1/4/10 Midday Report: It's 2010, yet the market is partying like it's 1999

Hide the women and children because the market is coming back with a vengeance, like Dirty Harry Callahan or Don Knotts on Three's Company.  The market appears to be determined to show all of the traders who manufactured complex derivitaves such MBS, ABS, and plain BS, that financial engineering can only keep it down for so long as eventually people have to consume.  The big news is that manufacturing continues to improve as inventories which were cut to bare bones minimums (and at a minimum, I would bone a bare Eva Wyrwal with my inventory) are now starting to be replenished.  China's manufacuring grew the fastest it has grown in 5 years which is great news for the lead paint industry but bad news for infants.  In the US, manufacturing grew faster than it has in 3 years according to the ISM.  This increase was driven by the stimulus spend, inventory build back, and increased sales of electronics to replace those which were broken by being thrown against the wall in disgust as the market cratered.  Along with China and the US, Europe also saw an increase in manufacturing to a 25 month high causing red light sales to cease across the red light district of Amsterdam.

While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model.  The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up "geysers") and China's manufacturing prowess spurring inflation concerns.  Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building.  Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.

In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring.  TMRK is in the colocation/hosting business along with RAX and EQIX.  This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced.  The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one's programs, files, and downloaded spankwire videos will be hosted in a "cloud," thus leaving the actual pc as just an interface.  Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week's supply of viagra.  TMRK is one of the companies building facilities to host all of this data.  It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don't grow on trees).  Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites.  This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks.  The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.