is quantitatively the worst simple strategy you could follow, even including your beloved "capital appreciation", over a very long period of time including periods in which dividends did not receive special tax treatment. Dividend growers are winners; non-payers are losers. Just as it's always been and will always be.
    Nov 15, 2012. 12:07 AM | 12 Likes Like |Link to Comment
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