Wednesday, January 13, 2010

1/13/10 Midday Report: Google threatens to pull out of China, claims "not properly protected," but does offer to finish on China's back

With macro news today apparently scarcer than free speech in Chinese search engines or free standing buildings in Haiti (too soon?), the big news moving the market is Google's threat to leave China after China left the toilet seat up one too many times and refused to take out the trash.  Google's panties are currently in a bunch (and honestly, this is why Money McBags suggests young ladies wear thongs) over sophisticated cyber attacks on the company and human rights advocates originating from somewhere in China (and investigators may want to start by looking in the offices of a certain chinese internet company that rhymes with Shmaidu).  Google issued a statement claiming they now know "it is China pretending to be the Nigerian Prince, and we will not fall for that again.  Though we would like our $1k back."  GOOG's threat to leave China (where they have 33% market share) has shares of BIDU soaring like the price of tequila on Cinco de Mayo.  BIDU is the #1 internet search provider in China with about 2/3 of the market so GOOG's potential exit should turn them into a monopoly, or as the Chinese call it, government.  Estimates are that GOOG may lose $600MM in annual revenue by leaving China, which isn't much considering they had $22B in revenue last year, but as China is a potential larger area of growth than the front of Lexington Steele's pants, a departure could have longer term implications.  The guess here is that a sell-off in GOOG will create a good buying opportunity for long term investors as GOOG and China will find a way to get back together and once again enjoy candlelight dinners over hot bowls of the famous Chinese delicacy, Cream of Sum Yung Gai.

In other market news, bank CEOs are sitting in front of congress and letting congress have their way with them like starry eyed young ladies in a Bangbus video.  No word on whether when the questioning is over, banking CEOs will be allowed to switch seats with the congressmen and ask them the same pointed questions about their pitiful job performance.  The highlight of the day has been Morgan Stanley CEO John Mack claiming "Many firms were too highly leveraged," which is a bit like OJ saying the knife was too sharp or Ken Lay claiming some accounting rules were too vague.  There has also been a bit of disagreement with Goldman Sachs CEO Lloyd "Big Tank" Blankfein claiming mark to market accounting helped them avoid some of the pitfalls while new BAC CEO Brian Moynihan correctly pointed out that mark to market accounting exacerbated the downfall.  Marking illiquid securities to a crumbling market where clearing prices were non-existent or less steeped in reality than Bernie Madoff's profits, and then requiring reserves to be raised to fill in these fictitious book value declines is the most underreported non-sensical catch-22 of the entire market collapse.  It made less sense than a Thomas Pynchon novel or raisinets (seriously, chocolate covered raisins?  Why not just piss on the chocolate too?).

In stock news, Kraft raised their outlook and simply claimed "umm guys, haven't you seen all of the fucking fat people in this country?  You know we make Oreos, right?" while financials have bounced around today with analysts on the street now saying investment banking profits may not be so outsized this quarter as fixed income revenues fell with decreased volatility.  This has caused Goldman to dial up the White House on their special diamond encrusted phone and tell them to "freak everyone out again, daddy needs the new Apple Tablet when it comes out."

Finally, Money McBags wrote about EBIX in this space just a few short days ago.  In his write-up, he mentioned his concerns about the company: "the CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO" and yet said he was willing to overlook those issues as the company remained cheap.  Well my friends, Money McBags has lost his appetite for EBIX.  After reading CFRA's scathing short report citing EBIX's changing of auditors, accounting irregularities, and potentially misleading topline growth, Money McBags just doesn't want to be involved and is trading out of his position.  While CFRA could be wrong, Money McBags has no edge on this company and does not want to get into a "he said-she said" with a company in which he already expressed some real concerns.  One could stay long EBIX and hedge it with long-dated out of the money puts, but one could also walk around town with no pants screaming "free lunch," so one could do many different things.  If the company is operating as they say they are, EBIX is a phenomenal buy, but Money McBags prefers to invest in companies in which he can be more confident (and yes, Money McBags owns RICK which is always one champagne room hummer away from massive litigation, so he realizes the potential folly of his previous statement).  So do your own research, but be aware that Money McBags is no longer involved in EBIX.  It could be a great buy here as short stories can create unheard of buying opportunities, like a 2007 Ashley Dupre, but you need to have more confidence than Money McBags currently does.

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