7/30/10 Midevening Report: GDP goes down again, claims it likes the taste

The big macro news today was that GDP slowed to 2.4% growth in Q2, that is until it's revised down next Q to keep up with the administration's "hold the shock and hope for no awe" strategy.  This strategy was further evident in today's release as GDP from the past 3 fucking years was revised downward because apparently the Commerce Department is still figuring out how to properly use the "solver" function in Excel.  The peak to trough decline is now seen to have been a 4.1% decline instead of a 3.7% drop, which officially makes this recession the worst since the 1940s which was so long ago that Abe Vigoda had only been dead for a decade and muff guessing still referred to fashion designers trying to figure out the latest in hand warming trends.

Surprisingly though, and in direct opposition to the downward revision strategy,  last quarter's GDP was revised up to 3.7% from 2.7% which makes today's number even worse.  It also goes against every fucking rule of manipulating data since, you know, the whole point of manipulating data is to use it to your advantage but apparently the new guy at the Commerce Department must have missed the memo while he was busy figuring out how to put a cover sheet on his fucking TPS report.

So GDP was below guesses of 2.6% growth and was mostly hurt by a trade deficit growing wider than the Octomom's cervix with imports spiking up 28% which is the largest jump in 25 years since the run on french cookies in the mid 1980s, consumer spend slowing to only 1.6% growth after growing 1.9% last Q, and a renaissance of common sense.  The one bright spot Money McBags could find was Jasmine Waltz, and the one bright spot he could find in the GDP report was that the equipment and software category grew at an annual rate of 21.9% as businesses need to buy a bunch of shit to do what people used to do.  The slower GDP growth comes a day after Fed Bank of St. Louis President James Bullard published an academic paper warning of the potential for the US economy to hit a period of deflation and turn in to Japan from 20 years ago which would be bad for everyone but the bukakke industry.

GDP is now slowing down, the economy has lost 8.4MM jobs, and Christina Hendricks still has not agreed to make a late night Skinamax movie, so any hopes of a speedy, stimulus driven recovery are becoming slimmer than Amy Fisher's parents hopes and dreams. Money McBags is sure the Fed will announce something soon to try to kickstart the economy, but based on the fact that they have been in existence for 100ish years and still haven't figured shit out (largely because economics is a more full of shit field of study than proctology), he's not holding his breath (though he would gladly hold anything of Hayley Atwell's).

In other US macro news, the University of Michigan's consumer sentiment index fell to 67.8 which is the lowest level since November and 10% below the 76 number it registered last month (though to be fair, it registered such a high number last month because it had put the thermometer next to the heater in hopes of being able to stay home from school).  As always, Money McBags has no idea what the difference between a 67.8 and a 76 is other than 8.2 so while market seems mildly happy that the 67.8 came in at .8 better than analysts' guesses, Money McBags is pretty sure an 8 point drop is worse than a .8 outperformance, even if it were measured on some weird logarithmic scale.

Finally in macro news, the Chicago PMI defied all common sense, data, and laws of supply and demand and rose by more than guessed for the month of July.  The PMI jumped from 59.1 to 62.3 while economists had guessed it would fall because, well, because we're in a fucking recession.  Interestingly enough, readings above 50 signal expansion so despite GDP slowing down and consistently high rates of foreclosures and unmeployment causing the midwest to be bleaker and more run down than Warsaw in 1945 or Barbara Walter's vagina, Chicago area manufacturing continues to grow.  It is as perplexing as the 9 dimensions needed for string theory to hold or the Lifetime channel. 

Internationally, Moody's cut Iceland's rating outlook to negative, said they they could cut it to junk, and warned Iceland that they better "check themselves, before they Reykjavík themselves, because fucking with foreign currency loans is bad for yo' health."  Iceland defended themselves by properly pointing out that Moody's is a bunch of asshats and by saying they are a long way off from defaulting on any debt payments.  When asked what a "long way" was, Economy Minister Gyfli Magnusson simply replied that he'd like to buy a vowel before quickly mushing off on his dogsled.

In the market, MRK's profits fell 52% due to merger and restructuring charges associated with buying Schering-Plough and redoing the company cafeteria.  Without those one time charges the company beat analyst eps guesses by $.03 and earned $.86 on the Q but the stock dropped as the company trimmed their full year guidance due to price cuts on drugs from European governments and slowing sales of vaccines and Singulair.  A company spokesman said they would do their best to continue to promote bad and unhealthy behavior in order to boost sales of their products.

In other earnings news MET insured the fuck out of some shit and beat analyst guesses while Amgen also beat guesses despite lower revenue and profits as  both investors and osteoporosis sufferers bend over backwards with excitement over their drug Proli.  Also in the market Disney sold Miramax for $660MM to better focus on making shitty vapid films for kids to buy shittier vapider toys off of and C paid a $75MM fine for a little something called misleading investors about the amonut of subprime loans they held on their books.  C claimed they only had $13B of exposure when they had $50B but Money McBags is sure the $75MM fine will make up for the billions investors lost by believing any of the publicly audited financial statements C released.

In small cap news, TSYS sold off by 17% after their net income fell by 50% in another quarter more confusing than the ending of a Kafka novel.  Remember a couple of weeks ago Money McBags told you TSYS would make an interesting short term trade and on this past Tuesday he said:  

"TSYS was up 4% plus and remember on 7/9 Money McBags said it was too cheap and would make a nice short term trade and it's up just under 20% since then so good for you if you picked up some shares but don't get too greedy as news on the company remains thinner than OJ's alibi and it has traded down for a year for a reason."

So hopefully you didn't get too greedy and took your profits and went home because we were given more reasons for its shitacular performance this year.

That said, on the surface, the quarter wasn't horrible, as revenue was an alltime high $92MM, though pretty much flat with the first two quarters of the year and gross profit of $33MM was also up a bit sequentially.  EBITDA of $15MM was down a bit sequentially and barely up from last year when revenue was $25MM less so they are clearly having margin/expense issues with gross margin dropping from ~45% to ~36% from last year's Q.  Not really what you'd like to see out of a supposedly growing business.  Money McBags is a firm believer in not owning businesses with negative operating leverage unless they are in the start-up stage, so that is a huge red flag, especially for a company that has relied on acquisitions for much of their growth.

That said, the biggest problem seems to be that they saw their text message licensing business slow down and lead to fewer sales of pepetual licenses which was what Money McBags thought was a big growth area for this company.  People like the fuck out of texting so it was always a bit confusing why this company's revenue didn't scale faster with that and why that is now slowing down for them.

Money McBags hasn't had time to listen to their call yet as he has been busy trying to solve the Riemann hyopthesis (he thinks the answer is zero) and looking for more pictures of Sofia Vergara, but he's sure the call would have been as confusing and unilluminating as ever as this management team has overpromised and underdelivered more than an M. Night Shyamalan film.  That said, he's not sure if they are still guiding to $80MM-$85MM in EBITDA as they are only at ~$30MM half way through the year with one of their growth segments slowing and margins getting squeezed like Ines Sainz' ass in an airplane seat.

The company currently has an EV ~$280MM so it's pretty cheap if you think that they can double their EBITDA in the second half of the year but as Money McBags needs a fucking forensic accountant, a strategy consultant, the Amazing Kreskin, and a fuckload of luck to understand their press release and the different parts of their business, he's going to stay the fuck away.

Hopefully you all made a nice short term profit and perhaps their call explained a lot, as this company seems way too fucking cheap for what they claim to do.  That said, the market isn't usually this wrong when selling something off over this long of a period of time, so Money McBags will remain happily uninvested.  That said, if anyone can clearly and concisely explain their business in two sentences or fewer, Money McBags would be interested to understand.

Enjoy your weekend and don't forget, When Genius Prevailed is on Facebook and Twitter.

5/27/10 Midafternoon Report: China backs up Euro, causes it to come from behind

The market was up stronger today than a shot of tequila washed down with a hefty glass of grain alcohol or as its known in the Hasselhoff household: "breakfast."  If you haven't heard, the Chinese are coming and this time it's not just from looking at Gaile Lok it's because they are still hella interested in investing in Europe because apparently they love them some Lucy Pinder.  As a tribute to Art Linkletter, China’s foreign exchange regulator said one of the darndest things today by refuting reports that China was reviewing their euro holdings as being “groundless."  Of course Money McBags would take it more seriously if the statement from the Chinese government didn't end with "in bed."   Fears of China dumping their Euro debt holdings caused the market to tank in the close of trading yesterday but investors appetites for equities have quickly come back as if it is 30 minutes after eating chinese food.  Investors are hoping this puts a floor on the Euro but more importantly, they are hoping the coke they were given by the Chinese foreign exchange regulator at press conference contained no pee pee.
 
In US news, GDP was revised lower going from 3.2% to 3% leaving everyone guessing whether the next downward revision will be 2.8% or the square root of -3 since the number is completely fucking imaginary.  The reasons for the downward revision were that consumers spent less than initially estimated (duh), business spent less than initially estimated (big duh), the trade deficit widened, and we're in a FUCKING GLOBAL RECESSION with markets that are less decoupled than two hydrogen atoms in a covalent bond or the lovely ladies at the end of an extremely NSFW Ultimate Surrender match.  In addition to lower consumer and business spend, state and local governments saw their spending drop by 3.9%, the fastest that rate has dropped since 1981 which was so long ago CDO's didn't exist, Ben Bernanke was still teaching MBAs at Stanford, and the competitive NSFW sport of muff guessing had not yet been invented.  A decline in state and local spending will mean more teachers being laid off, fewer police on patrol, and an increase in car axle sales due to larger and more prevalent street potholes.  In other bad US macro news, new claims for unemployment fell by 14k to 460k, but missed analyst guesses and sent the 4 week moving average higher.  The disappointement will only be matched by next week's disappointment when new claims are revised lower.

In stock news, everything was fucking up, well, everything except for MCO.  Moody's once again is taking a hit as hedge fund investor David Einhorn ripped the company a new ratings model in his speech at a hoity toity hedge fund dinner where the managers drank the blood of young bald eagles while rolling around in $1,000 bills and the tears of the first Dalai Lama.  Einhorn's biggest issues with MCO are that they don't have a long enough time frame and they suck at their jobs.  Money McBags has been riding the short MCO gravy train for quite awhile now as he maintains there is absolutely no reason for ratings agencies to exist other than to serve investment banks and help them perpetuate fraud in order to maximize the bankers' internal profitability.  In earnings news, Tiffany's put up a good quarter with profit more than doubling to $.50 per share causing analysts to throw up their breakfasts as TIF easily beat their guesses of $.35 per share.  The company cited strong growth in Asia and Europe with sales up 50% and 25% respectively as apparently rich people don't give a fuck about the global recession.  The company also raised guidance above estimates citing continued strong demand and their customers not being in touch with reality.  In other earnings news, both Costco and Jo-Ann Stores put up good numbers as people bough the shit out of bulk goods and cloth to make their own pantaloons.  Appraently people are doing this in order to save up for a Tiffany's bracelet.

In small cap news, everything rose like Gemma Arterton's popularity during take your kid to work day on the set of the Prince of Persia.  Leading the way was TSYS which was up 20% and Money McBags has mentioned them before as the sell off in the name has been way overdone.  Sure they put up a quarter crappier than Wilford Brimley's used adult diaper with NIM falling and their government systems business showing weak organic growth, but their guidance is still stellar.  Guidance is for $85MM EBITDA and 30% revenue growth which means they are trading at ~5x EV/EBITDA.  So sure competition from GOOG and NOK is coming and sure their management team talks a good game, but with the sell off, they are now just too cheap and set up for a couple of quarters of expectaion beats with analysts dashing to take down numbers.  Money McBags wouldn't buy today as there was likely more short covering than on a swimsuit photo shoot in the Middle East, but value investors should dig in to this company.

4/30/10 Midday Report: Biggest swinging dick on the Street may land in aptly named penal colony as criminal investigation launches on Goldman

The markets are down today due to mostly inline GDP, more shenanigans in Greece, further investigation in to Goldman Sachs, and gravity.  GDP for Q1 was released and the economy expanded by 3.2% thanks to consumer spending which was up 3.6% and interestingly enough coincided with the release of KFC's Double Down thereby spiking sales of Pepto Bismal and artificial hearts.  Guesses were for 3.3% GDP expansion so the economy pretty much performed inline but following a 5.6% expansion in Q4, the economy has now had it's best two quarters since the end of 2003 when the great mortgage fraud frenzy was peaking and anyone who currrently or previously had a heartbeat could get approved for a loan (Money McBags isn't saying it was easy to get a mortgage, but Abe Vigoda owned 6 mansions and one apartment complex during that time and he died in the 1980s.  What?  he's still alive?  Nevermind).  Also, the Fed's inflation target was only up .6% which is the lowest level since records started being kept in 1959 but that target ignores food and fuel prices since why measure the things people actually need to spend their money on when measuring the value of money?  It's a bit like judging a movie based on the font of the opening credits (and Money McBags loves him some Garamond) or a wet t-shirt contest based on the flip-flops the contestants are wearing, but whatever.  Business spend also keeps inproving as it was up 13% thanks to the fact that it is bouncing back from historical lows and an increase in the sale of cardboard boxes to help pack up laid off employees.  While the consumer appears strong in GDP numbers, consumer sentiment dropped in April, though it still beat analyst guesses and was essentially the same as last month.  Consumers are at least flat lining as the average US citizen gives a fuck about whatever is happening in Europe and as job losses have begun to stagnate, they are happily oblivious to any potential impending financial doom.  Money McBags is pretty sure Europe will get their shit together so perhaps ignorance is bliss (though probably not as blissful as Elisabetta Canalis). 

There is more he said/she said/finger pointing/tail wagging/pillow biting in Greece today.  Moody's downgraded 9 Greek banks which is a bit like downgrading hydrogen as a fuel for zeppelins after the Hindenburg crash or Heidi Montag's singing career after her second album was released.  Greek prime minister George Papandreou is back crying for help saying "what is at stake is the survival of the nation.”  But if he were really concerned about the survival of the nation, perhaps he wouldn't have let the debt grow out of control or claimed the comedian Ant as one of Greece's own.  Tomorrow's Labor Day festivities in Greece will likely be subdued as greater austerity measures threaten the ability of Greek workers to continue to produce no valuable output.  Seriously, what does Greece produce besides baklava for tourists and Julia Alexandratou sex tapes?  Perhaps union leaders should focus on that by figuratively solving the problem of what to do with all of the underwear they stole.

In the market, Goldman is getting sacked as US federal prosecutors may open a criminal case against them for crimes against humanity, or securities fraud, potato-puhtaato.  It's not clear what exactly the charges would be since every single investment bank does something criminal every day, but that is how the markets stay efficient.  Money McBags does wonder what will happen to CEO Lloyd Blankfein if GS is found guilty and whether his cellmate will try to put his underlying assets into Blankfein's special purpose entity.

Finally in small cap stocks, Money McBags favorite QCOR put up an ok quarter and yet are off to the races again.  After last Q, Money McBags highlighted this company and mentioned one should buy on any pull back, unfortunately that pull back never occured as QCOR is now up 50%+ since then.  This quarter revenue was up ~13% to $26.2MM and eps came in at $.11.  Both of these numbers were short of Money McBags' estimates (he had $27.5MM in revenue and $.15 eps) and yet the stock is absolutely ripping up like it is on a Red Bull and meth binge.  There are five reasons for this as far as Money McBags can tell. 

1.  Operating expenses were higher than normal as they try to build out their sales and marketing efforts.  Money McBags is 100% behind this as he'd like to be 100% behind Jessica Biel.  Anyway, with costs up to help grow future revenue, a bit of a hit to the bottom line is unconcerning.

2.  They announced that a panel of experts is going to rule on their FDA submission to get Acthar on label for IS on May 6th and QCOR will host a conference call about it on May 10th.  This isn't the final hurdle as the panel merely gives a recommendation to the FDA who then has the final ruling on June 11th, but a positive opinion will be a better sign for QCOR than marrying in to the Kennedy family was a positive sign for Arnold Schwarzenegger's political career.  Getting IS on label would finally allow QCOR to market to doctors in their historically biggest segment.

3.  Kelly Brook is hot.  Ok, this might have nothing to do with QCOR being up, but Money McBags had to investigate to make sure.  It is likely just spurious correlation but it was necessary for Money McBags to test his lurking variable to make sure.

4.  NS is coming.  Holy fucking shit could it be on.  The QCOR cake just got a little more icing on it as NS could be bigger than both their IS and MS segments combined according to management.  They filled 11 NS prescriptions this last Q which is still smaller than one of the late great He Ping Ping's turds but it is encouraging enough that management is going to launch a pilot sales program in April to try to reach nephrology doctors.  Patients with NS need to use Acthar for 3 to 6 months to be cured so the recurring revenue potential is huge for QCOR.

5.  MS continues to grow, ticking up 187% and overtaking IS as their biggest segment.  Remember, just two years ago this segment was about the same size as NS currently is but management dedicated resources to blowing it out, so it does bode well for their ability to execute a NS strategy.

So while all of that was good, numbers were still below what Money McBags thought and he is taking his full year estimate down to ~$.60 from ~$.70.  The big question for Money McBags has to do with why their reimbursement rate as a % of gross sales which had been running at 30%+  was down to ~22% this quarter?  The reimbursement rate takes gross sales to net sales by removing medicare/medicade/etc. expenses.  So with only a 22% remibursment rate, it means gross sales were way below Money McBags estimates and the question is why and what is the rate going to be going forward?  Sure they seemingly cleaned up a bunch of the tricare reimbursment issues, but is this 22% rate the rate to use going forward?  If so, that would be huge for eps and if not, investors may be in for a negative surprise next Q.  That said, with his current $.60 eps estimate (based on a 25% reimbursement rate, 20% sequential quarterly MS growth, no growth in IS, and no growth in NS) the stock is trading at 16x that, even after this run up so it's still not hella expensive especially with the NS potential.  Remember, they said NS could be bigger than their current business so in the ultimate best case scenario (and Money McBags is not saying this will happen, just their big upside possibility), they could more than double their earnings in 2012 (say it takes them 2 years to get NS up and running like it did for MS and they get operating leverage and continued growth in MS) which makes this a ridonkulous buy.  However, Money McBags would like to get a better understanding of reimbursement, a better understanding of what they are going to do with their cash (last Q they said they were going to look to buy another drug but there was no mention of it this Q), and a better understanding of Kate Bosworth.

3/26/10 Midday Report: GDP revised down, Market revised up

The market is up again today and as far as Money McBags can tell the main reason is that it is open.  There was a flurry of economic data released today, all of it inline, further signalling the stagnation of the recovery from a potential V-shape to a Bea Arthur-esque flatline (which is of course because she's dead).  Consumer sentiment remained unchanged from the previous month at 73.6 which was slightly higher than economist guesses of 73 (we are told the Albanian judge scored it a 75 due to difficulty, imagination, and grace under pressure which helped drive up the score).  Fourth quarter GDP was revised downward for the third time proving that three times isn't always a charm (unless of course you're the Dahm triplets).  GDP for Q4 is now said to have grown at 5.6%, down from the last guess of 5.9%, and the initial guess of 5.7% growth.  Economists had expected it to be unchanged but they also expected markets to be efficient and the overvaluation of the financial sector in the 2000s and undervaluation of Hayley Atwell easily disprove that theory.  GDP was driven by business spend and exports with US consumers largely remaining keeled over in the fetal position hoping the mortgage man won't come touch them in their foreclosure.  Money McBags anxiously awaits GDP to be further revised next month, pehaps becoming just DP by dropping the barely politically correct and bad for its self-esteem, "Gross" moniker.  And Alan Greenspan is at it again.  The 84 year old pontificated on the threat of rising long-term interest rates on the housing market right after wife Andrea Mitchell changed his depends and cut his food into little pieces to make it easier for him to chew.  Greenspan said he is "very much concerned about the fiscal situation," because the "last boob in charge really fucked things up."  When he was reminded that he was that boob, he simply replied that he has always been a breast man.  His concerns about longterm rates rising are that they "will make the housing recovery very difficult to implement and put a dampening on capital investment as well” whereas holding them low indefinitely will only create a bubble and lead to one of the worst global recessions in history, so I guess you're damned if you don't and you're damned if you do, which describes the philosophy of Roman Polanski in a nut shell (though it's unclear how or why he would be in a nut shell).  But all is not despair as unemployment rates fell in 7 US states including Michigan where now only 14.1% instead of 14.4% of people are out of work.  Of course unemployment rose in 27 states, but that is just a minor detail, like remembering to pull the rip cord on your parachute or always remembering to check for an adam's apple.  Overall, unemployment held flat at 9.7% furthering driving home the sluggishness of the recovery.

Internationally, Greece is still fucked, though maybe a bit less fucked as the EU and IMF finally have come to some sort of nebulous agreement on a bail out plan until next week when they will likely start all over again.  The IMF and EU are respecting Greece's personal choices and allowing them to take their funds anyway they want by making the funds bi-lateral.

In US stock news, Radio Shack, or as it has been rebranded "The Shack" after it's first rebrand of "Irrelevant" didn't work is rumored to be in the process of selling themselves and is up 8%+ on that news.  The company is armed with $900MM of cash and thinks they are worth $3B which is about where they are currently trading.  Potential buyers include PE firms, Best Buy, and anyone else looking for outdated business models.  Seriously, Money McBags doesn't get Radio Shack.  They sell batteries and cable cords and wires when we are like 18 months away from everything being wireless.  If you want to buy a tv/stereo/computer, you go to the internet or Best Buy or Circuit City (and see that's funny, because Circuit City is no longer in existence, so you get my point), not to a RadioShack.  Money McBags is a bit flummoxed by this one, perhaps there is some real estate value but otherwise he can't think of one reason for a company like this to exist.

In small cap news, KITD is set to have their earnings call next week and Money McBags is expecting big things or at least updated guidance to reflect their Multicast deal.  If guidance is only 10% as positively surprising as logging on to the not safe for work and perhaps not even safe for home spankwire.com and seeing a video starring, Hannah Hilton and Faye Reagan (and yes, that happened today), then KITD should rally.  It's been a pretty quiet week in small cap world and Money McBags has been very busy so he apologizes for the lack of analysis.  He will be back next week breaking down more companies for you and trying to continue to find good values.

Until then, enjoy the weekend.

2/26/10 Midafternoon Report: AIG loses more in Q4 than entire GDP of Malta, warns Botswana they're up next

The market is a bit mixed today like the drug cocktail found in Brittany Murphy's stomach.  Sales of existing homes dropped for the second consecutive month, this time by 7.2% which is the second largest decline ever and is creating more of a buyers market than the internet did for newspapers.  The decline was caused by the government tax credit winding down, the high unemployment rate, and the disappearance of the barter system.  Economists actually expected existing home sales to rise so it's good to see they are once again about as good at their predictions as Stevie Wonder is at being the seeker in a game of hide and seek (or as he calls it "life").  An interesting data point is that 38% of all homes sold were distressed sales.  That is a remarkable number.  So homeowners, look to the house on your left and look to the house on your right, because on average one of those houses is being foreclosed upon and your new neighbors may be a few tax brackets below you.  In more positive macro news, business activity grew more than anticipated and its most since 2005 according to the Chicago Purchasing Managers Index, or as its now more commonly known as: "Fiction."  Unless the index was measuring coffee sold while waiting in line at the unemployment office or tickets sold for the proposed Julia Mancuso/Lindsey Vonn catfight (and Money McBags would love to ski down Julia Mancuso's hills), the data is perplexing to say the least.  Also, GDP was revised up to 5.9% growth from 5.7%  in the last Q.  However, most of that growth was a result of inventory restocking.  Looking at GDP without the change in private inventories, growth was a He Ping Ping-esque 1.9% and consumer spending was revised down from 2.0% to 1.7%.  The point of all of this is that the economy is about as healthy as Mark Sanford's marriage or Money McBags' new found love of Alice Eve so until jobs can be created, we are going to have more and more marginal to disappointing economic news.

European markets were off to a better start today as the British Statistics Office revised up their estimate of UK economic growth in the fourth quarter to 0.3% from 0.1% citing the long awaited introduction of dental floss, while Asian markets advanced after figures showed that Japanese factory output, rose by 2.5% in anticipation of Nintendo's new game console, tentatively called "Wii're Fucked."

The big stock news today is that investors are not down with AIG and their craptastic quarter.  AIG posted an $8.57B loss or to make it seem smaller, $65 per share (and remember, shares are currently trading at $25, so that is a neat fucking trick).  At least analysts were close as operating loss per share was estimated to be $3.94 and it just missed that number by coming in at whopping $53.23 a share.  So estimates were only off by a factor of 14ish or as they say in the forecasting business, a nut hair (that is if it were one of Lexington Steele's nut hairs, and not a regular Lexington Steele, but one who had grown to be 30 feet tall as a result of radiation poisoning from his last scene with Gianna Michaels).  Shareholders should have faith though as CEO Robert Benmosche said in a pre-recorded (in order to duck questions) call: "While we are not out of the woods by any stretch, these numbers represent a substantial improvement from just one year ago...we believe we are on our way to regaining our stature as one of the world’s largest and most successful property-casualty insurance operations."  He then stated that he thinks Roman Polanksi is also on his way to regaining his stature as a successful babysitter and Bernie Madoff is on his way to regaining his stature as a first class investor.  While $6.2B of losses can be chalked up to paying back the government, the addition of $1.8B to their property-casualty reserves can be chalked up to being bad at the insurance business, whch would be fine, if insurance weren't their main fucking business.  Money McBags knows it's easy to kick someone when they are down, unless you're Oscar Pistorius (and in that case you just knee them), but AIG's situation is more convolutedly complex than the 11 dimensions needed in M-Theory or trying to figure out where the pictures come from for the still deliciously not safe for work Guesshermuff (and all my guesses remain "fantastic").  Trying to analyze AIG is a lot like taking your car to a mechanic, it's always something and you have no way to prove the guy wrong.  Money McBags is eagerly waiting AIG to come out and just blame their losses on a faulty johnson rod.  There are easier ways to make money so pay attention to AIG only for any market risk insight you may get.  In other stock news, C is replacing 3 of its directors as apparently Colombia Pictures has hired them back to shoot a remake of their long running hit Monkey Business.

In small cap news today RICK continues to show the market its tits by climbing another 3%.  CEO Eric Langan announced yesterday that he expects the VCGH deal to add $50MM of revenue by 2011 to bring RICK's revenues to $150MM.  He also said they would be consolidating brands in an attempt to streamline their image so they can better promote it through television commercials on such channels as ESPN.  Now look, Money McBags loves everything RICK is about, really he does, he loves the business, he loves the growth, and most of all he loves every coked-out part of their inventory.  That said, the idea of turning it into some Hooters-esque national chain is the worst thing they can do.  Strip clubs were not meant to be Walmarts or McDonalds and advertising them on prime TV channels is the wrong place and the wrong audience.  Anyone who wants to go to a strip club knows exactly where they are and which ones are best, they don't need a fucking TV commercial with some likely dopey jingle (Rick's Cabaret: Plop, plop, jizz, jizz, oh what a relief it is) reminding them that they love vagina.  So a TV ad campaign worries Money McBags like a parent learning their daughter will be going to Cancun for spring break.  This company should stick to what it knows and put marketing dollars into the girls, airport billboards, and hotel concierges' pockets.  Money McBags is still awaiting more detail on VCGH's financials, but the stock is nearing his price target.  In other small cap news, PMFG, a company that provides separation and filtration products mainly for natural gas and which Money McBags has followed off and on for the past couple of years announced a secondary offering today at a price a measly 30%ish below their close on Thursday causing investors to collectively utter a befuddled "What the fuck?"  They are selling 1.3MM shares for about 10% dilution at $11.50 and net proceeds from the offering will go towards repaying a portion of their outstanding borrowings in connection with their poorly timed acquisition of Nitram Energy, towards working capital, and also towards general corporate purposes such as settling the likely shareholder lawsuit to be filed against them for such a diltuive and poorly priced secondary.  Wow.  Money McBags is glad he doesn't currently own PMFG and can only scratch his well-coiffed head and wonder what is going on in their Dallas headquarters.

As always, enjoy the weekend and don't forget Money McBags is now on twitter.

1/29/10 Midday Report: Size doesn't matter as 6% GDP expansion fails to stimulate the market

The market is bouncing around today even though GDP grew 5.7%, the fastest pace in 6 years and beat estimates of 4.7% growth.  The upside was led by a restocking of inventories from their depressed levels (and inventories were more depressed than Kathy Griffin's bikini waxer the time she ran out of rubber gloves).  The change in inventories accounted for 3.4% of the growth with purchases of equipment and software up 13%, negating the 15% drop in commercial construction because building cardboard boxes is so much cheaper than actual homes.  So the question becomes is this a one quarter inventory rebuilding and stimulus induced anomaly or are we really on the way to a recovery?  In the delightful Elisabeth Kubler-Ross's model on the stages of grief (and for those who missed Ms. Kubler-Ross's induction into the National Women's Hall of Fame in 2007, the finger sandwiches were to die for), the economy has passed steps one and two by moving past denial (we are definitely fucked) and anger (openly calling for Dick Fuld to have his dick folded) and is now in the bargaining stage (please hire me, please, please).  Unfortunatley the next stage is depression, which hopefully isn't caused by another market crash when inventories fail to turn and/or by China's bubble bursting like Christina Hendricks' bustier.  Of course the last stage is acceptance and with any luck we will be accepting growth and recovery and not the realization that we are Japan circa 1989 or Taylor Rain's lovely backside in her brilliant performance in 2004's much overlooked film, Apprentass.


What is most concerning to Money McBags is that the market has been selling good news and is trading down now that the expected results are coming in much better.  Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data.  That is an amazing stat and yet the market rally seems to have fizzled out like Lindsay Lohan's singing career (and acting career, and pretty much anything other than her whoring career, which actually makes us all winners).

The other big news of the day is that Ben Bernanke was confirmed by the Senate for another 4 year term by a 70 to 30 vote.  The thirty who voted against him also voted for Mountain Dew in the Pepsi challenge, Curly Joe as their favorite of the 3 Stooges, and Anna Karenina as their favorite Tolstoy novel.  Money McBags is a Bernanke supporter and thinks he has done a perfectly reasonable job as Fed Chairman, so kudos and huzzah for the Senate who took a wide stance and voted bi-partisanly on this one.


In stock news, MSFT earnings were up 60% thanks to Windows 7 and a little something they refer to as a "monopoly."  They beat estimates by $.15 by earning $.74 per share and promised that with earnings like this Bill Gates may finally be able to move out of his mother's basement.  Amazon also put up a huge quarter with sales rising 43% and earnings coming in at a robust $.85 per share, well ahead of the $.72 estimates.  They also announced a $2B share buyback which boggles the mind considering that they are trading at 50x next year's earnings and with the iPad coming in to the market and potentially taking share away from the Kindle.  Why a commodity business with low barriers to entry should trade at 50x is beyond me, but then again, so is M-theory and all of it's absurdly thought out 11 dimensions.

In small cap news MED and ZAGG continue to trade down while EBIX gives back some of their gains from yesterday.  CRUS is also down despite their better than street guidance yesterday and run of analyst upgrades today.  Money McBags did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm) and buy a small position so go buy some iPhones.  Next week promises to be a wild week in the small cap space with more earnings announcements than Jack Nicholson has chins, so enjoy your weekend and be prepared.

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).

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.