Tuesday, December 14, 2004


The internet continues to grow rapidly and the places to advertise on the internet continues to grow rapidly. GOOG owns first place, YAHO is not too far behind and MSFT is a distant third. TWX is working hard to be included in the leaders but has a long way to go.

The list of Google services we use continues to grow. GMail, Search, Desk-top Search, Picassa, Adwords, Adsense, Froogle, Key-Hole and Blogger. The GOOG model of offering free services for advertising space continues to work well. GOOG is not locked into this model and may indeed eventually charge for services. However, the current model has a long way to go.

GOOG is currently scanning entire libraries of books. GOOG has exclusive contracts with more than one library. In some cases, GOOG is only scanning books that are beyond their copyright dates. In other cases, they have agreements in place to scan all books copyrighted by certain companies. This is a developing situation, but the long-term power of having the full text of libraries on line is incredible.

Frequently, we talk about how productivity is strong enough that our economy is growing quickly while inflation is tame. I have said the economy and the stock market is in a "sweet spot". The economy is cyclical still. Therefore, eventually the economy will become too strong and the federal reserve will have to take the punch away from the party.

Google is helping delay the day. The cost of maintaining libraries on line will be a fraction of our current costs and the benefit to the citizens will be incredible. This morning in a monitored account, we purchased more GOOG at $171.97 per share; right at double the offering price. BUY GOOG with confidence and hold long-term.

As with all stocks that sell at high valuations, there are risks involved. Bad news could send these shares down 50% or more quickly. This type of stock is likely to trade at an expensive price for years. Put no more than 7% of your portfolio into any stock. If you own 15 stocks and one of them does extremely well, it will not mater if all the others do poorly. Chances are good that if you buy 15 you will have several that do better than average. Hold those and get rid of the ones that go bad. My belief is that you want to own GOOG for the next 20 years.