Thursday, March 11, 2010

3/11/10 Midday Report: Yield curve spread continues to fatten, claims it wants to star in Precious sequel

The market is holding steady today as foreclosures in the US rose at their slowest pace in four years.  While slowing rates of foreclosures are sort of pyrrhic news similar to declining new cases of AIDS or slumping sales of country music cds, a slower rate means a slower rising homeless population and that can't be bad (unless you're scabies).  Though foreclosures were up 6% from last year, they were down 2% from January, and were aided by government legislation and loan modification programs such as helping homeowners to lower monthly payments, refi to lower rates, and break in to loan officers' file cabinets to burn original copies of their mortgage documents.  California saw default filings down 15% though still remained the state with the most default notices, but interestingly Florida's defaults rose by 16% and Michigan was up a ridonkulous 59% which begs the question "who knew people still lived in Michigan?"  Also making the market nervous today is investors increasing their bets on inflation with the yield curve within spitting distance of swallowing up its all time high.  The spread between thirty year bonds and two year bonds is now 377 bps as investors are starting to demand more yield for buying long term bonds thanks to the potentially Madoff-ian style recovery the US government is attempting to manufacture by borrowing $7ishT which they will pay back later once they raise some more debt or win the Powerball lottery just a few billion times.  Jobless claims were also out today and they fell by 6k to 462k which is also about the number of people who caught ear herpes from inadvertently turning on the radio to a Black Eyed Peas song.  Economists were expecting claims to fall by 8k, so the number was slightly disappointing but the difference between dropping by 1.3% instead of the expected 1.7% is less meaningful than William Henry Harrison's presidency or Tom Cruise's marriage.  While initial claims were slightly down, 4.56MM people continue to receive unemployment benefits and to put that number in perspective, it's more people than the entire population of Irleand and only slightly less than the number of "working" actresses Ron Jeremy and Peter North combined to bone in the 1980s.

In international news, Greek workers have continued to strike with no flights, trains, or buses operating in Greece yesterday so it's good that tourism only accounts for 15% of their GDP (and yes that was sarcasm).  The Greeks contiue to cut their well chiseled greek noses just to spite their faces (and if they go near Maria Menounos's face, they will have to answer to Money McBags).  Courts also shut down while hospitals remained with just emergency staff.  Wow.  So with no transportation, no laws, and little medical attentions, Greece has just become the Detroit of Europe.  In other international news the Chinese CPI was up 2.7% which is below the government's 3% target but a bit higher than estimates.  Depending on which news source you read, the 2.7% number is either manageable or way too high, so draw your own conclusion (though if Money McBags were to draw a conclusion, it would probably look something like this(maybe NSFW)).

In stock news, financials continue to rally with AIG and C leading the way as Enron executives now lament not receiving a government bailout as they opine: "if only we had more time."  Money McBags remains less interested in owning C than he is in getting in to a tickle fight with Eric Massa (and honestly, Money McBags doesn't care if it's your 50th birthday but if you ever try to tickle him and your name isn't Kate Bosworth or you weren't born with a uterus, there will be a fucking problem).  In other stock news Navistar continues to plunge after driving itself off of a cliff with an earnings number the other day that was only 1/3 of what analysts were expecting ($.23 per share vs. expectations of $.85).  A spokesman for the company said "if you just round up the nearest dollar, we at least met expectations." He then pointed to a spot behind reporters and yelled "Hey look.  Kool Aid!" before bolting out of the room.

In small cap news, Money McBags still eagerly waits for a response from WILC COO Zwi Williger to the questions posed yesterday on When Genius Prevailed.  Money McBags' finger is now a Vern Troyer taint hair away from hitting the sell button on his computer to ditch his WILC shares.  IMAX was out with their 4Q results last night and posted a profit while forecasting a "very strong year" ahead.  Avatar helped fuel their profit for the year as people love getting motion sickness while not moving, yet it was not a huge contributor to Q4.  The company continues to perform well as box office receipts for the first two months of the year are up 6x to $187MM.  Additionally, their JV strategy has increased gross margins from 24% to 51% and they believe that they have a continued strong upcoming movie schedule with Alice in Wonderland, How to Train Your Dragon, and a 3D remake of Ishtar.  The company just earned $60MM of EBITDA for the year and $20MM in the quarter with about $30MM of net debt so they are trading at around 13x an $80MM annual EBITDA run rate which isn't crazy expensive for a compay producing these results.  Of course one could argue that the current EBITDA run rate is way too low based on recent performance and growth of JVs.  Now look, Money McBags has said the stock seems expensive, and it's certainly not cheap, but they just blew away his expectations.  They continue to outpace his skepticism so it is definitely worth doing more research on the name.  The 3D trend apears to have more staying power than an American Idol winner and the JV strategy is ridiculously profitable.  Money McBags only wishes they would show any of Gracie Glam's heartwarming movies in 3D, that is if he could have the theatre to himself.

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