Is it us, or is watching the Fed even more boring when it does nothing? Boring, yes, but the implications.... Today, the Federal Open Market Committee (FOMC) held firm on the federal funds rate, which indirectly affects most key bank rates. In so doing, the committee expressed that, while it has seen some economic improvement, the "risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future."

Investors focused less on the Fed's concern and more on the benefits of low interest rates. All major stock indexes jumped on the news.

In today's Motley Fool Take:

A Regional Effect

By Mathew Emmert (TMF Gambit)

Bank of America's (NYSE: BAC) purchase of FleetBoston Financial(NYSE: FBF) could mark the next wave of consolidation in the banking sector, and regional banking stocks are ablaze because of it.

Yesterday, we covered the details of the merger announcement. Today, I'd like to focus on what this deal could mean for our beloved regional banking all-stars.

My regular readers know that I'm fond of financial companies, particularly regional banking firms. I shared one of my favorites, Synovus Financial(NYSE: SNV), several months ago and the company has since climbed a respectable 26.3%.

Indeed, my first investment selection in the Fool's latest newsletter, Motley Fool Income Investor, was another quality regional. The bank's 10.7% total return has been a solid contributor to Income Investor's market-beating performance. (A free trial will reveal this company, as well as the newsletter's other diverse selections).

Just as I tend to favor the smaller regional banks to their larger brethren, I also prefer smaller acquisitions to yesterday's blockbuster. Many of the larger banks have taken years to recover from the indigestion related to such mega-deals. For instance, Wachovia(NYSE: WB) has only recently recovered from its aggressive string of acquisitions, which were actually made by its predecessor, First Union.

As one might expect, smaller, fold-in acquisitions generally produce the best results. Such deals tend to be accretive to earnings in a much shorter time frame as cost savings are rapidly squeezed from newfound synergies.

In fact, there's very little evidence that the large deals produce favorable results for shareholders. Often, there are just too many variances for large companies to comfortably absorb. It can take years to trim overlapping business segments in order to eliminate redundancy, and combining different corporate cultures often proves much more challenging than companies anticipate.

The good news for us, however, is that the acquisitions that tend to work the best are exactly the ones that our regional banking favorites would be involved in. If you add some exposure to these quality banks to your portfolio, you could reap the benefits associated with one of your companies being acquired at a favorable premium. However, just as importantly, you can own a quality investment while you wait.

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Microsoft's New Windows

Yesterday, Microsoft(Nasdaq: MSFT) unveiled details about its next operating system, code-named Longhorn. The newest iteration of Windows promises, in the company's words, "increased security, performance, connectivity and scalability."

There's no question that the world's largest software maker can deliver exciting and useful new features with Longhorn, which would be available to consumers in 2005 at the earliest. But it speaks volumes that almost all of the talk since the unveiling has revolved around security. Yes, the world is so fed up with worms and viruses, patches and critical updates, that the biggest buzz surrounding the largest software launch since Windows 95 is whether the system will be secure.

Unfortunately, there's some reason to doubt just how beefy Longhorn can be. Although Microsoft has now made security a top priority, Gartner research analyst John Pescatore told NewsFactor Network that "there is likely to be billions of lines of code in Longhorn that did not go through the new due-diligence security processes Microsoft recently set up." In addition, Pescatore says the more features Longhorn packs in, the less secure it will be.

Still, the new Windows will almost certainly be far more secure than its predecessors. And to its credit, management says it will not rush Longhorn to market before it's ready -- something it's been accused of doing with past operating systems, in essence using consumers as beta testers. "This release is going to be driven by technology, not by a release date," Chairman Bill Gates said last month. "Which probably means it is going to be late."

Quote of Note

"Knowledge speaks, but wisdom listens." -- Jimi Hendrix

Tobacco's Big Deal

Tobacco companies were getting their butts kicked. Cheap imported smokes were cutting margins. Litigation's tab kept mounting. If it weren't for the high dividends, would anyone other than fiscal rubberneckers even look at this sector?

That's why R.J. Reynolds'(NYSE: RJR) bid for British American Tobacco's(NYSE: BTI) stateside operations is brilliant. No, Reynolds' putting up $2.6 billion in cash and stock for a 58% stake in the combined company won't solve all the industry's problems, but it certainly won't hurt.

If you can't collude, consolidate. With Altria(NYSE: MO) now the other guy, the three domestic tobacco leaders will become two. That won't stop the shipment of inexpensive cigarettes from overseas or help throw the scent off health-related litigation; however, it should make it easier to resist dabbling in pricing wars.

Still, folks who bought into the sector chasing puffy payouts need to be careful. The average yield of the three tobacco players is 6.5%, but readers of our Motley Fool Income Investor know that you can't always judge an income investment by the size of its quarterly distribution. The sector's turnaround is still hazy and investors are best served by waiting for the smoke to clear.

Discussion Board of the Day: Investing for Income

Have you been tempted by tobacco stocks given their high yields? What about the many other investment vehicles offering attractive payouts? All this and more -- in the Investing for Income discussion board. Only on

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And Finally...

Hey, Fools. Tom Gardner is wrapping up his search for a research assistant to help out with the Motley Fool Hidden Gems newsletter. If you or someone you know would be interested in joining the team at The Motley Fool, apply for the Hidden Gems position under the listing for "Newsletter Associate Writer" in the Editorial category on

Tom Jacobs would apply, but he works for no man. Just for Foolish readers like you. His latest, 7 Wireless Plays Plus Dell, will sure make you glad that he does. Halloween approaches: Grab a pumpkin and settle down with Rick "Howl at the" Munarriz's Marvel Entertainment: A Ghoulish Treat, then find out directly from the CEO why Netflix Churns Lower, Moves Higher and exactly what that means, anyway. Netfix is no trick.

Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Jeff Hwang, Tom Jacobs, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Reggie Santiago, Dayana Yochim