Yesterday, I pointed out that it's absurd to consider Microsoft a declining company when in fact it's been making an average of $15B a year in profit and has increased the value of its balance sheet  by billions of dollars every year for the past three years, during the worst recession of the past 80 years.

Today, to answer the critics, I will point out what's gone well and what's gone wrong with Microsoft. I'll even make suggestions about what the company should change. I believe the company is coming to a crucial point in its history, and CEO Steve Ballmer needs to make some radical changes.

First off: Microsoft's core businesses are as healthy as ever. Now that it fixed the Windows Vista debacle and Windows 7 is shipping, Microsofts' Windows Division and its Business Division are firing on all cylinders. Consider this: in fiscal year 2009, which ended June 30, 2009, the Windows division made $10B in profit. It has already equalled that in only 3 quarters of business this year. That means when Microsoft announces its earnings later this month it's likely to report year-on-year profit growth of more than 20% in the Windows division.

Today's headlines are filled with the usual obsessions: bank risks, online video, iPhone's and search.

What I find interesting about today's market dynamics is the dichotomy between Silicon Valley, where everything's gravy and people think it's still easy to get rich -- and the rest of the world, where people are worried about their state or country going bankrupt and making a dime is very tough.

Here's the news for today:

• As we predicted a while ago, YouTube would go to HTML5 soon. It has now, with a mobile version of YouTube (TechCrunch).
• Fast Company says Twitter now has the world's fastest growing search engine. But Silicon Alley Insider begs to differ, saying the numbers are inflated. 
• Speaking of Twitter, it can get you in a lot of trouble. A CNN Senior Editor is leaving the company following a tweet in which she praised Hezbollah leader Sayyed Mohammed Hussein Fadlallah. Say that three times, very fast (Mediaite).
• It was only a matter of time before we got naked pictures of the "Sexy Russian Spy" (Mediaite). “I found her Russian accent such a turn-on,” says her ex-husband.
• Meanwhile, back to the economy. A reader of Jim Sinclair's Mineset has pointed out that the banks being seized by the FDIC had their assets inflated by 20 to 80% (MineSet). Amazing stuff, that is.
• Speaking of greedy, lying banks. Yes, the European stress tests probably are a joke (Bloomberg). 
• "American Dream Elusive for New Generation," declares the New York Times, profiling a recent college grad. And then you read that da guy lives in a "comfortable suburb West of Boston," he's pictured with a nice road bike and a computer, and he turned down a job for $40,000 per year. Shall I play the violin on my small pinky?
• They've picked an English ref for the World Cup final (Telegraph). Hmm, it's hard to figure out who he'll be more biased against, the Dutch or the Spanish.
• Bond market signals depression, nobody cares (Telegraph).
• Pharma giant Merck is closing 16 factilities (WSJ).They just don't make drugs like they used to.
• Greece "Paralyzed By Strike" ahead of key pension vote (WSJ). Let them eat Souvlaki!
• Experimental solar aircraft makes a historical overnight flight (BusinessWeek). Yes -- a solar night flight. I had trouble figuring it out to. Add in the fact that it averaged 26 miles-per-hour, and it becomes a real head-scratcher.
• The next iPod Touch will include most of the features of the iPhone 4, says this reporter (CNET). Yes, that means all of the features except for the phone -- which doesn't really work that well anyway.