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.