The market is moving up again today as to the surprise of none, the Fed held rates near zero yesterday while restating their intention of keeping them low for an "extended period" (known as their menorrhagia strategy). The Fed did say they will stop buying MBS now that they have successfully kept home prices inflated, I mean stabilized the market. They believe private investors should now be confident enough to continue to lend without an appreciable increase in mortgage rates which should be great for all zero people looking to buy new homes. Once again, the lone dissenter and the turd in Bernanke's punchbowl was Thomas "T Ho" Hoenig who wanted to strike the "extended period" language from the Fed's release. T Ho keeps tryin' to dis all his sucka FOMC peeps as he is more concerned with fighting inflation and not overdoing the stimulus than he is in creating another bubble (and along those lines he is rumored to be releasing a mixed tape featuring the dis track "Ain't nuthin but a Greenspan thing"). In other US macro news, wholesale prices fell by more than estimated calming inflation fears for just a bit (of course worrying inflation fears is the bazillion dollars the Treasury printed in what Money McBags termed the "Too Big To Count" strategy). The .6% drop in prices was the biggest drop since July and should bode well for companies who now apparently get to pay less for shit while still getting to pay fewer workers lower salaries. The drop was led by energy with gas prices down 7.4% and crude goods (such as raw materials and Andrew "Dice" Clay's 1980s stand-up cd) down 3.5%. However, Food prices were once again up .4% which is great for trade down edibles such as SPAM and Ramen Noodles but bad for coronary arteries and health insurance premiums.
Internationally, we haven't heard from Japan for awhile as they have apparently been reduced to a catatonic state after a non-stop epileptic fit from watching too much anime, but they're back in the news. Channeling their inner Sesame Street, Japan is the one country not like the others as they are doubling a bank loan program to fight deflation. Given that rates are already at zero, this is one of the only ways Japan can try to stimulate liquidity (though a game of "Find the Pokemon" with Reon Kadena and Ourei Harada may be a better way of stimulating liquidity, assuming liquidity swings that way). The Japanese government hopes that these measures will be affective in fighting deflation and allow them to refocus on their real job of fighting Godzilla. In other international news, the World Bank raised their growth estimates in China from exponential to astronomical. New growth forecasts are for 9.5% but the World Bank tempered the forecast by stating that rates will have to rise, the renminbi is undervalued and needs to appreciate, and Chinese dentists will have to start scheduling appointments at times other than two thirty to better serve the growing population.
In stock news, Blockbuster is talking about filing for bankruptcy due to something about the fact that no one fucking rents movies anymore. With the emergence of Netflix, video on demand, and the internet, going to a video store is becoming as antiquated as candlestick phones, vinyl records, and civility.
In small cap news, crappy video game maker COOL announced their Q last night and it was decent, or at least not as puke awful as last Q where they did things to their shareholders that would make Jefffrey Dahmer blush (and also probably make him a bit hungry). COOL earned $.08 Non-GAAP this Q on a 11% drop in sales which they claim was a result of a tough comp due to last year's Q1 being the release of their Jillian Michaels game. They did manage to cut some costs, have $12MM of cash on the balance sheet, and touted the success of the Garden Mama franchise and the performance of their game centered around Alvin and the Chipmunks (and that is actually not a joke). Margins were back up from nonexistent last quarter (like Rod Blagojevich's dignity) to 30% but included a 300bp hit due to an impairment charge on two titles (those two titles are rumored to have been Teenage Mama and Jillian Michaels' Guess the Tranny). Even so, gross margins were still below Q1 2009's 36% as they shipped more DS games which cost more to produce than Wii games. The best part of COOL's $.08 Non-GAAP first quarter eps is that they kept guidance at $.05 for the year and while Money McBags is no maffematician (though he does have a BA in Economics, an MBA in Finance, and a PHD in NSFW muff guessing) that seems to indicate a loss of $.03 per share for the next nine months. This company is still trading at 20x that $.05 number which is way too high for a company that is banking their growth on titles such as The Daring Game For Girls (which is apparently aimed at pedophiliac gamer set) and Pizza Delivery Boy (subtitled, Who Ordered All of This Sausage?), and yes, those are the actual names of games this company is releasing. Money McBags is just waiting for them to extend their Garden Mama franchise to the MILF arena with Cooking MILF where you can direct the MILF to toss salads while trying to avoid having your nuts crushed in the Sundae challenge. If this company were bigger with more liquidity, Money McBags would be short. In other small cap news, Money McBags bought more KITD yesterday (and he broke down his logic for you at the end of yesterday's blog) and on the heels of their recent acquisition, KITD's estimates were raised today by an analyst at Merriman Ford Curhan. This of course caused most people on the street to wonder, who the fuck is Merriman Ford Curhan*? The analyst raised their price target to $15-$17 based on the Mulitcast deal and the exceptional price KITD was able to get on it. Money McBags may still buy more KITD as it could easily be a $20 stock with limited down side seeing as how they have a 99%+ retention rate and the only other things with retention rates that good are crack dealers and Kate Bosworth's vagina.
*For the record Merriman Ford Curhan is a small investment bank in San Francisco who away from work enjoys long walks on the beach, candle lit dinners, and visits to the World Famous Mitchell Brother's O'Farrell Theatre (NSFW). They're not looking for anything serious, but up for just about anything, so if you're interested, they'd love to hear from you.