Friday, May 28, 2010

5/28/10 Midafternoon Report: Market falls after basque-ing in Spain's downgrade

Money McBags has been busy so today's report will be brief, like the Anglo-Zanzibar war of 1896 or Gary Coleman's remaining days (what, too soon?).  The market tanked again and closed down 8% for the month of May which is the worst May in 48 years which was so long ago that the Hulk comic book had just been launched and Brigitte Bardot was at the peak of her ungodly powers.  Sinking the market today was that it was open, well that and Spain was downgraded by Fitch from cultutral institution to Europe's bitch.  Fitch cut Spain's rating from AAA to AA+ which means absolutely nothing to Money McBags because he doesn't use the metric system.  That said, if there is an algebra teacher in the house, Money McBags would love to have them solve for X in the equation AAA - X = AA+.  The director of Spain's Treasury, Soledad Nunez, whose first name is so awesome that Money McBags can't bring himself to mock it, reminded the market that AA+ is "still a high rating" before reminding the market that Fitch is worse at their jobs than he is.

In US macro news, incomes rose .4% but consumer spending was flat in the first logical economic move by US consumers since sales of the pet rock fell to 0.  Spending growing at a lower rate than income growth implies that people are actually saving which would go a huge way towards cleaing up this debt driven culture in the long run.

In stock news, some shit went up but most shit went down because we're in a bear market with more downside volatility than Lindsay Lohan with a dime bag.  AAPL was one company that was up strong today on a price target increase to $325 from BofA Merrill, or as they are better known as BofS Merrill.  With iPad sales predicted to make PCs obsolete and allow NSFW muff guessing enthusiasts to take their sport on the road with them, Apple is one company that should continue to do well even if Europe falls in to the ocean.  In other stock news, GS is said to be ready to settle with the SEC to avoid fraud charges but unless the settlement is inconceivably large for Lloyd Blankfein to handle, Money McBags would like to see this go to trial.  If Goldman is not guilty of fraud than Money McBags' understanding of the words "fraud" and "guilt" are worse than George W. Bush's understanding of the words "mission" and "accomplished" or Tiger Woods' understanding of the word "fidelity."

Anyway, sorry for a brief marginally funny report today but it has been busy at Chez McBags.  Of course, if you send 10 or1MM of your friends to When Genius Prevailed, Money McBags will be able to spend more time analyzing the markets, knocking out dick jokes, and sharing his love of all things Sonya Kraus.  So enjoy you're long weekend and remember to be careful out there.

Thursday, May 27, 2010

5/27/10 Midafternoon Report: China backs up Euro, causes it to come from behind

The market was up stronger today than a shot of tequila washed down with a hefty glass of grain alcohol or as its known in the Hasselhoff household: "breakfast."  If you haven't heard, the Chinese are coming and this time it's not just from looking at Gaile Lok it's because they are still hella interested in investing in Europe because apparently they love them some Lucy Pinder.  As a tribute to Art Linkletter, China’s foreign exchange regulator said one of the darndest things today by refuting reports that China was reviewing their euro holdings as being “groundless."  Of course Money McBags would take it more seriously if the statement from the Chinese government didn't end with "in bed."   Fears of China dumping their Euro debt holdings caused the market to tank in the close of trading yesterday but investors appetites for equities have quickly come back as if it is 30 minutes after eating chinese food.  Investors are hoping this puts a floor on the Euro but more importantly, they are hoping the coke they were given by the Chinese foreign exchange regulator at press conference contained no pee pee.
In US news, GDP was revised lower going from 3.2% to 3% leaving everyone guessing whether the next downward revision will be 2.8% or the square root of -3 since the number is completely fucking imaginary.  The reasons for the downward revision were that consumers spent less than initially estimated (duh), business spent less than initially estimated (big duh), the trade deficit widened, and we're in a FUCKING GLOBAL RECESSION with markets that are less decoupled than two hydrogen atoms in a covalent bond or the lovely ladies at the end of an extremely NSFW Ultimate Surrender match.  In addition to lower consumer and business spend, state and local governments saw their spending drop by 3.9%, the fastest that rate has dropped since 1981 which was so long ago CDO's didn't exist, Ben Bernanke was still teaching MBAs at Stanford, and the competitive NSFW sport of muff guessing had not yet been invented.  A decline in state and local spending will mean more teachers being laid off, fewer police on patrol, and an increase in car axle sales due to larger and more prevalent street potholes.  In other bad US macro news, new claims for unemployment fell by 14k to 460k, but missed analyst guesses and sent the 4 week moving average higher.  The disappointement will only be matched by next week's disappointment when new claims are revised lower.

In stock news, everything was fucking up, well, everything except for MCO.  Moody's once again is taking a hit as hedge fund investor David Einhorn ripped the company a new ratings model in his speech at a hoity toity hedge fund dinner where the managers drank the blood of young bald eagles while rolling around in $1,000 bills and the tears of the first Dalai Lama.  Einhorn's biggest issues with MCO are that they don't have a long enough time frame and they suck at their jobs.  Money McBags has been riding the short MCO gravy train for quite awhile now as he maintains there is absolutely no reason for ratings agencies to exist other than to serve investment banks and help them perpetuate fraud in order to maximize the bankers' internal profitability.  In earnings news, Tiffany's put up a good quarter with profit more than doubling to $.50 per share causing analysts to throw up their breakfasts as TIF easily beat their guesses of $.35 per share.  The company cited strong growth in Asia and Europe with sales up 50% and 25% respectively as apparently rich people don't give a fuck about the global recession.  The company also raised guidance above estimates citing continued strong demand and their customers not being in touch with reality.  In other earnings news, both Costco and Jo-Ann Stores put up good numbers as people bough the shit out of bulk goods and cloth to make their own pantaloons.  Appraently people are doing this in order to save up for a Tiffany's bracelet.

In small cap news, everything rose like Gemma Arterton's popularity during take your kid to work day on the set of the Prince of Persia.  Leading the way was TSYS which was up 20% and Money McBags has mentioned them before as the sell off in the name has been way overdone.  Sure they put up a quarter crappier than Wilford Brimley's used adult diaper with NIM falling and their government systems business showing weak organic growth, but their guidance is still stellar.  Guidance is for $85MM EBITDA and 30% revenue growth which means they are trading at ~5x EV/EBITDA.  So sure competition from GOOG and NOK is coming and sure their management team talks a good game, but with the sell off, they are now just too cheap and set up for a couple of quarters of expectaion beats with analysts dashing to take down numbers.  Money McBags wouldn't buy today as there was likely more short covering than on a swimsuit photo shoot in the Middle East, but value investors should dig in to this company.

Wednesday, May 26, 2010

5/26/10 Midevening Report: Market diagnosed with Meniere's disease as it can't stop falling

The market tried to rally today like a drunken hobo lying in a pool of his own vomit reaching for the discarded fifth of whiskey by his side to try to taste one last drop.  Unfortunately the last drop turned out to be another hobo's urine as Money McBags hasn't seen a rally less believable since John Edwards' ended his presidential campaign.  Yesterday's reversal had given investors confidence that perhaps the market had reached a technical support level (until that technical support level fails again), while common sense should have told them that shit is still worse than Stephen Hawking's time in the 40 yard dash.  Helping the market today, other than cognitive dissonance, was the report on new home sales which showed sales climbed 15% in April, triple analyst guesses which makes it one of their most accurate guesses of the year.  Of course sales were once again helped by government tax incentives and bedrooms being wallpapered with posters of Olivia Munn.  Also helping sales was the median home price dropping 10% to $198k which is the lowest it has been since December 2003 and means people are not just losing money in the market but also in real estate.  Finally orders for durable goods jumped 2.9% to their highest level since September 2008 but they fell by 1% excluding transportation and the 228% rise in bookings for aircraft.  The number was less impressive than a George Will stand-up routine and does note bode well for continued economic recovery.

Internationally, European markets rose a bit even with the EU talking about taxing banks to pay for their future fuck ups.  Money McBags applauds the move but wonders why the EU doesn't just better regulate them or find a more efficient financial system.  They are basically saying, "you can't be trusted not to fuck shit up again, and even though we already require you to hold reserves because there is systematic risk in what you do, you do it so poorly that unsystematic risk is less diversifiable than the crowd at a Charlie Daniels Band concert, so we're going to proactively make you pay for the shit you are inevitably going to fuck up."  So good for the EU.  Also, noted economists are out saying Greece is going to either need a debt restructuring, is going to default, or is going to have to start charging for sodas.  Economist Steve Hanke and Nobel Prize winning economist (which is a bit like being the world's tallest midget or the Kardashian with the fewest STDs) Robert Mundell were both on record talking about Greece's problems.  Mundell, who was one of the leaders in the development of supply side economics and the creation of the Euro which gives him all of the credibility to speak about Europe's debt situation as Mr. T,  Professor John Frink, and my left nut said a Greek default may be "inevitable."  Now look, Money McBags hates to nitpick (unless the nit resides on Imogen Thomas' and he is doing the picking) especially as Money McBags treats the english language like Joan Crawford treated her kids as he splits his infinitives more frequently than a diarrhetic splits their butt cheeks, but how is it possible that something "may be inevitable?"   By definition, the word inevitable mean "unable to be avoided."  So how the fuck can something maybe be avoided if one is unable to avoid it?  Chicken meet egg, egg meet chicken, now go screw.  It's just not logically possible, like a funny Dane Cook stand up routine or an MC Esher designed house.  Instead of saying it "may be inevitable" the great supply sider should have just said the debt restructuring is evitable which is the correct fucking word for what he was describing.  Ugh.  And yet someone listened to this dickbag enough to give him a prize other than a booby prize (though to be fair, Money McBags hopes to one day win a booby prize)?  Anyway, Mundell thinks the Euro needs to be strengthened rather than put out to pasture like Nell Carter after Gimme a Break, while Mr. Hanke thinks that Greece is likely going to default and thus all of the Euro bailouts will have been for naught.  Money McBags isn't sure what to think other than that everything is currently more fucked than a rent boy in George Rekers' european vacation suite.

In stock news, who cares, it's all going down.

Tuesday, May 25, 2010

5/25/10 Midafternoon Report: Volatility causes market to go up and down faster than a time constrained fluff girl

The markets sold off hard again today until the late afternoon with the the sell off being caused by Europe going to zero, financial reform, and now fucking North Korea dropping a turd in the proverbial kimchee bowl, and the hardness being caused by the market having grabbed a workout with Amanda Carrier.  So la-di-fucking-da.  With Kim Jong Il apparently getting his Napoleon complex on and dropping a South Korean warship like a diahrreatic drops logs (that is with ease and aplomb), the markets have more to worry about than a parent who sends their kids for music lessons at Gary Glitter's house.  It is ugly out there today (and not Lady GaGa ugly, but Amy Winehouse on crack sprinkled with a bit of Tina Yothers ugly) and Money McBags' screen was redder than a baboon's ass with a deep and gaping anal fissure for most of the day.  So what is an investor to do other than hide under their desks and dream of long walks on the beach with Melissa Giraldo while hoping the bad man leaves them alone?  If Money McBags had the answer, he would certainly let all of you know, but for now, he is hedging the volatility and waiting for things to settle before stepping back in to names that have good long term trends and are right now just guilty by association like the cast of a Robin Williams movie (names like KO, MCD, VMW, GOOG).  The market could really go either way at this technical level and while Money McBags is a very cunning linguist, he is not clairvoyant and thus does not want to bet on what will win in the current pissing match between bad macroeconomics and reasonable company fundamentals.

In US news, consumer confidence was up today to it's highest levels since May 2008 when it was caught doing lines in a Hollywood bathroom with Lindsay Lohan.  Americans are now rosier about job prospects as longterm unemployed people can no longer pay for phone service and thus have dropped off of the radar of people running these surveys.  Adding to the optimism is the complete lack of global perspective by US workers who think "european" is just something you say to your friend at the urinal next to you.  Also, LIBOR in dollars is spiking like it is Karch Karily after a health dose of PEDs.  The dollar Libor-OIS spread which is a gauge of banks’ reluctance to lend widened to the most since July and signals that banks are questioning the viability of their peers like a young Michael Jackson used to question the viability of Marlon.  And making matters worse is that the VIX continues to shoot up and investors have to hope that it is using one of Magic Johnson's needles and thus will soon die down.  Also, housing prices fell last quarter according the Case-Shiller report and fell sequentially for the month but were up modestly year over year.  So taking whatever metric and time frame you choose to use, housing prices were about as robust as Detroit's economy or Sarah Palin's vocabulary.

Internationally, shit is still all fucked up with Europe's economy sinking like Angela Merkel's neckline before a night out with the Bundestag and all investors can do is hope to grab on to some floatation devices to avoid sinking.  Spain and their banking system are sparking fears today with regional bank Cajasur having been bailed out yesterday and who knows what to be bailed out tomorrow leaving Spain's banking system under more fire than the Spanish Armada at Gravelines in 1588.  There is real fear that insolvency could spread like herpes in the Kardashian family and if that happens, not even extra strength Valtrex will be able to save the Europe's economy.  Of course today, North Korea has slapped their tiny penises (or is it peni? Can someone exhume William Safire and ask him?) on the table to take part in the global cock off to see who can fuck shit up the most.  After South Korea finally picked out the right stationary and calligrapher, they formally accused North Korea of sinking one of their warships in an incident that happened back in March.  South Korea also relisted North Korea as their "principal enemy" knocking forks,  Don Rickles, and Yonggary down on their list.  In return, North Korea has suspended any interaction with their neighbors to the South, banned South Korean ships from territorial waters and air space, and taken out an ad in the Rodong Sinmun calling South Korea a bunch of "chodes."  While this is not good news, Money McBags could give a shit if North and South Korea want to go to war, stop talking with each other, or have a fucking pillow fight.  What Money McBags cares about is the markets and as long as this threat of war doesn't stop sweat shops in Seoul from banging out willy warmers, he will blissfully ignore this hissy fit and assume everything will get better.

In stock news, GS is about the only thing up big today as investors fly to the safety of the US government.  Other financials continue to trade down as new legislation may require them to raise more reserves. spin off their profitable derivatives desks, and stop being such dicks.  In other stocks, DELL announced plans for an iPad rival which they are tentatively calling "failure" and Microsoft announced a management shake-up with the head of their entertainment division "retiring," no doubt to spend more time with his Zune.  With MSFT lagging Apple, Google, Nintendo, and the abacus in developing consumer products people actually want to buy, hiring someone with vision is going to be key for MSFT to grow back to a market leader.  Finally Autozone is up 5% today after reporting numbers better than estimates due to new store openings and higher demand for auto parts.  They expect continued strong demand for replacement parts as fewer people are buying new cars since it's not necessary to drive to one's living room which is where 20MM people now work.

In small cap news, KITD is getting pummeled again today.  Money McBags can't defend this stock anymore as he has said everything he can say.  He is going to hold on to his shares and just not pay attention to the price in this volatility.  Either their A/R are fucked or they're not and if they're not, this stock is easily a double from here.  Also, CTGX which Money McBags has blogged about many times and which he puked out the day of the "flash crash" may have bottomed out today as it is up in this tape.  The company is trading at ~10x Money McBags' fiscal 2011 EPS which implies 50% growth.  Their upside relies on government spending on electronic medical records and even if Europe falls in to the ocean and North Korea taints South Korea's kimchee supply, the US government is still going to be doling out billions of dollars to get EMR up and running.  So CTGX's main IBM outsourcing business may come under fire in a bad economy, but EMR should help pull them through.  There's a lot of Y2K about this company, but luckily, we're about to start the medical Y2K and they should post impressive earnings.  Money McBags is likely going to buy back when shit settles down a bit.  Right now low liquidity names scare him more than seemingly hot chicks with adam's apples.

Monday, May 24, 2010

5/24/10 Midafternoon Report: American xenophobes shout "I told you so!" as european fears send US markets tumbling

Stocks were mostly flat today like they had no gaussian curvature or had Heidi Montag's singing voice until they took a nosedive over the final 30 minutes of trading.  Existing home sales in the US rose by 7.6% and bested analyst guesses thanks to the first time home buyers tax credit, foreclosure auctions, and promises by Sabrina Soto to intervene with buyers' real estate and show them where to properly lay their pipes.  While home sales were up, prices also rose 4% with the median home price now $173k, or three times the cost of Detroit.  Treasuries continued to gain in this uncertain market as investors sell out of their equity holdings and seek safety in bonds, even if those bonds are issued by a country whose debt is 2/3 of their GDP and a country who somehow thought naming a town Bumpass was a bright idea.  In other US news, the financial services industry is still trying to figure out how they will be affected by the financial reform bill which was recently passed by the Senate thanks to a collective dose of extracorporeal shock wave lithotripsy.  Many analysts think the bill will reduce profits but leave industry size and power intact, which is basically like castrating Lexington Steele.  While profits could be cut by 20%, financial service companies will no doubt find new ways to exploit loopholes and the cornholes of average workers in order to extract maximum profits for doing nothing other than hitting buttons and passing paper.  Fear not though, Money McBags has a solution for America's impending debt problem that doesn't involve Faye Reagan offering to service said debt.  In an auction this weekend, the first US silver dollar which was minted in 1794 sold for  $7.5MM.  So all we need Bernanke to do is just mint a fuckload more silver dollars and fudge the dates on them.  Problem solved

In international news, the Bank of Spain bailed out a regional bank named Cajasur which of course is Spanish for "We suck at lending."  The bank is apparently largely controlled by the Catholic church whose strategy was to make up for losses by turning water into wine, unfortunately, they were less successful at that than Martin Luther was at keeping his complaints succinct (seriously, 95 fucking theses?  I mean we know the benches were too hard and chapped your ass cheeks, but couldn't you have left that one out and just made it 94?).  This marks the second time since 2009 that a regional bank has been bailed out by Spain and the also the second time since 2009 the Bank of Spain has put in longer than a two hour work day.  In other international news, Britain announced 6B euro in spending cuts.  They hope these cuts work out better than their spending cuts of 1932 which took dental care off of public health plans.  Among the cuts in the legislation are tighter restrictions on first class travel by public employees, advertising cuts for public projects, and less material to be used for the uniforms of the national soccer team.

In stock news, C was upgraded by Goldman Sachs to buy, most likely due to a typo or Goldman trying to pump C shares so GS's majority partner, the US government, can dump them.  C remains more full of shit than someone with Prader-Willi Syndrome and no anus.  The company is too big not to fail and has seen a talent drain similar to the third season of Flavor of Love.  Goldman analysts were busy today though as they also raised Sprint to a buy sending the stock up nearly 10%.  The reason for the upgrade was a potential lower churn as Sprint has likely already lost every customer they are going to lose.  Also, savings and loans banks reported their highest profit since 2007 when they were actively taking careless risks by lending money to people who couldn't afford to pay for haircuts, much less pay loans back.  Of course not even Thrift banks can screw up getting free money and lending it for more than free with the government ready to bail them out should anything go wrong (well, that is all Thrift banks except for maybe IndyMac).  Thus record profits aren't really anything to applaud as it is like applauding a hefty stripper in a Reno gentleman's club for convincing a patron to pay for a lap dance (and for those of you who have never been to a Reno strip club, they're all fucking hefty).

In small cap news, JOEZ was somehow up 8% despite small cap stocks being tossed off like a 21 year old virgin's wanker while guess 1629's NSFW muff.  Money McBags broke JOEZ down after their last Q and thinks they could earn between $.10 and $.15 per share in 2011 whic means the stock is now trading at 13x to 20x that but the concern is obviously that with Europe going to 0, people may not have money to spend and thus JOEZ's growth may slow.  While their jeans sales aren't directly related to Europe, the global economy is and the last time Money McBags checked, the US was part of the global economy.  Given the current market fear and dislocation, Money McBags has no interest in stepping in to JOEZ here, even if he'd be stepping in to the overpriced and stylish Outsider, but he is keeping abreast of the stock (though he wishes he were keeping stock of Brooklyn Decker's breasts instead).  In other small cap news, WGO continues their drop to $7.50 as high beta shit companies that rose for no reason are now becoming less in vogue than banana hammocks and Keynesian economics.  Money McBags has said this before but WGO is not going to make money this year and next year will be lucky to earn $.50 per share much less $1.20 and it is trading at 10x $1.20.  As long as the market continues to sink like all of Money McBags' hopes and dreams, WGO should be more than a big short (as opposed to these small shorts).  Finally, Money McBags dumped his DFZ today.  He loves the company and thinks they earn around $1.05 pretty easily next fiscal year with an accretive acquisition on the way.  That said, the stock is less liquid than a hefty corn shit and with the market structure broken, Money McBags doesn't want to get caught holding anything with no way to get out.  So he took his 25% profit and went home.

Friday, May 21, 2010

5/21/10 Midafternoon Report: Market rebounds, now it needs to stop missing shots

The market was up today as apparently it has been corrected like Stevie Wonder's vision or Larry Craig's family values.  With Europe now fixed, unemployment shrinking, and monkeys flying out Money McBags butt, it should be back to lobster tails and BJs in no time.  The good news is that nothing has really changed between today and yesterday, while the bad news is that nothing has really changed between today and yesterday.  Money McBags remains more fearful of the markets than he is of supply side economics, Sylvester Stallone's face, and girls with bacne so he is just trying to ride today out until the next correction begins.

In US news, the Senate passed a financial reform bill, despite the protestations of Senator Maria Cantwell who won the Huffington Post's sexiest Senator competition, narrowly edging out Senators Barbara Mikulski (who shocked the judges with a daring hail mary by sporting a thong in the swimsuit competion) and the delightful Mary Landrieu (who tittillated the judges in the talent competition with her pig hunting calls. Soowee indeed.).  In the bill, financials will have to go back to their room and think about how they have made the market feel.  The legislation includes restrictions on predatory lending (which is bad news for cougars like Kelly Madison who are among the fiercest predators in the animal kingdom), a way to liquidate failed banks without bail outs (like um, doing fucking nothing), and restrictions on derivatives trading (like maybe making sure they all have underlying assets, and Money McBags would love to lie under Lisa Ann's assets).  It also creates a “financial stability oversight council” which will exist until it fucks up by watching too much trannie porn like the SEC and a new council is created in ten years to clean up this mess.  This council reads like a who's who of economic red tape and includes the Treasury secretary, the chairman of the Federal Reserve, the comptroller of the currency, The "Million Dollar Man" Ted Dibiase, the director of the new consumer financial protection bureau, the heads of the Securities and Exchange Commission and the Federal Deposit Insurance Corporation, Scrooge McDuck, the director of the Federal Housing Finance Agency, an independent appointee of the president, and Malachi Constant so it goes.  Wow.  It's like a mental masturbation all-star team where the head of every shitty bureaucracy in the US can get together to form a super bureaucracy and fight off the Legion of Boom.  One troubling sign for the markets is that LIBOR rose to a ten month high as risk aversion is back like herpes, since it will never really go away.

In Europe, Germany's lower house (the Bundestag) voted to contribute to Europe's bail out followed by their upper house (the Bundesrat) agreeing as well which made Chancellor Angela Merkel (the Bundeshag) unpopular among the German people.  Causing concern in Europe today was that the Markit composite purchasing managers’ index fell in May to 56.2 from 57.3 a month earlier.  It was the sharpest fall since February 2009 when managers' subscriptions to Nuts magazine were taken out of the index.

In stock news, DELL beat earnings and revenue guesses but gross margin disappointed like William Henry Harrison's almost neverending inaugural address (I mean I know there was no televsion or movies or Spankwire to get home to, but really Will, couldn't you have skipped all of that Roman history crap and just gone with some war stories and then got the fuck out of there?  You know it was fucking snowing, right?) or the Pam Anderson-Tommy Lee sex tape (and calling it a sex tape is phonier advertising than the Ed Asner workout video).  Dell not only missed on margins, but they tempered investor expectations by pointing out that the iPad is really fucking cool.  In other stock news both Ann Taylor and the GAP put up good quarters and gave solid guidance as mediocre fasion is the new style.

As for small caps,  TSYS continues to get hammered and Money McBags will investigate next week.  This company should be growing as they offer mobile location based software and text message licenses so it is curious that their performance seems to be more stagnant than Mitt Romney's political career.  Money McBags has had a busy day so he apologizes for the lack of new research, next week he will get back to analyzing companies and trying to make money in a market that is rigged against retail investors.  He remains very concerned about a big market drop next week but until then, he hopes you have a good weekend and tell a few thousand friends about When Genius Prevailed.

Thursday, May 20, 2010

5/20/10 Midafternoon Report: S&P slides closer to next technical level of 0, most economists predict a bounce from there.

Fucking Europe.  Seriously.  First they tried to tax us without letting us represent ourselves and you know what, we don't play that way.  Then they got all upitty and burned down the White House while poor little James Madison sat on his gelding and got his S'mores on.  And after that we've had to bail them out of losing a fucking war to the worst human ever (and Money McBags does not mean Bill Laimbeer), got stuck with Pride and Prejudice being taught to every high school class in America, and were subjected to the fucking Spice Girls.  Really?  Jeesh.  As if Europe has not treated us poorly enough by using us like a young lady in Lawrence Taylor's hotel room, now they have decided to have their whole fucking economy go to $0 because the loose union of countries can't keep the weakest links from exhibiting worse moral hazard than Magic Johnson's wife after finding extra strength condoms.  Sure, we fucked up the whole financial system first, but for fucksake Europe, at least we know whom to blame.  So clean your shit up because Money McBags doesn't want to have another revolution and have to throw your tea away because his tea bagging is reserved for Faye Reagan only.  As an aside, Money McBags is aware that every example he used above refers to Britain and their tea and fucking krumpets eating, bad teeth having, and fag smoking nation, and that Britain does not use the Euro and therefore is not the problem.  That said, his commentary stands after all, we all know it wasn't over when the Germans bombed Pearl Harbor.

In US macro news, ain't a lot of good shit going on today.  New claims for unemployment spiked to 471k, up 25k from last week and the first rise in five weeks which surprised everyone but the 20MM people looking for jobs.  Riddle me this, with unemployment so high, how the fuck are all of these economists still getting paid for adding absolutely no value?  It is a more fraudulent occupation than the Chief Compliance Officer at Goldman Sachs or Lady GaGa's stylist.  Not only were new claims for unemployment up, but the index of leading indicators was down .1% which was worse than economist guesses for a .2% gain as apparently they confused the word "leading" with "made-up."  Finally, the Philadelphia Fed said manufacturing rose to 21.4 but was short of the 22 predicted by consensus estimates.  In that same report, the jobs number fell and more unemployment is only going to do wonders for the lovely metropolitan Philadelphia area where the motto is "if it's not nailed down, it's ours."

Politically, the SEC continues to investigate what is now being called the "flash crash" because "high frequency trade off," "stock schlock," and "holy fuck what just happened" apparently weren't catchy enough.  When they're done investigating the crash and can completely rule out trannie porn as the cause, Money McBags hopes they investigate why the market is going to $0.  Also, Senate Democrats apparently voted down a proposal for financial reform because Senators Feingold and Cantwell didn't think the proposed regulation went far enough and Money McBags applauds the state of Washington's lovely Ms. Cantwell who couldn't well pass the current legislation without stricter rules on derivatives.  The junior Senator said "Even something like Hoover Dam with all of the great concrete and all of the great engineering and all the great things that make that structure work, still has a problem if somebody drills a hole in the bottom of it."  Well said and to be brutally honest, Money McBags trusts any 51 year old single, never been married, woman when she talks about needing to proverbially put fingers in dykes.

Internationally, well, internationally things are more fucked than Dexter Manley in a spelling bee or Keynesian economics.  Germany's ban on naked short selling continues to spook the market as German traders all run to their nearest Breuninger's to load up on slacks.  Making matters worse is that Greek workers are on a 24 hour strike, or what used to be known as "Tuesday."  Money McBags isn't saying that Greek workers are lazy, but does it really take more than 300 years to clean up some rubble from the fucking Parthenon?  I mean we now have things called cranes and bulldozers.  Luckily, French economy minister Christine Lagarde said: “I absolutely do not think that the euro is in danger” before adding "it will provide great kindling for Europeans when they can no longer afford heat."

As for stock news, well, everything was down, especially financials though the always optimistic, rarely right, and yet deliciously named Dick Bove (rhymes with "oy vey") said banks stocks "may fall another 10% to 12% reflecting market fears but they are still very attractive investments."  He then opined, "Longer term, I still expect that these stocks will grow in multiples, not percentages, as long as we feed them after midnight, expose them to bright lights, and dunk them in water."   SPLS actually put up a good Q today, unfortunately the market cares less about performance than a John Meriwether investor.  Staples CEO said he is a little more optimistic than he has been and raised the low end of guidance for Q2.  Williams-Sonoma also posted better than expected profits, raised guidance, and said they are getting more positive about their customers coming back as apparently there is still a demographic that likes to buy overpriced shit that they don't need.  Also, Game Stop also put up a good quarter thanks to popular games like "Battlefield Bad Company 2," "God of War III," and "Erin Andrews Peephole Finder."  It's no surprise that a video game retailer would put up a good quarter because stoners are still selling the shit out of weed, something about inelastic demand.  Finally, Sears put up a shit awful Q simply because they are Sears.

In small cap news, everything is going haywire again except KITD has somehow moved up on another high volume day.  Money McBags has talked about KITD all week but their sell of was overdone if you believe management.  The spike in A/R has investors worried, especially as those receivables are tied to european revenues but management had a mostly logical response to the spike which Money McBags broke down the other day.  One of Money McBags' favorite small shorts (along with Bridget the Midget), WGO, has been getting hammered lately and he'd like to think it is because investors are finally realizing this company is not going to break even for at least another year and not just because everything is down.  WGO simply does not earn money and now that inventories have been un-destocked, they can't play the positive cash flow game anymore.  Even if WGO were to somehow earn money, for the stock to trade at its current price of ~$12.50, WGO would have to earn $1.25 next year because Money McBags would never pay more than 10x for a company selling an expensive discretionary good with little operational flexibility in the biggest recession since Herbert Hoover stuck to the gold standard.  So if you want to play the downside, shorting WGO is a decent option.  That said, when the market settles down, Money McBags will be looking to add with companies like CTGX, ARTG, TMRK, RICK, and QCOR on his to buy list.  But hey, be careful out there.

Wednesday, May 19, 2010

5/19/10 Midafternoon Report: VIX shoots up, claims it doesn't have a problem, just wants to try to take its mind off global recession

The market got clobbered again today (until a closing minutes rally) like it insulted Preston Brooks' uncle or like it had one too many shots of tequila while watching the donkey show.  Investors continue to fear the impending doom of Europe with their quaint monetary system, silly accents, and love of black jeans.  However, macro news in the US was marginal today with inflation at its lowest level in 44 years which should allow the Fed to keep rates at historic lows until it causes the next bubble.  Core inflation, which takes out the effects of things on which people actually spend their money like food, energy, and lap dances, was flat and thus led to the lowest 12 month gain since LBJ was president, yo-yos were a fad, and full muff was the style.  Overall though, consumer prices fell by .1% so on average the little money you have left will now get you .1% closer to buying some shit you can't afford.  On the housing front, mortgage demand shriveled up worse than your "jumbo arm" after diving into the arctic ocean immediately after viewing a Hanna Hilton opus.  With the federal tax credit for homebuying now expired, mortgage purchase applications fell by 27% despite record low rates and home sellers making sure all of their carpets match their drapes (and for the record, Money McBags is not in favor of carpeting for his hardwood).  Making matters worse is that foreclosures rose to a record high 4.63% and now 1 out of every 7 homes is either in foreclosure or delinquency or as it's known on the Street "a AAA rated Goldman MBS CDO."  Finally, the SEC is trying to put in circuit breakers for all S&P 500 stocks to combat the stranglehold high frequency traders have on the market (and as always, Money McBags is a big proponent of the Camel Clutch as the best stranglehold).  While these measures may have the effect of bringing a knife to a gun fight or hiring Magic Johnson to judge a grammar contest, the circuit breakers will seek to pause trading for five minutes if the price of a stock moves by 10% or more in a five-minute period or if Bar Refaeli show up on the floor of any exchange.

Internationally, investors are still freaked out by Angela Merkel's preemptive strike on naked short sellers and will make sure they have an extra pair of pants with them at all times just in case.  Germany's new shortng regulation has caused investors to wonder what exactly German leaders know that is not public as German bank stocks have yet to come under attack and usually politicians wait for things to crumble before acting.  Strangely, the rest of Europe has not followed what could now be the biggest Merkel boner since Fred failed to touch second base (and Money McBags would never fail to touch Angela's second base).  The failure of other european countries to follow Germany's lead in regulating their markets is causing investors to question the strength of the EU while applauding Europe's sanity because we all know what happened last time Europe followed the Germans.

In stock news, does anyone really care?  No seriously.  The market is not trading on fundamentals right now as forecasts for next year are more dubious than receiving a letter from Ted Kaczynski.  Money McBags has been harping on analysts using normalized earnings as a valuation metric for awhile now since normalized went out the door with subprime CDOs, easy credit, and the advent of the very NSFW muff guessing (though Money McBags does use normalized earnings in his EPAX valuation, but there is something to be said about being logically inconsistent, just ask Mark Souder who apparently values families so much, he has more than one).  Anyway, HPQ put up a nice quarter last night, beating analyst estimates and raising guidance thanks to strong demand for their PCs, a resurgence of their printer business, and absolutely no influence from Carly Fiorina in the past five years.  The company earned $1.09 per share, beating analyst guesses by $.04 and gave full year guidance of $4.45 eps to $4.50 eps which topped analyst guesses of $4.45, or by about the amount of their beat this Q.  The printing division grew revenue by 8% as they apparently supply the US Treasury with laser printers to spit out more dollars.  In other stocks, TGT put up a solid quarter though not nearly as delightful as BJ's who swallowed up the competition.  BJ's beat estimates and saw a 4% increase in customer traffic thanks to higher sales of candy, cigarettes and awesomeness.

In small cap news, once again Money McBags favorite KITD is getting demolished on high volume.  Either a large owner had a margin call, a Portia De Rossi fat finger, or just wants the fuck out like Ricky Martin trapped in a closet.  Here is what Money McBags knows:

1.  CEO Kaleil Tuzman bought 100k shares the other week.  When a CEO is buying, that usually means good news unless the CEO is Ken Lay and he is buying Enron.    That said, this should be at worst slightly positive.

2.  Their Q was ok by Money McBags' standards but caused analysts to increase targets.  This should be a slight positive as obviously, analysts are just guessing.

3.  They diluted the shit out of shareholders last month and have yet to put the majority of that money to work.  This is a big negative.

4.  They are levered to EU revenues.  Another big negative, like hiring Bernie Madoff to help allocate your assets.

5.  Kelly Madison puts the ILF in MILF.  And that is a huge positive for everyone involved.

6.  When the markets are diving, nobody wants to own a weird little company posting negative eps (thanks to one timers and derivative charges) with a promotional CEO who just wants to build something big enough and quick enough to sell.  There is obviously risk, that is why they call it gambling, I mean investing.

A lot of little stocks are taking it in the yingus right now.  Look at former Money McBags favorite RICK which is down around 30% from where we sold and almost 40% from the top  (and it is definitely time to start the due diligence on this stock again, especially if it invloves doing a stress test of their performers' assets).  Heck, FHCO was down 5% today, which was not unforseen by Money McBags, but their business is fine.  The point is, no one wants to own dinky little companies when the world is going to zero, so take a deep breath and do some real due dilligence now because when the market stops falling, there will be some very good buys.

Tuesday, May 18, 2010

5/18/10 Midafternoon Report: If you want to short in Germany, you now have to wear pants

The markets fell again today as US macro news was mediocre at best, fears in China have risen from red alert to Kung Pao levels, and Germany has banned naked short selling of stocks and CDS (though you are still encouraged to get long Salzgitter and Money McBags' "salzgitter" would get very long for Sonya Kraus and he would certainly let her take the other side of his Siemens trade).  With the ban on naked short selling in Germany, the markets floundered as traders sought to unwind positions and find alternative ways, or countries, to continue with the same bets they have been making.  This market reeks of dislocation worse than Ronnie Brown's lisfranc.

Not helping matters was that US macro data was more mixed than a can of nuts (and please, write your own punchline).  Home building rose in April with new home starts up 5.8%, the most since October 2008 as home builders prove to be more optimistic than Brooklyn Decker's bikini waxer.  However, construction plans fell to their lowest level this year as the tax credit ran out and people remain unfucking employed.  Building permits were down 11.5% and economists had guessed that they would be moderately up which once again proves that a broken clock is wrong 86,498 times a day.  In other macro news, seasonally adjusted PPI was down .1% last month due to more people keeping their eyelids shut as a result of allergies (and yes Money McBags has used the PPI pun before, but it is still horribly funny).  Core PPI, which excludes the essentials such as food, energy, and oxygen, was up .2%.  Money McBags always loves that economists apparently don't care about food and energy prices as a gauge of inflation which is as rational as a pareto inefficient nash equilibrium like the prisoner's dilemma (and if Money McBags were ever a prisoner, he would have no dilemma because he simply wouldn't pick up the soap).  Interestingly, energy prices actually slumped by .8% thanks to natural gas prices retreating from booming to silent but deadly and food prices declined by .2% despite meat rising 5.1% and thus beating meat price rises going back seven years.  The good news though is that inflation appears to be tamer than a Dane Cook stand up routine. 

Internationally, in addition to Germany banning naked shorting (and Money McBags hopes they don't ban naked cavorting), the EU sent 14.5B euro to Greece today and told them to keep the tip.  With that 14.5B, the EU hopes to stave off Greek defaults, restore order to the European financial system, and receive a free two-liter of coke with their souvlaki since their order exceeded $20.  Also, the ZEW Center for European Economic Research (ZEW of course standing for zero economic worth) said its indicator of German economic sentiment fell in May to 46 from 53.  The good news is that the indicator’s historical average is 27, the bad news is that the 46 was below the consensus guess of 47, and the even worse news is that Lucy Pinder has never been in my kitchen.  But it's not just Europe that is going in to the crapper like last night's bean burrito washed down with an extra large cup of metamucil and healthy dollop of "we're fucked," but also China as Chinese investors are also starting to get more nervous than Jackie Chan trying to roll his "r"s.  The stock market in China remains lackluster, down 21% for the year despite being sprinkled with MSG to keep investors coming back for more.  Driving the sell off has been expectations of rising interest rates,  fear of tighter bank lending to help rein in inflation and quiet soaring property prices, and fortune cookies throughout the region reading "You're going down" (in bed.  Booooyah!!).  The markets remain more jittery than Sarah Palin in a spelling bee, so remain careful.

In stock news, Walmart put up a good quarter beating analyst guesses of $.85 eps by $.03.  The world's largest seller of cheap crap had sales of $99B which were up 6% despite a 1.4% drop in same store sales.  Guidance was generally inline though management said sales are shifting away from entertainment and apparel and into do-it yourself auto repairs, pharmacy, and tight fitting topsHome Depot announced a good quarter and raised their outlook, yet the stock traded down as analysts think the outlook to be too rosy after Lowe's took a giant dump on Q2 forecasts yesterday.  Finally, financials fell again as potential new credit card regulations hit card issuers and fear of Europe imploding hit banks.  In all, it is uglier out there than Minnie Driver's face and tomorrow could get much much worse as fear has seeped back in to the market.

In small cap stocks, everything sucked.  KITD got hit with another big block trade around midday despite both Merriman Curhan Ford and Roth Capital's analysts raising price targets after yesterday's Q.  Money McBags promised he would listen to or watch their quarterly call today but he has been too busy to follow through on that, so his analysis from yesterday still stands.  The fact is it is a weird little company, exposed to many different currencies, and highly acquisitve in a market that may soon like none of those three things.  So the market may trade this down on technicals and fears, but fundamentally, if you don't mind some pain for awhile, it is worth holding on to like a drowning straight man would hold on to Christina Hendricks' life preservers.

Monday, May 17, 2010

5/17/10 Midafternoon Report: The Euro is falling! The Euro is falling!

The market was somehow flat today after spending most of  the day down again as the perilousness of Europe's debt situation continues to worry investors like laryngitis worries Pavarotti or like coming in to contact with Paris Hilton worries osmophobes.  Not only is Europe raining ash on the market's parade (both literally and figuratively, though to be fair, the market's parade today was in honor of Norwegian Constitution Day (better known as pedophilia Christmas for the tradtion of children's parades), which ranks somewhere between the invention of nose hair clippers and the launch of the Edsel in the pantheon of modern events, so not a big deal) but US macro news was mildly disappointing as well.  The NY Fed released their monthly manufacturing report and the gauge of general business conditions fell to empty.  The business index dropped from 31 to 19 and analysts had guessed it would be 30.  As always, Money McBags has no idea what the difference between 31 and 19 is (other than maybe a few kids and a meth problem), but he knows that they're both legal.  The new order index also tried to make this a Blue Monday by falling from 29 to 14 as inventories have been restocked (or un-destocked, whatever).  One positive aspect of the report though was that employment strengthened as payrolls grew the fastest they have in six years as NY manufacturing plants try to keep up with demand for tools and building materials to help batten down foreclosed on houses.  In other US macro news, home builders' sentiment hit a 2.5 year high as apparently delusion has finally creeped in to lift their spirits.  The index rose to a whopping 22 while analysts guessed it would be 20, so the difference is a rounding error or a stutter.  The bigger issue is that 50 or greater means more people are optimistic, so with the index only at 22, people are just slightly less negative, like a guy who breaks up with Amy Winehouse to date Mayim Bialik.

Internationally, the Euro continues to sink today as if it were a Brazilian Real in 1999 or had just hired Ted McGinley to star in its new TV drama (tentatively to be called The Big Crash Theory).   The ECB was out buying 16.5B of sovereign debt and in order to try to show they aren't just printing Euros, they will be taking in 16.5B of deposits from banks and paying out interest.  Wow.  So the banks get some free money while the ECB gets worthless bonds and has to pay interest on the money they didn't "print."  Seems a bit odd but then again, so does Rene Zellweger's face and that's never seemed to hinder her.  Also, bank lending in Europe is taking a significant hit as the rates banks charge each other for loans in dollars rose to a nine month high.  The Libor-OIS spread (which isn't nearly as interesting as the rumored Rachel Uchitel Playboy spread) increased to 24 basis points, the most since August, thus signaling that banks in Europe are as interested in lending as the FED is interested in transparency or as Ellen Degeneres is interested in penis.

In stock news, GM posted their first profit as apparently people can now only afford shitty cars.  GM earned $865MM and proved that all you need to do to succeed in business is suck badly at your job, lose a ton of money, and then get bailed out by good old Uncle Sam and his magic printing press.  Money McBags only laments that he missed that class during his business school days.  Not only did GM post a profit, but they are on course to go public again in Q4 to try to see if the investors have learned the old adage "Fool me once, shame on you, fool me twice, go fuck yourself."  Additonally, GM is said to be looking to get back in to the financing business which is a bit like letting Bernie Madoff handle the prison finances, filling the Goodyear blimp with hydrogen, or hiring Roman Polanski to babysit your 14 year old daughter.  In other earnings news, LOW beat earnings forecasts but like all companies in the past week, gave guidance more disappointing than Nicole Eggert's movie career (and Money McBags had so much hope).  CEO Robert Niblock said that 2010 will be a "year of transition" while significant growth won't happen until 2011, and if it doesn't, no one will remember he said it would.  Guidance for Q2 was $.57 to $.59 per share which was below analyst estimates of $.62 per share and sent the stock down for the day.

In small cap news, KITD had their quarterly earnings release today and you all know Money McBags loves KITD like Joanie loves Chachi or high frequency traders love turning off liquidity when the market is tumbling.  The stock is trading down heavily thanks to some block trades around midday where someone just wanted to puke this out like a bulimic with emetophilia at an all you can eat Sizzler buffet.  Money McBags hasn't had a chance to listen to or watch their call, though he will tonight or tommorow, but he did go through their Q and hear the last 20 minutes of Q&A.  To be honest, their Q was a bit lighter on the revenue side than Money McBags would have liked to see.  Revenue of $17.4MM was up 80% y/y but up only 8% sequentially, though management explained that this is typically a sequentially down revenue Q due to reduced digital media consumption in the industry.  That said, EBITDA margins were only 17% after being 19% last Q and accounts receivables continue to be higher than John Belushi at a Chateau Marmont casino night.  Management explained that as they are a small company with Fortune 500 clients, they have about as much leverage in bill collecting as He Ping Ping does on a see saw with Shaquille O'Neal (and that's not just because Mr. Ping Ping was so small, but also because he is dead).  As they explained, they have been getting business in towards the end of the Q which causes A/R to spike right before the Q but their larger clients get around to paying them within 45 to 60 days typically since KITD's services are usually a small expense for them.  An interesting point made by CEO Tuzman was that they could factor their receivables but they choose not to because they are not worried about collecting and thus don't want to give up the economics.  Their customers are going to pay as they are big, established companies, but they just take a bit longer.  Three other interesting points:

1.  In the press release they say: "In answer to a couple of investors' questions, we have not seen any slow-down in IP video-related expenditures in Europe as a result of the Greek fiscal crisis."  This is good news as most of their revenue comes from Europe, so Money McBags is happy to see this and hopes it holds.

2.  They purchased a company called Benchmark which gives them a presence in Singapore, mainland China, and Southeast Asia.  Benchmark is supposed to have $10MM in revenue in the next 12 months and they paid ~$11MM for it if Money McBags did the math correctly.  The deal should be immediately accretive and will open up opportunities in Asia for them where there are two main competitors who they hinted that they may already be in negotiations with to do JVs or acquisitions.  Money McBags is glad they are finding shit to buy with all of the dilutive equity they just raised.

3.  Kelly Brook is hot.

Anyway, guidance for this year which was released a few quarters ago was $75MM+ revenue but since then they have added Multicast which should be ~$12MM revenue and 9 months of Benchmark which should be ~$7.5MM revenue, so they are now on pace for ~$94MM in revenue.  However, they only earned $17.5MM this Q so in the next 3 Qs they are going to have to average ~$25MM revenue which seems a bit like a stretch.  In terms of earnings, gross profit was up to 61%, a number they said will likely continue to climb a bit depending on mix and after stripping out merger, restructuring, non-cash stock comp, and integration expense, Money McBags has KITD with ~$1.5MM of operating income this Q and with the 23MM shares they now have, that would have been ~.07 EPS.  So not great, but on the right track.  To give you an idea about the leverage though, if they had earned $25MM in revenue, they would have had another ~$4.5MM of gross profit and even if op ex rose $1MM, that would have earned another $.15 putting them at $.22 eps or ~$.88 eps run rate and they are trading at ~15x that with today's sell off.  As highlighted earlier, guidance and acquisitions now get us to $25MM revenue quarters so over the next year that type of operating EPS is possible, and with 50% growth, KITD remains very cheap.

Friday, May 14, 2010

5/14/10 Midafternoon Report: Market loses again but Nets and Knicks still said to be interested

Oh shit, the market sunk today like Bernie Madoff's grandchildren's hopes and dreams or like a booze cruise captained by Joseph Hazelwood.  Just when you thought investors had forgotten about Greece like John Edwards forgot about dignity (though perhaps he never had any) or Britney Spears forgot about underwear, it is back in the news bringing down the Euro.  Fears remain that Greece won't be able to service its debt (and it won't, unless perhaps Julia Alexandratou does the servicing), that the Euro may be doomed (is everyone else riding out EUO with Money McBags?), and that Nia Vardalos will finally make a sequel to My Big Fat Greek Wedding.  Making matters worse are that Sony warned that they may suffer a “significant impact” if Europe’s deficit spreads, Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” thanks to the continuing debt crisis and the foundations being made out of tofu (and not extra firm tofu, but the regular mushy shit) and paper (the paper of course being the dying Euro), and Hannah Hilton still remains "retired."  Things are looking so bleak today that even the cheering of Alison Preston likely won't cure the markets (though Money McBags would still like to put his rah in her sis-boom-bah).  One way to stop the debt contagion from spreading is to go all Weimar Republic and inflate the shit out of the Euro, another is to break up the EU and stop rewarding moral hazard which seems to be at what Gremany is now hinting.  Breaking up the EU would not only allow Germany and its strong economy to avoid taxing its workers in order to save its freespending neighbors, but it would also allow Germans to practice their favorite past time of schadenfreude.  It is scary out there today so take a deep breath and start booking your vacation to Paris because the Louvre is getting cheaper by the day.

In the US, the banking sector is taken a beating like it's 1986 and it just walked up to Mike Tyson and told him he talks like girl.  Politicians finally seem to want to try to regulate the industry that gave poor people loans in order to sell those loans off to greedy rich people not paying attention and thus destroy the global economy.  First off, credit card companies are taking it in the first bucket today (that was for all you credit card analysts out there) as the Senate voted on legislation to limit interchange fees.  AXP, COF, MA, and V are all down 5% to 10% as a key source of their revenue appears to be drying up like Soul Glo-less jheri curls.  Not only are politicians going after card issuers, but they are trying to fix the rating agencies by creating a middleman (or lucky pierre if you will) to determine who will rate bonds.  This is a bassackward solution, but still better than having rating agencies bid for business and thus completely take objectivity out of just a little something called objectively rating fucking bonds.  First of all, Money McBags doesn't know why any bonds need third party ratings.  Investors should just do their fucking work themselves or rely on the sellside or fucking for all Money McBags cares.  Most importantly though, the current system is more screwed up than Oedipus' sex life or Tori Spellings' face, so Money McBags applauds the baby fucking steps politicians are taking but it's a bit like showering before you bone a hooker because at the end of the day you're still going to get herpes.  Finally, the SEC and NYAG are still going after banks who may have lied to ratings agencies about what they were actually putting in CDOs.  Look, Money McBags has said this before, but they were all fucking complicit.  Honestly, it would take about 3 minutes going through e-mails to convict every bank and every ratings agency of screwing the consumer like the consumer was walking home and hitched a ride on the the Bang Bus.  It was a big shell game only the shell was the global economy and the game was gay chicken and no one flinched so we're all left with flacid cock in our hands.  Be very wary of the financials space right now because if the government wants to be serious and prosecute, there will be no winners, like a Wilford Brimley-Kathy Bates sex tape.

As for macro news, US consumer sentiment was up in May and inline with analyst guesses as the average US consumer can't find Canada on a map, much less Greece, so it just proves that ignorance, and Madelyn Marie, are truly bliss.  Also retail sales rose by .4% which beat analyst guesses of .2%.  However, if autos, gas, and building materials are excluded, retail sales dropped .2%.  Up .4%, down .2%, whatever, it's all rounding to Money McBags, but the point is, and Money McBags has to put this extrememly elegantly because he expects his readers all to be very cunning linguists, shit is still fucked up.

In stock news, it was what Money McBags calls an AC Green or a celibate day as shorts were up and longs were down.  In addition to credit card issuers having their balances transfered, chipmaker Nvidia put up a big quarter but was down on a forecast more lacking than diction on an NBA studio show.  The stock was down 10%+ as they guided to a 3% to 5% revenue decline for the upcoming quarter and analysts were guessing flat to moderately up revenue growth.  Videogame makers are also all getting hit as an industry tracker showed the worst year over year sales decline since the Mario Brothers were implicated in the steroid ring and thus became a bit less "super."  Software sales were down 23% and analysts were expected sales to rise, especially off of a week April number last year while hardware sales were down and amazing 37% as teenagers spent more time playing Scrabble on Facebook and learning to YoYo from the way ahead of his time K-Strass.

In small cap news, everything tumbled except sleepy Money McBags holding DFZ and IBKR.  IBKR is a bit of an interesting play here as the CEO (who also owns 80% of the company) thinks there is $2 of eanrings power in his business but they face lumpy Qs as their market making business is always long volatility to hedge.  Well guess what, unless you have been on the planet Melmac for the past week eating pussy, you are probably aware that volatility is spiking up and thus IBKR's long vol play should bring earnings back to their market making business.  The company takes little balance sheet risk as they are making markets in listed options and hedging their exposures and they have a nice other business which is an online trading platform that is growing 20%+.  This business has been more of a value trap than going to the backroom in a Vegas strip club (and as a word of advice, save the $150 and just get 7 lap dances), but this is the kind of environment where they should excel.  So if you are itching for risk, this is one way to play the financials space relatively safely and with the trends going in your favor and it's still pretty cheap trading at only ~8.5x their earnings potential.

So enjoy your weekend and remember to tell a friend or 10,000 about When Genius Prevailed because the  Money McBags's revolution is underway.  And feel free to follow Money McBags on twitter.

Thursday, May 13, 2010

5/13/10 Midafternoon Report: Market down as Prozac prescription runs out, or common sense prevails, take your pick

The market bounced around today before closing down as it seemingly takes a breather from a week so volatile that it caused quants to come out of the closet and question their autoregressive conditional heteroskedasticity (but that is what they get for having a GARCH model and not Brooklyn Decker as the centerfold for last month's Automated Trader Magazine).  In US macro news, new claims for unemployment were down slightly, or they weren't, depending on who is making up the data this week.  According to the Labor Department, claims fell by 4k from last week to drop to 444k new claims.  Of course last week, claims dropped by 7k to also reach 444k.  Hmmm.  Now look, Money McBags is no Stephen Hawking (and that's not just because Money McBags isn't a professor of Mathematics, but also because Money McBags can walk), but if new claims for unemployment were 444k last week, how the fuck could they fall by 4k to the same 444k this week?  Unless high frequency traders have also begun manipulating the laws of mathemetics, Money McBags is pretty sure 444k - 4k = 440k.  In fact, he's more sure of that than he is sure that Cheryl Cole is hot and that John Edwards is not just a scumbag, but also has bad taste.  So what say you Department of Labor with your statistics, PhDs, and cluttered website?  Is this some new kind of math that will lead to solving the great P=NP problem or finally answer the question of how all of those clowns fit in to that one little car?  Ohhhh, I see.  Apparently, the Labor Department revised last week's number up by 4k to 448k in order to have another positive headline this week.  So good on you Hilda Solis, because who can't get logically confused and thus miss the point by reading "new claims for unemployment fall by 4k from 444k to 444k."  And the point of all of this is new unemployment claims are stagnant, or they're not, apparently, it depends on what day you ask, but things are not getting appreciably better.  In other US news, the NY AG is going after banks who may have lied to ratings agencies about what was in their MBS CDOs.  Wow, really?  You think the banks were fudging the details a bit or do you think rating agencies were turning their heads the other way and coughing as the banks cupped their bottom lines?   Or do you think, I don't know, that everyone was fucking complicit?  Jeesh.  There were more shenanigans going on in CDO deals than there were in Lawrence Taylor's hotel room last week.  If the SEC, NYAG, or the ghost of Nipsey Russell wanted to seriously prosecute the banks, it would take like one second of research to do so since the banks have been manipulating markets since Alexander Hamilton donned a powdered wig and let Maria Reynolds sample his US Mint.  So a big fucking yawn until someone actually does something to protect investors.

In international news today, the ECB is trimming their purchasing of Italian and Spanish bonds after trying to save the market from collapsing in a pool of its own inflation.  By providing liquidity to the Europe bond markets, the ECB hopes they have fooled investors into thinking there are actual bids in the market and are also hoping that investors will continue to have shorter term memories than Charlie Sheen's wife.  Also, Portugal announced an austerity plan following the leads of Spain and Greece.  When Prime Minister Jose Socrates was asked if he would also jump off a bridge if Spain and Greece did first, he replied that it would depend on the height of the bridge and the motion of the ocean beneath.  Portugal's austerity plan calls for a 5% cut to the salaries of senior public officials, increases in value added taxes, and the end of free Madeira Mondays.

In stock news, CSCO reported a solid Q (and Money McBags is an owner of CSCO), yet is getting walloped after CEO John Chambers gave forward guidance weaker than a warm O'Douls.  Revenue and earnings both beat analyst guesses as the company grew topline 27% thanks to increased demand for web and video applications and showing topline Austin Kincaid's greatest hits.  Guidance was lacking though as revenue for the upcoming quarter was forecast to be $10.7B which was inline with guesses but below the high end estimates of $11B.  With the stock overreacting to that news, Chambers went on CNBC to try to do some damage control by reminding investors that they were going to grow revenues 25%-28% and that the market was "over interpreting" what he had said on the conference call.  The fact is, when a company like CSCO can grow 25%+ and is selling off, you should think about building a position as the internet, data, and the NSFW aren't going anywhere and will need CSCO's back end solutions to keep them running (though I hope they never find a solution for Alexis Texas' back-end).

In small cap stocks today, CRUS continues to run and stomp all over Money McBags' hopes and dreams.  Money McBags was in at ~$7.75 and yet sold last week on liquidity fears, so good on all of you who still own it.  Money McBags promised he'd take a look at FHCO's Q and he finally had a chance to do so though he still has yet to test out the product like all good investors should.  FHCO's Q was rather uninspiring and frankly a little confusing.  They earned $.06 per share which was down from last year's $.07 per share due largely due to increased operating costs.  Revenue was flat with last year though that was to be expected as they shifted to the lower priced, higher margin, better tasting FC2.  So while revenue was flat, gross margin was up from 53% to 58% yielding a 7% increase in gross profit thanks to 23% growth in units (Money McBags will allow you to write your own unit growth pun for that one as it is just too easy, like Tila Tequila after a shot of whiskey).  The problem they had  was that operating expenses were up by $600k or ~40%.  What is not clear is how much of the increased expenses were one-time charges and Money McBags has not listened to the conference call yet so perhaps they answered it.  $120k was due to stock comp and $100k looks like it was due to restructuring and exiting their FC1 UK operations, but the rest of the increase seems ongoing as $60k was for marketing the FC2 in US retail channels and $100k was for staff expansion and team training (and Money McBags would expand his staff and train a team on FC2 free of charge if that team included Kate Bosworth and Alice Eve).  Anyway, if ~$220k was onetime, eps would have been closer to $.08 per share but that is not the kind of growth one would like to see.  The company maintained their guidance of 30% to 40% operating income growth which would put their operating income ~$6.5MM and their operating EPS ~$.23 per share.  But even with an increase in expenses, their operating eps this Q was $1.9MM so they are at a close to $8MM operating EPS run rate which would equate to $.28 per share.  The point is, this company is trading at over 20x that and it's not clear how much that is going to grow next year.  Sure they have a nice yield with $.05 quarterly dividend and $5MM cash and no debt on the balance sheet, but Money McBags thinks this stock is a bit ahead of itself unless they can continue to grow earnings at 20%+.  If operating earnings grow at 20% next year from the current $2MM per Q run rate, the company could earn $.30 to $.35 per share next year and is trading at a reasonable mulitple for that.  So Money McBags wouldn't be buying here, but this remains an interesting little company.

Wednesday, May 12, 2010

5/12/10 Midevening Report: Gold hits record high causing a run on Flavor Flav's teeth

The markets were on fucking fire today as investors shook off the historic drop last Thursday, apparently confident that the SEC looking in to the causes of the sell off will yield answers other than the current ones whch include:  "Beats me," "How the fuck should I know," "and hey look, it's Enrico Pallazzo!"  The head of the SEC, Mary Schapiro, who in her short time leading the never distinguished agency has already instituted sweeping reform including such things as following up on leads, proactively going after market manipulators, and clamping down on tranny porn at the office, has called last week's market failure “profoundly disappointing and troubling.”   She then added, "I haven't been this disappointed with anything since Meaghan Chung worked at the SEC or since I bought a slap chop."  Luckily regulators are getting closer to finding out what was wrong with the market by ruling out several potential causes such as erroneous fat finger trades (known here on WGP as Portia De Rossis), unusual trading in P&G stock, hackers, terrorist activity, and Noriel Roubini shouting "Beetle Juice" three times quickly.  The SEC has sent out subpoenas to further look into this matter, though they have not said to whom they have sent them, but Mary Schapiro was seen asking Goldman's CEO if his first name is spelled with one "L" or two.  While equities are bouncing back, it is still showering gold in the markets as gold has hit an all-time high which means Mt. T's neck is now the richest person in America (and he pities the fool who told him all that jewelry was silly).  The fact that investors are rushing in to gold is not a good sign for the markets as it signals little faith in currencies and a fear that escalating debt will continue to cause gevernments to run their printing presses more rapidly than drunk Hollywood wannabes run through Paris Hilton's panties.  Money McBags remains very afraid.

Helping drive the markets up today is that Spain has announced an austerity plan that will involve cutting wages of government employees, reducing public investment spend, and increasing the use of home grown green technologies such as spanish fly.  There is real fear that workers may strike throughout the countrty, but economists are fairly certain strikes won't come to fruition because strikes would cut in to workers' daily siestas.  In addition to Spain making like they are serious about their budget, in much the same way that James McGreevey made like he was serious about Dina Matos, Portugal sold the fuck out of some bonds.  Portugal raised 1B euro (though the euro isn't worth what it used to be) which is a good sign for the markets, though the fact that they need to raise another ~20B by the end of the year is a sign worse than waking up pantsless in a West Hollywood alley with a sore rear end and rainbow colored socks.  Joining in on all of the debt lip service in Europe (and Money McBags wishes Faye Reagan would give his growing debt some lip service), is Britain who is instituting budget cuts as unemploymnet spikes to its highest level in 16 years.  The new fiscal policies could include a tax on banks, black jeans, and Lucy Pinder downloads.  Also, data came out today showing GDP in Europe was up modestly in Q1, growing .2%, or as it's better known as: a rounding error. 

In the US, markets rocketed up thanks to positive forecasts from tech companies who said they expect it to be sunny with a chance of silicon.  Tech giants IBM and INTC both gave positive outlooks today with IBM saying they expect to earn at least $20 per share by 2015 which is double their current business and INTC's CEO saying he expects a double digit percent rise in revenues and earnings.  Additionally, MSFT was up today after they said they will offer Microsoft Office free online so the whole world can spend their days dicking around with PowerPoint for no charge.  Wow.  Technology hasn't received news this good since Number 5 was found to be alive.  Also, the US trade deficit widened to a 15 month high as exports were up 3.2% and imports were up 3.1%  For March, the rise in exports reflected increased sales of American farm products, a wide range of heavy machinery, and dollars.  The rise in imports was driven by a 26% jump in crude oil shipments (though not nearly as crude as Dice Clay CD shipments).

In small cap stocks, everything rode up like a hand on Alexis Texas' ample thighs.  CRUS, TMRK, and KITD continue to rally even though Money McBags ditched them for liquidity reasons last week.  Money McBags did buy back some KITD today in the $12.90s in anticipation of a good earnings call on Monday.  If the market structure is healthy, KITD remains a high upside company.  Also, QCOR is holding a conference call this afternoon to discuss the FDA panel's ruling on Acthar last week where the drug was found to be both less filling and taste great by a panel of experts.  The FDA panel voted 22-1 in favor of Acthar's efficacy in treating IS but there was some concern over how manageable and reversible the complications were.  Money McBags is sure QCOR will delve into all of this this afternoon, but on the surface it seems like very positive news since it points to the FDA putting IS on label for Acthar and thus allowing QCOR to market to IS doctors, something they have been unable to do despite being the favored IS treatment.  Money McBags promised some analysis today and he has FHCO's Q on his to do list (though it is much behind Alice Eve and Ashley on his to do list), but time ran short today so tomorrow he will try to hit you up with some micro to go with the macro.

Tuesday, May 11, 2010

5/11/10 Midafternoon Report: Europe bailout signals "too PIIGS to fail" policy

Did I miss something yesterday?  Jeesh, Money McBags takes a day off to fine tune his factors of production and Europe decides to mimic Ben Bernanke's "too big to count" strategy by printing up enough Euros to finally finish off the Bialowieza Forest or to get 36 very straight hours with the lovely Ashley Dupre.  Perhaps the EU just wanted to test out the theoretical economic J-curve as part of some bs study by INSEAD to help future business leaders understand the value of exporting, but if they really wanted to devalue their currency, they should have just married it to Mickey Rourke.  But hey, as long as the EU is content to continue to tickle John Maynard Keynes' shriveled balls with their embracing of debt, perhaps they'll go shock thumb on Sir Thomas Gresham's law by creating a shittier currency than the Euro in order to reinflate the dying currency's value. Ugh.  This bail out continues to promote moral hazard and serves to merely put a band aid on a gun shot wound or a regular condom on Lexington Steele.  Giving more money to countries who spent it like Kirtstie Alley at a Sizzler on rib night is just bad business.  If your kid ran up a credit card bill, odds are you'd take it the fuck away from them and not increase their credit line which is basically what is happening in Europe.  So Greece, Spain, Lucy Pinder, keep buying the shit out of whatever you want because Jean-Claude Trichet and Christine LaGarde have the printing presses on full bore and it's lend one lend one free day across the continent.  And Europeans, start spending those Euros because the currency is about to become as worthless as campaign funds to John Edwards, binoculars to Stevie Wonder, or a lap dance to Richard Simmons.

The market however is rallying again today as apparently the UK is talking about instituting budget cuts.   What is encouraging is that Britain is doing this despite its current hung parliament (and an English parliament hasn't been this hung since the aptly named Dick Long dangled his legislation in the House of Commons in the late 1600s).  With all of this commotion in Europe, let's not forget that China may still be a problem as inflation is rising with home prices up 12.8%.  China continues to boom with retail sales up 18.5% and bank lending in the month of April  up to $113B.  Hey EU, why not just quit screwing around and sell yourselves to China and be done with it.  With China's economy bubblerific, it would be a bit like AOL buying Time Warner, but that worked out well for everyone right (and by everyone, Money McBags means Steve Case)?

In US news, the SEC is getting exchanges to institute new circuit breakers to stop stocks from falling too much too quickly.  In this way the SEC hopes to remanipulate the market from the high frequency traders who currently manipulate it.  Money McBags still has no faith in the current market structure after last week's crash that was only stopped by dumb luck.  In macro news, wholesale inventories in the US rose .4% in March which was a tick below analyst guesses but puts wholesale inventories at their eight month high which is marginally not bad news for the economy.

In stock news, LM beat expectations, announced a potential $1B buyback, and apparently cured cancer as the stock is up 13%.  They earned $.39 per share which bested analyst guesses of $.35 even though they still had $10.9B of outflows.  LM also announced a "profit boosting" plan which consists of boosting more people out of jobs to increase overall profit as the investment manager continues to lose assest (though at a much slower pace).  Alternatively, Priceline is down 10% today causing investors to all ask the questions "Priceline is still in business?  Will they take Beenz?"  Apparently PCLN's guidance was weaker than Money McBags knees after encountering the lovely Raven Alexis as they warned of a slowdown in their international business for the upcoming quarter thanks to a series of events including the Iceland volcano erupting, the weakening of the Euro, and a week long Hanna Hilton marathon on Spice.

In small cap news, CRUS continues to rally after apparently Jim Cramer slathered all over it last night.  Money McBags has been pimping CRUS for quite a while now even though he sold it the other day to mitigate his risk (but hey, who needed the extra 20% upside, ugh).  Money McBags thinks $1.20 in eps is not unreasonable for CRUS which puts the company at ~10x + $2 in cash.  He wouldn't be buying here because Cramer's picks tend to get a pop up before sliding back down, but this is a solid growth company (you can read for yourself if you just type CRUS in to the search box here, speaking of which, Money Mcbags would love to search Hayley Atwell's box).  Money McBags is still concerned about the market structure and the influence high frequency traders have so he is not sure fundamental analysis is really all that worthwhile right now.  If you believe in the markets though, KITD is ridonkulously cheap after the sell off last week and has yet to rebound.  The issue that Money McBags is trying to work through though is KITD's reliance on Europe with 70% of their revenue coming from European companies.  Money McBags will ponder this as he swapped his holding into GLD but will be back analyzing companies tomorrow.