Monday, August 2, 2010

8/2/10 Midevening Report: Market hits ten week high as meth lab in the basement finally pays off

The market ran faster today than Roman Polanski going to get his keys to pick the baby sitter up because the manufacturing sector grew at its slowest pace since December, private construction spend dipped for the second month in a row, and Ben Bernanke said shit still sucks out there.  So rally fucking on like Donkey Kong having his way with the princess, only if the princess had tainted his banana wth AIDS.

With the market rallying on macro news that was about as positive as a RuPaul pregnancy test, Money McBags is left to wonder what he is missing, how much the market would rally if there were actually something positive going on in the economy (like maybe either the second derivative of released data positively increasing or the unemployment rate decreasing and not from just from a declining labor force participation rate), and how he overlooked this delightful NSFW Alice Eve scene which has caused his Oscar to stand and applaud.  Money McBags is not quite sure how to interpret the market moving in opposition to macro data, as the language of giberrish wasn't on the rosetta stone the last time he checked, but he hopes those of you buying in to this capitualting market are careful.

As for macro news, Benny B warned us that "we have a considerable way to go to achieve full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure, and lost savings, in addition to the angst and nausea they feel every time they look at the deficit and realize their kids may be more fucked than Stephen Hawking in a duel."  Ok, perhaps that last bit was made up but, whatever.  Bennie B did get slightly positive by saying he fully expects consumer spend to pick up in the next few quarters as wages rise, business demand picks up, and the US finally figures out what to do with all of the underwear they stole.

Money McBags is a bit skeptical of Bennie B's claims since unemployment remains more stagnant than the Terri Moulton Horman for "Stepmother of the Year" campaign or jokes here on the great When Genius Prevailed so it's not clear where these rising wages are going to come from unless it's from laying more people off and then giving those still employed a bit of the saved salary, which of course would do nothing for overall consumer demand.  But hey, when Bennie B gets his Fed on, the market listens (to the parts it wants to hear).

In other macro news, the ISM came out with their numbers for July and the manufacturing sector grew at its slowest pace this year, but luckily, the 55.5 number was better than the 54.2 analyst had guessed so rally on my friends.  It was the third straight month (and the month was so straight it even got it up for a Kathy Najimy-Rachel Ray threesome) of slower growth but remember, readings above 50 still signal expansion, so apparently there is nothing to see here (except for new orders dropping to their lowest level in over a year, production slowing down, and Kagney Linn Karter).

In the final bit of macro news, construction spending rose .1% as increased investment in public projects (perhaps maybe a bridge to somewhere) offset the 15th straight monthly decline in private nonresidential construction and the .8% decline in private homebuilding (which included growth from the Greenspanville's being erected across the country, and yes, Money McBags said erected). Yowsa.  As usual, last month's new construction was revised downward from a .2% drop to a 1% drop as part of the government's "hold the shock and hope for no awe" strategy, so this month's .1% decline should be labeled as "wishful thinking."

Internationally, China's manufacturing sector cooled further as the government tries to reign in reckless speculation on real estate and ben wa balls.    The official purchasing managers' index  fell to a 17 month low of 51.2 from 52.1, a separate PMI released today by HSBC and Markit Economics showed a drop to 49.4 from 50.4, and a third reading of PMI from the desk of Sum Dum Gai simply took the average of the two.  China's ec0nomy slowing down is actually favorable as it has been growing at a rate less sustainable than a conversation involving only eye contact with Christina Hendricks so having it moderate a bit and perhaps not inflate to a bubble like every other emerged economy would be beneficial for all involved.

Driving the market today was the European banking sector thanks to HSBC putting down its fag, rolling up its sleves, and earning the fuck out of some profits.  The bank doubled its profits to $7B despite revenue growth declining by 7%, operating expenses increasing by 9%, and no one having any fucking money.  Profits rose as losses on bad loans tumbled to $7.5B, just over half of last year's losses, and were the result of bad loans rolling off the books and the bank not lending anyone any money.  BNP Paribas also put up a good Q, with the French bank's profits rising due to credit getting better and having Laetita Casta on call to help coax out customer deposits.  Just like in the US, bank profitablity seems to be rising across the globe despite declining revenues as credit is improving.  That said, credit can only drive earnings for so long until the banks are going to have to start lending to people again to drive revenue and thus the vicious cycle will begin anew.

In other market news, Blackberry is not just losing market share to the iPhone but now the UAE said they will cut RIMM's data service like the dirty infidel that it is.  The UAE cited security concerns over RIMM's reliance on encrypted emails which make it easier for criminals to operate and harder for the government to watch that stupid fucking video of the double rainbow that everyone seems to be emailing around.  Not since Peter Chung anointed himself King has there been an international email controversy like this and it does not augur well for RIMM's jobs overseas going forward as other countries like Saudi Arabia are also thinking about taking steps to ban Blackberry's mobile services.

Finally, KO got an upgrade today from JP Morgan on the strength of the company's emerging markets and having read Money McBags' columns about the solid brand equity overseas the company enjoys.  An article in Baron's also pimped KO today, saying it could rise by at least 10% in the next year because of North American markets and because it still tastes better than water.  And last but not least, Corning was up nearly 6% on news that it's 50 year old Gorilla glass could be the next bazillion dollar product for flat screens and touch screens as it is 2 to 3 times stronger than regular glass, half the thickness, and sells for only a few bananas.  The lighter, sturdier glass should cut down on shipping costs and scratched screens while also being easier to clean after one gets done with a chat roulette session.

In small cap news, everything was up.  Money McBags is short on time today but he wants to highlight KIRK which remains too fucking cheap even though it was up strong today.  Money McBags broke KIRK down a little over month ago saying its low end market focus (midwestern/southeastern housewives who love tchotchkes more than Joanie loves Chachi), growth through the downturn (and now they are going to be opening stores instead of closing them), and valuation (it is now trading ~9x to 10x eps estimates not including the $3.50 per share of cash on the balance sheet) make it almost as attractive as Diora Baird, and nothing has changed since then except for John Kyl's stand on the 14th Amendment.  The other interesting small cap name is NTRI who traded down big on Friday after what Money McBags thought was an OKish quarter.  He has to go through it in more detail and while he wouldn't be a buyer of the stock until their management team actually performs (they are 0 for the last bazillion quarters, rounding up to the nearest bazillion), they pay a nice yield, have a terrific cost structure, and are in a growing (pun intended) market.  It's worth keeping on a watch list for when/if they can figure out how to start accelerating their growth rates (Money McBags votes for getting Nicole Eggert as a spokeswoman, but that's just him).


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