Friday, February 26, 2010

2/26/10 Midafternoon Report: AIG loses more in Q4 than entire GDP of Malta, warns Botswana they're up next

The market is a bit mixed today like the drug cocktail found in Brittany Murphy's stomachSales of existing homes dropped for the second consecutive month, this time by 7.2% which is the second largest decline ever and is creating more of a buyers market than the internet did for newspapers.  The decline was caused by the government tax credit winding down, the high unemployment rate, and the disappearance of the barter system.  Economists actually expected existing home sales to rise so it's good to see they are once again about as good at their predictions as Stevie Wonder is at being the seeker in a game of hide and seek (or as he calls it "life").  An interesting data point is that 38% of all homes sold were distressed sales.  That is a remarkable number.  So homeowners, look to the house on your left and look to the house on your right, because on average one of those houses is being foreclosed upon and your new neighbors may be a few tax brackets below you.  In more positive macro news, business activity grew more than anticipated and its most since 2005 according to the Chicago Purchasing Managers Index, or as its now more commonly known as: "Fiction."  Unless the index was measuring coffee sold while waiting in line at the unemployment office or tickets sold for the proposed Julia Mancuso/Lindsey Vonn catfight (and Money McBags would love to ski down Julia Mancuso's hills), the data is perplexing to say the least.  Also, GDP was revised up to 5.9% growth from 5.7%  in the last Q.  However, most of that growth was a result of inventory restocking.  Looking at GDP without the change in private inventories, growth was a He Ping Ping-esque 1.9% and consumer spending was revised down from 2.0% to 1.7%.  The point of all of this is that the economy is about as healthy as Mark Sanford's marriage or Money McBags' new found love of Alice Eve so until jobs can be created, we are going to have more and more marginal to disappointing economic news.

European markets were off to a better start today as the British Statistics Office revised up their estimate of UK economic growth in the fourth quarter to 0.3% from 0.1% citing the long awaited introduction of dental floss, while Asian markets advanced after figures showed that Japanese factory output, rose by 2.5% in anticipation of Nintendo's new game console, tentatively called "Wii're Fucked."

The big stock news today is that investors are not down with AIG and their craptastic quarter.  AIG posted an $8.57B loss or to make it seem smaller, $65 per share (and remember, shares are currently trading at $25, so that is a neat fucking trick).  At least analysts were close as operating loss per share was estimated to be $3.94 and it just missed that number by coming in at whopping $53.23 a share.  So estimates were only off by a factor of 14ish or as they say in the forecasting business, a nut hair (that is if it were one of Lexington Steele's nut hairs, and not a regular Lexington Steele, but one who had grown to be 30 feet tall as a result of radiation poisoning from his last scene with Gianna Michaels).  Shareholders should have faith though as CEO Robert Benmosche said in a pre-recorded (in order to duck questions) call: "While we are not out of the woods by any stretch, these numbers represent a substantial improvement from just one year ago...we believe we are on our way to regaining our stature as one of the world’s largest and most successful property-casualty insurance operations."  He then stated that he thinks Roman Polanksi is also on his way to regaining his stature as a successful babysitter and Bernie Madoff is on his way to regaining his stature as a first class investor.  While $6.2B of losses can be chalked up to paying back the government, the addition of $1.8B to their property-casualty reserves can be chalked up to being bad at the insurance business, whch would be fine, if insurance weren't their main fucking business.  Money McBags knows it's easy to kick someone when they are down, unless you're Oscar Pistorius (and in that case you just knee them), but AIG's situation is more convolutedly complex than the 11 dimensions needed in M-Theory or trying to figure out where the pictures come from for the still deliciously not safe for work Guesshermuff (and all my guesses remain "fantastic").  Trying to analyze AIG is a lot like taking your car to a mechanic, it's always something and you have no way to prove the guy wrong.  Money McBags is eagerly waiting AIG to come out and just blame their losses on a faulty johnson rod.  There are easier ways to make money so pay attention to AIG only for any market risk insight you may get.  In other stock news, C is replacing 3 of its directors as apparently Colombia Pictures has hired them back to shoot a remake of their long running hit Monkey Business.

In small cap news today RICK continues to show the market its tits by climbing another 3%.  CEO Eric Langan announced yesterday that he expects the VCGH deal to add $50MM of revenue by 2011 to bring RICK's revenues to $150MM.  He also said they would be consolidating brands in an attempt to streamline their image so they can better promote it through television commercials on such channels as ESPN.  Now look, Money McBags loves everything RICK is about, really he does, he loves the business, he loves the growth, and most of all he loves every coked-out part of their inventory.  That said, the idea of turning it into some Hooters-esque national chain is the worst thing they can do.  Strip clubs were not meant to be Walmarts or McDonalds and advertising them on prime TV channels is the wrong place and the wrong audience.  Anyone who wants to go to a strip club knows exactly where they are and which ones are best, they don't need a fucking TV commercial with some likely dopey jingle (Rick's Cabaret: Plop, plop, jizz, jizz, oh what a relief it is) reminding them that they love vagina.  So a TV ad campaign worries Money McBags like a parent learning their daughter will be going to Cancun for spring break.  This company should stick to what it knows and put marketing dollars into the girls, airport billboards, and hotel concierges' pockets.  Money McBags is still awaiting more detail on VCGH's financials, but the stock is nearing his price target.  In other small cap news, PMFG, a company that provides separation and filtration products mainly for natural gas and which Money McBags has followed off and on for the past couple of years announced a secondary offering today at a price a measly 30%ish below their close on Thursday causing investors to collectively utter a befuddled "What the fuck?"  They are selling 1.3MM shares for about 10% dilution at $11.50 and net proceeds from the offering will go towards repaying a portion of their outstanding borrowings in connection with their poorly timed acquisition of Nitram Energy, towards working capital, and also towards general corporate purposes such as settling the likely shareholder lawsuit to be filed against them for such a diltuive and poorly priced secondary.  Wow.  Money McBags is glad he doesn't currently own PMFG and can only scratch his well-coiffed head and wonder what is going on in their Dallas headquarters.

As always, enjoy the weekend and don't forget Money McBags is now on twitter.


Anonymous said...

Love the blog! Have you hopped on the KITD train yet? Video presentation and earnings on the 30th of march! Do you have any info on their growth in net receivables?

Money McBags said...


Is that a family name? Anyway, glad you like the blog and feel free to tell a friend or 1k as When Genius Prevailed needs to reach the masses so Money McBags can complete his ultimate of goal of world domination (or a threesome with Faye Reagan and Kate Bosworth, whichever is easiest). Money McBags has not bought in to KITD yet (and he announces all of his relevant stock transactions on the blog, because sharing the love is something he wholeheartedly believes in, you hear that Brookly Decker? Share the fucking love.) but there is absolutely no reason why he hasn't. Ok, there are a couple of reasons.

1. Money McBags is a bit skittish on the market right now and in any sell off, stuff like KITD (with no volume, little institutional ownership, and frankly, a weird fucking management team/structure) will trade down more than the market. Their size makes them the slowest zebra or the fat girl when women and children are running for the lifeboats of a sinking ship and there are very few spots. So a better price may await if one shows some patience.

2. There isn't going to be any news for a while on this company (unless they make another unexpected acquisition), so there is no rush to get in right now. Sure the price is ridonkulously cheap, but there is plenty of upside here so missing out on a few cents by coming in a little late to the game isn't too worrisome for Money McBags (at least not as worrisome as unshaved bush becoming a trend again).

Nothing new on their accounts receivables. Look at their last Q and you can see they ramped faster than revenue. Money McBags thinks Soc Gen was reaching on that one but we'll see what KITD has to say on the conference call.

KITD is likely the next small cap stock Money McBags will buy (in large caps he's thinking of picking up some more GOOG and KO), but he's in no rush, unless it starts really taking off. He'd like to get in below $10 so is using that as his guidepost.


Money McBags

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