It is a bizarre day on the market today as INTC crushed numbers and is down, JP Morgan turned a huge profit, yet disappointed, and the dollar actually gained last night as apparently Amanda Drury was at the New York Rick's Cabaret and only accepted the local currency (ok, the last one may not have been true, but Money McBags would certainly contribute his market insights to Ms. Drury's Squawk Box anytime). Before we get to earnings today, there were a flurry of macroeconomic reports this morning. Inflation was flatter that Lindsay Lohan's derrierre as the consumer price index rose only .1% and the Michigan Consumer Sentiment index rose only slightly from "holy fuck" to "we're just kind of screwed." These data points continue to signal that the lack of job creation and lingering 10% unemployment are likely to temper the economic recovery like ALS tempered Stephen Hawkings' dreams of becoming a dancer. With inflation proving to be tamer than a Jay Leno monologue, the fed is poised to keep rates low for the near and immediate future. This should be continued good news for the banking industry (and again, the only business plan better than lending free money for more than free is the US Mint, mmmmmmm mint) despite JP Morgan's topline miss today. Given that yields are still juicy and rates unlikely to go up, smart investors may want to dabble in NLY and their 16%ish dividend yield as those guys just know how to make money (of course, investing in a company that relies on repo funding makes Money McBags more skittish than a paraskevidekatriaphobic at an all day Jason Vorhees marathon on Friday the 13th, so buyer beware).
As for stock news today, INTC blew away their quarter like they were auditioning for an upcoming role in a bukakke kings film. Expectations were for $.30 eps and they dropped $.40 eps on analysts' excel models while hitting record gross margins and guided to above Street revenue. The fact that they are trading off today is nuttier than a cock sandwich with extra balls as analysts question whether things can get any better. INTC is suffering from Wall Street's buy the rumor, sell the news mentality which doesn't make sense to Money McBags. It's like boning Brooklyn Decker and then complaining that you'll never do better. Hey assholes, you're still boning Brooklyn Decker so quit your whining and ride out INTC. Just because she's 22 doesn't mean she's peaked and just because INTC had record gross margins doesn't mean Moore's Law won't still propel them to better quarters. I mean INTC had a record gross margin despite the record sales of their lower end Atom chip. There is still room to grow here.
The bigger news on the market today is that JP Morgan's profitlicious quarter disappointed The Street as revenue was a little light (though not as light as a bulimic with a supercharged gag reflex), the retail bank put up a loss, and while EPS beat estimates, the beat was seen as lower quality than a Rollex watch or a Louis Vuittone bag as it was driven by tax benefits, lower comp, and the end of lobster Wednesdays. The low quality beat has sent the market down as investors now worry about other, less well-managed big banks (Citi, cough, Citi) and their retail exposures.
In small cap news today, COOL not only shit the proverbial bed, but they then remade the bed and shit in it all over again before tucking themselves in for the night. Analysts expected $.11 of eps and COOL was able to deliver a not so cool $.16 eps loss. For those of you not familiar with the company, they license and buy the rights to cheap crappy games for the Wii and DS aimed at families and girls in what is called the "casual gaming" segment ("casual" of course being an interesting epithet for "non"). Anyway, in a neat trick (though not as neat as the hidden button illusion) COOL has seen revenues increase but bottom line decrease as they believe profitability is just a suggestion. After diluting shareholders last Q by raising $9MM in cash, COOL further ingratiating themselves to their owners by accruing a $.10 impairment loss because nobody actually wanted their crappy games, a $.05 charge because their Our House franchise was apparently foreclosed upon, and another $.07 eps drop from lower margins due to something called "poor sales". Their gross margin dipped from 28% to 3% and they guided to 2010 non-gaap eps of $.05, so even though they are down 22% today, they are still trading at 20ish times 2010 eps and that number is less believable than Larry Craig having a wide stance. This company continues to grow revenue and become less profitable every quarter (and for their next trick they will lose weight and become more unattractive) and should probably trade at no more than $.50 or 10x their unlikely 2010 eps. If you were short them, congratulations. Money McBags was on the sidelines for this one, but thought the company was potentially cheap if management could show progress, which of course they didn't.
Enjoy the long weekend, Money McBags will be back when the market reopens on Tuesday.