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Dear Mr. Berko:

Dear E.B.:

Advertising is the fuel that drives the engines of Google Inc. (GOOG-$653), Yahoo! Inc. (YHOO-$22.56) and America Online, more commonly known as AOL. However, AOL merged with Time Warner Inc. (TWX-$15.93) in mid-2001 when TWX was trading at $60, so it’s not a stand-alone company. In fact, AOL is the weak chink in TWX’s armor because of sluggish advertising revenues. And advertising revenues for GOOG as well as YHOO may not sizzle and soar this year or next, perhaps debunking the ionospheric predictions of Wall Street’s wisest gurus. So, rapid as a rabbit I’d sell your 25 shares of GOOG in which you still have a swell profit.

Frankly, I think the stock is an excellent short. And the reason I figure that UBS, Bear Stearns and other Wall Street firms still maintain a “buy” recommendation on GOOG is that the Google boys wouldn’t look kindly at a “sell” recommendation on their stock. Management at UBS, etc., knows that a “sell” recommendation virtually eliminates any possibility of future consulting or investment banking business from Google. One is not supposed to say bad things about the people with whom you do business or someday may do business. Would it be fair to say that Wall Street research is less than 50 percent honest?

According to eMarketer (an online research firm), online advertising in the United States should increase by 29 percent this year and 33 percent in 2008. However, asking eMarketer for information about online advertising is like asking a fox for information on how to guard a henhouse. Though the number of online advertisers might increase, observers doubt that revenues will grow at 29 percent and 33 percent. A larger portion of 2008 revenue growth will accrue not to GOOG, YHOO or AOL but to thousands of smaller Web sites like blogs, niche content sites, news collectors and the enormous number of growing social networking sites.

Meanwhile, the new generation of “Webbers” is becoming quite skillful at finding data online, eschewing the use of less trusted portals such as GOOG, YHOO and AOL. So in my opinion, GOOG doesn’t deserve to trade at 53 times earnings, nor does YHOO deserve its high, nosebleeding price-earnings ratio of 46. Now is not the time to buy YHOO, either!

XM Satellite Radio Holdings Inc. (XMSR-$10.77) and Sirius Satellite Radio Inc. (SIRI-$2.85) are losers and may be losers for some time to come. Though these two companies have agreed on a merger, there seems to be enormous resistance from Congress, the Federal Communications Commission and the National Association of Broadcasters. They’re concerned that this merger would create a monopoly; I doubt there’s much reason to be concerned. A significant portion of the advertising on XMSR and SIRI is exploitive, phony subreption and pure bald-faced tommyrot. Most FM and AM radio stations around the country wouldn’t stoop low enough to attract the sleaze that advertise on XMSR or SIRI.

And although satellite reception is simply superb and some of the programming is simply wonderful, both companies are managed by incompetents who think “profit” is a filthy word. Both stocks are trading just off their 52-week lows, and I doubt there’s much that can happen to transmute that dross into gold. Just keep that money in your pocket; there will be a time soon when you can put it to much better use.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service