7/21/10 Midevening Report: Market "unusually certain" that it should go down

The market was chugging right along today like a Kennedy at a sorority mixer after Apple titillated the market with sales stronger than the breath of either of the world's foremost cunning linguists, the great Vladmir Nabokov and the greater Janine Lindemulder, until Ben Bernanke got up and threw his figurative Baby Ruth into the market's pool causing investors to run for safety.  Bennie B. got his best gangsta lean on and told the Senate Banking Committee, who never met a bubble they couldn't regulate after it had already deflated itself, that the recovery remains "unusually uncertain and shit" before repeatedly rhetorically axing "you know what I mean?"  His befuddling remarks caused the market to fall faster than Andrew Johnson's reputation in the Republican party after suceeding (or more appropriately, failing) Lincoln and thus negated a rare day where earnings were mostly positive.

While it's not entirely clear what "unusually uncertain" means, especially since Money McBags finds all uncertainties a bit unusual, he believes the term is Fed-bonics for "We have less of a fucking clue about what is happening than we usually do."  Bernanke did say the Fed is ready to step in as needed and while he didn't say what those steps may be, one can assume they include keeping rates low (for an extended period like a metrorrhagia sufferer), manipulating the Fed's balance sheet, and the Charleston.

Prior to Bennie B. unleashing his pimp hand and treating the market like his bottom bitch, President Obama signed the financial legislation bill which after two years of debate has been watered down more than a virgin bloody mary without the tomato juice or tobasco (though he signed it "Alan Smithee", so it's not clear if the bill will hold).  The most worrisome part of the bill is that many of the details are more open ended than Alexis Texas right before filming Buttwoman which leaves regulators plenty of wiggle room to fuck more shit up.  As far as Money McBags is concerned the bill didn't go far enough in regulating the use of derivatives, in limiting the size of banks, or in raising reserve requirements and making banks responsible for their greed which led to credit scoring models to be less frequently used than MySpace (does anyone remember that piece of crap?).

In macro news, mortgage applications jumped last week for the first time in five weeks in what surely is a fictitious number, or a typo.  What is more believable is that refi applications were at 14 month highs as record low mortgage rates of 4.59% have led homeowners to lower their interest payments faster than the Stoughton, MA police department lowered the boom on one of their officers who was just doing a little (and Money McBags stresses "little") due diligence. 

The real story of the day (other than Bennie B.'s uncertain uncertainty) was Apple's Q in which they sold what is known in the retail space as "a fuckload of shit" and put up a huge earnings number.  Apple's net income rose by 78% by selling 3.3MM iPads, 8.4MM iPhones despite people waiting until the end of the Q for the iPhone 4 launch in order to be able to make use of the front facing camera while masturbating for strangers on chatroulette from work bathroom stalls everywhere, and a whopping and quarterly high 3.5MM Macintosh computers making everyone loudly say "Apple sells computers?"  Revenue was up 60% to $15.7B, beating analyst guesses by $1B, and putting the company only $4B away from world domination.  Steve Jobs also defended the iPhone antenna problem by simply saying "deal with it.  And if you don't like it, go by one of those Blackberries and make sure it matches your 8-track player and Jams."  That said, Lenovo is set to launch a challenger to the iPad using GOOG's Android system and they are referring to it as "LePad" because apparently "LeThingThatIsn'tGoingToSell" was already taken.

In other strong earnings news, MS put up a ginormous Q, harkening back to the pre-2006 days when investment banks ruled the markets like Jessica Simpson ruled the short bus in her elementary school days.  Revenue grew 53% to $7.95B and beat analyst guesses of $7.93B driven by MS' trading business which earned $4.1B in operating profits after trading their souls for three more months of manipulating the markets and a good night kiss from Rose Huntington Whiteley.  Also, KO put up a good quarter on the heels of PEP's outperformance yesteray once again reinforcing the demand inelasticity of sugar and water.  KO earned $1.06 per share, beating analyst guesses of $1.03 per share, and saw 5% growth worldwide led by international growth ex. Europe of 6%.  Money McBags is a longterm owner of KO because it is a cheap aspirational brand that appeals to emerging markets that will continue to grow as the US slogs its way towards mediocrity (though mediocrity would be a good thing).  Finally, YHOO dropped 8% on a disappointing earnings report as revenue growth remains more challenging than Sudoku for a dyslexia sufferer.

In small cap news, Money McBags mentioned CRUS yesterday but he was in such a time rush that he missed their quarterly earnings release from earlier in the day which turned out to be more positive than Robin Williams' herpes test.  The company earned $.29 per share in the quarter on 118% y/y revenue growth and margins going to 57% from 52% last year and 56% last Q.  Most surprisingly, their energy business jumped up to $28MM from $22MM as a result of the both the power meter business and their energy exploration business.  On the call, they talked about this business but gave fewer useful details as to what is driving it than a republican strategist gives details about their plan to fix the economy.

That said, it's really CRUS' consumer audio business that has investors drooling over this company as if it were Hayley Atwell as they provide an audio chip for the iPhone and that segment absolutely killed it.  Revenue was up 32% sequentially in that segment with Apple moving to 35% of their overall revenues.  Company guidance was also stellar with next Q predicted to have at the midpoints $102MM in revenues, 57% gross margins, and $27MM non-Gaap op ex. and while Money McBags is no maffematecian (he only counts to two when told to turn his head and cough), those number should get them to ~$.44 eps as they still have more NOLs than Money McBags has broken dreams.

The hard part is forecasting this company since they are obviously a play on the iPhone and AAPL could find a new suplier or put more pricing pressure on them at any time.  Now look, Money McBags doesn't think that will happen anytime soon as their chip is supposed to provide the best audio quality and they are continually investing in R&D, but it is something of which investors should be aware.  Money McBags' previous estimate for fiscal year EPS was $1.20 but with CRUS earning $.29 per share  in Q1 and guiding for $.44 per share in Q2, $1.20 seems like it is lower than Andy Rooney's balls.  So Money McBags is going to get a bit conservative here and estimate that the energy business falls to ~$24MM quarterly run rate, the non-AAPL consumer business stays flat, and the AAPL business only grows 10% sequentially.

Doing that (and using 55% margins which may be on the low end and $110MM op ex), Money McBags gets an estimate of $1.47 which is about double what they should earn in the first half of the fiscal year.  Of course, those are very low end estimates as the AAPL business has been growing 30%+ sequentially and gross margins have been above 55%, so at the hgh end we could be looking at closer to $1.70 EPS for the fiscal year.

Either way, the stock is now trading at ~$19 which is ~13x Money McBags' low end estimate and the company has ~$2.50 in cash on the balance sheet and 13x for a company growing this fast is just way too fucking cheap.  If you want, throw a 20x on $1.47 and get to ~$30 for a target price.  As long as Apple doesn't pull the rug out from under these guys, there is plenty of room to move up even though it has already had a better run than a roidal Ben Johnson.

7/20/10 Midevening Report: Republicans fail to stop unemployment benefits from being extended, next up, trying to outlaw wheelchairs for quadriplegics

The market was moderately down today like a dysthymic after downing a plate of sugar coated prozac and a 2 liter of Jolt Cola before it ran up in the late afternoon due to the Senate extending unemployment benefits.  Earnings were the biggest disappointment early on with IBM, TXN, and GS all putting up subpar topline numbers (see Money McBags' prescient headline from yesterday) as if they were a Jerry Bruckheimer film or Greece.  That said, macro news also disappointed which is about as surprising as learning that BP may have more problems or Hilary Swank is really a man.

The main US macro news out today was that home construction declined because, well, because people don't even have enough money to build confidence, much less houses.  Construction of new homes fell 5% in June led by a 20% drop in the construction of condominiums and apartments but helped out by the increase in the construction of shanty towns and modern day Hoovervilles (and hopefully soon, Hootervilles, which will be made out of plenty of wood and pure awesomeness).  On the positive side, there was a 2.1% increase in the demand for new building permits though the Commerce Department listed it as "wishful thinking," and on the slightly more positive side Russian spy Anna Chapman may pose for Playboy.

The big news of the day was that the senate is set to extend jobless aid after some guy named Carte Goodwin was appointed to Robert Byrd's old Senate seat, making it in fact a "good win" for struggling people everywhere (and yes, that was an awful pun, nowhere near as good as someone named Mr. Goodjoint looking like this).  Yeah, Money McBags knows spending more money is not the best longterm strategy and that if the government keeps perpetuating this global ponzi scheme, we are all going to be more fucked than Lisa Ann on the set of Who's Nailin' Paylin, but having 4MM people surviving on month old pop tarts and feces is certainly not the answer.  There are easily other areas where one could cut spending to make up for supporting people who need extended unemployment benefits (like maybe buying 2 or 3 fewer stealth bombers, using credit cards instead of cash in Iraq, and taking memberships to Tranny porn sites out of the SEC's benefits package).

That said, never before has there been a need to cut costs to allow for extended unemployment and never before has the government tried to do that in the middle of a recession, but apparently Republicans hate winning elections.  Look, all of this money gets put right back in to the economy and is a mini stimulus which might buy the US another month or six to give it a chance to hit a patch of dumb luck and thus avoid being knocked in to bolivion.   Either way, Republicans blocking this package is among the stupidest political strategy blunders in American history, right up there with Nixon sweating through the Nixon-Kennedy debate, anyone allowing Sarah Palin to be interviewed, and Warren Harding banging a hooker with a teapot (or something like that).  Obviously the deficit needs to be better managed lest we fall further in to Keynes' folly, but cutting extended unemployment benefits is not the way to go unless one wants to speed up the oncoming anarchy and see what happens when crime starts moving to the suburbs.

In stock news, earnings disappointments led the day with Goldman missing estimates of ~$2.98 EPS by earning only ~$2.75 per share ex one-timers and if this keeps up, theWhite House GS' management team, may be in trouble.  Those one-timers included the $550MM settlement with the SEC, $600MM for a British bank payroll tax, and Raven Alexis the night of the company picnic after wowing her with how deep their structured products run.  It is a rare miss for the company, as they have perfected the ability to control both the markets and the government without winning a popular election or being likeable, but every once in a while even the great Ron Jeremy must come up flaccid.  The biggest issue with GS' Q was on the topline driven by revenue from trading of fixed income products, currencies and commodities, falling to $4.4B from $7.4B in Q1 and $6.8 billion in last year's Q2 which is a more precipitous decline than Lloyd Blankfein's hairline (or reputation) and caused him to vociferously utter "inconceivable" to anyone who would listen.  Of course with revenue falling, GS had to cut compensation in order to keep some profits (though profitability did fall 82% even with the cuts) and the ratio of compensation to net revenue fell to 43% in the first half from 49% in the first half of last year which means employees will now have to buy the in the lot Lamborghinis rather than have them custom made.

While last week Goldman settled with the SEC and admitted no wrongdoing (which is a bit like Roman Polanski claiming it was consensual or Eddie Murphy claiming he only acted in The Adventures of Pluto Nash and didn't write or direct it), the VP in charge of the (allegedly) fraudulent Abacus CDO, Fabulous Fab Tourre still faces a law suit from the SEC which could undermine Goldman's lack of admission of guilt, especially if Fab continues to blame it on the rain (and that reference will never stop being funny).  Tourre made a filing today with the courts saying that he isn't responsible “for any alleged failings” by GS and he didn't mean to sucker people out of their money, it just seemed like the thing to do.

In other earnings news, IBM's revenue came in short of analyst guesses at $23.72B vs. guesses of $24.17B due to a drop in service contracts which the company says were merely pushed back in to next quarter and sluggish growth in Europe due to it being siesta season overseas.  Also disappointing was TXN, whose earnings and revenue were at the midrange of guidance but failed to outperform whisper numbers (and Money McBags only hopes it was Alice Eve whispering the numbers).  Despite a 900bp increase in gross margins, 42% revenue growth, and above street guidance, the stock tumbled today as if it had downed a fifth of Jack Daniels and had vestibular neuritis.  On the positive side,  Pepsi beat estimates and earnings were driven by strength in emerging markets with sales in Asia/Middle East/Africa up 16% proving that the demand for sugary water is more inelastic than the demand for running water, shelter and malaria medicine.  After beating earnings estimates of $1.08 per share by $.01, PEP maintained their 11% to 13% earnings growth estimate for the year despite currency hurting their growth rate by 1% and Coke hurting their feelings by calling them copycats.

In small cap news, just about everything ran up end of day and Money McBags is pressed for time today so he'll just leave you with one thought: CRUS.  Apple reports tonight and CRUS provides an audio chip that goes in to their iPhone.  Money McBags has talked about this stock in depth here and all it has done is go up like the age of consent in Georgia over the past 200 years.  You can read Money McBags' analysis of CRUS by using the search function on WGP but he was alerting you to this stock when it was below $10 and his estimates have continued to go up with the surprisingly quick rebound of their energy business.  Money McBags thinks they can earn $1.20 per share and with the type of growth they have been witnessing, there is no reason the company shouldn't trade at 20x that which means you can still earn >25% here.  So pay attention to AAPL's release because strong iPhone sales should bode well for CRUS' upcoming Q.

6/18/10 Midday Report: Gold hits new highs, silver plans an intervention

It's quadruple witching Friday today in the market which is unfortunately just the day where stock index futures, stock index options, stock options, and single stock futures all expire and not the day where the market finally gets a 5-some with Elizabeth Montgomery, Barbara Eden, Melissa Joan Hart, and Omarrosa.  While this is usually a volatile day, the market has been quieter than the Clinton's bedroom as there has been little macro or company news released today.  That said, owners of gold are being showered with rewards as gold has reached a record high today thanks to investors betting against the current fiat system remaining viable.  While it's likely we'll hit a deflationary period before inflation takes off like Shawn Kemp from a delivery room, holding gold as part of your portfolio right now as a hedge against volatility and the potential crash of the Euro makes more sense than pairing Suaterenes with a nice foie gras.  In other US news, Tim Geithner is apparently getting new and more power which he has easily earned given how he has revived this economy from dead to about to die again and helped to bail out the firms who caused this mess.  Geithner is set to lead a new council run by the Treasury Department to identify companies that might be shut down because they pose a risk to the financial system.  So does that mean the government is going to shut down the SEC, FCIC, FINRA, FDIC, and NAMBLA?  Don't they all do the same fucking thing?  Hey, I know how to solve a problem, let's just create other fucking groups to do the same thing that current groups do but hope they do it better.  Unbelievable.  Money McBags just wants to know when more bureaucracy has ever fixed anything other than creating meaningless jobs.  Somewhere Josef K. is scratching his head.

Internationally, the Eurozone added Estonia as the lastest member in their global ponzi scheme.  Estonia now has to pay $1B to Greece, and then Greece will pay 80% of that up to Spain, who will then pay 80% of that up to Germany.  Funding problems solved.  While it is certainly odd timing for a country to be joining the eurozone, Estonia said they had no choice after the University of Texas decided to stay in the Big 12 and and Utah beat them out for the last spot in the Pac 10.  “It’s a great day for Estonia,” remarked Estonian prime minister Andrus Ansip, who was perhaps (an)sipping on a little too much Saku Originaal as getting in to the Eurozone right now is about as desirable as joining a tv show co-starring Ted McGinley or being drafted by the Washington Generals.  Anyway, for those of you unfamiliar with Estonia, here are some quick facts:  They were 4th out of 173 countries in the Worldwide Press Freedom Index narrowly being edged out by Canada and their NSFW Naked News, they've previously been occupied by more countries than Zsa Zsa Gabor's vagina, and the person they most admire is Yosemite Sam.  They've been independent since 1991 and are finally looking to settle down after 20 years of hard drinking and nordic flirtations in order to raise their favorite offspring Tiiu Kuik in a stronger family environment.  So welcome to the Euro Estonia, just don't burn all those Kroons quite yet.  In other international news, the IMF backed Spain's austerity measures after downing one sangria too many and learning about imaginary numbers.

In stock news, C is planning on raising $3B because they haven't lost enough investor capital already.  Just remember, this bank is so poorly run and has such bad judgment that they fired someone for being too hot, and she's not even really that hot, I mean we're not talking about Sara Carbonero for fucksake.  And the best part about this is that they are raising money for their private equity and hedge fund groups right before Paul Volcker slaps his rule on the table and bans banks from owning those type of funds.  Wow.  Good for the funds but that makes about as much sense for C as it did for Saddam Hussein to build a new palace in Baghdad in March of 2003 or Simona Halep to go bra shopping right before the summer of 2009.  Money McBags is sure C's CEO Vikram Pandit will retain some type of personal interest in these funds when the Volcker Rule takes effect so I guess it makes sense for him but for C shareholders it seems like a whole lot of wasted time and energy (though if you're a C shareholder, you have bigger problems to worry about than the company raising money for funds they are going to have to give up soon).  In other news, CVS and WAG decided to end their snit over prescription drug benefit reimbursement and just go back to screwing Medicare and the American health care system together.  Finally Moody's lowered their ratings of BP by 3 notches from the unintelligible Aa2 to the just as unintelligible A2 (or maybe it was the other way around, who the fuck knows).  It's nice to see that weeks in to one of the biggest environmental disasters in history, Moody's is still on the ball.  Good job guys, Money McBags eagerly awaits your downgrade of daguerreotype companies within the next 6 months.  Though to be honest, any investor who needs Moody's to tell them BP is more fucked than a cupcake in Kirstie Alley's house probably shouldn't be investing.

In small cap news CRUS continues to rocket up.  Money McBags believes $24 (20x his $1.20 estimates) is a plenty fair price but at $20 he'd start to think about trimming to take some of the hella sweet profits you've made off the table (and rememeber Money McBags first brought CRUS to your attention when they were trading under $8 and he told you he bought them shortly thereafter.  The fact that he dumped them after the "Flash crash" for liquidity reasons doesn't change his valuation, it only makes him angrier that he believes the market structure is so broken that fundamentals may not matter).  And if any of you are interested in a high flying small volatile momentum name, check out SPRT.  Money McBags will try to break them down next week but they are basically outsourced and remote computer repair.  It's like Geek Squad only you don't have to have a fat smelly skeevy fuck show up at your house and stink the place up while he wipes all of the porn off your computer to clean up whatever virus you downloaded while searching for that Miley Cyrus upskirt pic (and Money McBags will not be linking to the pic since he believes in the legal system).  It's certainly an interesting and potential low cost business model and the company is currently scaling up their technicians faster than a young hollywood starlet scales up her ambitions.  It is doubtful that in this market Money McBags would ever own this stock because a lot has to go right for it to be valued even near what it is trading today, but it has a nice story has some real opportunity, and more than anything it has strong momentum and a rapidly accelerating business.  If you have money you don't care about, send it to Money McBags for a night out at Rick's, otherwise, do some research here as this might be a good trade.

6/17/10 Midafternoon Report: New claims for unemployment claim the economy still sucks

The market didn't do much today as it tries to come down off its volatility high which was fueled by mass uncertainty, broken technical barriers, and a fuckload of pixie sticks.  In macro news, new claims for unemployment were much worse than analyst guesses and also once again tested the (No) Labor Department's ability to do simple math.  Claims were up by 12k, bringing total claims to 472k which would make sense if last week claims weren't 456k.  You see, once again we're left with an equal sign that has to be more confused than Chastity Bono's bikini waxer because 456k +12k = 472k only in the land of make believe where it rains gum drops, pants are optional, and everyone looks like Diora Baird.  Once again the (No) Labor Department (though the parentheses may drop from the No if claims keep up at these levels) revised last week's number upwards by 4k which only gives initial false optimism and then leads people to believe any of these results about as much as they believe in the existence of the Loch Ness monster, vampires, or Abe Vigoda.  All one can glean from things is that directionally things remain bad no matter what made up number is given by Hilda Solis' henchmen and henchwomen and that when the number is released next week, this week's 472k new claims will have been revised up to somewhere between 475k and "we're all fucked."  With the federal government now paying 73 weeks of unemployment on top of the 26 weeks people already receive from the states, 10MM Americans are being paid to fix up their resumes for the one current job opening in this country which is for a ticket taker at the Regal Cinemas in Topeka, Kansas (and if you're interested, just leave your resume in the box).  Job growth remains more stunted than He Ping Ping with a bad case of whiskey dick.  In other macro news, the Philly Fed announced today that business activity for manufacturers in the Mid-Atlantic region declined which was most surprising because everyone assumed the Philly Fed had been robbed and burned down like everything else in Philadelphia.  The Philly Fed's index of business activity fell to 8.0, from 21.4 in May, and was well below analyst guesses of 21.0 since analysts are clueless and no one in Philly can afford shit.  Finally the CPI was out today and was up 2.2% from last year but basically flat with last month which is a good sign for those worried about inflation but a bad sign that the Fed is going to continue to keep rates at a level where the next bubble is only a financially engineered instrument away.

Internationally, the EU says they will release the results of their bank stress tests but will release them only in the ancient and dead language of Yola.  Of course the language is irrelevant because Money McBags is 100% sure that the results will show European banks are in better shape than a young Jack LaLanne and he is also 100% sure he won't believe any of those results.  It serves Europe, the US, and the whole global financial system no good to be honest about the banking problems in Europe unless we really want to try to fix the problems rather than sweeping them under the rug for another few years as we bask in our own delusions and continue to fight windmills for the love of Dulcinea (though if she looks anything like Elizabeth Canalis, it will certainly be worth it).  Also, a Spanish bond offering went off without a hitch as Spain saw strong demand for their 10 and 30 year bonds thanks to raising the premiums by 80bps and 110bps and promising that Nereida Gallardo would personally service all of the debt.

In stock news, AAPL is reaching record highs as they announced they sold more than 600k of their new 4G iPhones in one day (though they failed to disclose that the iPhones were laced with heroin and MSG).  Apple's news is also pushing up a Money McBags' favorite small cap name CRUS.  Goldman was up despite Credit Suisse cutting their price target on GS from $235 to $225 once again proving that Credit Suisse moves the market about as much as Stephen Hawking moves his trachea.  And finally the great Dick "Don't call me Richard" Bove cut his price target on USB from $29.50 to $27 continuing his run of cutting bank price targets to only 40% above their current prices making him as bearish (though still as deluded) as he has ever been.

In small cap news, WGO came out with earnings today and Money McBags told all of you to keep your eyes on it as the company has run way ahead of actually putting up any kind of numbers.  Those who have owned the company got in earlier than a NAMBLA member gets in to the dating pool.  While Money McBags has hated the stock and still thinks it remains overvalued, he will give them credit for putting up a decent quarter, though not as decent as the headlines would lead you to believe.  The good news for the company is that sales grew 165%, they were profitable, had positive ~$8.5MM EBITDA, prices were up 20% for an average of $98k per unit (because they've now infused their motor homes with the scent of Diane Kruger's vagina which I am told smells like talcum powder, fresh rose petals, and rich people), and apparently people will still buy expensive shit that they don't need.  Honestly, Money McBags is flummoxed by this one.  He understands why people would be dropping $100k for new motor homes when they are on sale for a fuckload less than that at maybe a year old on the used market as much as he understands Naked Lunch or country fucking music (and if it's not clear, that is "not at all").  Now the bad news for the company is that the earnings headline number was 2x what it really was thanks to a tax benefit, the sales growth rate slowed down from last quarter, gross margins are still fuck awful and below 10%, accounts payable jumped, they are trading at a ridonkulous multiple, and the economy still sucks like Nikki Dial on the set of White Men Can't Hump.

Ok, so let's just look at the quarter a little bit.  Revenue was ~$135MM, up 165% year over year but up only ~20% sequentially.  Alternatively, last year in this sequential Q revenue was up 60% while last Q year over year revenue was up 247%.  So sure, it sounds stupid to call 165% growth bad, but contextually sales are slowing down after a big ramp up post stimulus.  More importantly, headlines say the company earned $.21 per share but that number is phonier than Jack Nicholson's accent in The Departed or a married woman who says she likes giving hummers.  WGO had $.21 in earnings per share thanks to a $2.4MM tax benefit.  If we take out the tax benefit, they had $3.4MM in operating earnings for ~$.11-$.12 in EPS.  But hey, Money McBags will give them credit for making money, good on them, really, too bad their unrecognized tax benefit is only going to last another couple of quarters.  Anyway, Money McBags' big concern is that they can't keep up this pace and have reached a new near equilibrium level and at that new equilibrium level they are still more expensive than bald eagle foie gras (and nowhere near as tasty).  The market cap is $357MM after today's run up and they have ~$77MM in cash so an enterpirse value of $280MM.  This Q EBITDA was ~$8.5MM so if we annualize that, WGO is trading at ~8x-9x EV/EBITDA.  Also, they just earned ~$.115 per share so annualizing that yields ~$.46 eps and they are trading at ~27x that.  Obviously those who own the stock think that they are not at run rate earnings levels and can continue to grow even though the economy is stagnating, even though inventories have already been rebuilt, even though input prices are rising for WGO, and even though someone spending $100k on a completely discretionary item in this economy is more confusing than Schrodinger's cat (and newsflash, it wasn't the poison that killed or didn't kill Schrodinger's cat, it was fucking curiousity as he tried to figure out why the fuck he was in a box).  Anyway, it could happen, really, sales could somehow keep growing but this industry was in a sector decline BEFORE the recession hit and there is no way one can call this a growth company over the long run.  Money McBags would never put more than a market multiple on WGO and thus to justify the current $12.30 price WGO would have to earn $.82 next year to have a more likely 15x multiple and that just doesn't seem reasonable.  So look, Money McBags was expecting worse than what WGO has done and it's been a crappy short, but he still thinks the stock is overvalued.  Let the short squeeze die down today and monitor this company for another quarter to see if they can replicate this success before making any big calls.  Money McBags previous downside price was $7.50 and now it's probably closer to $9 (15x ~$40).  WGO was at ~$11 when Money McBags posted his initial short thesis and the market has been flat since then, so it hasn't been a good trade, it happens.  If Money McBags were right about everything he'd currently be in the Bahamas about to share a cleveland steamer with Hannah Hilton and not writing this, so it is what it is.

5/13/10 Midafternoon Report: Market down as Prozac prescription runs out, or common sense prevails, take your pick

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5/12/10 Midevening Report: Gold hits record high causing a run on Flavor Flav's teeth

The markets were on fucking fire today as investors shook off the historic drop last Thursday, apparently confident that the SEC looking in to the causes of the sell off will yield answers other than the current ones whch include:  "Beats me," "How the fuck should I know," "and hey look, it's Enrico Pallazzo!"  The head of the SEC, Mary Schapiro, who in her short time leading the never distinguished agency has already instituted sweeping reform including such things as following up on leads, proactively going after market manipulators, and clamping down on tranny porn at the office, has called last week's market failure “profoundly disappointing and troubling.”   She then added, "I haven't been this disappointed with anything since Meaghan Chung worked at the SEC or since I bought a slap chop."  Luckily regulators are getting closer to finding out what was wrong with the market by ruling out several potential causes such as erroneous fat finger trades (known here on WGP as Portia De Rossis), unusual trading in P&G stock, hackers, terrorist activity, and Noriel Roubini shouting "Beetle Juice" three times quickly.  The SEC has sent out subpoenas to further look into this matter, though they have not said to whom they have sent them, but Mary Schapiro was seen asking Goldman's CEO if his first name is spelled with one "L" or two.  While equities are bouncing back, it is still showering gold in the markets as gold has hit an all-time high which means Mt. T's neck is now the richest person in America (and he pities the fool who told him all that jewelry was silly).  The fact that investors are rushing in to gold is not a good sign for the markets as it signals little faith in currencies and a fear that escalating debt will continue to cause gevernments to run their printing presses more rapidly than drunk Hollywood wannabes run through Paris Hilton's panties.  Money McBags remains very afraid.

Helping drive the markets up today is that Spain has announced an austerity plan that will involve cutting wages of government employees, reducing public investment spend, and increasing the use of home grown green technologies such as spanish fly.  There is real fear that workers may strike throughout the countrty, but economists are fairly certain strikes won't come to fruition because strikes would cut in to workers' daily siestas.  In addition to Spain making like they are serious about their budget, in much the same way that James McGreevey made like he was serious about Dina Matos, Portugal sold the fuck out of some bonds.  Portugal raised 1B euro (though the euro isn't worth what it used to be) which is a good sign for the markets, though the fact that they need to raise another ~20B by the end of the year is a sign worse than waking up pantsless in a West Hollywood alley with a sore rear end and rainbow colored socks.  Joining in on all of the debt lip service in Europe (and Money McBags wishes Faye Reagan would give his growing debt some lip service), is Britain who is instituting budget cuts as unemploymnet spikes to its highest level in 16 years.  The new fiscal policies could include a tax on banks, black jeans, and Lucy Pinder downloads.  Also, data came out today showing GDP in Europe was up modestly in Q1, growing .2%, or as it's better known as: a rounding error. 


In the US, markets rocketed up thanks to positive forecasts from tech companies who said they expect it to be sunny with a chance of silicon.  Tech giants IBM and INTC both gave positive outlooks today with IBM saying they expect to earn at least $20 per share by 2015 which is double their current business and INTC's CEO saying he expects a double digit percent rise in revenues and earnings.  Additionally, MSFT was up today after they said they will offer Microsoft Office free online so the whole world can spend their days dicking around with PowerPoint for no charge.  Wow.  Technology hasn't received news this good since Number 5 was found to be alive.  Also, the US trade deficit widened to a 15 month high as exports were up 3.2% and imports were up 3.1%  For March, the rise in exports reflected increased sales of American farm products, a wide range of heavy machinery, and dollars.  The rise in imports was driven by a 26% jump in crude oil shipments (though not nearly as crude as Dice Clay CD shipments).

In small cap stocks, everything rode up like a hand on Alexis Texas' ample thighs.  CRUS, TMRK, and KITD continue to rally even though Money McBags ditched them for liquidity reasons last week.  Money McBags did buy back some KITD today in the $12.90s in anticipation of a good earnings call on Monday.  If the market structure is healthy, KITD remains a high upside company.  Also, QCOR is holding a conference call this afternoon to discuss the FDA panel's ruling on Acthar last week where the drug was found to be both less filling and taste great by a panel of experts.  The FDA panel voted 22-1 in favor of Acthar's efficacy in treating IS but there was some concern over how manageable and reversible the complications were.  Money McBags is sure QCOR will delve into all of this this afternoon, but on the surface it seems like very positive news since it points to the FDA putting IS on label for Acthar and thus allowing QCOR to market to IS doctors, something they have been unable to do despite being the favored IS treatment.  Money McBags promised some analysis today and he has FHCO's Q on his to do list (though it is much behind Alice Eve and Ashley on his to do list), but time ran short today so tomorrow he will try to hit you up with some micro to go with the macro.

5/11/10 Midafternoon Report: Europe bailout signals "too PIIGS to fail" policy

Did I miss something yesterday?  Jeesh, Money McBags takes a day off to fine tune his factors of production and Europe decides to mimic Ben Bernanke's "too big to count" strategy by printing up enough Euros to finally finish off the Bialowieza Forest or to get 36 very straight hours with the lovely Ashley Dupre.  Perhaps the EU just wanted to test out the theoretical economic J-curve as part of some bs study by INSEAD to help future business leaders understand the value of exporting, but if they really wanted to devalue their currency, they should have just married it to Mickey Rourke.  But hey, as long as the EU is content to continue to tickle John Maynard Keynes' shriveled balls with their embracing of debt, perhaps they'll go shock thumb on Sir Thomas Gresham's law by creating a shittier currency than the Euro in order to reinflate the dying currency's value. Ugh.  This bail out continues to promote moral hazard and serves to merely put a band aid on a gun shot wound or a regular condom on Lexington Steele.  Giving more money to countries who spent it like Kirtstie Alley at a Sizzler on rib night is just bad business.  If your kid ran up a credit card bill, odds are you'd take it the fuck away from them and not increase their credit line which is basically what is happening in Europe.  So Greece, Spain, Lucy Pinder, keep buying the shit out of whatever you want because Jean-Claude Trichet and Christine LaGarde have the printing presses on full bore and it's lend one lend one free day across the continent.  And Europeans, start spending those Euros because the currency is about to become as worthless as campaign funds to John Edwards, binoculars to Stevie Wonder, or a lap dance to Richard Simmons.

The market however is rallying again today as apparently the UK is talking about instituting budget cuts.   What is encouraging is that Britain is doing this despite its current hung parliament (and an English parliament hasn't been this hung since the aptly named Dick Long dangled his legislation in the House of Commons in the late 1600s).  With all of this commotion in Europe, let's not forget that China may still be a problem as inflation is rising with home prices up 12.8%.  China continues to boom with retail sales up 18.5% and bank lending in the month of April  up to $113B.  Hey EU, why not just quit screwing around and sell yourselves to China and be done with it.  With China's economy bubblerific, it would be a bit like AOL buying Time Warner, but that worked out well for everyone right (and by everyone, Money McBags means Steve Case)?

In US news, the SEC is getting exchanges to institute new circuit breakers to stop stocks from falling too much too quickly.  In this way the SEC hopes to remanipulate the market from the high frequency traders who currently manipulate it.  Money McBags still has no faith in the current market structure after last week's crash that was only stopped by dumb luck.  In macro news, wholesale inventories in the US rose .4% in March which was a tick below analyst guesses but puts wholesale inventories at their eight month high which is marginally not bad news for the economy.

In stock news, LM beat expectations, announced a potential $1B buyback, and apparently cured cancer as the stock is up 13%.  They earned $.39 per share which bested analyst guesses of $.35 even though they still had $10.9B of outflows.  LM also announced a "profit boosting" plan which consists of boosting more people out of jobs to increase overall profit as the investment manager continues to lose assest (though at a much slower pace).  Alternatively, Priceline is down 10% today causing investors to all ask the questions "Priceline is still in business?  Will they take Beenz?"  Apparently PCLN's guidance was weaker than Money McBags knees after encountering the lovely Raven Alexis as they warned of a slowdown in their international business for the upcoming quarter thanks to a series of events including the Iceland volcano erupting, the weakening of the Euro, and a week long Hanna Hilton marathon on Spice.

In small cap news, CRUS continues to rally after apparently Jim Cramer slathered all over it last night.  Money McBags has been pimping CRUS for quite a while now even though he sold it the other day to mitigate his risk (but hey, who needed the extra 20% upside, ugh).  Money McBags thinks $1.20 in eps is not unreasonable for CRUS which puts the company at ~10x + $2 in cash.  He wouldn't be buying here because Cramer's picks tend to get a pop up before sliding back down, but this is a solid growth company (you can read for yourself if you just type CRUS in to the search box here, speaking of which, Money Mcbags would love to search Hayley Atwell's box).  Money McBags is still concerned about the market structure and the influence high frequency traders have so he is not sure fundamental analysis is really all that worthwhile right now.  If you believe in the markets though, KITD is ridonkulously cheap after the sell off last week and has yet to rebound.  The issue that Money McBags is trying to work through though is KITD's reliance on Europe with 70% of their revenue coming from European companies.  Money McBags will ponder this as he swapped his holding into GLD but will be back analyzing companies tomorrow.

5/7/10 Midday Report: The market has no clothes (and sadly, it resembles Abe Vigoda)

Holy fucking shit.  You'll have to excuse Money McBags today because he is still trying to put his limbs back on after jumping from his penthouse apartment during yesterday's volatility which saw the market drop by 9% in 20 minutes.  Whether it was spurred by riots in Greece, a fat finger (or as Portia Di Rossi would call it, "heaven"), or a broken flux capacitor, it is clear that high frequency trading exacerbated the problem and Money McBags is freaked the fuck out.  As a dedicated reader of zerohedge, Money McBags applauds their foresight into, and explanation of, this problem and it is enough to make anyone want to pack it up and join the circus (though if Money McBags were to join the circus, he hopes it would be the Circus of the Stars so he could have the lovely Brooke Shields tame his lion).  Anyway, all of you should read this explanation or simply watch this as Money McBags can offer no better insight in to what happened yesterday and frankly, is liquidating a lot of his shit right now because playing a game where the rules change at any time and you have no control over them is not something Money McBags wants to be a part of unless the game involves Heather Vandeven and the rule changes all involve tickling.  What happened yesterday has made Money McBags feel sicker and more disgusted than he imagines Rosie O'Donnell's kids will feel when they find out where their other mother puts her mouth at night.  If you want more proof of what a sham the current market is, NASDAQ is cancelling the trades of 296 stocks from yesterday.  So if you bought at the drop and made a fuckload of money, you are now left holding a dick sandwich without the bread.  But hey, Money McBags has lost money on trades before so why won't NASDAQ go back and retroactively cancel those?  Who the fuck does Money McBags have to market manipulate or high frequency trade with to get someone to throw him a fucking trade break?  Something about this whole thing smells fishier than Oprah Winfrey's tampon after a 5k.  The market as we know it might be dead, so be smart, and be ready.

In macro news, who gives a shit, but if you do, the US added 290k jobs and yet unemployment rose to 9.9%, as apparently they hired one person to do all 290k jobs.  Economists guessed that 190k jobs would be added so the report was slightly better than expectations but 66k of the jobs added were temporary government jobs to deal with the census so before we reach for any bottles of Dom over a growth in jobs, lets be realistic about what is actually happening.  And to try to keep people's minds off of what happened to the market yesterday, the government revised the jobs numbers from each of the last 2 months upwards.  That's right, March's job adds were revised upward from 162k to 230k and February was revised up from a loss of 14k to a gain of 39k.  Hey, why not just revise each month to a gain of fucking 1MM as long as we are making shit up.  Money McBags believes any of those numbers like he believes in the Lochness monster, dividing by zero, or the existence money shots in lesbian porn.

In stock news today, it doesn't matter.  Everything is being manipulated.  Money McBags hedged his portfolio earlier this week with EPV and has been adding FAZ and GLD.  He has also sold his favorite little companies for fear of liquidity issues.  So bye bye CRUS, KITD, and CTGX.  It is a sad sad day but one must not fight the market.  Money McBags still believes in their stories and will buy them back once (and if) the market settles.  If it settles up from here, he's ok with that.  Money McBags made good money on all of those so lets take some profits off the table while the market drops like John Edwards' popularity or Hillary Duff on her engagement night.  Money McBags needs some time off rigt now because what he thought was real may be faker than Tom Cruise's marriage.  So try to enjoy the weekend.  Money Mcbags will likely be back Monday and will try to analyze companies and perhaps the market will have rallied all the way back by then and all of you who are buying right now will be enjoying bottles of Cristal and blumpkins in your seaside cabana, but be careful out there, because the retail investor is the sucker in this game and it is always better to be the suckee, than it is to be the sucker (unless you are from Transylvania).

And remember to speak well of Money McBags.

5/4/10 Midafternoon Report: Monty Python to rewrite script as somebody expects the Spanish Inquisition

Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrr.  The market is trading down as if Europe is going to go bankrupt like John Edward's morals or like investors think it will give them AIDS (which means Magic Johnson is happily buying today since he can't be infected again).  The news continues to be fears that even with austerity measures and a bailout, Greece is going to be more fucked than Custer at the Battle of Little Bighorn or Houston after the Houston 620.  As a result, the dollar is at its one year high against the euro, though to be fair, part of that high is because 90% of dollars have traces of cocaine on them.  Adding fear to Greece's impending doom is worry that the debt contagion is spreading to the other crappy European countries about which no one cares (you hear that Liechtenstein with your alps, tax haven, and policy of neutrality?).  Spain is once again worrying the markets as Spanish banks are proving to be weaker than the force carried by W and Z bosons or Tiger Wood's "sexual addiction" excuse.  Apparently two banks in Northern Spain were supposed to merge but that is now some sort of power struggle to see who gets to be in charge of the crappy loans which sounds a bit like Dustin Hoffman and Warren Beatty arguing over who gets the marketing rights to Ishtar.  Along with bank issues, the country's current unemployment rate is over 20% and considering they have like a 15 hour work week, that is fucking shocking.   Spanish Prime Minister Jose Luis Rodriguez Gonzalez Ramirez Guerrero Zapatero is shocked by the speculation that his country may be facing worse fiscal problems and claimed his country has “strong solvency” and the possibilty of needing a bailout is “complete madness”  before he asked reporters if they'd like to buy an unfinished church and promised he'd make them a deal, even throwing in a Shake Weight for free.  The market is scared today with Europe's debt crisis pulling a Coleman Silk and spooking investors but we were due for some consolidation so as long as you hold names you are comfortable with, don't panic.

In US macro news, pending home sales rose 5.3% which beat guesses and reached a 5 month high.  As always, this increase was driven by tax breaks for new home buyers and cardboard boxes now being included in reported home sales numbers.  Also, factory orders jumped 1.3% in March and were up 3.1% when excluding transportation orders which is the biggest surge in 5 years since the great home redecoration bubble of 2005.  The US macro news continues to be encouraging but we still need to see unemployment decline until we will start feeling giddier than Amanda Carrier's bowflex.

In stock news, everything is down so this could be a buying opportunity for real companies.  Unfortunately, SIRI isn't one of them despite putting up a quarter where they actually earned a $.01 per share profit.  SIRI's business model is more flawed than Amy Winehouse's face or supply side economics.  With the prevalence of iPods, podcasts, internet radio, and Brooklyn Decker (not clear what Brooklyn Decker has to do with this, but she is hot), there is absolutely no reason to pay for radio unless you are a fan of the great Howard Stern and when Stern retires at the end of the year, Sirius will be deader than Larry Craig's political career.  Money McBags would rather be subject to 24 hours of Celine Dion's music while watching re-runs of Friends and having his anus waxed than go long SIRI.  In other news, MRK and PFE both had good quarters as untemployed people still need to stay medicated to stave off depression, anxiety attacks, and the stench from Paris Hilton's vagina.

In small cap news, Money McBags is getting absolutely obliterated like Alf Landon in the 1936 election (perhaps he shouldn't have eaten all of those cats) or Carmella Bing in Sodom 4.  CRUS is getting pounded, though it has run up so much that momentum investors are likely just taking profits.  This is true of most of Money McBags' names but he is holding steady as he believes in their stories and they are not overvalued (except for maybe VMW which is a bit overvalued, but whatever).  Yesterday Money McBags told all of you to watch NTRI's Q last night and they are up 20%+ after putting up moderately better numbers than the street was expecting yet giving what Money McBags thinks is pretty good guidance.  For the Q, NTRI earned $.15 per share on revenue of $159MM of revenue but they had $8MM of potential one-time marketing expenses so absent those, they would have earned closer to $.28 per share.  While revenue was basically flat with last year, new customers were up 11% and new customer revenue was up 14% due to a mix shift back to more expensive products.  New customers basically drive this business as they help with reactivation as recency of dropping out plays a big role in getting people to rejoin plus the weak new customer additions from the past two quarters have hurt their regular program revenues.  The bad news was that their Walmart/Walgreen's/Sam's club retail promotions bombed worse than Michael Richards on Showtime at the Apollo.  The roll out of those programs cost them $3MM in marketing expense which won't be repeated again and was part of the $8MM excess marketing spend.  Of course that other $5MM came from higher ad rates so it's not clear how much of those are really temporary vs. a shift in demand for ads and thus persistently higher rates.  The company guided to $1.02-$1.12 eps for the year and $.33-$.36 eps for next Q with moderate topline growth so they are banking on marketing spend going back down to ~29% of sales while their gross margin and op ex improvements maintaining.  They are trading at ~20x that with their 20% run up today and are still pretty cheap on an EBITDA basis.    They earned ~$70MM EBITDA last year but with their guidance they should slightly exceed that so call it $75MM.  With $90MM cash and no debt, they now have an EV of $600MM and thus are <9x EV/EBITDA on 2010 earnings.  That's about inline with peers but pretty cheap for their cash flow business model.  The stock is still 33% below its high from the beginning of the year which means they have 50% more to go to get back to where the market thought they should be valued if growth was to come back.  The point is, strong growth isn't quite here yet but they are starting to get trickling sequential growth and adding that to operating improvements gives you a stock with the potential that is now reasonably priced for a static environment.  But the thing is, we know there are a ton of fat people in this country so programs like this are always going to be in demand until society stops shunning bulimia.  NTRI's diabetic targeted product is continuing to grow and apparently hiring the once delicious Angie Everhart has spiked up sales to their women's segment.  Money McBags is going to let the shorts cover today but may be buying tomorrow when this thing settles.  There is plenty of room to move up while downside seems limited, that said, the stock is near fairly valued if you think their weight loss products will only have moderate growth.

4/29/10 Midday Report: HP thinks it bought a rosy PALM, no word on whether they will also buy her five sisters

The rally is back on thanks to solid earnings, Greece likely getting bailed out again (for now), and the FED reaffirming their promise to keep rates low until the next bubble.  Not only that, but new claims for unemployment were down by 11k which was just shy of analyst guesses and just shy of asking Kristen Bell out on a date.  In financial news, Republicans voted to finally allow debate on financial reform because somehow the good of the country became more important than the search for birth certificates, reigning in wide stances, and understanding what about tea bagging is so appealing to Sarah Palin.  Money McBags hopes there will be real reform like you know, requiring reserves to be held on insurance contracts more commonly known as CDS, limiting the size of financial institutions, and closing down the ratings agencies whose business models incent them to do the opposite of give unbiased ratings and who sucked at their jobs like a blind skeet shooter or a fluff girl on the set of a Sabrina Johnson record breaking film.  While there is no doubt Wall Street will eventually find the loopholes in any regulation because greed is a dish best served with caviar, Dom Perignon, and peach cobbler (the first definition of course) and that shit ain't cheap, at least the government can make it a bit harder.  Money McBags is all for the Volcker rule, for hedge fund regulation, and for derivatives regulation even if the last one may cause Warren Buffett like a millisecond of a sleepless night on his mattress made of gold and the tears of baby bald eagles.  The SEC's new found ballsac is refreshing and Money McBags hopes they are serious about regulating the markets and watching porn instead of just watching porn (unless it is first time lesbian porn, and then Money McBags understands).

Internationally, Greek is getting some drachma again as the IMF promised to raise their bailout funds from 45B euros to 120B over 3 years.  However, as part of the stipulation for getting funding, Greece is going to have to put in place stricter austerity plans and better track and report their finances by allowing the IMF to inspect their "cash boxes" once a year on the island of Lesbos.  Greek Prime Minister George Papandreou was said to have started negotiating with labor unions to cut two of their fourteen monthly salaries, to institute higher value added taxes, and to require they work longer than three hour work weeks.  The real question is whether German Chancellor Angela Merkel stops being a sour kraut and agrees to help with the bailout or if she continues to waffle in hopes of maintaining support in Germany to propel her party to victory in the upcoming North Rhine-Westphalia election.  That's right, Merkel is letting Greece, Europe, and the global markets dangle in the wind because of some do shit election in a country that isn't going to even exist should Europe go bankrupt.  Angela, be a good girl and come listen to Money McBags.  I know it is fiscally irresponsible to continue with the steroidal Wimpy strategy of getting a hamburger today and paying for ten of them on Tuesday, I know you want to stay in power (though Germans fighting for power scares the gifelte fish out of Money McBags), but sometimes you have to do stupid stuff for the greater fucking good.  Yeah, Greece acted less fiscally responsible than Stephen Baldwin or a homeless crack addict on pay day, but as the great Zeno Cosini once said "complete freedom consists of being able to do what you like, provided you also do something you like less."  So fucking lend Greece the damn money already and enjoy the freedom to have a European economy.  Now go get me a Kreppel but go light on the powdered sugar because Money McBags hates getting that shit on his fingers.

In stock news earnings were so jizztastic that the market is now expecting octuplets.  But before we even get to earnings, HP is buying PALM for $1.2B in a move that had been rumored for weeks.  Money McBags gets why HP did it as PALM has a good ass operating system and HPQ has the means to try to make it work with better hardware and distribution, but going after AAPL and Blackberry and GOOG is kind of like buying Dr. Pepper and trying to take on KO and PEP or thinking you can beat Lisa Ann and Alexis Texas in a nice ass contest relying on only the Butt Blaster and not implants.  The handset market is more fully penetrated than Bridget the Midget in a tryst with Lexington Steele so sure you might get a little market share with HP behind a Pre-type phone/operating system, but $1.2B seems like a lot to pay for a company that was dying.  Anyway, in other stock news MOT put up a quarter that beat on the bottom line thanks to aggressive cost cutting which did away with lobster thermidor Thursdays in the executive cafe.  Mobile phone shipments fell 43% despite the rise in smartphone sales but the company's guidance of $.07 to $.09 eps next Q was well ahead of analyst guesses of $.03 eps.  BIDU also put up a ridonkulous quarter as chinese people apparently searched for more than just their freedom.  Their profit was up 165% and BIDU's market share in China rose by 600bps to 64% thanks to GOOG's exit from the chinese market and thanks to Olivia Munn's new billboard which was posted online.   Other companies that beat earnings include V, HOT, FSLR, and anyone who sold anything anywhere over the last three months.

In small cap news CRUS continues to run while Money McBags' largest small cap holding KITD is breaking out like Cameron Diaz's face after a pepperoni pizza.  Money McBags has blogged about this so many times that he is risking being more repetitive than a stutterer reading a tongue twister, so he will spare you the details (just use the search function on When Genius Prevails), but this stock is easily worth $20.  They had a call the other day about the $50MM capital raise they just did and basically said it is a war chest to help them fend off Brightcove for acquisitions as Brightcove is going public, any deal they make will be immediately accretive and between 5% and 15% of revenue, they are still targeting 60% organic growth, and world domination is only months aways.  Ok, that last one was made up but the point is the video asset management space is more fragmented than J Howard Marshall's beneficiaries and KITD is in a strong position to help roll it up while putting on it's nicest Sunday dress to appeal to buyers (and yes, KITD will be acquired in the next 1-3 years, that is the play).  And it's still not too late to get in.  Money McBags has purchased three times and if you look at the archives, the first time was at ~$10 so hopefully you're all doing well on this too.  In other small cap news, another Money McBags holding, CTGX, put up a decent Q the other day.  Money McBags broke down CTGX on 2/22/10 so read the full analysis there but the story is they are basically a shitty IT services/staffing outsourcing business with a growing health care IT focus and a specialty in installing electronic medical records.  It's a bit like Y2K IT firms in 2000 in that there is a specific event (hospitals moving to EMR) that will last a finite time (though probably 3 to 7 years starting in 2011), but there are only a few firms who can do this and CTGX is the lowest priced one with the best service.  In this last quarter they finally saw revenue growth after a number of down quarters due to business spend going away in the recession like an 18 year old wanna be actress' dignity on her first casting couch.  Revenue was up 5%, operating income was up 28%, operating margin increased to 3.9%, and eps was $.11.  No real surprises but a nice sold quarter and that is all we're playing for right now.  Just keep ticking along until hospitals spend their stimulus money and seek out IT professionals to give them the MANDATED EMR systems (and yes, caps were intentional because hospitals are required to have EMR systems up by 2015).  The best news is that they said they closed a significant multi-year deal with a large physician practice for EMR, EMR proposal activity is accelerating, and "the first portion of the $19 billion in federal stimulus funds allocated to EMRs has been released to help states advance EMR projects."  Guidance was raised a bit for 2010 to 15% topline growth and EPS between $.47 and $.55, but if you go back and read Money McBags' archives, you'll know that 2010 is irrelevant.  It is not until 2011 that EMR will hit for them and as those projects have greater than 10% margins and bring in $2MM to $3MM of revenue per year, it is not inconceivable that CTGX can earn an incremental ~$.25 per share in 2011 from EMR and thus if they just hold their main business steady (though it should increase if businesses start spending again), they could earn $.75 and thus are only trading at ~11.5x that despite the possibility for >50% growth.  It's still early for this stock but now is the time to get in before it takes off.

4/27/10 Midafternoon Report: If Greece is now junk, what does that make Haiti?

The market is down today as Standard and Poor's downgraded Portugal to a principality and Greek to junk and not the the kind in a trunk that most investors love, but good old fashioned junk.  It was the first time since the advent of the Euro that a European country has lost its investment grade status and Money McBags would be concerned if the rating cut hadn't coming from an agency who missed something called the subprime mortgage meltdown which only caused the biggest financial collapse in 80 years.  The real fear is that the EU can not handle this situation and it spreads throughout Europe like the bubonic plague in the 1600s or black jeans in the last half of the 20th century.  Consider the market spooked as it was looking for a reason to consolidate down anyway and now we have it.

In the US, consumer confidence rose to its highest level since Lehman Brothers collapsed and the highest level since the pet rock fad (because seriously, if people were willing to throw money away on fucking rocks, they must have been hella confident that things were going ok).  The consumer confidence index came in at 57.9 beating even the highest of forecasts after getting those forecasts in a camel clutch and having them submit.  People are generally starting to feel better and the fact that most Americans don't read the news and have no idea that Europe is teetering on the brink of bankruptcy while their own government printed more money than humanly possible to count (again, the "too big to count" strategy) can only help the blissful ignorance.  In other macro news, the Case-Shiller index showed that home prices were up from a year ago but declined on adjusted basis by .1% sequentially.  This still beat analyst guesses though prices are basically stagnant which is better than them dropping but is still a long way from a recovery.  And grabbing most headlines today were Goldman Sachs executives and Fabulous Fab Tourre who never saw shitty CDOs they couldn't pawn off on investors, testifying in front of congress about their alleged fraudulent behavior.  After hours of questions and answers, all we learned is that Senators don't have a fucking clue about the financial system and Senator Claire McCaskill, to quote another great Fabulous Fab, "Girl you know it's true, ooo, ooo, ooo."  Today's hearings accomplished nothing other than letting some rich assturds (the Senators) grandstand and belittle the richer assturds (GS executives).  Excuse me while Money McBags yawns through this part of the saga.  The fact is GS did some shady shit as did the whole fucking financial system so unless GS gets more than a slap on the wrist, nothing is going to change.  Money McBags is close buying long dated out of the money puts on MCO because when the smoke clears from this cock off, the rating agencies are going to be the musician to the regulators' very rusty trombone.

In stock news, Ford reported their 4th consecutive profitable quarter and earned $.46 per share which easily blew by analyst guesses of $.31.  In the Q, Ford outsold GM for the first time in 50 years and gained 2.7% market share thanks to the Toyota recall and vibrating seat warmers.  The stock is getting clobbered though as it had a huge run up and they still sell Fords.

In small cap news CRUS put up a huge quarter and Money McBags is an owner of CRUS and has talked about it many times on When Genius Prevailed.  He first alerted all of you to the company on 1/12/10, told you all he was buying on 1/28/10, and it is now up 75%+ which is enough to take Hayley Atwell out for a nice dinner of tea and my crumpets.  CRUS's Q was way better than Money McBags was expecting though and their guidance pissed all over Money McBags' estimates as if it suffered from bladder incontinence and had just downed a two liter of Mountain Dew and a box of Franzia.  For the Q, CRUS earned $.16 non-GAAP and Money McBags was expecting $.11 with their revenue coming in ~15% stronger than they had indicated.  They said all segments were pretty much up, but energy rebouned to $22MM up from $14MM last year and back to where it was before the economy bent over and starting catching pitches from pitchers with low hanging FICOs.  Guidance is for $78MM-$84MM in revenue for next Q (Fiscal Q1) with 55% margins and ~$26MM non-gaap operating expenses.  With ~65MM shares and enough NOLs to make Wesley Snipes salivate and thus not pay taxes for real, that gets to an eps estimate of ~$.29 if Money McBags is doing the math correctly (and it has been suggested that the correct way to do math is with a reverse cowboy).  CRUS didn't give detailed full year guidance as visibility in to Qs 3 and 4 is low (though hopefully not lower than Stevie Wonder's visibility in trying to see a shooting star without a telescope) but they gave full year revenue growth guidance of 30%.  Of course, guidance for fiscal Q1 already puts them at that 30% revenue growth and it is unlikely that the next 3 quarters will be flat with last year given the audio growth and return of the energy business.  Plus, they said none of their new products figured in to their backlog and thus there could be some upside if some of the new applications start taking off.  So how the fuck should we value this company?  As said previously, Heather Vandeven is hot, but as also said previously, Money McBags had an ~$.85 eps for CRUS for this upcoming fiscal year with ~$.19 coming next Q.   So we could assume they will be inline with Money McBags estimates for the rest of the year and gross up his previous $.85 with the $.10 beat in Q1 their gudiance implies and thus get a $.95 fiscal year eps estimate.  Alternatively, we can take Q1 estimates as a baseline, say they get an uptick in September's Q like usual, and the other Qs will all come in the same as Q1 guidance.  So 3 Qs at $.29 and one slightly higher gets us to $1.20.  Either way, just call earnings somewhere between $1.00 and $1.20 per share and given that, the company is still fairly cheap trading at 10x to 12x fiscal 2011 with $2 of cash on the balance sheet (of course some of that cash is going out the door because on the call they said they were buying a building to relocate their headquarters and it's not clear what real estate in Austin is going for these days).  The point is, this company just grew revenue 87% and the trends are still in their favor as their 35% customer which is AAPL is still selling the fuck out of some iPhones.  So hopefully you all bought with Money McBags, and if you didn't, the stock should consolidate down a bit over the next few days and it is still relatively cheap, so you'll get another chance.  Throw a 15x multiple on $1.00 of earnings and you get a $15 stock and that seems to be a fair low end price.

4/14/10 Midafternoon Report: Market movin' on up, only a matter of time before it buys a dee-luxe apartment in the sky

Oh shit, it is on today like fucking Donkey Kong only this time Mario is not only going to save the Princess but he's going to get rich while doing so.  The market is rallying like it's 1999 with positive earnings, positive macro data, and not a fucking peep out of those Greek assholes who keep trying to fuck things up by going bankrupt (You hear that Greece?  Stay the fuck away from the market, put your hands on the car, and assume the position).  On the day before tax day, the market is making investors forget about the dough they are handing over to Uncle Sam and instead focusing them on the dough they will have to hand over to Uncle Sam next year with all of their oh so sweet gains.  Ahh, to be young and invested.  The rally today was sparked by earnings from JPM and INTC who treated earnings like it was a cup and they were the two girls (and if you don't get that reference and have a very strong stomach and lenient internet rules, Money McBags begrudgingly recommends you google "two girls one cup," but don't say he didn't warn you).  Along with positive earnings, macro data was so good Ben Bernanke was seen taking it out to lunch, playing a little footsie with it under the table, and then inviting it back to his hotel for a little regression analysis to make sure it was heteroskedastic.

US retail sales were up 1.6% in March over the previous month and up 7.4% from March of 2009 which beat economists' guesses.  The beat was driven by car sales which were up 6.8% thanks to incentives such as tax breaks, low financing, and taint massages by Kelly Brook.  Even with unemployment stuck at 9.7% like Keely Shaye Smith in a mudslide, consumers are spending because that is what they do.  When the AIDS scare hit the porn scene in the 1980s, did that stop great films from being made?  Maybe for a bit but now 20+ years later we're back to bareback ATM films with no worries by the performers about diseases.  This is just like consumers coming back after the recession and levering up again because daddy needs his 60 inch tv.  People have short memories (and Money McBags' short memories are mostly of He Ping Ping) and are generally optimistic so good news spurs them to repeat behaviors that may not be optimal for them in the long run.  In other macro news, the CPI was up only.1% and was flat excluding food and energy (or you know, the things you actually need).  The lack of an increase in CPI bodes well for the Federal Reserves' plan to keep interest rates low for an "extended period" as inflation looks like it will be pushed out for another few quarters until investors can actually finish counting all of the cash the US government printed (you all remember Money McBags' "Too big to count" hypothesis).  The one small turd in the punchbowl today was that mortgage applications fell for the second straight week as people seem content to live in their current abodes and the game of flipping houses has finally passed like a painful kidney stone, Mickey Roarke's comeback, or one piece bathing suits.

On top of the good macro news, Bernanke was getting his Fed on today in front of Congress by saying that he doesn't plan to change any policy decisions but the recovery may be moderate due to high and prolonged unemployment, low construction demand, the poor fiscal condition of state and local governments, and Rasheed Wallace.  Bernanke was quoted as saying about borrowing that "The decline in large part reflects sluggish loan demand and the fact that many potential borrowers no longer qualify for credit, both results of a weak economy."  Luckily, banks have shorter memories than investors and it is only a matter of months before FICO 560 people are once again getting $500k loans to buy houses in states they don't work at variable interest rates.  But hey, until then, rally on!!!!!!!

In stock news, JP Morgan beat estimates, grew income by 55%, and raised their outlook for the year.  So fuck you right in the ear recession, you hear that (though maybe you won't hear it with a dick in your ear)?  JPM earned $.74 per share which was $.10 above analyst guesses and revenue was $28.2B, ~$2B above guesses of $26.5B.  While JPM's retail bank and customer card businesses are still struggling a bit, the investment bank blew it out thanks to strong fixed income trading.  And if a weak retail business and strong fixed income trading don't bode well for the economy, then Money McBags didn't learn anything over these past few years.  Oh wait, trading profits and a fuckshit consumer are exactly what got us in to this situation, ugh.  But I guess there is something to say about the classics.  CEO Jamie Dimon did say that “We continued to see delinquencies stabilize, and in some cases improve, in our credit portfolios,”  which is a good sign, but then he added "and if they don't stabilize, we'll just create some complex products to trade with other banks and further boost our illusory profits."  While Chase card may have struggled, at least the bad loans have been siphoned off into a holding company to separate the risk and to hopefully make investors forget about what happened and just concentrate on Chase's growth portfolio which won't need to be put in to it's own holding tank, until it does.  In other stock news INTC crushed their quarter with eps coming in at $.43 which was well above last year's $.11 eps and revenue was up $3B to $10B.  They also announced strong revenue guidance, an improving gross margin, and they will be hiring 1k to 2k people which will be their first new hires in 5 years, so take that unemployment rate.  INTC's Q was so good that Money McBags may have to take it in to the bathroom and have a little time for himself with it while thinking about INTC's motherboards which are so sexy they can be considered MBILFs.  Finally Apple announced that they are going to delay the iPad launch outside of the US because demand in the US has been stronger than the demand for accutane in Jessica Simpson's house or the female condom in Britney Spears' house.

In small cap news, AAPL's strong demand for the iPad could bode well for CRUS if CRUS actually has a chip in the iPad like they do the iPhone.  The stock is reacting well today to the INTC blow out quarter and potentially the iPad news.  Money McBags thinks they can earn $.73 next year but assumes only 12% topline growth so if their energy business can continue to come back and if their audio business just slows down a little from their current 80% growth rate, that number should be surpassed easier than a 3rd grader surpasses Kim Kardashian's reading level.  The stock is now near $10, and remember Money McBags has been talking about CRUS since 1/12/10 when it was trading just under $8 and he mentioned he bought some on 1/29/10 when it had fallen below $7, so a >40% gain in 2+ months isn't too bad.  Money McBags hopes you all joined him on this ride and have been able to take your lady friends (or man friends) out to many lobster tail and bj dinners.  That said, they have $2 in cash so they are really trading at ~10x Money McBags admittedly cautious estimate for this year which is pretty fucking cheap for a company that sells a chip to the biggest fucking electronics seller/fad in the Universe.  Also, JOEZ is rallying today after the huge sell off from their earnings.  Money McBags is still on the sidelines here for reasons he has laid out over the past few days.  Basically, if you're in the market today you can't lose, like flipping a two headed coin, having your brother be the Governor of the state you need to win in a contested election, or being Alexis Texas in a great ass contest.  One stock that is down which Money McBags is going to start looking in to again is CKSW which produces the best logistics/scheduling software for fleets.  The company announced a 15MM share shelf offering today which is really fucking odd since they only have 30MM shares outstanding so this would be hella dilutive if they actually went through with the full offering.  Money McBags is going to look more in to this over the next few days as the company apparently has the best software, but a shelf like that is more perplexing than Jennifer Love Hewitt's career or an Amish computer camp.