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.

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