7/23/10 Midafternoon Report: European banks pass stress test, results of colonoscopy still pending

The market was quiet in the morning despite a slew of solid earnings announcements as it waited for the release of the Europe bank stress tests which were more highly anticipated than Lindsay Lohan's jail stint, Avatar's opening weekend, or Mel Gibson's next career limiting phone call.  Well the results came out midday and were exactly as worthless as one could have hoped.  Only 7 out of 91 banks failed the stress test including Munich based Hypo Real Estate, Greek based ATE Bank (which apparently "ate" a fuckload of bad loans), some Spanish banks, and Italy's Bank of Madoffia.  Of course these stress tests were weaker than the efficient market hypothesis in the era of high frequency traders or Haiti's infrastructure, so it's hard to get too excited about the results.

The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks' balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam's Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch. 

From day one it was obvious that the stress tests were more bogus than Iraq having weapons of mass destruction, MBA programs teaching anything useful, or Ricky Martin being interested in any female who bangs.  There was no way the EU was going to have the test results come out and show that a fucklaod of banks had failed and yet they also wanted to try to have some credibility and not have every bank pass because that would have been less believable than the US bank stress tests or GS' non-admission of guilt in the Abacus CDO manipulations.  So the Committee of European Banking Supervisors managed to find some BS Goldilocks scenario where 7 banks would fail in a number deemed to be just right in not causing more fear but also just right in showing that there are some problems.  So jolly good show, hope no one in the CEBS tore their black jeans in their rigorous assessment of the data.

The point is, the banks may be healthy or they may not be healthy, but don't piss on Money McBags and tell him that it's raining (unless you are Kelly Brook and just downed a case 1787 Chateau Lafite, and in that case, piss away) by claiming the tests that were run give any kind of conclusive evidence about the health of the EU's banking system.  So excuse Money McBags while he yawns this one out while the market rallies on the news. 

In other european news, Britain had a 1.1% increase in GDP which was double what economists had guessed but is still nowhere near pre-recession levels.  The country hopes their newly introduced dental sector can help spur GDP higher.  In Germany, business confidence rose the most since reunification and to its highest level in three years as the whole country celebrates schadenfreude at the downfall of their fellow EU members.  Finally, Hungary's credit rating may be falling to junk after their talks with the IMF went worse than Sarah Palin's talks with Bristol about abstinence.  A lower credit rating could leave investors in Hungary starving and will cause it to be more difficult for the country to raise money which it won't likely to be able to pay back anyway.  That said, the threat of credit ratings downgrades are coming from S&P and Moody's who, as always, suck at their jobs worse than a closterphobic magician's assistant, so take it for what it is worth.

And in China, worries are getting out that banks may not be able to collect on nearly a quarter of the loans they made to local governments for the building of airports, highways, and lunch delivery of the nation's favorite soup, cream of Sum Yung Gai.  Banking regulators haven't addressed this potential shortfall but Money McBags is sure they will successfully manipulate their way out of it.

In market news, earnings are powering US companies like spinach powers Popeye or herpes powers Britney Spears (she does run on herpes, right?  It's the only logical conclusion with which Money McBags can come up for regarding the affair du Federline).  Ford reported a profit again and said they expect next year to be even better thanks to their new vibrating seats functionality.  The company was strongly cash flow positive with $2.6B of cash brought in and they say they will be in a net cash position by the end of next year (and net cash is Money McBags' third favorite position, right behind lowering taxes and reverse cowboy).  Ford's sales were up 28% in the first half which is twice the industry average as consumers move down market and no longer care about status.

In other earnings news, MCD beat estimates yet traded down as it missed whatever the whisper number analysts made up but were to chickenshit to actually put on paper was.  Money McBags will never understand the concept of a whisper number (unless it is Olivia Munn whispering Money McBags her number) because it is a bigger cop out than "it got lost in the mail," "I was young at the time," or running to Miami to play with Dwyane Wade.  In theory, sell side analysts get paid to provide their unbiased opinions while in practice they get paid to pump up the stocks for whom their firms are trying to raise money, to write meaningless daily updates, and to anally rape sheep (ok, one of those may be made up) and the lameness of not having the nuts to put a whisper number in any of their daily drivel says all one needs to know about paid research.  Anyway, MCD had a nice quarter with revenue up 5%, same store growth of 4.8%, $1.13 eps, and only 1k blocked coronary arteries in the Q.  Strong international growth helped fuel the results as MCD's cheap menu and and aspirational brand equity resonantes in countries with large poor populations such as India, China, and the United States.

Also, MSFT put up a big Q after running up yesterday in anticipation of good things happening like the resurgence of the corporate upgrade cycle, stronger sales of Windows, and Excel hardcoating goalseek to always find the lovely Sofia Vergara.  EPS was up 48% to $.51 and revenue grew from $13B to $15B, both numbers handily beating analyst guesses though the numbers could contain a trojan horse virus so no one wants to get close enough to them to really dig in.

Finally, Verizon slapped their cocks on the table and yelled "can you hear me now?" as they beat guesses by $.02 per share by earning $.58 per share despite flatish revenue growth and no exposure to the iPhone thanks to better operation.  And AXP beat estimates and tripled their profts as customer spend was up 16% and like all financial companies, they lowereed their provisioning, likely just in time to have to raise it again for the second dip in the upcoming recession.

Not all was lobster tails and blow jobs though as AMZN missed their earnings estimates despite growing the top and bottom lines by 40%+.  Analysts had guessed the company would earn $.54 per share but instead they earned $.45 per share due to an increase in operating expenses as the company has to spend more on advertising to convince people that the Kindle wasn't outdated two months ago with the release of the iPad or ~600 years ago with the release of the printing press.  Amazon has always seemed like a nebulous investment to Money McBags given the competition, relatively low barriers to entry for specialty sites, and consistently high valuation so he is as happy to not be involved in this stock as Dan Quayle is happy not to be involved in a spelling bee (and yes, Money McBags just whipped out a 20 year old punch line because frankly, 1k-1.5k words of dick jokes a day is a blistering pace, even for a talent like Money McBags).

In small cap news, IBKR reported and managed to shit all over themselves, and Money McBags' thesis, as if they didn't just have Montezuma's Revenge but had his ire, hatred, and angst as well.  Their results made Money McBags sadder than he was this morning when read that the inventor of the black box had died until he realized it was this guy and not Roxy Reynolds or Vanessa Del Rio's mom.

Anyway, before we get to IBKR's numbers, Money McBags wants to apologize for saying buying some options in this piece of shit company ahead of earnings would be a good strategy.  He believes his logic was sound, but unfortunately he made the mistake of believing he had correctly called the bottom of one of the biggest value traps the market has seen since AIG in 2006 or Elizabeth Berkley's acting career pre-Showgirls, so he is sorry for that.  Never again will he give a fuck about this shitty company whose market making business which is based on voaltility couldn't profit when the market was, umm, how to put this lightly, fucking volatile. 

IBKR earned $.09 per share in the Q which was down from $.31 per share in last year's Q and continued the unpredictable nature of this company whose quarters are more up and down than Oprah's weight (see, Money McBags could write for Leno, no problem) or Faye Reagan on a sybian (he could also write for the AVN awards, he is bi-comedial).  Their internet brokerage business fared well and continued to grow increasing accounts by 20% and customer equity by 43% but all of that was irrelevant because their market making business made a mockery of themselves and only had a 5% pre-tax profit margins leading to a profit of $3.9MM which was down 97% from last year.

The stock is such a peice of shit that their CEO who is an ~80% owner has given up trying to make it seem like anything someone would want to invest in and is instead now marketing the stock as some type of hedge for anyone who wants to keep their portfolio from growing too much.

The CEO said: "increasing fluctuations in foreign exchange markets have a corresponding impact on our reported results in U.S. dollars. This makes it ever more apparent that our shares would be more appropriately considered as an investment in a global enterprise based in a diversified basket of currencies rather than in U.S. dollars."

So any of you out there who own a global enterpirse, buy away.

On the call, CEO Peterffy claimed that the appreciation of the dollar cost them $72MM in revenue or $.16 per share because it's always one excuse or another.  Anyway, Money McBags clearly fucked up and was speculating on market volatility causing earnings to appreciate, which apparently they would have had the dollar not strengthened, but whatever.  As Money McBags was speculating, he said to buy options and not the stock so your losses would be minimized, but either way, fuck this company and if any of you ever read Money McBags trying to give an opinion on IBKR other than he has no idea and they hate turning out a profit, you have permission to punch Money McBags in the nuts while forcing him to listen to the melodic stylings of Celine Dion.

So have a good weekend and remember When Genius Prevailed is on Facebook and Twitter.

7/19/10 Midevening Report: Stocks higher as earnings more highly anticipated than the last thing that wound up disappointing everyone

The market sagged today like a droopy catenary with a very low value of "a" or Uma Thurman on vacation, before gaining some steam in the afternoon.  With earnings season started, macro data was lighter than Ben Stein's reputation as an economist or sales of Liberace's last book: "How not to get AIDS and die."  Homebuilder confidence dropped to it's lowest level in over a year as The National Association of Home Builder's index slipped to 14, with readings lower than 50 meaning more respondents said conditions were poor, and readings lower than 20 meaning we're completely fucked.  At blame for the drop was the governement tax credit running out, foreclosures continuing to increase, and pessimism proving to be higher than if Arthur Schopenhauer were trying to sell a mansion in Detroit at full price.

Alternatively, some made up organization called the National Association for Business Economics (and Money McBags would love to see the charts and graphs they pull out of their asses) said hiring picked up in the economy with 31% of businesses increasing payrolls while only 14% decreased payrolls.  What they negelcted to say is that of the 82 businesses which they survey, 31% are in the reposession business and 55% are fictitious.   

Internationally, Moody's cut their ratings on Ireland from a little drunk to fucking sloshed as a result of a weakening banking system, increasing deficits, and way to much puke still littering the streets from St. Patrick's day.  The downgrade was a full notch lower to Aa2 which as always means absolutely nothing to Money McBags since he knows Moody's is more fraudulent than a Lou Pearlmen business venture or Jamie Lee Curtis's vagina and he has no idea what the difference is between Aa2, Aa1, and Baa other than that two of them are ridiculous and one of them is the noise Roseanne Barr makes when taking it from behind.


Now look, Money McBags is no Donnie Deutsch (and not just because he has no idea who Donny Deutsch actually is, but also because he's not completely full of shit), but it doesn't take a marketing guru to understand that if you are selling something, those buying it should assume it works and also understand what the fuck it is they are buying.  Since Moody's obviously has failed step 1, they can at least have their ratings be understandable.  Thus if Money McBags were in charge of Moody's, the first thing he would do is fire everyone, the second thing he would do is hire Ines Sainz as his personal assistant (actually, he would do that first and fire everyone second, but whatever), and the third thing he would do is get rid of the stupid rating system and only have three categories companies could fall in to:  No Problems, Shit is getting a bit scary, and Stay the Fuck Away.

And it's not just Ireland in the international news today, but Hungary is starving for attention as the government refused further austerity measures which caused the IMF and the EU to get their panties all in a bunch (which wouldn't be a problem if the IMF were Sofia Vergara and the EU were Jessica Biel).  The government's stance has apparently called off offers of further aid for the country from the EU/IMF which has led to yields on Hungarian bonds to shoot up like Chris Farley after reading a review of Beverly Hills Ninja.

In stock news, after being swallowed by Nokia and spit out as a JV, Siemens* is sticking to a deal to purchase a Motorola unit that makes telecommunications equipment.  The company hopes that upgrading their equipment will help the company grow and thus lead to a stronger, and perhaps better aimed and placed, Siemens' strategy.  Also, Apple continues to fall despite saying they will give iPhone 4 users a free case to correct the call dropping problem that happens when holding the phone with a bare hand (also known as phonetile dysfunction).  In order to plug the gap in the antenna, the case comes with plenty of lube and a lifetime supply of viagra.

In small cap news, JOEZ sold off again today and remains either cheap or expensive depending on if you think management can go against previous performance and figure out how to turn growing revenue in to something called profits.  One company that Money McBags would like to highlight is IBKR which has earnings later this week.  Money McBags has talked about IBKR a few times on this blog (just throw it into the search function) and has consistently brought up the statement from their CEO, who owns 80% of the stock, that the company has $2 of annual earnings power, which it earned in 2008.

The problem is that this company has been more of a value trap than Alyssa Milano's crotch and it has done nothing but go down since it went public in 2007.  The company has two basic businesses, they are a market maker for listed options and they have an online brokerage.  In the market making business, they take no counter party risk and in times of volatility also take no profits as when volatility is low, the bid/ask spread gets compressed with competition increasing.  This kills margins in that business worse than cheating on your cancer stricken wife, having a baby with the person you are cheating with, and then claiming the baby is not yours, kills a political career.  Margins in the market making business dropped to 7% last Q thanks to actual volatility coming in lower than implied volatility which hurts them since they are long volatility like Lexington Steele is long dongability.  So net income in the segment dropped from $118MM to $5MM which is a bigger drop than Mel Gibson's popularity after a few late night booty calls to his wife.

IBKR's other business is an online brokerage unit for daytraders that has had strong growth.  The business continues to grow accounts by 25%+ and grew net income from $45MM to $65MM last Q.  That said, no one really gives a fuck about this business yet because it doesn't drive the business.

Anyway, the reason Money McBags thinks this is an interesting company right now is that volatilty in the last Q has been spiking like KaKa's popularity in Brazil, and last year when volatility was this high, the company earned $.30 per share.  Check out the chart of the VIX below which Money McBags is using as a volatility proxy:

So look, Money McBags has no idea how to forecast this Q for IBKR since their quarters are lumpier than Dolly Parton lying on her back but the business is set up to perform well in volatile times and their earnings in theory should smooth out over the long run (which as Money McBags said in an earlier post, may be eons).

That said, they have proved that they can earn $2 per share and if they can achieve that again, they are trading at 8.5x that which is hella fucking cheap for their growth.  Plus, since the economy is teetering on the brink of shitting its pants for the second time, volatility should only increase in the long run and thus IBKR should start to grow their earnings power.  Anyway, if ever IBKR were going to put up a good q again, this should be it, so buying a few short term call options may not be the worst idea here.  Though to be fair, Money McBags has yet to meet a value investor who has not angrily urinated on their tattered copy of Securities Analysis while cursing Benjamin Graham's margin of safety after investing in IBKR, so buyer beware.

 *Money McBags knows it was Siemens Networks and not Siemens, but sometimes we must sacrifice for the joke.

6/8/10 Midevening Report: Bernanke speech fails to significantly rally the market, says he'll overpromise more next time

The market was relatively quiet today as there was a lack of macro news though Fed Chairman Ben Bernanke was out late Monday saying: "My best guess is that we’ll have a continued recovery, but it won’t feel terrific like a blumpkin from Sara Varone followed by a nice wipe with that oh so soft aloe infused Cottonelle.  Instead, it will feel more like having your nut hairs pulled out while listening to the smooth adult contemporary sounds of Sade".  Ok, Money McBags made part of that up but that's not the point, the point is, Bernanke is hedging on this recovery like he just bought FAZ in his IRA.   While he says the economy won't likely have a double dip recession, he did not say it wouldn't have a single dip recession followed by a falling off the cliff depression, so it's merely a matter of semantics.  Bernanke also dusted off his Phillips curve (though it wasn't as curvy as Kimberly Phillips) and added that the central bank would raise rates before the economy returns to full employment, which should be any century now.  That's great, but Money McBags would like to know what the full employment rate is?  Is it 4%, 6%, or whatever proof the whiskey was that Milton Friedman was drinking when he came up with NAIRU (seriously Milt, you couldn't have come up with a catchier name than the Non-Accelerating Inflation Rate of Unemployment?  Really?  That name could put Ritalin out of business because just reading it has to make even the most hyperactive person drowsy.)?  The point is, the full employment rate is a bogus hurdle as there is no set rate so saying rates will rise before we reach that level is as helpful as saying you'll stop running when you catch the horizon.   With the stimulus funds coming to an end over the next few quarters and the economy already starting to show signs of coming down from its stimulus induced bender where it got drunk off of bail outs and hand outs and now finds itself waking up in a pool of its own spending while dry humping Greece's Aegean coast to the sweet whisperings of Benjamin S. Bernanke and and his magical money making machine, the economy is in a precarious position (though not as precarious of a position as Kirstie Alley's girdle).    

Internationally, the new government in Hungary has announced a set of austerity measures aimed at solving their debt crisis.  The austerity measures include cutting public wages, overhauling the tax system, banning mortgage lending in foreign currencies, and stopping free cookie day at the National Assembly.  Also, the European Union's finance ministers met in Luxembourg with the most important outcomes being an agreement to allow tighter oversight on countries suspected of falsifying economic data and an agreement that Ginger Spice was the hottest of the Spice Girls.

In stock news, AAPL introduced a $199 iPhone which has a front facing camera that should now allow users to masturbate on chatroulette wherever they may be.  The new iPhone is slimmer than the previous version, has better picture quality, and doesn't insist on cuddling when you are done with it.  In other stock news, MCD had better than guessed at growth for the month of May of 4.8% worldwide thanks to the fact that they sell cheap shit and people can only afford to eat cheap shit.  The company announced the falling Euro would impact yearly earnings but announced that to make up for those lost earning they are forming a partnership with American Heart Association to get a portion of the profits from all angiograms caused by eating their food.  Finally, analysts were busy today with INTC downgraded by SIG to neutral because the analyst had to do something to try to drum up trading business for SIG and Dick Bove, who never saw a financial stock he didn't like and didn't understand, cut his price target at JP Morgan from jizztastic to just ballticklingly good.

In small cap stocks, Money McBags favorite KITD continues to get pounded like Alexis Texas on payday.  With ~70% of their revenues coming from Europe, topline should be impacted by the 15%-20% drop in the Euro with investors seemingly betting on worse.  Given that, it is difficult to come up with a short term valuation for KITD as the Euro appears to be falling off worse than proper grammar or Britney Spears' top.  Last Q, the $/Euro exchange rate was somewhere around $1.38 and this Q, it's likely going to be around $1.25, and after that, who knows?  So lets take a worse case scenario where we assume the exchange goes to parity.  So that would be a 28% drop in the exchange rate from last Q.  Money McBags thinks at the high end KITD can do $150MM of revenue next year, but let's call it $130MM because of the global uncertainty.  The thing is, that number was derived off of the old $/EU exchange so if we knock 70% of their revenue (their EU exposed revenue) by 28%, revenue decreases by ~$25MM.  So insted of $130MM, a worst case scenario yields revenue of $105MM and at 20% EBITDA margins, that is ~$21MM EBITDA.  The company currently has a market cap of $210MM but they have somewhere around $30MM in cash after their last deal so they have an enterprise value of roughly $180MM and thus are currently at a worst case scenario of ~9x EV/EBITDA and topline growth in that scenario would still be ~20% (and dollar euro parity is almost as bad a scenario for the financial markets as having your daughter bring home Jordan Van Der Sloot for Thanksgiving Break).  Of course all of this assumes that their costs and revenue are tied together so if the euro drops by 28% the associated costs with that will drop by 28% and thus margins will remain intact.  The point is, Money McBags still likes this company longterm as they are in a rapidly growing space that is going to continue to grow for several years, but there are certainly short term currency issues.  However, they are diversifying their revenues in to the US and Asia so as to become less dependent on Europe so while things look bad now, in the long run this company should be fine.  With uncertainty comes opportunity and it is getting to the point where this company is just getting stupid cheap.

6/7/10 Midafternoon Report: Hold on to your shorts as market continues on wild ride down

The market was chugging along today, taking a brief respite to lick its wounds after Friday's jobs report gave even the most virulent Bull a bad case of Foot in the Mouth disease, until it dropped precipitously in the last half hour like Helen Thomas' reputation at a B'nai B'rith fundraiser.   With Europe's ongoing debt problems and the US' stagnant at best job growth, investing long in the market remains more perilous than fighting a land war in Russia in the deepest of winters (though not as deep as Money McBags would go in Ophelie Winter) or challenging Anamika Veeramani to a spelling bee (or just challening Anamika Veeramani to spell her name).  The US news that had the most effect on the markets early today was that Goldman Sachs was issued a subpoena from the FCIC, also known as the "too little, too late" commission.  Money McBags eagerly awaits the FCIC's findings in several years, after no doubt much excrutiatingly toilsome research and much tax payer money has been spent, where they will 100% determine that we are fucked (of course we could save the time and money and just look for the reset button, but that would be too easy).  Seriously, that we need a 10 member commisson to figure this out makes as much sense as firing an employee because she is too hot (reason #989 why C is going to $0.  And as an aside, if Money McBags owned a bank, he would hire Ms. Lorenzana to manage his branch deposits anyday).  Anyway, the subpeona was issued as Goldman refused to submit documents the commission requested and when reached for comment, a Goldman spokesman said they just wanted to see if FCIC Commissioner Heather H. Murren would deliver the subpoena in person.  All along, Goldman Sachs has maintained that the suit is “unfounded in law and fact” and if one can't believe what a company that has manipulated the market while bringing in absorbitant profits and destroying value for average citizens thanks to their buddy-buddy taint tickling relationship with the federal government says, then whom can one trust?  As Money McBags has maintained all along, Goldman and every other Wall Street bank were complicit in the destruction of the US financial system and it would be easier to find incriminating evidence on them than it is to find rolls of back fat on a topless, sunbathing Kathy Bates, you just need to find someone with the stomach to do that dirty job.  So it's good that the FCIC is trying to grow a sac and go after them, but until they actually make some charges, this is all still lip service (though if the lip service is coming from the aforementioned Heather Murren, perhaps it's not all that bad).

Internationally, German factory orders apparently grew faster than the cells of Henrietta Lacks as they surged due to the weaker Euro, increased private sector investment, and the uptick in demand for industrial strength floor buffers to help clean up the sets of Germany's growing scat film industry.  Orders were up 2.9% in April from the 5% they were up in March which for the first time ever makes Germany Europe's shining example.  Also, Hungary is still in the news as investors continue to try to find it on a map and wonder if to solve their financial crisis they should just gobble up Turkey.  Hungary's financial crisis is the biggest turd to hit the country since the famous Diet of Turda in 1558 which established the freedom to practice Catholicism, Lutheranism, or by the name, apparently coprophagia.  Finally, fears are starting up again that China is increasing prices which will cause world wide inflation as they raise the minimum wage by 20%, though it will still leave workers wanting more half an hour after they receive their paychecks.  However, if China unpegs their difficult to spell renminbi from the dollar and allows their currency to appreciate while the their own product prices increase, foreign exports could become more competitve than Alan Greenspan at a bubble blowing contest.

In stock news, BP is showing their first signs of progress in stopping the oil leak which is destroying the Gulf and causing the slogan "drill baby drill" to be returned to Peter North where it rightfully belongs.  At this rate, the oil leak will be stopped and cleaned up somewhere around the time Paris Hilton finds some dignity.  Also, Money McBags favorite Dick "don't call me Richard, or Rich, or Rick, or Rightaboutanything" Bove (and again, Bove rhymes with "Oy vey") lowered his price target on BAC yet maintained his buy rating, mimicking his brilliant market call of Lehman right before they collpased.  Bove cited increased regulation, foreign exposure, and his lack of understanding of the financial markets for the price target cut.  Finally, BMY shares are taking off today as they announced that their experimental drug for skin cancer was found to extend the lives of patients with incurable melanoma by 4 months.  Patients were ecstatic, until they were told that four months that were being extended were Winter.

In small cap news today ISLE is falling back to where it was pre-earnings and after earnings Money McBags said the jump up was likely a quick short squeeze as the stock wasn't cheap and the company is debt-ridden, and features bleaker properties than the Detroit version of Monopoly.  Not only is ISLE falling but WGO is finally ticking down under $11 on its way to $7.50.  The price of this stock makes less sense than the 11 dimensions of M theory or any song by the Black Eyed Peas.  And look out tomorrow for MLNK earnings.  Money McBags has written about this company many times as it is cheaper than a kissing booth being manned by Gabourey Sidibe after she downed a gallon of extra spicy garlic fries and 2 liter of Dr. Pepper.  It is trading at 3x a run rate EV/EBITDA with 50% of their market cap in cash.  They key to tomorrow's release will be their cash flow statement to see if they were able to avoid burning cash as their business will likely have another sluggish quarter (according to them, though Money McBags doesn't quite understand why, since their biggest customer HP had a good Q,  but perhaps tomorrow they'll make it more clear).  So look for the release because when the markets get better (which is sometime between 2015 and the next Galactic Empire), this stock should have some nice upside with its current limited downside (again, barring a huge cash burn this quarter).

6/4/10 Midafternoon Report: Jobs report challenges Marmaduke movie for biggest bomb released on Friday

The (No) Labor Department's jobs report came out today and was well below analyst guesses which sent the market tumbling like Tony Hayward's Q score at a Greenpeace convention.  The US added 431k jobs in May which was the biggest increase in a single month in over a decade since the internet was founded and needed people to set up all of the tubes.  While on the surface that number seems spanktastic (though not nearly as spanktastic as Rosie Huntington-Whiteley who Money McBags would let hunt his whitey anytime), the market was surprisingly not fooled by it.  First of all, analysts had guessed 500k jobs would be created so the actual number came up shorter than a Kristen Bell skirt or Bernie Madoff's alibi.  But what makes matter worse is if one digs in to the numbers it is doubtful any real jobs were created despite the government claiming that a whopping 41k private sector jobs were created, and honestly, bragging about 41k private sector jobs being created is like bragging that you won the spelling bee on the short bus.  But let's look at the numbers more closely.

Of the 431k jobs created, 411k were temporary census workers and 31k were temporary service workers.  So already were at a net -11k permanent job creation number unless the government decides to turn the US into Oceania and thus take a new census every month thereby making those temporary jobs permanent.  Now the Labor Department said the government cut 20k permanent jobs so the 411k census jobs added led to a net 391k new government jobs.  So since the top line number was 431K, they solve for x in 431k - x = 391k and get "you're fucked," I mean ~40k for private sector job growth.  But here's the thing, as we said above, 31k of those ~40k were temporary fucking jobs so even using the government's hunky dory jobs created numbers, there were only ~10k PERMANENT private jobs added to the economy or 10k total permanent jobs lost including the government figures.  That number is more piss awful than having to listen to Lynyrd Skynyrd put to music any of George Will's essays about baseball.  But wait, it gets even fucking worse, like being married for 21 years, or being for 21 years and then finding out your spouse was gay the whole time, and yes I mean you Fran Drescher (though to be fair, having to hear Fran Drescher every morning might turn Money McBags gay as well).  You see the BLS uses something they call a birth death-model to estimate the lag between the creation of new businesses and the close of businesses that their survey misses in the short term.  They don't release the methodology so it is the biggest black box Money McBags has seen since Vanessa Del Rio graced the screen in the 1980s.  For May, the BLS' birth death model showed an increase of 215k jobs, which again is an estimate likely based on population levels, claims for unemployment, and shoving one's thumb far up one's own ass.  So based on our previous numbers where we showed 10k permanent private sector jobs were created and 10k overall permanent jobs were lost, we can now deduct a number somewhere between 0 and 215k from that (and Money McBags believes the number is closer to 215k since the birth-death model is likely more fictitious than strippers who dance just to put themselves through college) to get the real job DESTRUCTION number which was likely more negative than a disgruntled anion.  So we've got that going for us.

Other tidbits from the jobs report show that 6.8MM people have been out of work for more than 6 months, the average length of unemployment is now 34 weeks which is the longest period since the government started keeping track in 1948, and Chewbacca was a wookie.  Some may spin the drop in the unemployment rate from 9.9% to 9.7% as positive but that was more likely caused by people leaving the workforce as the Labor Force Participation Rate, which oddly enough measures the labor force participation of working age adults, decreased to 65.0% from 65.2%.  So no matter how the government spins the jobs number, it sucked harder than a young lady trying to fellate Whitezilla all by herself.

In international news, everything was down as the Euro broke through the critical $1.20 mark on its way to extinction.  Traders now see $1.18 as the next short term technical downside target for the Euro until it falls below that.  The latest fears coming out of Europe revolve around Hungary which is apparently starving for funding.  The newly elected vice president of Hungary, Lajos Kosa, channeled his inner Joe Biden late yesterday by saying that Hungary is in a Greece-like sovereign credit crisis.  In response Prime Minister Viktor Orban didn't deny the issues but did call Kosa a dicknut for speaking out of turn and promised to punish him by uninviting him to the new administration's meet and greet with Zita Gorog.  The new government is now in the process of determining the real state of the budget, and will report this weekend on whether they are fucked or just lovingly violated.  The fear of Hungary defaulting is causing a spike in european CDS and has caused the price of European default insurance to rise to it's highest price since Jean-Paul Marat forgot to lock his bathroom door.

In stock news, everything is down as the government can't even properly manipulate the economy anymore.  MCD is showing weakness because they annonced they will have to recall 12MM Shrek drinking glasses that contain the toxic metal cadmium.  The irony in this is that the cadmium glasses are still less toxic and better for you than the nine piece Chicken McNuggets.  And WMT had their annual shareholders meeting today where they announced a five year plan to add 500k jobs, insitute a $15B stock buyback plan, and continue to make the world a worse place.

In small cap news, WGO took it in the winnebago again today since the stock remains more overvalued than multi-family dwellings in Detroit before the subprime crash.  Money McBags has been through this before but the company is not going to make money this year and is trading at a valuation that makes less sense than the rules of cricket.  This is a best a $7.50 stock and on high volatility days it will get pitched around like the SS Minnow because valuation is based solely on hope and hope doesn't put food on the table (though Hope Dworaczyk could put her melons on Money McBags' table any day).  The fact is, every small cap closed down except for somehow CTGX, JOEZ, TZA, and TWM (and that last two are funny because they are leveraged small cap short ETFs) because no one wants to hold illiquid little shit when the economy is still struggling, Europe is going to 0, and we now have to give a fuck about some do-shit country called Hungary who dropped a steaming pile of ghoulash on the markets today.

Oh well, at least try to have a good weekend.