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.

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