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 Yelp.com 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.

3/10/10 Midafternoon Report: Is that a bank rally in your pants or are you just happy to see me?

The market is higher today on the strength of a banking sector rally, positive economic news from China, and a likely date tonight with Izabel Goulart (because why else would it be this excited?).  The macro news today has been slightly positive with wholesale inventories down only .2% sequentially in January after being down 1% in December.  While this is the 13th consecutive month of wholesale inventory declines, the second derivative continues to sink like John Meriwether's hedge fund career and a continued decline in the rate of inventory cuts is certinaly a positive sign.  The Commerce Department, led by esteemed Secretary Gary Faye "Reagan" Locke also said that sales were up 1.3% and that dropped the ratio of inventories to sales to a record low of 1.10.  This is an interesting metric as company inventories are now leaner than James Polk's credentials in 1844 or Adam Sandler's Oscar trophy shelf.  If the economy can somehow forget about the 10% unemployment rate, the mounds of money printed by the US government, and Hillary Swank's Academy Awards dress (and really, where did those come from?), and just start to gradually build back some inventories there could be some real recovery, despite what the great Roubini is out saying today about the increasing odds of a double dip recession (ugh).  New unemployment data is also out at the state level with the unemployment rate increasing in 30 states (though more if one includes the states of panic, fear, and pants shitting) and decreasing in 9.  One of the states to see declining unemployment was Michigan where the rate dropped from a national high of 14.5% to a still "you're fucked" rate of 14.3%.  But those three extra people who got hired to man the Burger King drive-through line in Kalamazoo could be a signal (unfortunately that signal is "we need some fucking jobs").

In international news, Greece's economic crisis is more over than Corey Haim (what, too soon?) according to Romano Prodi who is a former Italian Prime Minister, now teaching at a college in Shanghai.  Money McBags has always said if you can't trust an Italian Prime Minister, especially one who has been out of office for years and has had absolutley no real role in anything having to do with the Greek crisis, then you can't trust anyone.  Prodi will continue his "speaking out of my ass" tour by taking part in a roundtable on how global warming has finally ended before chairing a conference on the demise of the internet.  Also fueling the market today is that China's exports rose 46%.  This likely signals increased consumer demand for products that cause nervous system and kidney damage to infants, or as they are more commonly known as: toys.  Infant nephrologists across the nation are excited by this uptick in China and are anxiously awaiting orders of their new CT scan machines to be delivered.

In market news, the always delightful Dick "Don't call me Richard" Bove (with the last syllable of Bove pronounced like the last syllable of oy-vey), was on CNBC talking up the financial sector.  Mr. Bove (Money McBags refuses to call anyone Dick), said he thinks bank dividends will go back up to their previous levels in the next two years and he gave a vote of confidence to Citi.  And let Money McBags tell you, getting a vote of confidence from an analyst who missed the symptoms of the ride down is as valuable as being dong-less in Vietnam (though to be fair, they all missed the ride down except perhaps the lovely Meredith Whitney whom Money McBags has such a crush on that he would body slam Mr. Whitney and put him in the Camel Clutch were he ever to meet him).

In small cap news, WILC had their quarter last week and Money McBags promised he would break it down for all of you this week.  Unfortunately, Money McBags needed a fucking talmudic scholar to decipher WILC's press release as it was more confusing than a plague of frogs (no really, you're doling out 10 plagues and frogs is the best you can do for one of them?  Really?  You ever hear of small pox, syphilis, or grizzly bears?).  Money McBags wonders if he should have read the release from right to left to better understand exactly which numbers were real numbers and what went in to them.  Unsurprisingly, WILC's conference call contained enough jibberish and was hard enough to hear that it made the press release look like a fucking Dr. Seuss book.  Between COO Zwi Williger's accent and the fact that they refused to take questions, WILC's conference call was as helpful as giving a band aid to a hemophiliac or an all expense paid trip to the Mustang Ranch to a eunuch.  Seriously guys, you're running a fucking public company, can you at least, you know, present the information in a user friendly manner to your shareholders (and Money McBags is a shareholder).  Anyway, on the surface, their Q was pretty good.  They grew sales 12% in NIS (New Israel Shekels) and increased their gross margins which they said was the result of continuing to introduce new higher margin products.  They said they earned $.20 per share in US which puts them at $.80 for the year.  They have $26MM of cash on the balance sheet which is roughly 1/3 of their market cap.  That said, their selling expense was up as a % of sales from 11% to 15% which they attribute to promotions, and their G&A was up as a % of sales as a result of management bonuses.  On the call they also talked about product launches to a big box US/Canadian retailer but ZWI's accent was thicker than the always lovely Carmella Bing so Money McBags could not make out to whom or to what he was referring.  Now look, Money McBags is also a Jew and while his hebrew language skills are more non-existent than Satyrs, weapons of mass destruction in Iraq, or money shots in lesbian porn, he honestly feels he would have got more out of the call had ZWI just spoken in his native language.  The most confounding part was that he did not take any questions, citing their pending share offering of $20MM.  Come on Zwi let's sit down and talk about this yid to yid.  We can kibbitz a bit about the old days and all of the shiksas we'd like to have boned, but just be fucking honest with me so we can avoid any Jew on Jew crime.  If you're not going to take questions on the call, then perhaps you'll answer them here for your shareholders.  Below are things investors need to know:

1.  Why is there no quarterly income statement or cash flow statement?  Why only give the annual summary?  For fucksake, even in your share registration statement you filed with the SEC the day of the earnings release, you only include Q3 numbers.  WTF?  Can you give your shareholders a break and just give us the information without making us break out excel and remember how to run a fucking vlookup table?

2.  Along those lines, you quote a $.20 eps and a net income of $2.12MM.  Yet in the same paragraph you say income before taxes was $1.84MM.  Now look, I'm no Harry Markopolos, but how the fuck is your net income higher than income before taxes seeing as how you are a tax payer?  Honestly, this is more confusing than a Thomas Pynchon novel or trying to figure out exactly of what Captain Crunch is the captain (and don't say crunch).  Money McBags broke out his proverbial magnifying glass and it looks like $.04 of your $.20 eps this Q was from discontinued operations.  And that extra $.04 is almost enough to meet the discrepancy.  Even if that is not the discrepancy, why the fuck are you quoting earnings of $.20 when only $.16 of it was from continuing operations??  As of 9/30/09 you had earned $.59 per share with $0 from discontinued operations and for the year you earned $.79 with $.04 coming from discontinued operations.  So that sounds like a $.16 Q4 to me.  So why would you quote the $.20 number?  Work with me here.

3.  How much of your increased gross margin was due to currency effects?   It's great that margins are rising but you have talked about the advantage you get through currency differences between your costs and revenues, so would it kill you to break that out for us?  You said some of the margin increase was due to selling higher margin products, but how much?  Could you do shareholders a mitzvah here and let us know how the actual business is tracking ex. currency effects?

4.  Why did your cash balance go down in the quarter if you were profitable?  Since there was no cash flow statement, Money McBags had to copy/paste the last two balance sheets into his outdated excel and use the delicious text-to-columns feature just to figure out what was going on and let me tell you, when Money McBags has to start breaking out old school excel functions, he is less happy than Mark Sanford's wife on a family trip to Argentina.  You earned $2.1MM from continued and discontinued operations and yet your cash balance was down by about $2MM.  With your PP&E remaining about the same (and in Money McBags younger club days, he would often see people pee-peeing some E) it looks like the cash outflow was from a $4.5MM increase in inventory and $2.5MM increase in trade receivables.  Hmmmmmmmm.  Care to answer WTF caused this cash decline?

5.  As related to what we found in question 4, why did inventories go up by more than 50%?  Seriously, can you help me on this one?  Is this a normal seasonal inventory tick-up of matzo, gefilte fish, and grape juice for the upcoming Passover seders or is something else going on here? You said you are launching more products so is this the ramp up of that?

6.  Why are you raising $20MM?  Is this really related to expansion or does this have to do with the declining cash balance in the quarter?  You have $26MM of cash on your balance sheet and are a $75MM market cap company, why do you need to dilute share holders by 20%ish to bring in $20MM?  You have stated that you are looking to buy a distribution center in the US or form a JV, but do you really need to an additional $20MM for that kind of acquisition?

So ZWI, if you're reading this, and I know you are, can you help a fellow semite out a bit?  I mean it's not like I am asking you where the afikoman is (don't tell me, it's in the bookcase?), just help me analyze your actual business.  Money McBags wants to be a longterm shareholder but he is thinking about selling despite the ridiculously cheap valuation because he is not clear what the actual earnings power is.  You said you will answer questions after the share offering which will likely include or be followed shortly thereafter by some "important announcement" (hopefully that announcement isn't that you have run off with the cash), but can you tickle Money McBags' balls just a bit here and give some real information?  And let Money McBags be brutally honest with you, if you ever quote your eps/net income number again and include discontinued operations, Money McBags will go to the Wailing Wall and pray for someone else to take over the company.  The whole press release/call/equity raise is just so fucking meshugganah that shareholders need to know you are not boozing on Manischewitz and can actually run a public company.

The dreidle is in your court Zwi.  You know where to reach me.  MoneyMcbags@gmail.com or www.twitter.com/moneymcbags.  I'll be here all day.

1/25/10 Midday Report: Bernanke likely to get bipartisan support despite claiming he doesn't swing that way

The market is trying to rally after last week's sell off which was caused by Obama letting Paul Volcker threaten to open up a can of whoop ass on the banking system, the senate seemingly hedging on reaffirming Ben Bernanke as Chairman of the Federal Reserve proving once and for all that the Senate is as good at making decisions as NBC is at handling their prime time schedule, and something called "data" which showed that unemployment remains higher than Brittany Murphy on the morning of 12/20/09.  Money McBags has been saying this for a while, but we are at an inflection point.  The market has rallied back to above a fair value based on earnings, so either earnings are going to have to be strong, or the market is going to have to do a very public walk of shame and re-trace some of its steps.

The news today is that the Senate has defied all known human physiology and started to think with their asses (because that is where their brains appear to be) and is likely going to reconfirm Ben Bernanke as Fed Chairman.  This move is said to largely be a result of the Senate's other top choices, Bernie Madoff and Raj Rajaratnam (or Raj-squared for short), currently being a bit indisposed (though to be honest, Money McBags highly approves of Mr. Rajaratnam's hiring practices and only wonders if he would have hired Mrs. Brosnan to cover large cap stocks or some woman named Heidi Montag to cover plastics).  InTrade is betting there is a 95% chance Bernanke stays as Fed chair which are exactly the same odds of the US highest income tax rate being above 38% in 2010 and Hilary Clinton being a man.

In macro news, US existing home sales plunged 17% which was the biggest decrease since they started keeping records in 1968 (thus after both the Great Depression of the 1930s and the scratch and sniff paint fad of the 1940s).  The drop in home sales was driven by the end of government tax incentives for first time buyers, continued unemployment, tougher lending standards, and not being able to find a carpet to match the drapes (a problem which Jenny McCarthy can sympathize with in this very not safe for work image).

In stock news, it's still earnings season and most people are eagerly awaiting Apple's earnings tonight after the bell.  If they beat estimates, will they be able to rise or will the market sell the news like they did to GOOG, INTC, and Jay Leno on prime time?  Haliburton announced earnings today and profits were down 7%. The company cited weaker drilling activity and the fact that Dick Cheney is no longer vice-president.  And Ericcson will be cutting 1,500 jobs due to an 82% drop in profits.  However, the drop in profit does disprove Tiger Woods theory that Swedes don't go down.


In small cap news, HAFC continues it's fall from a silly rally as it shows that the book value depends on the book (you hear that Peter Cooper Village?), and ZAGG is also taking it in the yingus as the market realizes that no one wants to pay $30 for an iPhone cover (and honestly, this might have been the easiest short since Bridget the Midget).  In fact on 12/31/09, Money McBags said this in the comment section of this very blog while debating with a reader: "In fact I will wager 1 share of ZAGG (and that is funny because ZAGG is going to $0)."  Just a few months ago, ZAGG was trading at a multiple greater than 30x, despite the fact that they sell one product which is overpriced, don't even own the technology, are in a market with low barriers to entry with a lot of competitors coming in, and it is easier and less time consuming to get Artie Lange off drugs than it is to apply their ZaggSkin product.  Plus management was talking about building ZAGG stores for all of their future products instead of figuring out how to make their current product easier to apply and cheaper.  They are now trading at around 14x 2009 expected earnings of $.20 per share, a number by the way which has maintained stagnant despite top line growth (which happens when you have to distribute products to more expensive channels and you pay more for shipping than you receive).  The easy money has been made on this short, but it is unlikely their ZaggBox sells even as well as Rosie O'Donnell's box and their App Store or marketplace or whatever they want to call it is more commoditized than fake boobs at a casting call for Van Wilder 3: The Rise of My Pants.  In other small cap news, MED pre-announced a good quarter today of 75% growth and EPS to be $.17 to $.20 in this Q.  The company has great ROEs, is growing faster than a steroidal weed, and is trading at only around 20x 2010 earnings and estimates will likely move up after today's pre-announcement.  Money McBags would ordinarily like a stock like this, especially after it's big recent sell-off, but there is something about multi-level marketing that feels oh so dirty to him and apparently others agree.  MED could be a big winner, but Money McBags is going to sit this one out.

1/22/10 Midday Report: Volcker? I hardly even know her.

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1/21/10 Midday Report: With healthcare solved, Obama to take on banking industry

The big news spooking the market today is Obama's unknown plan to try to regulate banks.  He is now said to be giving former Fed Chairman Paul Volcker the keys to palace and Volcker is rumored to be getting all Glass-Steagall on bankers's asses telling them they can't trade financial securities using their own deposits.  Money McBags is usually for the free market (especially if that free market specializes in foie gras or taint cleanings), but large financials firms need to be regulated.  They have too much sway over the global economy, like Rasputin had over the Tsaritsa Alexandra or ugly chicks have over former President Bill Clinton.

The other news moving the market today is that China's GDP rose the fastest it has in two years as it grew 10.7% thanks in part to their ability to make really cheap shit and therefore have consumers need to continually replace said really cheap shit when it breaks/tears/poisons them.  Q4 economic growth was driven by a $586B stimulus package, subsidies for consumer purchases, a credit-fueled investment boom, and buy one get one free happy endings at local Shanghai massage parlors.  The strong growth in China has investors worrying that the Chinese government will finally try to slow down their lending to avoid more of a bubble than they have already created, which in turn will dampen the global economic recovery.

In US macro news, first time claims for unemployment rose last week by 36k to 482k defying analyst expectations for a 4k drop.  Money McBags is not going to harp on analysts for getting the number wrong as he knows it's not easy to guess at a number that can be anywhere from 0 to 300MM, but guys (and gals), can we at least get the fucking direction right?  You have a 50-50 chance on that one which is slightly better than your odds of not contracting herpes from shaking Tiger Woods' hands, so can we do a little better?  Luckily an economist for the  U.S. Labor Department (or as it is soon to be renamed, the U.S. Non-Labor Department or simply You're Fucked) cleared everything up by claiming that last week's numbers were higher than expected in part because the Christmas and New Years holidays created a backlog in some states.  To quote this brilliant economist: "It is not an economic thing -- it is an administrative thing."  He then went on to explain that the recent market crash also "wasn't an economic thing, it was a math thing," John Edwards denials about being some broad's baby daddy "wasn't a lying thing, it was a syntax thing," and for the ladies out there, swallowing after a hummer "isn't a romantic thing, it is a nutrition thing, so bottoms up" (when of course, we all know it is both).  The main point is, whether or not the rise in new unemployment claims was due to an anomalous administrative glitch or more people simply losing their fucking jobs (you know, what the statistic actually measures), there were still at least 450k people who recently filed for unemployment so this economy is about as healthy as Amy Winehouse at an all you can smoke crack bar or a Krispy Kreme donut with extra transfats.

Also, the Philly Fed showed the pace of manufacturing slowed a bit in January as the index fell to 15.2 from 22 and was below the expectations of 17.  Apparently a positive number still signals growth so since we have no idea of the impact of the relative values of the arbitrary numbers (how much worse is a 15 than a 17?  And about 10% is not likely the correct answer), all we can say is that the Philadelphia area produced some shit, though it was likely all stolen by the residents, so should have minimal economic impact.

In stock news EBAY put up a huge quarter as PayPal revenue was up 28% thanks to an uptick in Nigerian princes needing funds to return to their homelands and reclaim their fortunes, while Starbucks (SBUX) beat analyst estimates by quadrupling profits from a year ago.  Same store sales were up 4% proving that overpriced coffee may be a giffen good.  The biggest stock news of the day though was Goldman Sachs beating profit estimates by raking in $4.95B in the Q.  More surprising than Goldman's success under the Obama administration was the Streltsys' profitability during the reign of Ivan the Terrible, the benefits earned by the Imperial Guard during the Napoleonic era, and Haliburton's favorable business wins during Dick Cheney's vice-presidency.  Goldman's revenue was mostly inline and their outperformance was caused by putting aside only $16B for bonuses.  The pay ratio dropped to 38.5% which means the average worker will be forced to scavenge with only a $500k bonus and with the way the dollar is dropping, that means these poor Goldman employees will only be able to buy one Maybach and 3 nights with Charisma Cappelli (though to be honest, if all 32k employees had 3 nights with young Ms. Cappelli, she may get a little tired, so to those Goldman employees reading this out there, try to be in the first 1k if possible).

As for small stocks, HAFC continues to love it's long time shareholders as it erupts for the second day in a row on no news.  As stated yesterday, TBV is somewhere around $3.60 so this stock has plenty of room to move up, but this is very speculative as Money McBags trusts that TBV number about as much as he trusts politicians, Mexican water, and 35 year old virgins.  Also, anything that has recently risen, like RICK, is selling off faster than Rachel Uchitel's 10 minutes of fame.  This is going to present some buying opportunities for the better companies.  Over the past several weeks Money McBags has mentioned several companies he thought were solid but had run up a little too much (CRUS, NTRI, TMRK, heck even INTC) so use this sell off wisely to re-evaluate and make some smart decisions like the guy who married Christina Hendricks.  Oh yeah, a big shout out to When Genius Prevailed reader Matthew who has nailed NLS like a 19 year old girl in her first Monsters of Cock video.  Kudos on that pick.

1/20/10 Midday Report: China flexes pimp hand and vows to curb lending, businesses cower in the corner and promise to work harder for daddy

The big news bringing the market down today is that China is beginning to realize they may have a bit of a bubble on their hands as they opened up their fortune cookie last night and saw their fortune was written on the back of a yuan (as for the fortune, it said "man who puts balls in peanut butter is fucking nuts").  As a result, China will reel in their profligate lending.  The chairman of the China Banking Regulatory Commission said that he expects banks in China to decrease their loans by 22% in 2010.  So in the year of the golden tiger (and also the year of Tiger Wang), businesses may not receive the showers of money they saw in 2009 (now aptly renamed from the year of the Ox, to the year of the golden shower).  It is good that China is realizing that they need to reign in their stimulus sooner rather than later, but this news of course is putting fear in to investors who worry about the short term recovery from the global recession.

In US macro news, US wholesale prices showed virtually no inflation as energy price declines offset increases in food prices.  This is bad news for fat people but good news for the Tin Man.

In stock news, BAC and WFC reported earnings, well to be more precise, WFC reported earnings and BAC reported losses.  BAC underperformed analyst expectations by posting a loss of $.60 per share vs. estimates of a $.52 loss per share.  They blamed the $.08 miss on analysts being really bad at math.  Without the TARP repayment and dividends paid on preferred stock, the Q4 loss would have only been $194MM, and in related news, if I didn't have a dick, I'd be a chick, so unfortunately the details matter (and if I were a chick, I would be totally gay for Aubrey O'Day).  BAC also raised their provision for credit losses to $10.1B in Q4, from $8.5B a year earlier because of some little thing I believe they referred to as "people not wanting to fucking pay shit back."  They also had total write-downs for the year of $33.7B, more than double the $16.2B in 2008, so at least we finally know the price of dignity.

The point is, BAC benefited from the investment banking gains of Merrill Lynch while they still took it in the yingus from their consumer portfolio.  They suffered a loss of $4.9B on their consumer credit card business, compared with a $3.3 billion loss a year earlier.  So guess what market, things aren't getting much better.  People still love charging off like Martha Coakley loves being bad at politics (and I need to digress for a second here.  Money McBags does not get involved in politics.  He does not care one iota what the fuck happens in this world as long there is world peace, no capital gains tax, and free blumpkins for all.  And to be honest, he'd be happy with just one of those three, unless that one was world peace, and then he'd need at least one of the other two.  The point is, Money McBags is completely apolitical, for all he cares, a gay person could marry an abortion while smoking a joint through the barrel of a shotgun in the middle of the oval office while spraying chlorofluorocarbons all over a bald eagle, so the fact that he has an opinion on this senate race is unusual.  But this must be said.  For a democrat to lose Ted fucking Kennedy's senate seat in Massachusetts after having a 30 point lead in the polls and without having killed someone, been arrested for fraud, or openly rooted for the Yankees and claimed Bill Russell was a bitch, is perhaps the worst performance not just in the history of politics, but in the history of anything.  Think about it.  Ted Kennedy killed a lady and that couldn't stop him form winning election after election.  All this Coakley broad had to do was be alive, and yet somehow she fucked that up.  Sure the dude who beat her (and yes this is really him, and sorry to my straight male readers) had a secret weapon in his lovely daughter Ayla, for whom Money McBags would cure cancer (though not one of those hard cancers like nut cancer, something much easier, like cancer of the mouth, also known as Kathy Griffin), but Coakley's loss is so colossal it should be part of the lexicon.  So here we go, BAC did not lose $.60 per share this Q, they Coakleyed $.60 per share.  Diatribe over).

Most interesting was the verbiage from BAC's CEO who said "economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.”    Which seemed at odds with WFC's CEO's statement that:  “While losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate.”  Of course, WFC managed to turn an $.08 profit compared with a ginormous loss last year, so things are looking a bit rosier for them, except if you look at their charge-off numbers which were up sequentially $300MM to$5.4B driven by commercial and consumer real estate.

So are all banks created equal or will performance differences really start to show now that the economy has sort of recovered?  More importantly, has the economy actually recovered?  Here are four interesting stats from this NYTimes article (as always, buyer beware with facts and the NYTimes):


1. Bank of America said the percentage of credit card loans it thinks will never be paid hit 13.53 percent in December. JPMorgan Chase expects to charge off 10.5 percent of its credit card portfolios in the first half of 2010.

2.  Fourth quarter of 2009, the number of domestic credit card accounts has declined by 20 percent from its peak in the second quarter of 2008, to 341 million from 426 million

3.  the amount of available credit on cards has declined by 21 percent since its peak, from $3.51 trillion in the third quarter of 2008 to $2.77 trillion in the fourth quarter of 2009, the data shows

4.  Hayley Atwell is still really hot, and Money McBags will drive this bandwagon into the ground until playboy drops by the Atwell residence.

So available credit is shrinking for the US consumer.  What would be interesting to know is how utilization rates have changed and whether anything can be gleaned from this other than people got rid of their 3rd and 4th credit cards which they rarely used anyway and unemployment is still high (no word on how it can afford to keep getting high though).

In small cap news, KITD, a company Money McBags is following closely announced they will be issuing shares in both the US and Prague (where they will soon be listed).  They are seemingly raising capital for more acquisitions where they buy companies for their customers, fire all the employees, and enjoy the benefits of leverage.  KITD is basically a large database of videos for internet/IP delivery.  They get raw video from customers and then help clients manage, view, distribute, manipulate, and store that data.  They have a greater than 99% customer renewal rate because once a customer gives them their data, it is a huge pain in the ass for that customer to get all of the data back and have to reformat it, etc. (it is more of a pain in the ass than Valentine's day).  KITD's market is growing 100% a year as IP takes off, they have little competition, they also have a ton of NOLs, and 93% of their business is outside of the US.  IP video is cheaper and better than digital and it represents only 23% of the global video market so there is a lot of room to grow.  That said, the company is a bit odd as it has had headquarters in Dubai and now Prague and they are still unprofitable from an operating eps standpoint.  Also, the CEO loves himself almost as much as he loves money and looking silly at the movies and the company basically just relaunched less than a year ago when this new CEO came in and developed a new strategy.  Now the good news is that the CEO is the biggest owner and has a substantial portion of his net worth in the company, the bad news is that the CEO has led failed companies before.  But he has had success recently and at least we are betting with him.  Also, despite little US exposure, they did win the business of Verizon Fios which is the only IPTV telco user in the US.  The company has little sell side coverage but recently announced fiscal 2010 guidance for revenue to increase at least 60% to more than $75 million, with an annual operating EBITDA margin exceeding 17.5%.  Ok, so EBITDA will be somewhere around $13MM and their market cap $120MM is with $13MM of net cash as of their last 10Q, so they are trading at around 8x EV/EBITDA before their just announced capital raise and at around 1.5x revenues when companies like this who use the software as a service model tend to trade at between 2x and 6x revenues.  These are relatively cheap multiples for a growing company with a high recurring revenue base which contains many blue chip customers.  Money McBags does not yet own KITD because he is still trying to fully understand the company's competitive advantage, but he is thinking about buying a starter position and will throw down the gauntlet to his loyal readers to do some of their own research here and see if they come up with anything else important.

Oh yeah, a Money McBags longtime reader e-mailed him about a Korean-American bank HAFC which is apparently now trading at around .5x of TBV (even with today's big run-up) and promises to love you long time.  Money McBags knows nothing about HAFC and how real their TBV really is but if it is even 80% correct then there is room to grow here.  So you should all do some due diligence.

1/15/10 Midday Report: JPM sends the market down on estimate beat, promises to do worse next time

It is a bizarre day on the market today as INTC crushed numbers and is down, JP Morgan turned a huge profit, yet disappointed, and the dollar actually gained last night as apparently Amanda Drury was at the New York Rick's Cabaret and only accepted the local currency (ok, the last one may not have been true, but Money McBags would certainly contribute his market insights to Ms. Drury's Squawk Box anytime).  Before we get to earnings today, there were a flurry of macroeconomic reports this morning.  Inflation was flatter that Lindsay Lohan's derrierre as the consumer price index rose only .1% and the Michigan Consumer Sentiment index rose only slightly from "holy fuck" to "we're just kind of screwed."  These data points continue to signal that the lack of job creation and lingering 10% unemployment are likely to temper the economic recovery like ALS tempered Stephen Hawkings' dreams of becoming a dancer.  With inflation proving to be tamer than a Jay Leno monologue, the fed is poised to keep rates low for the near and immediate future.  This should be continued good news for the banking industry (and again, the only business plan better than lending free money for more than free is the US Mint, mmmmmmm mint) despite JP Morgan's topline miss today.  Given that yields are still juicy and rates unlikely to go up, smart investors may want to dabble in NLY and their 16%ish dividend yield as those guys just know how to make money (of course, investing in a company that relies on repo funding makes Money McBags more skittish than a paraskevidekatriaphobic at an all day Jason Vorhees marathon on Friday the 13th, so buyer beware).

As for stock news today, INTC blew away their quarter like they were auditioning for an upcoming role in a bukakke kings film.  Expectations were for $.30 eps and they dropped $.40 eps on analysts' excel models while hitting record gross margins and guided to above Street revenue.  The fact that they are trading off today is nuttier than a cock sandwich with extra balls as analysts question whether things can get any better.  INTC is suffering from Wall Street's buy the rumor, sell the news mentality which doesn't make sense to Money McBags.  It's like boning Brooklyn Decker and then complaining that you'll never do better.  Hey assholes, you're still boning Brooklyn Decker so quit your whining and ride out INTC.  Just because she's 22 doesn't mean she's peaked and just because INTC had record gross margins doesn't mean Moore's Law won't still propel them to better quarters.  I mean INTC had a record gross margin despite the record sales of their lower end Atom chip.   There is still room to grow here.

The bigger news on the market today is that JP Morgan's profitlicious quarter disappointed The Street as revenue was a little light (though not as light as a bulimic with a supercharged gag reflex), the retail bank put up a loss, and while EPS beat estimates, the beat was seen as lower quality than a Rollex watch or a Louis Vuittone bag as it was driven by tax benefits, lower comp, and the end of lobster Wednesdays.  The low quality beat has sent the market down as investors now worry about other, less well-managed big banks (Citi, cough, Citi) and their retail exposures.

In small cap news today, COOL not only shit the proverbial bed, but they then remade the bed and shit in it all over again before tucking themselves in for the night.  Analysts expected $.11 of eps and COOL was able to deliver a not so cool $.16 eps loss.  For those of you not familiar with the company, they license and buy the rights to cheap crappy games for the Wii and DS aimed at families and girls in what is called the "casual gaming" segment ("casual" of course being an interesting epithet for "non").  Anyway, in a neat trick (though not as neat as the hidden button illusion) COOL has seen revenues increase but bottom line decrease as they believe profitability is just a suggestion.  After diluting shareholders last Q by raising $9MM in cash, COOL further ingratiating themselves to their owners by accruing a $.10 impairment loss because nobody actually wanted their crappy games, a $.05 charge because their Our House franchise was apparently foreclosed upon, and another $.07 eps drop from lower margins due to something called "poor sales".  Their gross margin dipped from 28% to 3% and they guided to 2010 non-gaap eps of $.05, so even though they are down 22% today, they are still trading at 20ish times 2010 eps and that number is less believable than Larry Craig having a wide stance.  This company continues to grow revenue and become less profitable every quarter (and for their next trick they will lose weight and become more unattractive) and should probably trade at no more than $.50 or 10x their unlikely 2010 eps.  If you were short them, congratulations.  Money McBags was on the sidelines for this one, but thought the company was potentially cheap if management could show progress, which of course they didn't.

Enjoy the long weekend,  Money McBags will be back when the market reopens on Tuesday.

1/13/10 Midday Report: Google threatens to pull out of China, claims "not properly protected," but does offer to finish on China's back

With macro news today apparently scarcer than free speech in Chinese search engines or free standing buildings in Haiti (too soon?), the big news moving the market is Google's threat to leave China after China left the toilet seat up one too many times and refused to take out the trash.  Google's panties are currently in a bunch (and honestly, this is why Money McBags suggests young ladies wear thongs) over sophisticated cyber attacks on the company and human rights advocates originating from somewhere in China (and investigators may want to start by looking in the offices of a certain chinese internet company that rhymes with Shmaidu).  Google issued a statement claiming they now know "it is China pretending to be the Nigerian Prince, and we will not fall for that again.  Though we would like our $1k back."  GOOG's threat to leave China (where they have 33% market share) has shares of BIDU soaring like the price of tequila on Cinco de Mayo.  BIDU is the #1 internet search provider in China with about 2/3 of the market so GOOG's potential exit should turn them into a monopoly, or as the Chinese call it, government.  Estimates are that GOOG may lose $600MM in annual revenue by leaving China, which isn't much considering they had $22B in revenue last year, but as China is a potential larger area of growth than the front of Lexington Steele's pants, a departure could have longer term implications.  The guess here is that a sell-off in GOOG will create a good buying opportunity for long term investors as GOOG and China will find a way to get back together and once again enjoy candlelight dinners over hot bowls of the famous Chinese delicacy, Cream of Sum Yung Gai.

In other market news, bank CEOs are sitting in front of congress and letting congress have their way with them like starry eyed young ladies in a Bangbus video.  No word on whether when the questioning is over, banking CEOs will be allowed to switch seats with the congressmen and ask them the same pointed questions about their pitiful job performance.  The highlight of the day has been Morgan Stanley CEO John Mack claiming "Many firms were too highly leveraged," which is a bit like OJ saying the knife was too sharp or Ken Lay claiming some accounting rules were too vague.  There has also been a bit of disagreement with Goldman Sachs CEO Lloyd "Big Tank" Blankfein claiming mark to market accounting helped them avoid some of the pitfalls while new BAC CEO Brian Moynihan correctly pointed out that mark to market accounting exacerbated the downfall.  Marking illiquid securities to a crumbling market where clearing prices were non-existent or less steeped in reality than Bernie Madoff's profits, and then requiring reserves to be raised to fill in these fictitious book value declines is the most underreported non-sensical catch-22 of the entire market collapse.  It made less sense than a Thomas Pynchon novel or raisinets (seriously, chocolate covered raisins?  Why not just piss on the chocolate too?).

In stock news, Kraft raised their outlook and simply claimed "umm guys, haven't you seen all of the fucking fat people in this country?  You know we make Oreos, right?" while financials have bounced around today with analysts on the street now saying investment banking profits may not be so outsized this quarter as fixed income revenues fell with decreased volatility.  This has caused Goldman to dial up the White House on their special diamond encrusted phone and tell them to "freak everyone out again, daddy needs the new Apple Tablet when it comes out."

Finally, Money McBags wrote about EBIX in this space just a few short days ago.  In his write-up, he mentioned his concerns about the company: "the CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO" and yet said he was willing to overlook those issues as the company remained cheap.  Well my friends, Money McBags has lost his appetite for EBIX.  After reading CFRA's scathing short report citing EBIX's changing of auditors, accounting irregularities, and potentially misleading topline growth, Money McBags just doesn't want to be involved and is trading out of his position.  While CFRA could be wrong, Money McBags has no edge on this company and does not want to get into a "he said-she said" with a company in which he already expressed some real concerns.  One could stay long EBIX and hedge it with long-dated out of the money puts, but one could also walk around town with no pants screaming "free lunch," so one could do many different things.  If the company is operating as they say they are, EBIX is a phenomenal buy, but Money McBags prefers to invest in companies in which he can be more confident (and yes, Money McBags owns RICK which is always one champagne room hummer away from massive litigation, so he realizes the potential folly of his previous statement).  So do your own research, but be aware that Money McBags is no longer involved in EBIX.  It could be a great buy here as short stories can create unheard of buying opportunities, like a 2007 Ashley Dupre, but you need to have more confidence than Money McBags currently does.

1/12/10 Midday Report: China trying to cool economy, hires Justin Timberlake to dole out stimulus funds

The big macro news today is that China raised the reserve ratio that banks need to hold aside as deposits, signalling that China's central bank is starting to become acutely aware of inflation concerns (whereas the world is starting to become acutely aware of Christina Hendricks' "concerns").  Given that China is going to spend roughly 4 trillion yuan in stimulus through 2010, inflationary worries are less surprising than learning that Mark McGwire used steroids, Bea Arthur was really a man, or Napoleon was a bit touchy about his height.

In US market news, the US trade deficit widened more than expected (though not as much as Nicole Eggert's waistline) as imports outpaced exports thanks largely to consumer goods, capital goods, and Malawain babies.  The good news is that this should start to reverse itself as the dollar continues to plummet like Lindsay Lohan's acting career, the bad news of course is that the dollar continues to plummet.  Also, the government is said to be getting all loan sharky on banks and demanding their TARP money back or they will start breaking deposit caps.  The rumor is that the government will somehow put an unenforcable tax on the banks to recoup the money they lent to them as part of the bail out.  It only took a year for the government to realize that lending money to failing banks may result in losses, so we'll call that progress.

Earnings season got underway today and has largely been a disappointment, like your first kiss or any Wes Anderson movie of the past ten years (And don't give me that Fantastic Mr. Fox crap, if I want to see an animated fox I'll break out an old VHS tape and watch Jessica Rabbit).  Alcoa kicked off earnings season by missing estimates as analysts were expecting AA to exhibit more leverage on the cost side while Electronic Arts lowered estimates as sales of their newest titles RockBand: Milli Vanilli, The Sims: Guantanamo Bay, and Paris Hilton's Great Herpes Adventure were all below expectations.

In small cap news CRUS pre-announced a ginormous quarter last night, easily beating analyst estimates as revenue is expected to soar 49% year over year with gross margin rising 200ish basis points to 54%.  New guidance for the March quarter is for a 58% revenue improvement.  CRUS makes ICs for the portable audio and the energy exploration markets.  A few quarters ago they won business to be one of the audio chips for the iPhone and being a chip supplier to the iPhone is like being the stylus provider to Palm Pilots in 1998, in other words, the technology g-spot.    Their revenue had been in decline as their energy exploration business sank like John Edwards' political career (except without getting anyone pregnant) but their audio business was up 67% in the September Q.  The pre-announcement last night said growth was mainly from new products but said they are seeing "increased demand from our customers for a broad mix of both our audio and energy products."  The key here is that if the energy business can rebound to say a $80MM a year revenue run rate (they had quarters in excess of $20MM in this business previously and were at $14MM last Q which was up sequentially), and the audio business can continue to grow, CRUS could exceed their current forecast.  Even taking their current forecast as inline, analysts have raised their estimates to around $.60 eps for fiscal 2011 and around $.40 eps for fiscal 2010.  While Money McBags does not know how much of an energy rebound those numbers include, he is guessing they undervalue the potential for growth in CRUS's smart grid products.  Either way, just say analysts are right and the company earns $.60 in fiscal 2011, CRUS is now trading at 13x that not including the $124MM of cash on the balance sheet.  Yes, the easy money has been made and the jump today could be on short covering (though I have no idea why anyone would have been short a stock this cheap, but then again I have no idea why anyone thinks Jay Leno is funny, so what do I know?), so Money McBags would hold off on buying today, but there is still probably $2-$4 of upside (15x FY 2011 $.60 estimates + $2ish in cash per share) and that is if the energy market does not have a big comeback.  It is worth tuning into their 1/28/10 call to see what they have to say, so put this on your watch list and be ready to buy the dip.

1/08/10 Midday Report: Market shakes off unemployment reports, claims those people are just lazy

The big news of the day is that the Labor Department, led by Hilda Solis whose name is an anagram for the upcoming Snoop Dogg swine flu dis track titled "Hos said ill," came out with their jobs report for December which showed a loss of 85k jobs.  This was worse than expectations and held the unemployment rate at 10% while moving the underemployment rate up from 17.2% to 17.3% (you know, the rate that actually counts all of the people unemployed, like the ones who have given up on trying to find a job because they're 50 years old and companies can just hire someone half their age, if they're going to hire anyone, at half the price to sit at a desk all day and watch Youtube videos, look at the hot chicks they can date, and wonder why Leon gets to take a break at 2pm while they have to fake work until 3pm).  So look at the person to your left and then look at the person to your right, and then look at the person one over from that person to your right and the person one over from the one to your left, and odds are one of you will be underemployed.  Leading the way down were builders who cut 53k jobs last month as the construction industry halted to stare at the Burj Dubai Tower and all it's infinite awesomeness which now claims the title of the world's tallest building, though still measures a few centimeter less than Peter North's most famous appendage.

Further causing concern is that unemployment in the euro zone rose to 10%, it's highest rate since 1998.  This was led by Latvia who now sports a 22% unemployment rate to go with it's 22% literacy rate and Spain where 43.8% of the population under the age of 25 is now on siesta according to the NY Times, which we know is chock full of typos today.  If true, that is a truly amazing statistic.  You would think with all of that unemployed labor they could finally finish the Sagrada Familia, I mean it's only been under construction for 128 years and to put that in context, 128 years ago there was no Panama Canal, TV hadn't yet been invented, and Barbara Walters was still in High School.

In stock news today KO slid 2% as JP Morgan downgarded them to neutral based on KO's 18% premium to the group.  The analyst obviously is unaware of KO being a great dollar hedge due to their booming worldwide business spurred on by great brand equity and a fuck load of sugar.  The financial sector is also giving back some gains today with the Citi analyst cutting estmates for investment banks and people getting temporary amnesia and forgetting the one fact Money McBags keeps harping on, banks are getting money for free and lending it for more than free and at a spread at historic highs.  Sure risk mitigation is the most important metric, and banks have failed at that worse than Artie Lange failed at accuracy, but the next few Qs should show record profits.

Anyway, that's all until monday, until then, enjoy the weekend.

1/4/10 Midday Report: It's 2010, yet the market is partying like it's 1999

Hide the women and children because the market is coming back with a vengeance, like Dirty Harry Callahan or Don Knotts on Three's Company.  The market appears to be determined to show all of the traders who manufactured complex derivitaves such MBS, ABS, and plain BS, that financial engineering can only keep it down for so long as eventually people have to consume.  The big news is that manufacturing continues to improve as inventories which were cut to bare bones minimums (and at a minimum, I would bone a bare Eva Wyrwal with my inventory) are now starting to be replenished.  China's manufacuring grew the fastest it has grown in 5 years which is great news for the lead paint industry but bad news for infants.  In the US, manufacturing grew faster than it has in 3 years according to the ISM.  This increase was driven by the stimulus spend, inventory build back, and increased sales of electronics to replace those which were broken by being thrown against the wall in disgust as the market cratered.  Along with China and the US, Europe also saw an increase in manufacturing to a 25 month high causing red light sales to cease across the red light district of Amsterdam.

While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model.  The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up "geysers") and China's manufacturing prowess spurring inflation concerns.  Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building.  Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.

In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring.  TMRK is in the colocation/hosting business along with RAX and EQIX.  This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced.  The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one's programs, files, and downloaded spankwire videos will be hosted in a "cloud," thus leaving the actual pc as just an interface.  Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week's supply of viagra.  TMRK is one of the companies building facilities to host all of this data.  It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don't grow on trees).  Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites.  This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks.  The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.

12/30/09 Midday Report: The market mimics the Alabama school system as investors close their books until the New Year

With the year coming to a close, trading is thinner than a bulimic after a good gastric banding while market news is scarcer than Paris Hilton's panties or Bernie Madoff's investment returns.  The only real market news out today is that the Chicago ISM was released and measured a whopping 60, though it is unclear what 60 is out of and what 60 actually means, but it was higher than estimates so that must be good.  Apparently, readings over 50 signal expansion which means every time Bar Refaeli shows up on my screen, my pants would read about a 99 on the Chicago ISM scale.  Directionally, the results point to manufacturing in the midwest gaining strength and could signal positive changes for the job market as long as you are looking for a job as a competitve eater, snow shoveler, or corrupt politician (Chicago's 3 big industries).

The dollar is also on a bit of a rally as people forget how much money the US printed and borrowed, thus sending metals prices down.  Money McBags has talked about gold's Bubblicious rise in the past and we are now witnessing some sell off.  Long term, gold still remains a good hedge, though not as good as wearing two condoms when in Thailand.

Finally, GMAC may need more money from the government to the tune of $3B to $3.5B as not only did they finance shitty cars, but they financed them shittily.  As a result of this news, the financial services sector is down as the fear of more bad loans and bail outs is leaving a slight scent on the market (and that scent is a bit like a young skunk who has been urinated on and left to sleep with Amy Winehouse for a week).  That said, remember, these banks are getting free money and lending it out for a heck of a lot more than free so they should be raking in the dough so there are still some good buys out there.

In stock news, Money McBags favorite WILC hit its 52 week high as the shekel increases vs. the dollar and companies (unlike overweight strippers and kleenex) just can't stay ridiculously cheap forever.  Also there appears to be a sell off of momentum names in the weight loss space as NTRI and MED are dropping like Alan Greenspan's credibility.  NTRI announced a $5MM impairment charge yesterday, MED's CEO is regstered as having sold shares, and these names have been flying higher than a coked up Ruppell's griffon so a sell off is not unexpected.  Money McBags does recommend keeping an eye on NTRI as they have had solid returns, recently entered the diabetic market, and have new deals with WMT and Walgreens.  The company is a solid cash flow generator and this country has more fat people than Tiger Woods has STDs, so their business has plenty of room to grow.  It is worth following and waiting for the momentum buyers to finish selling.

12/22/09 Midday Report: GDP revised down, existing home sales up (await downward revision)

The market got mixed news today as sales of existing homes grew 7.4% to a two year high of a 6.5MM annual rate (and we thank our lucky pornstars for tax breaks, 4% lower median home prices, foreclosure sales of houses formerly owned by the unemployed, and Faye Reagan) while GDP was revised downward from 2.8% to 2.2% growth.  The commerce department loves downward revisions like WGO loves losing money ($.14 last q, don't let the tax break fool you) and America loves watching stuff that sucks. 

The downward revision strategy does seem to be a winner though as the market is up and the previous GDP announcement helped spur on this rally.  Money McBags now suggests all of you try this "downward revision" strategy on your first dates.  Just tell the lovely lady you are wining and dining that you are a multi-millionaire, have houses on both coasts (and are just renting a crappy apartment while they are being renovated), and are hung like a moose (and not any moose, but a Canadian moose, on steroids).  If she winds up liking you, just downwardly revise those estimates every week or so and you're golden.  If she doesn't like you, just up your upward estimates next time.  So kudos to Secretary Gary Locke and his Commerce Department for that strategy, we always wondered how he scored a fox like Mona Lee, but I guess now we know.

Meanwhile, the yield curve continues to widen like Ben Bernanke's forehead, Kevin Federline's waist, and a young wannabe actresses' sphincter in a Bang Bros. video.  The steepening of the yield curve should be a boon to banks who really need a break after almost destroying the economy by lending money to people who couldn't pay, then getting bailed out by the government, and then getting to borrow money for free and lend it for more than free (and that "more than free" is currently growing to "profit-licious").  Now, just when the banks raised more equity (further diluting already underwater shareholders) to pay back the TARP in order to give employees bonuses (and those bonuses are mostly well deserved, and by "mostly" I mean "not at all"), they get historically favorable spreads in which to make money.  Thank goodness, I was starting to get worried, but the banking system really does need this kind of break.  Now if we could just release OJ, redirect a few billion dollars of the funds going to repair the New Orleans levees to aid in building more golf courses, and elect the cast of the Jersey Shore to congress (with the lovely Jwoww promoted to be Secretary of My Interior), then everything would be alright with this country. 

So if you don't care about spiraling credit card risk and the potential commercial real estate bust, now would be a good time to invest in some banks (just not C, because they are to banking what John Meriwether is to hedge funds).

12/15/09 Midday Report: Porter trims forces to 4 as commodities laugh at competitivie advantages

The big news today is that wholesale inflation is up 1.8% and manufacturing in the US is churning out more goods people can't afford to buy, especially if prices have to be raised now that input costs/commodities are moving up faster than expectations (weird that expectations were wrong, though much less weird than the new hair trend sweeping across the US).  With the continued increase in commodity prices, unemployed aging workers are rushing to their dentists to have their gold/silver/mercury fillings pulled to sell them on the black market.

In world markets,  Greece is the latest country now seemingly assfucked (which apparently the Greeks actually enjoy, so kudos to them on that) as their credit rating was downgraded last week by Fitch from "you need a little perfume" to "take a fucking shower."  The Greek prime minister George Papadapolis has said he will cut Greece's current 12.7% budget deficit to 3% over the next few years by exporting more baklava, feta cheese, and Greek Helmets.

And in stock news, WFC becomes the latest bank to raise money to pay back their TARP funds in order to be able to pay bonuses to all of the employees who didn't destroy value (surely someone gave a small business loan that worked out, I mean they are getting free fucking money.  Even Bernie Madoff could make money doing that.).  At this rate, the banks will have their balance sheets all squared up in no time so they can continue to not lend to consumers and businesses without having to worry about the pesky government.

12/14/09 Midday Report: Abu Dhabi on a Dubai-ing spree for Christmas (or whatever the fuck they celebrate)

Before we get to the midday report, we all need to pour out a little Courvoisier (or whatever your revealed preference for drinks may be) for noted Economist Paul Samuelson who passed away at age 94  Samuelson did his best to try to bring legitimacy to the completely made up and theoretical field of study called Economics, which as every good professor will tell you does not work in the real world, like "just being friends" and Eddy Curry.  Samuelson wrote the most famous textbooks on Economics and luckily he was reading one as he passed away so he died peacefully in his sleep.  A big Money McBags moment of silence for Professor Samuelson.

In market news, Abu Dhabi is bailing out $10B of Dubai's debt which would be great if Dubai didn't owe another $150Bish (but why let math get in the way of a market rally?).  If 14 other Dubai neighbors each pony up $10B, this should all blow over like Eliot Spitzer's dalliances.  I mean nothing ever came of those, right?

As for stocks, C somehow raised enough money to pay back their TARP funds just in time to get the government off their backs so they can pay out end of year bonuses (and really, if anyone deserves a bonus this year, it is the management team of C, who never saw value they couldn't destroy.  They are to banking talent what Sarah Palin is to syntax).  Also, Exxon is spending $31B to buy XTO Energy, a domestic producer of natural gas.  Hey Exxon, instead of dropping $30B on XTO, how about just giving me $10MM and I'll stop off at Taco Bell daily, order 5 bean burritos, and give you all the natural gas you need.  That's right Exxon, I got your natural gas right here.  OH!

12/03/09 Midday Report: BAC does not need your stinking funds (well at least not until next time)

The market is abuzz today with BAC's repayment of $45B to Uncle Sam who apparently got drunk and touched BAC in their loan loss reserves just one too many times.  So to break the cycle, BAC is going to pay back their bail out funds through the profits they made by being able to borrow from said Uncle Sam at 0% and lend for more than 0% and then have Uncle Sam bail them out should those more than 0% loans go bad.  Honestly, that is the best business model ever created, even better than the Brooklyn Decker kissing and rim job booth.

But it gets better.  BAC is going to repay some of their bailout funds by issuing $18B of securities which should be great for the current shareholders since issuing securities isn't dilutive or anything, right?  Why else would BAC have opened up 6%?  Oh wait, issuing equity will lead to substantial dilution on the order of 10% to 15% (according to street analysts who may be right or wrong depends on the coin flip).   So this all makes perfect sense.  All companies need to do in this market is fuck up really badly, get coddled by good old Unky Sam, and then fuck their shareholders over and over again until their balance sheet is completely flaccid.  After this, their stock should shoot up at least 6%.  Makes perfect sense, just like intelligent design (spindle cells be damned) or Tori Spelling's face.

In other market news, Comcast is buying NBC so now not only will NBC have shitty programming, but their customer service will suck too.  But hey, this deal is synergy-istic and synergies are what the business world is all about.  Just ask Time Warner and AOL or this guy.  

As for our daily job report data, the service industry saw jobs contracting but initial jobless claims fell unexpectedly.  So our economy is getting worse and it is getting better at the same time, it's like Schrodinger's cat.  Is the cat alive, is it dead, or does anyone fucking care (and who put the cat in the fucking box anyway? Do I need to sick PETA on this Schrodinger fellow?)  So depending on what data you view as most representative, we are either fucked or slightly fucked, take your pick.

11/24/09 Midday Report: Stocks are down as people hate spending, unless they are spending on cheap shoes

The big news of the day is that the government revised GDP data downward and consumer spending took the brunt of it (which is how it works when consumer spending is 70% of GDP, dipshits).  The new estimates are that there was a 2.8% rise in GDP from this past Q vs. the previously announced 3.5% growth.  While it was inline with the expectations of economists (and we all know what great guessers economists are, which reminds me of the old joke:  Why did the economist cross the road?  Who the fuck cares, now pass the salt.), it showed that the economic resiliency may not be as robust as bulls hoped.  But hey, the economy still grew so round of hummers and lobster tales for Bernanke, right? 

Also in the news today, banks stocks took it in the yingus as the government wants their stimulus funds paid back and people continue to realize the banking system is as healthy as Paris Hitlon's vagina (which of course isn't good since she has herpes).  Additionally, the US fund for bank deposit insurance fell into the red, but don't worry because we can always print more money.

In stock news, DSW shot up on a good earnings report because poor people (US citizens) love them some cheap ass shoes.  Better yet, RVI which owns a disproportionate amount of DSW maintained their huge spread to DSW (a spread larger than the Octomom's punany after dropping out little child protective service kids).  RVI owns around 63% of DSW and yet trades at around 33% of DSW's market cap.  RVI sold it's holdings in Filene's Basement and Value City so all they have now is DSW.  This valuation makes less sense than Ron Artest's singing career or the Lifetime channel (who puts the less in mindless).

The economy can still go either way so as always, be careful out there.

Happy hunting.