Shot in the Foot, Again!
Research for Online Investors

by John Dalt

9/15/10

Microsoft (MSFT) announced Tuesday they would borrow up to $6 billion to fund share buybacks and dividends. Speculation tells us that it may also build a war chest for a big acquisition. But, why borrow money? They don’t need it. On June 30, 2010, MSFT had almost $37 billion in cash and short term investments! They have another $18 billion in receivables and other current assets. Why borrow money? Are they going to buy Apple?

MSFT made close to $25 billion last year, so they are adding another $2 billion + per month to their coffers.  The problem for MSFT, about half of their profits come from overseas.

If they repatriate their overseas profits to the U.S., they have to pay taxes.

We wrote about U.S. immigration laws on Sept. 3 in Speak Truth to Power.  The U.S. issues student visas to engineering students from overseas (and future community organizers). Our universities grant scholarships to the brightest. Once the engineering students graduate, our government refuses to issue work permits which forces them to return to their country. They let community organizers and lawyers stay!

Microsoft is one of the companies hurt by this policy.  They clamor for the brightest computer programmers, software development scholars and other high-tech engineers.  Our government’s stated policy of discouraging companies from moving operations overseas runs counter to our tax treatment of overseas profits.

Microsoft can spend their overseas profits overseas. Hire the software engineers the U.S. educated, then refused work visas and kicked out, save the U.S. taxes, make more money.  U.S. tax policies encourage investment and employment overseas.  Why not put capital to work at the source rather than return it to the U.S.?

The populism of high tax rates on companies and individuals has consequences.   The U.S. immigration policy of restricting immigration of highly educated and skilled workers while accepting anyone who can walk over the southern border is a form of national suicide.

MSFT share price jumped almost 5% on the news they were going to borrow money.  You may want to watch for a good entry point.  MSFT paid a special dividend of $3 per share in 2004, another may be in the future.

To the mailbag:
A number of years ago, I was a retail stock broker for ________ in St. Louis.  When their lead trading expert would make a recommendation, we would just do the opposite.  Yes, we came out ahead more than he did!---paid up subscriber J.P.

John’s reply:  Was he related to Cramer?

Today’s quote:
It is not more people that are needed in the world but better people, physically, morally and mentally. This question of raising the quality of our American population must also be taken into account in the question of immigration.---Agnes E. Meyer, mother of Katharine Graham (publisher of the Washington Post)

Editor’s note:  The problem with old quotes, they come back to haunt you.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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