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Macke's Movers: What Microsoft Can Learn From Michael Corleone

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Mafia movies and the tech titan.

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Greetings from New York, where I'm flipping some inventory, sunning my melon and generally enjoying the fact that no one in the house is sick, there aren't any fingers stuck in toys, no one is screaming and my biggest challenge is the seductive cry of the great outdoors. Here's what I'm doing to stay focused as the day unfolds:

  • Microsoft (MSFT) is getting smacked after the company reported a quarter which (shocker coming) suggested a somewhat subdued business environment overall. No kidding. As threatened yesterday, I've added to my Microsoft long right around the $30 level. It's funny how much better it feels to average up on a dipping winner than to average down on a plunging loser. In my experience there's a sort of subtle but quite critical difference between the two.

  • Speaking of difference, I've finished my purge on Yahoo (YHOO) today, ahead of deadline Saturday, when the MSFT bid for Yahoo is set to expire. Microsoft figures to bump the bid slightly but, frankly, I'm not sure why. The Michael Corleone play for Ballmer is to offer Yahoo nothing, then treat them like that Nevada governor who wouldn't sell the Corleones a gaming license. In two years MSFT will be able to throw an arm around a shivering Yahoo and say, "I know your stock is at $10. Out of respect I am giving you a $12 bid. Your jobs will be vaporized; what will remain is our friendship."

  • If MSFT ignores my advice and raises the Yahoo bid substantially I am going to be a very bitter bald man. If it walks, MSFT should work higher quite quickly.

  • Away from software and silly narratives, the banks (XLF) are working higher again. Good stocks find excuses to rally: The financials, where the news remains horrible, are acting very much like good stocks.

  • Consumer Confidence: 61. The news is being cited for helping push Wal-Mart (WMT) to a 52-week high. Another good stock finding an excuse.
Position in MSFT.

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