Friday, January 22, 2010

1/22/10 Midday Report: Volcker? I hardly even know her.

The market continues to sell off as fears grow that Obama's financial service regulation will limit the profitability of the banks who nearly destroyed the global financial system.  How fucking dare he try to regulate these fine bastions of our economy who did nothing to deserve this other than invent complex derivatives based on loans made using lax lending standards to people who couldn't afford to purchase what they were getting loans for and then trade these derivatives using their customers' deposits which in turn created a minor global economic recession (and by minor, I mean the exact opposite of that) when these customers could not make payments.  Seriously, so they fucked up a little, big freaking deal.  What's next, is the government going to ban foods that kill us or make sure blindfolds are always available in case of a Lady Gaga sighting?  Anyway I'll get off my high horse for now (mainly because have any of you ever tried to type on a high horse? 1.  It is extremely difficult to find a place for your laptop and 2. a high horse isn't exactly steady, especially because of the resulting munchies from being so high) but fear is that while regulations may limit the banks' ability to give the economy monetary AIDS, they will severely limit profitability and this has caused the market and bank executives to get their panties in a bunch today (which is why Money McBags is always a strong advocate of thongs (barely safe for work link)).  Banks now must know how Ron Jeremy felt in the 1980s when the AIDS epidemic struck and he was forced to wear condoms, sure it still felt good (banks can still earn money), and sure he was no longer at risk of dying (the government bailed the banks out), but can't a dude just enjoy some good old fashion bareback (prop trading)?

In macro news, 43 states reported an increase in the unemployment rate in December, reversing the November trend.  All 50 states had higher unemployment rates than last year led by Michigan at 14.6%.  Michigan was closely followed by the state of Nevada, the state of Rhode Island, and the state of utter fucking despair.  As Money McBags stated a few days ago, the S&P P/E ratio is above it's historic mean so the market has recovered to the point where we are going to have to see some real economic and earnings progress.

And speaking of earnings progress, GOOG absolutely crushed their quarter today but they are trading down despite beating analyst estimates because they were short of whatever their whisper number was (and the only number Money McBags ever likes having whispered to him is 69).  Google's sales were up 17% to $6.7B and they quintupled their net income which tired net income out so much, it was unavailable for interviews.  CEO Eric Schmidt was also giddy calling this an “extraordinary end to a roller coaster year," and maintained “We are optimistic about the future as a result.”   He then went on to say "And China, if you fuck with us again, I know where you live, no really I do, I put China into Google maps and there you were, but the point is, I will track you down should you hack us again and you don't want to see me when I get mad.  I will take away your surfing privileges and that means no more" (that last quote may have been off the record).

In other earnings news today, people continue to eat the fuck out of some McDonald's hamburgers as they grew US same stores sales by 1% after 2 months of declines and saw solid international growth with 5.1% growth in Europe and 1% growth in Asia/Pacific/Middle East/Africa or what is known as "the non-white areas."  GE also reported a $.02 earnings beat though it was considered somewhat of a low quality beat as it was driven by tax benefits and not buying new office furniture but simply reupholstering it with pleather.  The stock is moving though because big-ticket capital goods orders were up, GE Capital staved off implosion for at least another quarter, and their sale of a majority stake of NBC has investors yawning over NBC's 30% drop in profitability due to something called producing shitty shows (and NBC, if you're reading this, Money McBags is available to deliver his Midday Report as part of your National News any day except for Friday, because Fridays are his date nights and he needs his personal time to prepare).  Finally AXP and COF are both trading down big today after strong quarters.  COF announced that they expect charge-offs to increase (something about people not having jobs) so that explains their drop but AXP did nothing wrong other than be in the financial services industry and already be relatively fairly priced.  If AXP continues to sell off, it may bear digging deeper.

In small cap news today HAFC is finally dropping after it's huge run up that Money McBags has been mentioning here over the past several days.  This company is more speculative than the beef and broccoli at a Panda Express located next to a pet store, but someone seems to want to take that risk.   Also, KITD pulled their European share offering after raising $31MM in the US markets saying they prefer to find less dilutive ways to eliminate their warrants.  Money McBags thinks this is a positive decision for shareholders and KITD remains his favorite potential buy (other than any movie that has a Hayley Atwell nude scene).   One small cap company that bears following here is a stock that Money McBags owns and that is MLNK.  MLNK is the former CMGI (go ahead and chuckle now, get it out if the way, it will be better for all of us) but now focuses on a core business which is basically a supply chain and rebate/repair management system mostly for computer hardware manufacturers with 70% of their business coming from Fortune 500 companies.  They just put up a Q of $18MM of non-gaap operating earnings, have $145MM cash after their TFL acquisition in December and no debt and a market cap of $452MM.  So that puts them at around a 4.5x run rate EV/EBITDA if one considers the $18MM per Q a good run rate, but it might not be, it might actually be too low.  The company expects ths upcoming Q to be inline with their last one and then they expect to see growth in the second half of the year and they are still cutting costs which contributed to a 500bp margin improvement in the last q.  It's not a dynamic business and probably in a market growing at high single digits plus they rely on a few big customers (HP is 25% or so of revenue) and are highly levered to consumer technology purchases, but this company is cheaper than an AIDS ridden bangkok hooker who hasn't eaten for a week.  Their revenue is starting to come back, they are still streamlining the business and they are making acquisitions, but even should EBITDA somehow drop to $10MM per q, they would still be trading at less than 8x that.  Money McBags is a shareholder, and will likely buy more in this downturn, so you should all take a look.

Enjoy your weekend, Money McBags will be back on Monday.

1 comment:

Jack Reylan said...

If securities rules applied to federal research grants, half the professors would be in jail! Obama's constituencies are universities, lawyers and unions. The universities are in it for the grants. Any Republican that votes money for universities is a traitor. Climategate is what happens when universities become addicted on federal grants for research, so they invent catastrophes like Y2K or global warming to extort a bigger fix of money.

UPI June 6, 1992 Sovern took over at Columbia after student protests of 1968 and New York's fiscal problems in the '70s resulted in less financial support for the school, a situation made more dire by recent federal government budget cuts. . . But Columbia will be looking for a new president in a period troubled by criticism for destroying records that were being reviewed for improprieties. Universities in general have been under greater scrutiny for how they charge the government for federally sponsored research.

Columbia's financial engineering graduates are just programmers pretending to be quants just like their industrial engineers are mostly actuaries.
No other academic department is more responsible for the destruction of both the American banking and automobile industries. Those Trotskyites never believed in American economics and just faked it. You don't see them saying anything how Japan collapsed form all their good advice and you don't see them admonishing their fellow reds in China for bad quality.

They love third world students because they don't expect the professors to work for the tuition! Surely You Are Joking Feynman p 215 "If I ask you a question during the lecture, afterwards everybody will be telling me, 'What are you wasting our time for in the class? We're trying to learn something. And you're stopping him by asking a question'."

Columbia Civil Engineering is controlled by the mafia, which is why all the famous professors whose surnames started with S up and left. Engineering is the only Columbia library that does not check id so mafia contractors can go without a trace.