High? What High?

Said a really curmudgeonly guy
On the Dow Jones Industrial high:
"It's still quite a ways
From the Internet craze,
When adjusted for core CPI."

Bad Search Results

An Internet stock tumbled early
When missed earnings leaked prematurely.
It's bad to surprise,
But if profits should rise,
The stock would go up again, surely.

The stock market was gripped by a thrill of panic Thursday, when Google's 3rd quarter earnings announcement was leaked during trading hours instead of after the 4:00 PM close. However, it was not just the slip-up by $GOOG's financial printer R.R. Donnelley that roiled the market, but the news itself: a 20% fall in profits and slowing revenue growth. Like fellow internet behemoth Facebook, Google is having some challenges in building ad revenue from increasingly popular mobile usage to the extent that it has from the desktop. There is hope for the future, though; CEO Larry Page, on the earnings conference call, enthused over the "tremendous innovation in advertising, which I believe will help us monetize mobile queries more effectively than desktop today." So, $GOOG shares, which closed down 8% on the day, may soon resume their upward trend.

In the meantime, the company has built up its cash pile to $45.7 billion, an amount large enough to -

• Pay for all of the e-commerce in China during the second quarter of this year;
• Bail out Bank of America;
• Close the funding gap in the Michigan Public School Employees Retirement System.

Small consolation for an earnings disappointment.

The $37 Billion Question

Said a Harvard professor of econ,
"That Google's got something unique on:
They have cash by the score,
Yet still borrow more;
This is something I've puzzled all week on."  

Said an expert in cross-border taxes,
"I should hope the professor relaxes;
As Google keeps cash
In an overseas stash,
'Til taxation here wanes and not waxes."  

Professor Greg Mankiw, who teaches economics at Harvard and writes America's best-selling textbooks on the topic, wondered in his blog about the apparent contradiction of Google's borrowing money at long-term rates, when they already have $37 billion in cash idling at short-term rates close to zero. Proving that smart people attract smart blog followers, Prof. Mankiw quotes a reader who responds that Google is "intertemporally arbitrag[ing] the U.S. tax code. By not repatriating the $37 billion now, they are betting that the U.S. corporate tax rate on repatriated foreign profits will be appreciably lower in the future."