In correspondence with Amey Stone, (one of our beloved editors) almost two years ago, during a very shaky market, I did some rare speculating.

I preface this article by acknowledging that such exercises are usually pointless and not something I engage in very often. My deep value investing style is focused on companies and not markets, facts and verifiable high probability theories. Often I am the contrarian as in Me and my Merck: Should I keep it? Sometimes I am the curmudgeon (hopefully lovable curmudgeon) and I have scoffed at analysts (Analyzing the Analysts - It's all a joke right?) and prognosticators whose primary business is skimming fees from the top of your investment stash.

Among what I thought at the time were my verifiable high probability theories was that oil money, real estate money and Chinese money (from our sad trade deficit) was going to recirculate back into the stock market. Oil prices were just starting to move up, real estate was booming, and the Chinese were piling up billions of dollars of our treasury notes. Furthermore I thought the Chinese would not just be satisfied moving some of their debt instruments (bonds) into equities (stocks) but actually start shopping for U.S. companies. This came to pass in their acquisition of IBM's Think Pad (R) division by Levano, and their failed attempt to acquire Unocal, and they are still on the look-out for other opportunities.

So in early 2005 I made the case to Amey that we were going to see the Dow hit 11,000 by the end of the year and that we would hit 12,000 by the end of this year. Well of course the Dow Jones Industrial Average did hit 11,000 as anticpated climbing from about 10,000 mid year in '05 and I believe it will soon reach 12,000, maybe even by the end of the year, which was on my list of "speculations".

It's only a question of time. It's only another 3% +/- in a year of mixed results.

By the way, Warren Buffett comments about the trade deficit in a story about our loss of integrity in Warren Buffett, America's greatest storyteller.

So having just about hit all my targets from my notes to Amey of two years ago I started thinking about where we go from here. I think we are in for more of the same and for the same reasons. Plus a few new insights, if I may be so bold.

Microsoft Corporation (NASDAQ:MSFT) has many issues to contend with at the company's current size and complexity. Among them is the disparity of its growing line of products; the lower profit margins offered by hardware sales in comparison to its traditional high margin software sales; and the increased number of formidable competitors it faces in every direction it looks.

This is the continuation of Monday's story Micro'soft' vs Micro'hard' -- Break it up fellas! In the first article I touched upon the scale of Microsoft and their lack of agility. I concluded that even several tremendous successes (swallowing Apple (AAPL) whole was used to exemplify) would only have marginal affect on the share price in the aggregate.

This story is not about whether Microsoft makes worthy products, or is inventive, or can create the next big thing. This is about what Microsoft is, and what it should be as a company going forward. Does Microsoft want to get back to its high-growth days and generate the kind of excitement a Google, Inc. (NASDAQ:GOOG) or MySpace (recently acquired by Newscorp (NYSE:NWS)) does, or do they want to be a large conglomerate. Given the number of new products that are announced weekly, and all the unfinished business the company has started, it is apparent that the die has been cast for the latter; it is a conglomerate.

Conglomerate \Con*glom"er*ate\, n.

Webster's: That which is heaped together in a mass or compacted from various sources; a mass formed of fragments; collection; accumulation.

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