5/6/10 Midafternoon Report: Europe to be the new Australia as european debt falls "down under"

The market continues to sell off as Angela Merkel happily plays her fiddle atop the Zugspitze while Europe burns below.  The debt crisis in Europe continues to gain momentum like it has an improbable, though theoretically possible, coefficient of restitution greater than one or as if it were running for office with the promise that Amanda Carrier will personally "thank" every voter.  ECB president Jean-Claude Trichet (also known as the peon from Lyon from his starring roles in Bubble Impact and Wall Street Fighter) warned of an uncertain outlook for the EU after the ECB held rates at 1%.  The uncertainty stems from the EU not being sure if Europe's impending bankruptcy will be caused by hyperinflation or just good old fashioned default.  He also defended the ECB's decision to suspend Greece's bond ratings by saying "well, we didn't have a rating lower than junk, so it wasn't really a tough choice" and when queried about Spain and Portugal, he responded that they are "not in the same boat" as Greece, before mumbling "They're in the boat that is sinking next to Greece's boat."  Trichet then lauded Greece's austerity measures and shrugged while claiming if they didn't work "c'est la vie."  Slightly positive news is that while Spain's cost of raising debt was up by ~80bps and a quart of paella, demand remained strong with their latest bond offering being oversold by ~2.5x.  However, rumors are that the EU is looking into what is being called a "nuclear option" of buying government debt in the secondary market in order to help keep demand and liquidity at reasonable levels and if that doesn't work, they will try the "nuclear cough option" which is trickier and has a stronger possibility of backfiring.  The point is there is some bad shit going down in Europe and the scary part is that the US suffers from many of the same issues since we love eating hamburgers today, even though we'll have to pay for five of them on Tuesday.  Money McBags prefers to think about baseball, bunny rabbits, and Alice Eve and thus sweep the impending economic crisis under the rug because if he stops and focuses on the real issues he gets nauseated enough to give even the most discerning emetophiliac a stiffy.

In the US, Retail sales slumped a bit in April with some analysts blaming the earlier Easter season and others blaming something called 10% unemployment.  Speaking of unemployment, new claims for unemployment dropped last week by 7k to 444k or as Moses Malone would say "fo fo fo."  Economists were guessing claims would drop by 11k so the number was a bit of a disappointment, though not as much of a disappointment as Ron Palillo's career.  One thing that may be keeping claims down is the productivity rate in the US which grew 3.6% and bested economist guesses of 2.5%.  See as workers and production become more efficient, employers need to hire fewer people thus prolonging the unemployment cycle.  So a big fuck you to all of you efficient workers who are keeping the unemployment rate so high that the economy is still struggling.  If Money McBags were president, and trust me he has turned down the nomination many times, the first thing he would do would be to hire Alan Greenspan, just so he could fire him again, the second thing he would do is make Hayley Atwell his Undersecretary of State, and the third thing he would do is promote the terribly NSFW guesshermuff to the work force thus sinking their productivity as they spend hours mastering the competitive sport of muff guessing.  And with that one move, producitivity would decrease enough to cause companies to hire more people and thus unemployment would start to abate.  Problem fucking solved (and to be honest, Money McBags would love to solve any problem the still NSFW 1600 has).

In stock news, MGM posted a loss thanks in part to their CityCenter development on the Las Vegas strip which had a $255MM operating loss.  Apparently people stopped buying overpriced condos in overdeveloped Las Vegas and CityCenter went through a drastic hooker shortage.  MGM is trading down 6% on the day but promises it will make it up to investors tonight when they finally hit a hot streak at the craps table.  Nintendo is down 3% on a disappointing Q as apparently Mario finally saved the Princess from Donkey Kong thereby leaving the franchise to spend some time alone with his long lost fair maiden.  Sales of the Wii were down 20% for the year and the company is guiding to further declines as the market becomes more competitive and saturated and teenagers start to discover something called "outside."

In small cap news, everything is pretty much getting shit on like it is playing the foil (or perhaps the saran wrap) in a German scat film.  One company Money McBags has talked about before though never felt comfortable enough to own, HIL, just put up a craptastic quarter and is down a whopping 24%.  HIL is a project and claims manager for construction projects with most of their revenue coming from outside the US.  Money McBags has not listened to their call yet but he went through their release and it looks like the problem stemmed from cost controls worse than those of Stephen Baldwin.  Revenue was flattish and basically in line at $104.5MM vs analyst guesses of  $106MM but eps missed by a wider spread than Larry Craig in a Manhole bathroom.  Analysts guessed eps would be $.11 and it came in at $.06 as SG&A rose from 31.4% to 33.0% of their consulting fee revenue which is a heck of a lot of nights out at the Dubai Rick's Cabaret.  Not only was SG&A up, but backlog fell from $620MM to $540MM, 12 month backlog fell from $280MM to $240MM, and Money McBags' back log fell after eating a bean burrito with extra hot sauce.  Most of the damage was done in their claims management business which is ~75% of revenue and was down ~8% organically largely driven by business in the Middle East (perhaps they lost out to the Bluth Company in building construction in Iraq).  Money McBags isn't sure what the fuck is going on with this business as managament had mostly indicated that things were ok so it is not clear why they managed costs like Corey Feldman has managed his career.  If you annualize this Q's EPS and EBITDA, the company is trading at 20x eps and ~9x EV/EBITDA even with the down 24% today.  Unfortunately, that seems a little too pricey until we can understand why SG&A went up so much and how they are going to backfill the loss of organic growth in the Middle East (and speaking of backfill, Money McBags would love fill Marissa Miller's back).

And loyal readers, don't forget Money McBags is on twitter and since he is providing you with top level analysis, insights, and plenty of dick jokes all out of the goodness of his way too big heart, how about telling a friend or 10,000 about When Genius Prevailed?  Could you help an analyst out?

2/19/10 Midafternoon Report: Core inflation tame, good news for those who don't eat or use energy

The market hung in there today despite Ben Bernanke's surprising discount rate raise after the market closed yesterday.  Bernanke continues to think outside of the box in managing the economy (and as long as it isn't Hannah Hilton's box, then Money McBags is fully on board because one should only think inside her box, never outside of it).  There is no telling what Bernanke will do next as a Federal Reserve Chairman hasn't done anything as radical as he has since Marriner S. Eccles wore black shoes with a brown belt on day back in 1937.  Money McBags is all in favor of the proactivity of the Fed and anxiously awaits their next move, whether it be reducing their balance sheet, paying interest on bank loans, or having the head of the Cleveland branch of the Fed, Sandra Pianalto, man the kissing booth at the Fed's next holiday party (what, you'd prefer Janet Yellen?).

The Dollar is now at its nine month high against the Euro, reaching $1.35 to the Euro, thanks to the Fed actions which means that all of the unemployed people who couldn't afford to book vacations to see the leaning tower of Pisa this winter can now hypothetically be able to at least afford to check a bag.  CPI data also came out today and showed inflation to be less than expected except for a couple of small things called energy and food.  Excluding food and fuel costs, prices fell .1% which was the first decline in over 25 years.  So as long as you don't eat or go anywhere in the fucking car which you probably have to sell anyway to make the mortgage payments on the house you couldn't afford but were able to get a loan for so the endowment fund at the University of My Left Nut (go fighting Ballhawks!) could get a little extra yield on their fixed income portfolio by having bankers slice up pools of those mortgages which enabled those same bankers to buy even more coke and purchase hookers with fewer diseases, everything should be ok.  For fucksake, we're not hunter-gatherers anymore (though if we were, I would hunt and gather me some Amanda Seyfried) and thus excluding food and fuel costs from the CPI is like excluding money shots from bukakke films or excluding General Winfield Scott from a list of greatest guys with the first name Winfield (and a big shout out to Old Fuss and Feathers, all the Whigs in the house give me a "hell yeah!").

In stock news today, DELL apparently has been spending way too much time trying to find the Erin Andrews peephole video and apparently downloaded a virus in the process as they are down 6% on last night's disappointing quarter.  Revenue grew 11% while profit dropped 4.8%.  We have a word for that on When Genius Prevailed, it's called "bad fucking business" (and yes Money McBags knows that is actually three words but like DELL, he is giving you 200% more for the same price).  Dell's continued reliance on discounting is good for consumers (assuming they wanted a shitty Dell computer with customer service so bad that it that makes Britney Spears teaching you bernouilli distributions seem helpful), but not good for shareholders.  Granted all PCs not starting with an "i" are essentially commodities so price competition is inherrent to the market, but negative operating leverage for a business is like a female with a hairy ass, it's uninteresting, unbecoming, and frankly unnatural.  In other large cap news FSLR reported a decent quarter, beating analyst estimates but then guided to increased margin pressure in the second half of the year as apparently their main source of energy, the sun, is free.  Solar stocks are being eclipsed by the market today as a result.

In small cap news, JOEZ continues to rally (and Money McBags broke down JOEZ quarter a couple of weeks ago) while for some reason HIL continues to crumble like poorly installed dry wall (and that is punny because HIL oversees commercial construction).  Money McBags has been a fan of HIL as they are diversified globally, have had solid performance, and don't take on any building risk.  They are hired to litigate and to manage the building process.  The company is now trading at 10x estimates, around 1.5x book value, and close to 8.5x EV/EBITDA.  They have been acquiring companies in geographies they are not in and think their claims business should start coming back.  The stock is down by close to 1/3 in he past four months and now it seems to be fairly cheap.  Money McBags is unsure why it has been hit so badly as it offers a nice way to diversify into real estate without taking the building balance sheet risk.  So your homework for the weekend, other than taking out the trash, is to figure out what is going on with HIL.  Money McBags will dig into it a bit more next week and see if he can't find a reason for the four month sell off because if there is nothing nefarious going on (like a Goldman Sachs Greek bond placement and currency swap or a Heidi Montag record promotion) then this could be a good entry point.

So enjoy the weekend and Money McBags will be back on Monday.

11/27/09 Midday Report: Dubai? Do Sell.

Money Mcbags hopes you all had a good Thanksgiving and were able to "stuff a turkey" thanksgiving night after stuffing yourself with turkey thanksgiving day.  But Thanksgiving is over now and the markets are taking a dive because apparently Dubai can't pay off their debts.  Honestly, this is about as surprising as finding out strippers aren't dancing just to put themselves through college and Britney Spears had boob implants.

For those of you who haven't been paying attention, we're in a bit of a global recession led by financial derivatives exciting a real estate boom.  Over that time, one of the most developing countries was Dubai who now features one skyscraper per every two people (I get floors 1-50, you can have 51-99, and floor 100 we'll just turn into our own personal oda).  Well now apparently Dubai World (the investment are of the Dubai government) wants to suspend their repayments of $60B of debt.  Uh oh, UAE we have a problem.

Money McBags isn't too concered over this since it should have been baked into forecasts.  Dubai having debt issues caused by construction has been known for quite awhile, just ask small public construction management companies like HIL (and Money McBags thinks HIL is a nice little play for you small cap ladies out there looking to add some "steel rods to your portfolio" with little inventory risk.  Actually, it would even be a good play for the guys too.).  The point of all of this is we are still in turbulent times and commercial real estate is still overvalued whether it's in the US, Dubai, or Uzbekistan since we are in a global economy.  So as always be smart out there and remember, Money McBags is here for you.