Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts
Wednesday, May 19, 2010
5/19/10 Midafternoon Report: VIX shoots up, claims it doesn't have a problem, just wants to try to take its mind off global recession
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Wednesday, February 24, 2010
2/24/10 Midafternoon Report: Bernanke channels his inner Greenspan and promises to keep rates low until the next bubble
Dizzam, Benny B went in front of the House Financial Services Commitee today and let everyone know that rates will be kept low for a more "extended period" than a menometrorrhagia sufferer. Despite last week's back and forth between Bernanke and his henchman Thomas "T-Ho" Hoenig about the language used by the Fed in their minutes (and Money McBags would vote for Esperanto just to switch things up), Benny B held to his guns and let congress know he isn't going to raise rates until he sees the whites of the recovery's eyes (or the P in their GDP). Bernanke also said he believes the recent uptick in business growth was just an inventory restocking which is exactly what Money McBags has been yelling through the gold-plated window of his ivory tower for the past several months.
Bernanke stated: “As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services." (Bolding is from Money McBags, multisyllabic, excessive, and painfully boring verbiage is from Bernanke as apparently he gets paid by the snore).
Bernanke cited the diminishing skills of workers who have been forced into long term unemployment, the current deficit, and Hannah Hilton's apparent cinematic retirement as concerns potentially inhibiting a full recovery. He did say he expected the unemployment rate to drop to 7% by 2012, but he didn't say that it was likely going to be as a result of a massive numerator shift caused by those currently longterm unemployed workers starving to death in the new Dust Bowl, or aptly named for our times, The Capital One Mortgage Bowl: What Used to Be in Your Wallet? Bernanke also said that inflation would be "subdued" for some time as the US printed so much money that investors are still trying to count it to figure out exactly how much there is, so until that time, the market will remain blissfully ignorant. Call it the "Too Big To Count" theory.
In other macro news, prices of new homes fell surprising everyone except for the 15MM to 20MM unemployed Americans. Despite the government extending the tax credit for first time home buyers, purchases still declined by 11% and fell to their all-time low as any first time home buyers had likely already taken advantage of the tax credit last year by rushing in to buy before the previous deadline. Therefore extending the tax credit was like offering lunch to the Nathan's Hot Dog Eating Contest contestants immediately after the final gag sounded. There is currently a 9 month inventory of houses on the market and 3MM more houses are forecast to be foreclosed upon this year which is great for vermin, but not so great for the economy.
In stock news, Dollar Tree destroyed their analyst estimates as if those estimates were Joanie's rectum and they were Chachi after a blue-balled night of doing body shots off of Pinky Tuscadero. DLTR beat estimates of $1.44 eps by $.08 thanks to better gross margins and gave guidance well above analyst estimates for Q1 and the full year with EPS slated to be $3.96 to $4.23 for 2010. They also generate a ton of cash and for those who have been on the planet Melmac for the past few years living off of toasted feline (and to be honest, if it were Jayde Nicole's "cat" being served on Melmac, Money McBags would immediately build a spaceship) and aren't familiar with the company, they sell incredibly cheap shit in a recessionary environment. They are now trading at around 14x 2010 guidance but this environment for them should be as profitable as the guy operating the lifeboat booth on the Titanic or whoever was selling bullets at the Alamo. Money McBags has not followed DLTR as closely as he should have, but the story makes sense and the valuation isn't horrible. They'll probably trade down tomorrow after today's jump, but this stock is worth investigating further.
As for small caps, CTGX reported their quarter last night and it was inline but their guidance was better than Money McBags was expecting. Money McBags previewed ther quarter the other day and was perfectly content with their release last night as he was just expecting more of the same for now in their core business and that is what he got. Their revenue for the Q was down 19% with equal declines in their solutions and staffing business. Honestly, Money McBags can't do anything but yawn about this as it is completly irrelevant to the story as he previously outlined. As long as the core business doesn't blow up (and there is really no reason it should), the EMR business CTGX is in should provide the real growth for this company over the next 3 to 5 years. This was Money McBags favorite quote from their press release (he'd quote their call, but it was fantastically bland, like a primetime sitcom or anything written by that Michael Crichton guy):
"Looking further out, with the billions of dollars in federal stimulus money for EMRs from ARRA, Medicare, and Medicaid still unspent, we expect demand for EMR implementation support will steadily accelerate as these funds become available and access to the credit markets opens up for providers. Based on our deep EMR experience for large providers and communitywide health information exchanges, we are confident in our ability to secure significant new EMR work over the next three years, particularly as the 2014 deadline for having systems meeting meaningful use criteria in place draws closer." (Bolding again from Money McBags).
That is pretty much all you need to know. Now guidance for 2010 is for eps of $.46-$.56 on 11% revenue growth. So they are trading at around 15.5x the midpoint of guidance and they actually see their staffing business picking up into the year and have begun hiring. Also, their balance sheet is cleaner than the grout on germaphobe's tiled bathroom floor and they are buying back shares. There is not much reason for the company to take off right now, but EMR is coming so this stock is the definition of buy and hold, especially as it isn't horribly priced (it isn't all that cheap though).
Bernanke stated: “As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services." (Bolding is from Money McBags, multisyllabic, excessive, and painfully boring verbiage is from Bernanke as apparently he gets paid by the snore).
Bernanke cited the diminishing skills of workers who have been forced into long term unemployment, the current deficit, and Hannah Hilton's apparent cinematic retirement as concerns potentially inhibiting a full recovery. He did say he expected the unemployment rate to drop to 7% by 2012, but he didn't say that it was likely going to be as a result of a massive numerator shift caused by those currently longterm unemployed workers starving to death in the new Dust Bowl, or aptly named for our times, The Capital One Mortgage Bowl: What Used to Be in Your Wallet? Bernanke also said that inflation would be "subdued" for some time as the US printed so much money that investors are still trying to count it to figure out exactly how much there is, so until that time, the market will remain blissfully ignorant. Call it the "Too Big To Count" theory.
In other macro news, prices of new homes fell surprising everyone except for the 15MM to 20MM unemployed Americans. Despite the government extending the tax credit for first time home buyers, purchases still declined by 11% and fell to their all-time low as any first time home buyers had likely already taken advantage of the tax credit last year by rushing in to buy before the previous deadline. Therefore extending the tax credit was like offering lunch to the Nathan's Hot Dog Eating Contest contestants immediately after the final gag sounded. There is currently a 9 month inventory of houses on the market and 3MM more houses are forecast to be foreclosed upon this year which is great for vermin, but not so great for the economy.
In stock news, Dollar Tree destroyed their analyst estimates as if those estimates were Joanie's rectum and they were Chachi after a blue-balled night of doing body shots off of Pinky Tuscadero. DLTR beat estimates of $1.44 eps by $.08 thanks to better gross margins and gave guidance well above analyst estimates for Q1 and the full year with EPS slated to be $3.96 to $4.23 for 2010. They also generate a ton of cash and for those who have been on the planet Melmac for the past few years living off of toasted feline (and to be honest, if it were Jayde Nicole's "cat" being served on Melmac, Money McBags would immediately build a spaceship) and aren't familiar with the company, they sell incredibly cheap shit in a recessionary environment. They are now trading at around 14x 2010 guidance but this environment for them should be as profitable as the guy operating the lifeboat booth on the Titanic or whoever was selling bullets at the Alamo. Money McBags has not followed DLTR as closely as he should have, but the story makes sense and the valuation isn't horrible. They'll probably trade down tomorrow after today's jump, but this stock is worth investigating further.
As for small caps, CTGX reported their quarter last night and it was inline but their guidance was better than Money McBags was expecting. Money McBags previewed ther quarter the other day and was perfectly content with their release last night as he was just expecting more of the same for now in their core business and that is what he got. Their revenue for the Q was down 19% with equal declines in their solutions and staffing business. Honestly, Money McBags can't do anything but yawn about this as it is completly irrelevant to the story as he previously outlined. As long as the core business doesn't blow up (and there is really no reason it should), the EMR business CTGX is in should provide the real growth for this company over the next 3 to 5 years. This was Money McBags favorite quote from their press release (he'd quote their call, but it was fantastically bland, like a primetime sitcom or anything written by that Michael Crichton guy):
"Looking further out, with the billions of dollars in federal stimulus money for EMRs from ARRA, Medicare, and Medicaid still unspent, we expect demand for EMR implementation support will steadily accelerate as these funds become available and access to the credit markets opens up for providers. Based on our deep EMR experience for large providers and communitywide health information exchanges, we are confident in our ability to secure significant new EMR work over the next three years, particularly as the 2014 deadline for having systems meeting meaningful use criteria in place draws closer." (Bolding again from Money McBags).
That is pretty much all you need to know. Now guidance for 2010 is for eps of $.46-$.56 on 11% revenue growth. So they are trading at around 15.5x the midpoint of guidance and they actually see their staffing business picking up into the year and have begun hiring. Also, their balance sheet is cleaner than the grout on germaphobe's tiled bathroom floor and they are buying back shares. There is not much reason for the company to take off right now, but EMR is coming so this stock is the definition of buy and hold, especially as it isn't horribly priced (it isn't all that cheap though).
Friday, February 19, 2010
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.
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.
Thursday, February 18, 2010
2/18/10 Midevening Report : Bernanke preemptively raises discount rate, causes Alan Greenspan to roll over in his grave
Aw shit, it is now on like donkey kong as the Fed is getting serious about some shit. This ain't your Greenspan pushover, lolligagging, lobster tails and blow jobs for everyone, bubble creating Federal Reserve. No siree, this Bernanke guy is a straight up pimp and will bitch slap the market back to reality and remind them not to take daddy's money before they get too uppity on him. With the markets running off of a 3 day orgy filled with earnings, mediocre economic news, and a potential bailout to get the EU out of the greek headlock in which they have been painfully trapped, Bernanke had had enough. We all remember when the fed minutes were released yesterday and one of Bernanke's henchman, T-Ho (Fed Reserve of KC bank president Thomas Hoenig) started to warn Ben about getting high off his own supply by keeping rates too low. Well Benny B took that to heart and after the market closed he took out his pimp hand and smacked the shit out of the market by surprisingly raising the discount rate to 75bps while yelling "That's right market, don't forget, I'm you're daddy. Come on, say it. Who's your daddy? Let me hear it. You know you want it tight in the discount window." This is the first time the rate has been increased in three years and will likely halt the market's rally tomorrow.
Aside from Bernanke trying to win his cock-off with the market, macro news was mixed today with the Philly Fed saying manufacturing had picked up again and new orders are at their highest levels in 5 years (of course in Philly, those new orders are for Uzis, Butterscotch Krimpets, and fecal matter to make the city even shittier than it is). New claims for unemployment also came out today and were worse than expectations, rising by 31k to 473k as opposed to falling as analysts had expected. Money McBags has been through this before, but if you're an analyst, can you at least get the direction correct? For fucksake you have a 50% chance, I mean it's not like the 33% chance you have in guessing "man, woman, or tranny?" with Kathleen Turner. Finally the PPI came out today (as opposed to the pee pee eye that landed R Kelly on trial) and was up 1.4% signalling inflation. While the core rate was only up .3%, it was still worse than the .1% expectation. The point is, inflation is coming and it's a good thing Bernanke looks to be proactive about it.
WMT had their earnings announcement today and beat earnings expectations yet had negative same store sales growth as a result of declining traffic. Their guidance for Q1 was also almost as bleak as John Tyler's 1844 re-election campaign or Heidi Montag's Celebrity Jeopardy! prospects as they said it will be a challenging quarter. The stock was down moderately today but if Bernanke is determined to quiet the market, shares of WMT may become more interesting if they fall another 5%.
Finally in small cap news WILC was down 10%. Really? No, really? There are people who want to puke out a company trading at less than 4x EV/EBITDA, less than 10x earnings (or 5x earnings if you take out the 50% cash they have on the balance sheet), with growth prospects to potentially double revenues? Seriously? Unless you think CEO Gee Willi Zwi Williger is blowing smoke out of his shofar and is fooling his auditors and submitting his financials in crayon on the back of a discarded yarmulke, there is absoltuely no fucking reason to be selling this stock here. It is still cheaper than a pail of salt water on the sunken island of Atlantis or the self respect of an 18 year old wanna be model on her first Hollywood casting couch. Yeah, Money McBags knows it is a weird fucking company (he broke it all down for you way back in 2009) and he also knows that the volume on this stock tends to be thinner than a bulimic with an oversensitive gag reflex, but for fucksake, what is it going to trade down to? Cash? A business earning money with no debt and growing is going to trade down to cash (which is only 50% downside from here)? If that's the case than Money McBags clearly has no idea what he is doing and needs to get of this business and into whatever idiots do, like maybe politics, making oven mitts, or running the LA Clippers. Unless this company is completely full of shit like a constipated political consultant, it is a fucking screaming buy. And yes Money McBags owns it, so yes he is talking up his book. Full fucking disclosure, as always.
Aside from Bernanke trying to win his cock-off with the market, macro news was mixed today with the Philly Fed saying manufacturing had picked up again and new orders are at their highest levels in 5 years (of course in Philly, those new orders are for Uzis, Butterscotch Krimpets, and fecal matter to make the city even shittier than it is). New claims for unemployment also came out today and were worse than expectations, rising by 31k to 473k as opposed to falling as analysts had expected. Money McBags has been through this before, but if you're an analyst, can you at least get the direction correct? For fucksake you have a 50% chance, I mean it's not like the 33% chance you have in guessing "man, woman, or tranny?" with Kathleen Turner. Finally the PPI came out today (as opposed to the pee pee eye that landed R Kelly on trial) and was up 1.4% signalling inflation. While the core rate was only up .3%, it was still worse than the .1% expectation. The point is, inflation is coming and it's a good thing Bernanke looks to be proactive about it.
WMT had their earnings announcement today and beat earnings expectations yet had negative same store sales growth as a result of declining traffic. Their guidance for Q1 was also almost as bleak as John Tyler's 1844 re-election campaign or Heidi Montag's Celebrity Jeopardy! prospects as they said it will be a challenging quarter. The stock was down moderately today but if Bernanke is determined to quiet the market, shares of WMT may become more interesting if they fall another 5%.
Finally in small cap news WILC was down 10%. Really? No, really? There are people who want to puke out a company trading at less than 4x EV/EBITDA, less than 10x earnings (or 5x earnings if you take out the 50% cash they have on the balance sheet), with growth prospects to potentially double revenues? Seriously? Unless you think CEO Gee Willi Zwi Williger is blowing smoke out of his shofar and is fooling his auditors and submitting his financials in crayon on the back of a discarded yarmulke, there is absoltuely no fucking reason to be selling this stock here. It is still cheaper than a pail of salt water on the sunken island of Atlantis or the self respect of an 18 year old wanna be model on her first Hollywood casting couch. Yeah, Money McBags knows it is a weird fucking company (he broke it all down for you way back in 2009) and he also knows that the volume on this stock tends to be thinner than a bulimic with an oversensitive gag reflex, but for fucksake, what is it going to trade down to? Cash? A business earning money with no debt and growing is going to trade down to cash (which is only 50% downside from here)? If that's the case than Money McBags clearly has no idea what he is doing and needs to get of this business and into whatever idiots do, like maybe politics, making oven mitts, or running the LA Clippers. Unless this company is completely full of shit like a constipated political consultant, it is a fucking screaming buy. And yes Money McBags owns it, so yes he is talking up his book. Full fucking disclosure, as always.
Wednesday, February 17, 2010
2/17/10 Midevening Report: Fed hints at reversing stimulus, starts by canceling Bernanke's Playboy subscription
The market was up today like a hooker's skirt in Tiger Wood's SUV. The rally was driven by earnings, earnings, earnings and some macro data. Apparently people are still building houses as housing starts hit their 6-month high, rising 2.8% to an annual rate of 591k. This marginally beat expectations and should be a good sign for the economy, even if half of the houses were built from legos and the other half have already been forelcosed on. In other macro news, the Fed announced that industrial output grew .9% which also beat expectations with capacity utilization coming in at 72%, 8% below the average from the last 37 years. So there is still room for the economy to rebound and thus produce more of those delightful "For Sale" signs to go in front yards, printers to print out resumes, and muzzles to put over Lady Gaga's face. Also, import prices rose by 1.4% signalling inflation may be on the way (and for those of you who need a less subtle signal: INFLATION IS COMING!! And Ben Bernanke is going to have to make inflation think long and hard about baseball for him to try to stop it from coming). Many analysts were unphased by the rise in import prices claiming oil and natural gas drove up prices, so I guess it's good we don't rely on those fuels at all or else we might have to worry a bit more about the dollar. Phew.
There was one piece of macro news which caused a brief sell-off before the market put back on its pearl necklace and returned to the ball (and yes, all of those were very bad puns). The minutes came out today from the last FOMC meeting and the head of the Kansas City branch of the Fed, Thomas Hoenig (known at the Fed as T-Ho), was the one dissenting vote on interest rates. T-Ho got all up in Benny B's grill and axed him why they needed to say the fed funds rate would remain low for an "extended period," preferring to change the language to say the fed funds rate would remain low for "some time, and shit." The minutes also revealed that the Fed is starting to look at downsizing their balance sheet and selling into the market the toxic assets, I mean mortgages, they previously bought. The key message here being that further stimulus to help the economy may be less likely than Brooklyn Decker dumping Andy Roddick for the first guy eliminated from next season's The Biggest Loser. The Fed might actually be doing something smart here by looking to get in front of a bubble and stopping it before it happens rather than pulling an Alan Greenspan and blowing hot air into it like it was Andrea Mitchell's rectum.
In earnings news, Deere's profit climbed 19% and they raised forecasts thanks to strength in "large ag equipment", or what's more commonly known as: "Rosie O'Donnell's dildos." Also, WFMI not only had a kashi-tastic quarter as Money McBags predicted yesterday, but is was double fiber kashi-tastic. WFMI same store sales were up 3.5% and they gave total revenue guidance for 10.5% growth in 2010 while raising full year earnings guidance to $1.20 to $1.25 per share, about 10% above current estimates. Yeah, it was a good Q but they are now trading at around 25x 2011 earnings which wouldn't be so bad if they were growing by more than 10%. Of course, EBITDA was up 25% and they raised EBITDA guidance by about 5% to $635MM-$685MM for 2010 which means they're trading at around 7x to 7.5x 2010 EV/EBITDA which actually isn't all that unreasonable. Money McBag's guess is that there was a whole lot of short covering today and in the next couple of weeks WFMI will come down a bit, but it is still trendier than Jessica Biel giving free blow jobs to bloggers (and trust me, that is going to be a huge trend).
In small cap news, RICK reported yesterday and they managed to not only shit the bed, but then they announced they were going to buy VCGH and shit all over their bed too (though to be fair, VCGH's bed was plenty shitty to begin with). Money McBags never thought he would be unhappy getting fucked by someone at RICK, and RICK not only fucked him, but they sent the 40 year old C-section showing, needle marks in the arm having, 2pm shift D-team dancer to do the job. Jeesh. Could they at least kiss me next time before they fuck me? Actually, scratch that. I mean I love the lovely ladies at Rick's who express themselves through dance to pay their college tuition, but they probably have more lip herpes than Richard Simmons has anal warts, so they can hold off on the kissing. Anyway, RICK reported the quarter that Money McBags had feared since they bought their Las Vegas club. You see, in order to win business in Vegas, Rick's pays the fuck out of cab drivers to bring patrons to their club. It is labeled as marketing costs, but it is payment of cash to cab drivers as clubs compete for traffic. All of the clubs kind of collude to keep that price to around $20, but to gain business and to slap their cocks on the table and let other club owners know they are serious, RICK had been occasionally upping the ante to as much as $100. Well it looks like in this quarter that occasional upped ante was both not occasional and was so far up that it gave itself a cerebral edema from hypobaropathy. Rick's marketing costs soared by $1.7MM to $2.9MM and treated their earnings like an Alabama professor after learning she wouldn't be tenured. Now on the call they said the marketing increase was related to more than just the Vegas club and that the Vegas club turned a profit in January and should be profitable for this Q, so that makes Money McBags feel a bit better, like how Jessica Simpson felt when she learned stupidity wasn't contagious, but it is a huge red flag. Their earnings missed the high end by $.08 which is actually slightly less than the uptick in marketing costs. Revenue was up a healthy 16.5% but it was achieved in the most unhealthy way, by paying people/cab drivers to show up. To Money McBags it is a huge concern and kept him out of the stock until a few months ago. Now on top of their shittastic performance, they announced a $45MM cash and stock acquisition of VCGH which will make them the largest strip club operator in the world. While Money McBags is a firm believer in bigger is better (such as the fine backsides of Carmen Kinsley and Alexis Texas), this deal has a ton of dilution as Rick is going to have to issue somwhere around 2.5MM shares and thus increase their share count by 25%. Rick's maintins that they will benefit from synergies such as corporate overhead, regional management, and shared thongs, and thinks EBITDA will be $25MM for the combined company. They also reaffirmed guidance for 2010 without VCGH of $.90 to $1.05 per share, so they are still fairly cheap on a p/e basis. The biggest problem is that Money McBags can't really analyze this deal because VCGH stopped filing financials months ago so there is no way to understand if their clubs are even remotely profitable. So you have a shitty quarter, a questionable deal, and a stock that has been on the move but is still cheap if you believe the marketing uptick was a one-time offense (and Money McBags has no idea about that). If you own RICK, it might not be a bad idea to trim a bit here, and if you're at Rick's, it might not be a bad idea to see some trim there. Alot of questions remain after this call such as will decreasing marketing costs hurt top line, what does Rick's new cap structure look like, and can a brother get a table dance? Unfortunately, after this quarter there will be no sex in Money McBags' champagne room and for those RICK's owners, you should really due some more work. Money McBags is holding for now, but leaning towards selling some as it's unclear how RICK will still hit their guidance for the year after missing this Q and how they will grow if they lower marketing costs, since if lower marketing costs were to allow them to grow, why wouldn't they have been lower this Q? Damn you logic.
There was one piece of macro news which caused a brief sell-off before the market put back on its pearl necklace and returned to the ball (and yes, all of those were very bad puns). The minutes came out today from the last FOMC meeting and the head of the Kansas City branch of the Fed, Thomas Hoenig (known at the Fed as T-Ho), was the one dissenting vote on interest rates. T-Ho got all up in Benny B's grill and axed him why they needed to say the fed funds rate would remain low for an "extended period," preferring to change the language to say the fed funds rate would remain low for "some time, and shit." The minutes also revealed that the Fed is starting to look at downsizing their balance sheet and selling into the market the toxic assets, I mean mortgages, they previously bought. The key message here being that further stimulus to help the economy may be less likely than Brooklyn Decker dumping Andy Roddick for the first guy eliminated from next season's The Biggest Loser. The Fed might actually be doing something smart here by looking to get in front of a bubble and stopping it before it happens rather than pulling an Alan Greenspan and blowing hot air into it like it was Andrea Mitchell's rectum.
In earnings news, Deere's profit climbed 19% and they raised forecasts thanks to strength in "large ag equipment", or what's more commonly known as: "Rosie O'Donnell's dildos." Also, WFMI not only had a kashi-tastic quarter as Money McBags predicted yesterday, but is was double fiber kashi-tastic. WFMI same store sales were up 3.5% and they gave total revenue guidance for 10.5% growth in 2010 while raising full year earnings guidance to $1.20 to $1.25 per share, about 10% above current estimates. Yeah, it was a good Q but they are now trading at around 25x 2011 earnings which wouldn't be so bad if they were growing by more than 10%. Of course, EBITDA was up 25% and they raised EBITDA guidance by about 5% to $635MM-$685MM for 2010 which means they're trading at around 7x to 7.5x 2010 EV/EBITDA which actually isn't all that unreasonable. Money McBag's guess is that there was a whole lot of short covering today and in the next couple of weeks WFMI will come down a bit, but it is still trendier than Jessica Biel giving free blow jobs to bloggers (and trust me, that is going to be a huge trend).
In small cap news, RICK reported yesterday and they managed to not only shit the bed, but then they announced they were going to buy VCGH and shit all over their bed too (though to be fair, VCGH's bed was plenty shitty to begin with). Money McBags never thought he would be unhappy getting fucked by someone at RICK, and RICK not only fucked him, but they sent the 40 year old C-section showing, needle marks in the arm having, 2pm shift D-team dancer to do the job. Jeesh. Could they at least kiss me next time before they fuck me? Actually, scratch that. I mean I love the lovely ladies at Rick's who express themselves through dance to pay their college tuition, but they probably have more lip herpes than Richard Simmons has anal warts, so they can hold off on the kissing. Anyway, RICK reported the quarter that Money McBags had feared since they bought their Las Vegas club. You see, in order to win business in Vegas, Rick's pays the fuck out of cab drivers to bring patrons to their club. It is labeled as marketing costs, but it is payment of cash to cab drivers as clubs compete for traffic. All of the clubs kind of collude to keep that price to around $20, but to gain business and to slap their cocks on the table and let other club owners know they are serious, RICK had been occasionally upping the ante to as much as $100. Well it looks like in this quarter that occasional upped ante was both not occasional and was so far up that it gave itself a cerebral edema from hypobaropathy. Rick's marketing costs soared by $1.7MM to $2.9MM and treated their earnings like an Alabama professor after learning she wouldn't be tenured. Now on the call they said the marketing increase was related to more than just the Vegas club and that the Vegas club turned a profit in January and should be profitable for this Q, so that makes Money McBags feel a bit better, like how Jessica Simpson felt when she learned stupidity wasn't contagious, but it is a huge red flag. Their earnings missed the high end by $.08 which is actually slightly less than the uptick in marketing costs. Revenue was up a healthy 16.5% but it was achieved in the most unhealthy way, by paying people/cab drivers to show up. To Money McBags it is a huge concern and kept him out of the stock until a few months ago. Now on top of their shittastic performance, they announced a $45MM cash and stock acquisition of VCGH which will make them the largest strip club operator in the world. While Money McBags is a firm believer in bigger is better (such as the fine backsides of Carmen Kinsley and Alexis Texas), this deal has a ton of dilution as Rick is going to have to issue somwhere around 2.5MM shares and thus increase their share count by 25%. Rick's maintins that they will benefit from synergies such as corporate overhead, regional management, and shared thongs, and thinks EBITDA will be $25MM for the combined company. They also reaffirmed guidance for 2010 without VCGH of $.90 to $1.05 per share, so they are still fairly cheap on a p/e basis. The biggest problem is that Money McBags can't really analyze this deal because VCGH stopped filing financials months ago so there is no way to understand if their clubs are even remotely profitable. So you have a shitty quarter, a questionable deal, and a stock that has been on the move but is still cheap if you believe the marketing uptick was a one-time offense (and Money McBags has no idea about that). If you own RICK, it might not be a bad idea to trim a bit here, and if you're at Rick's, it might not be a bad idea to see some trim there. Alot of questions remain after this call such as will decreasing marketing costs hurt top line, what does Rick's new cap structure look like, and can a brother get a table dance? Unfortunately, after this quarter there will be no sex in Money McBags' champagne room and for those RICK's owners, you should really due some more work. Money McBags is holding for now, but leaning towards selling some as it's unclear how RICK will still hit their guidance for the year after missing this Q and how they will grow if they lower marketing costs, since if lower marketing costs were to allow them to grow, why wouldn't they have been lower this Q? Damn you logic.
Wednesday, January 20, 2010
1/20/10 Midday Report: China flexes pimp hand and vows to curb lending, businesses cower in the corner and promise to work harder for daddy
The big news bringing the market down today is that China is beginning to realize they may have a bit of a bubble on their hands as they opened up their fortune cookie last night and saw their fortune was written on the back of a yuan (as for the fortune, it said "man who puts balls in peanut butter is fucking nuts"). As a result, China will reel in their profligate lending. The chairman of the China Banking Regulatory Commission said that he expects banks in China to decrease their loans by 22% in 2010. So in the year of the golden tiger (and also the year of Tiger Wang), businesses may not receive the showers of money they saw in 2009 (now aptly renamed from the year of the Ox, to the year of the golden shower). It is good that China is realizing that they need to reign in their stimulus sooner rather than later, but this news of course is putting fear in to investors who worry about the short term recovery from the global recession.
In US macro news, US wholesale prices showed virtually no inflation as energy price declines offset increases in food prices. This is bad news for fat people but good news for the Tin Man.
In stock news, BAC and WFC reported earnings, well to be more precise, WFC reported earnings and BAC reported losses. BAC underperformed analyst expectations by posting a loss of $.60 per share vs. estimates of a $.52 loss per share. They blamed the $.08 miss on analysts being really bad at math. Without the TARP repayment and dividends paid on preferred stock, the Q4 loss would have only been $194MM, and in related news, if I didn't have a dick, I'd be a chick, so unfortunately the details matter (and if I were a chick, I would be totally gay for Aubrey O'Day). BAC also raised their provision for credit losses to $10.1B in Q4, from $8.5B a year earlier because of some little thing I believe they referred to as "people not wanting to fucking pay shit back." They also had total write-downs for the year of $33.7B, more than double the $16.2B in 2008, so at least we finally know the price of dignity.
The point is, BAC benefited from the investment banking gains of Merrill Lynch while they still took it in the yingus from their consumer portfolio. They suffered a loss of $4.9B on their consumer credit card business, compared with a $3.3 billion loss a year earlier. So guess what market, things aren't getting much better. People still love charging off like Martha Coakley loves being bad at politics (and I need to digress for a second here. Money McBags does not get involved in politics. He does not care one iota what the fuck happens in this world as long there is world peace, no capital gains tax, and free blumpkins for all. And to be honest, he'd be happy with just one of those three, unless that one was world peace, and then he'd need at least one of the other two. The point is, Money McBags is completely apolitical, for all he cares, a gay person could marry an abortion while smoking a joint through the barrel of a shotgun in the middle of the oval office while spraying chlorofluorocarbons all over a bald eagle, so the fact that he has an opinion on this senate race is unusual. But this must be said. For a democrat to lose Ted fucking Kennedy's senate seat in Massachusetts after having a 30 point lead in the polls and without having killed someone, been arrested for fraud, or openly rooted for the Yankees and claimed Bill Russell was a bitch, is perhaps the worst performance not just in the history of politics, but in the history of anything. Think about it. Ted Kennedy killed a lady and that couldn't stop him form winning election after election. All this Coakley broad had to do was be alive, and yet somehow she fucked that up. Sure the dude who beat her (and yes this is really him, and sorry to my straight male readers) had a secret weapon in his lovely daughter Ayla, for whom Money McBags would cure cancer (though not one of those hard cancers like nut cancer, something much easier, like cancer of the mouth, also known as Kathy Griffin), but Coakley's loss is so colossal it should be part of the lexicon. So here we go, BAC did not lose $.60 per share this Q, they Coakleyed $.60 per share. Diatribe over).
Most interesting was the verbiage from BAC's CEO who said "economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.” Which seemed at odds with WFC's CEO's statement that: “While losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate.” Of course, WFC managed to turn an $.08 profit compared with a ginormous loss last year, so things are looking a bit rosier for them, except if you look at their charge-off numbers which were up sequentially $300MM to$5.4B driven by commercial and consumer real estate.
So are all banks created equal or will performance differences really start to show now that the economy has sort of recovered? More importantly, has the economy actually recovered? Here are four interesting stats from this NYTimes article (as always, buyer beware with facts and the NYTimes):
1. Bank of America said the percentage of credit card loans it thinks will never be paid hit 13.53 percent in December. JPMorgan Chase expects to charge off 10.5 percent of its credit card portfolios in the first half of 2010.
2. Fourth quarter of 2009, the number of domestic credit card accounts has declined by 20 percent from its peak in the second quarter of 2008, to 341 million from 426 million
3. the amount of available credit on cards has declined by 21 percent since its peak, from $3.51 trillion in the third quarter of 2008 to $2.77 trillion in the fourth quarter of 2009, the data shows
4. Hayley Atwell is still really hot, and Money McBags will drive this bandwagon into the ground until playboy drops by the Atwell residence.
So available credit is shrinking for the US consumer. What would be interesting to know is how utilization rates have changed and whether anything can be gleaned from this other than people got rid of their 3rd and 4th credit cards which they rarely used anyway and unemployment is still high (no word on how it can afford to keep getting high though).
In small cap news, KITD, a company Money McBags is following closely announced they will be issuing shares in both the US and Prague (where they will soon be listed). They are seemingly raising capital for more acquisitions where they buy companies for their customers, fire all the employees, and enjoy the benefits of leverage. KITD is basically a large database of videos for internet/IP delivery. They get raw video from customers and then help clients manage, view, distribute, manipulate, and store that data. They have a greater than 99% customer renewal rate because once a customer gives them their data, it is a huge pain in the ass for that customer to get all of the data back and have to reformat it, etc. (it is more of a pain in the ass than Valentine's day). KITD's market is growing 100% a year as IP takes off, they have little competition, they also have a ton of NOLs, and 93% of their business is outside of the US. IP video is cheaper and better than digital and it represents only 23% of the global video market so there is a lot of room to grow. That said, the company is a bit odd as it has had headquarters in Dubai and now Prague and they are still unprofitable from an operating eps standpoint. Also, the CEO loves himself almost as much as he loves money and looking silly at the movies and the company basically just relaunched less than a year ago when this new CEO came in and developed a new strategy. Now the good news is that the CEO is the biggest owner and has a substantial portion of his net worth in the company, the bad news is that the CEO has led failed companies before. But he has had success recently and at least we are betting with him. Also, despite little US exposure, they did win the business of Verizon Fios which is the only IPTV telco user in the US. The company has little sell side coverage but recently announced fiscal 2010 guidance for revenue to increase at least 60% to more than $75 million, with an annual operating EBITDA margin exceeding 17.5%. Ok, so EBITDA will be somewhere around $13MM and their market cap $120MM is with $13MM of net cash as of their last 10Q, so they are trading at around 8x EV/EBITDA before their just announced capital raise and at around 1.5x revenues when companies like this who use the software as a service model tend to trade at between 2x and 6x revenues. These are relatively cheap multiples for a growing company with a high recurring revenue base which contains many blue chip customers. Money McBags does not yet own KITD because he is still trying to fully understand the company's competitive advantage, but he is thinking about buying a starter position and will throw down the gauntlet to his loyal readers to do some of their own research here and see if they come up with anything else important.
Oh yeah, a Money McBags longtime reader e-mailed him about a Korean-American bank HAFC which is apparently now trading at around .5x of TBV (even with today's big run-up) and promises to love you long time. Money McBags knows nothing about HAFC and how real their TBV really is but if it is even 80% correct then there is room to grow here. So you should all do some due diligence.
In US macro news, US wholesale prices showed virtually no inflation as energy price declines offset increases in food prices. This is bad news for fat people but good news for the Tin Man.
In stock news, BAC and WFC reported earnings, well to be more precise, WFC reported earnings and BAC reported losses. BAC underperformed analyst expectations by posting a loss of $.60 per share vs. estimates of a $.52 loss per share. They blamed the $.08 miss on analysts being really bad at math. Without the TARP repayment and dividends paid on preferred stock, the Q4 loss would have only been $194MM, and in related news, if I didn't have a dick, I'd be a chick, so unfortunately the details matter (and if I were a chick, I would be totally gay for Aubrey O'Day). BAC also raised their provision for credit losses to $10.1B in Q4, from $8.5B a year earlier because of some little thing I believe they referred to as "people not wanting to fucking pay shit back." They also had total write-downs for the year of $33.7B, more than double the $16.2B in 2008, so at least we finally know the price of dignity.
The point is, BAC benefited from the investment banking gains of Merrill Lynch while they still took it in the yingus from their consumer portfolio. They suffered a loss of $4.9B on their consumer credit card business, compared with a $3.3 billion loss a year earlier. So guess what market, things aren't getting much better. People still love charging off like Martha Coakley loves being bad at politics (and I need to digress for a second here. Money McBags does not get involved in politics. He does not care one iota what the fuck happens in this world as long there is world peace, no capital gains tax, and free blumpkins for all. And to be honest, he'd be happy with just one of those three, unless that one was world peace, and then he'd need at least one of the other two. The point is, Money McBags is completely apolitical, for all he cares, a gay person could marry an abortion while smoking a joint through the barrel of a shotgun in the middle of the oval office while spraying chlorofluorocarbons all over a bald eagle, so the fact that he has an opinion on this senate race is unusual. But this must be said. For a democrat to lose Ted fucking Kennedy's senate seat in Massachusetts after having a 30 point lead in the polls and without having killed someone, been arrested for fraud, or openly rooted for the Yankees and claimed Bill Russell was a bitch, is perhaps the worst performance not just in the history of politics, but in the history of anything. Think about it. Ted Kennedy killed a lady and that couldn't stop him form winning election after election. All this Coakley broad had to do was be alive, and yet somehow she fucked that up. Sure the dude who beat her (and yes this is really him, and sorry to my straight male readers) had a secret weapon in his lovely daughter Ayla, for whom Money McBags would cure cancer (though not one of those hard cancers like nut cancer, something much easier, like cancer of the mouth, also known as Kathy Griffin), but Coakley's loss is so colossal it should be part of the lexicon. So here we go, BAC did not lose $.60 per share this Q, they Coakleyed $.60 per share. Diatribe over).
Most interesting was the verbiage from BAC's CEO who said "economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.” Which seemed at odds with WFC's CEO's statement that: “While losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate.” Of course, WFC managed to turn an $.08 profit compared with a ginormous loss last year, so things are looking a bit rosier for them, except if you look at their charge-off numbers which were up sequentially $300MM to$5.4B driven by commercial and consumer real estate.
So are all banks created equal or will performance differences really start to show now that the economy has sort of recovered? More importantly, has the economy actually recovered? Here are four interesting stats from this NYTimes article (as always, buyer beware with facts and the NYTimes):
1. Bank of America said the percentage of credit card loans it thinks will never be paid hit 13.53 percent in December. JPMorgan Chase expects to charge off 10.5 percent of its credit card portfolios in the first half of 2010.
2. Fourth quarter of 2009, the number of domestic credit card accounts has declined by 20 percent from its peak in the second quarter of 2008, to 341 million from 426 million
3. the amount of available credit on cards has declined by 21 percent since its peak, from $3.51 trillion in the third quarter of 2008 to $2.77 trillion in the fourth quarter of 2009, the data shows
4. Hayley Atwell is still really hot, and Money McBags will drive this bandwagon into the ground until playboy drops by the Atwell residence.
So available credit is shrinking for the US consumer. What would be interesting to know is how utilization rates have changed and whether anything can be gleaned from this other than people got rid of their 3rd and 4th credit cards which they rarely used anyway and unemployment is still high (no word on how it can afford to keep getting high though).
In small cap news, KITD, a company Money McBags is following closely announced they will be issuing shares in both the US and Prague (where they will soon be listed). They are seemingly raising capital for more acquisitions where they buy companies for their customers, fire all the employees, and enjoy the benefits of leverage. KITD is basically a large database of videos for internet/IP delivery. They get raw video from customers and then help clients manage, view, distribute, manipulate, and store that data. They have a greater than 99% customer renewal rate because once a customer gives them their data, it is a huge pain in the ass for that customer to get all of the data back and have to reformat it, etc. (it is more of a pain in the ass than Valentine's day). KITD's market is growing 100% a year as IP takes off, they have little competition, they also have a ton of NOLs, and 93% of their business is outside of the US. IP video is cheaper and better than digital and it represents only 23% of the global video market so there is a lot of room to grow. That said, the company is a bit odd as it has had headquarters in Dubai and now Prague and they are still unprofitable from an operating eps standpoint. Also, the CEO loves himself almost as much as he loves money and looking silly at the movies and the company basically just relaunched less than a year ago when this new CEO came in and developed a new strategy. Now the good news is that the CEO is the biggest owner and has a substantial portion of his net worth in the company, the bad news is that the CEO has led failed companies before. But he has had success recently and at least we are betting with him. Also, despite little US exposure, they did win the business of Verizon Fios which is the only IPTV telco user in the US. The company has little sell side coverage but recently announced fiscal 2010 guidance for revenue to increase at least 60% to more than $75 million, with an annual operating EBITDA margin exceeding 17.5%. Ok, so EBITDA will be somewhere around $13MM and their market cap $120MM is with $13MM of net cash as of their last 10Q, so they are trading at around 8x EV/EBITDA before their just announced capital raise and at around 1.5x revenues when companies like this who use the software as a service model tend to trade at between 2x and 6x revenues. These are relatively cheap multiples for a growing company with a high recurring revenue base which contains many blue chip customers. Money McBags does not yet own KITD because he is still trying to fully understand the company's competitive advantage, but he is thinking about buying a starter position and will throw down the gauntlet to his loyal readers to do some of their own research here and see if they come up with anything else important.
Oh yeah, a Money McBags longtime reader e-mailed him about a Korean-American bank HAFC which is apparently now trading at around .5x of TBV (even with today's big run-up) and promises to love you long time. Money McBags knows nothing about HAFC and how real their TBV really is but if it is even 80% correct then there is room to grow here. So you should all do some due diligence.
Friday, January 15, 2010
1/15/10 Midday Report: JPM sends the market down on estimate beat, promises to do worse next time
It is a bizarre day on the market today as INTC crushed numbers and is down, JP Morgan turned a huge profit, yet disappointed, and the dollar actually gained last night as apparently Amanda Drury was at the New York Rick's Cabaret and only accepted the local currency (ok, the last one may not have been true, but Money McBags would certainly contribute his market insights to Ms. Drury's Squawk Box anytime). Before we get to earnings today, there were a flurry of macroeconomic reports this morning. Inflation was flatter that Lindsay Lohan's derrierre as the consumer price index rose only .1% and the Michigan Consumer Sentiment index rose only slightly from "holy fuck" to "we're just kind of screwed." These data points continue to signal that the lack of job creation and lingering 10% unemployment are likely to temper the economic recovery like ALS tempered Stephen Hawkings' dreams of becoming a dancer. With inflation proving to be tamer than a Jay Leno monologue, the fed is poised to keep rates low for the near and immediate future. This should be continued good news for the banking industry (and again, the only business plan better than lending free money for more than free is the US Mint, mmmmmmm mint) despite JP Morgan's topline miss today. Given that yields are still juicy and rates unlikely to go up, smart investors may want to dabble in NLY and their 16%ish dividend yield as those guys just know how to make money (of course, investing in a company that relies on repo funding makes Money McBags more skittish than a paraskevidekatriaphobic at an all day Jason Vorhees marathon on Friday the 13th, so buyer beware).
As for stock news today, INTC blew away their quarter like they were auditioning for an upcoming role in a bukakke kings film. Expectations were for $.30 eps and they dropped $.40 eps on analysts' excel models while hitting record gross margins and guided to above Street revenue. The fact that they are trading off today is nuttier than a cock sandwich with extra balls as analysts question whether things can get any better. INTC is suffering from Wall Street's buy the rumor, sell the news mentality which doesn't make sense to Money McBags. It's like boning Brooklyn Decker and then complaining that you'll never do better. Hey assholes, you're still boning Brooklyn Decker so quit your whining and ride out INTC. Just because she's 22 doesn't mean she's peaked and just because INTC had record gross margins doesn't mean Moore's Law won't still propel them to better quarters. I mean INTC had a record gross margin despite the record sales of their lower end Atom chip. There is still room to grow here.
The bigger news on the market today is that JP Morgan's profitlicious quarter disappointed The Street as revenue was a little light (though not as light as a bulimic with a supercharged gag reflex), the retail bank put up a loss, and while EPS beat estimates, the beat was seen as lower quality than a Rollex watch or a Louis Vuittone bag as it was driven by tax benefits, lower comp, and the end of lobster Wednesdays. The low quality beat has sent the market down as investors now worry about other, less well-managed big banks (Citi, cough, Citi) and their retail exposures.
In small cap news today, COOL not only shit the proverbial bed, but they then remade the bed and shit in it all over again before tucking themselves in for the night. Analysts expected $.11 of eps and COOL was able to deliver a not so cool $.16 eps loss. For those of you not familiar with the company, they license and buy the rights to cheap crappy games for the Wii and DS aimed at families and girls in what is called the "casual gaming" segment ("casual" of course being an interesting epithet for "non"). Anyway, in a neat trick (though not as neat as the hidden button illusion) COOL has seen revenues increase but bottom line decrease as they believe profitability is just a suggestion. After diluting shareholders last Q by raising $9MM in cash, COOL further ingratiating themselves to their owners by accruing a $.10 impairment loss because nobody actually wanted their crappy games, a $.05 charge because their Our House franchise was apparently foreclosed upon, and another $.07 eps drop from lower margins due to something called "poor sales". Their gross margin dipped from 28% to 3% and they guided to 2010 non-gaap eps of $.05, so even though they are down 22% today, they are still trading at 20ish times 2010 eps and that number is less believable than Larry Craig having a wide stance. This company continues to grow revenue and become less profitable every quarter (and for their next trick they will lose weight and become more unattractive) and should probably trade at no more than $.50 or 10x their unlikely 2010 eps. If you were short them, congratulations. Money McBags was on the sidelines for this one, but thought the company was potentially cheap if management could show progress, which of course they didn't.
Enjoy the long weekend, Money McBags will be back when the market reopens on Tuesday.
As for stock news today, INTC blew away their quarter like they were auditioning for an upcoming role in a bukakke kings film. Expectations were for $.30 eps and they dropped $.40 eps on analysts' excel models while hitting record gross margins and guided to above Street revenue. The fact that they are trading off today is nuttier than a cock sandwich with extra balls as analysts question whether things can get any better. INTC is suffering from Wall Street's buy the rumor, sell the news mentality which doesn't make sense to Money McBags. It's like boning Brooklyn Decker and then complaining that you'll never do better. Hey assholes, you're still boning Brooklyn Decker so quit your whining and ride out INTC. Just because she's 22 doesn't mean she's peaked and just because INTC had record gross margins doesn't mean Moore's Law won't still propel them to better quarters. I mean INTC had a record gross margin despite the record sales of their lower end Atom chip. There is still room to grow here.
The bigger news on the market today is that JP Morgan's profitlicious quarter disappointed The Street as revenue was a little light (though not as light as a bulimic with a supercharged gag reflex), the retail bank put up a loss, and while EPS beat estimates, the beat was seen as lower quality than a Rollex watch or a Louis Vuittone bag as it was driven by tax benefits, lower comp, and the end of lobster Wednesdays. The low quality beat has sent the market down as investors now worry about other, less well-managed big banks (Citi, cough, Citi) and their retail exposures.
In small cap news today, COOL not only shit the proverbial bed, but they then remade the bed and shit in it all over again before tucking themselves in for the night. Analysts expected $.11 of eps and COOL was able to deliver a not so cool $.16 eps loss. For those of you not familiar with the company, they license and buy the rights to cheap crappy games for the Wii and DS aimed at families and girls in what is called the "casual gaming" segment ("casual" of course being an interesting epithet for "non"). Anyway, in a neat trick (though not as neat as the hidden button illusion) COOL has seen revenues increase but bottom line decrease as they believe profitability is just a suggestion. After diluting shareholders last Q by raising $9MM in cash, COOL further ingratiating themselves to their owners by accruing a $.10 impairment loss because nobody actually wanted their crappy games, a $.05 charge because their Our House franchise was apparently foreclosed upon, and another $.07 eps drop from lower margins due to something called "poor sales". Their gross margin dipped from 28% to 3% and they guided to 2010 non-gaap eps of $.05, so even though they are down 22% today, they are still trading at 20ish times 2010 eps and that number is less believable than Larry Craig having a wide stance. This company continues to grow revenue and become less profitable every quarter (and for their next trick they will lose weight and become more unattractive) and should probably trade at no more than $.50 or 10x their unlikely 2010 eps. If you were short them, congratulations. Money McBags was on the sidelines for this one, but thought the company was potentially cheap if management could show progress, which of course they didn't.
Enjoy the long weekend, Money McBags will be back when the market reopens on Tuesday.
Tuesday, January 5, 2010
1/5/10 Midday Report: After 330 years, stock market proves Isaac Newton wrong: Gravity, schmavity. What goes down, must keep going up
The market continues it's latest rally despite at best mixed news today. The biggest news is that pending home sales dropped more than Dolly Parton's boobs have in the past 5 years (and for the record, she now calls them "anklets"). The 16% drop was more than the expectation of a 2% drop after a 3.7% gain last month. Of course the gain last month was due to the first time home buyer tax credit which stimulated the existing home sales market like Simona Halep once stimulated the WTA. The number today should not be shocking as when there are incentives for something, and then those incentives go away, that behavior does not always remain when it comes to a non-reflex behavior like Economics. You hear that Pavlov? You can keep ringing that bell, but I know there is no tax-incentive in the dish, so stop fucking with me and get me my $5k deduction while I lick my balls some more. On second thought, I'm just gonna keep doing this, so you can get me the deduction later. Arf. Therefore, it is not surprising that the initial sell-off in the morning based on this news has reversed.
The one real effect of the news though was the dollar falling again as optimism that the Fed will raise rates sooner rather than later is beginning to wane, like Alan Greenspan's misguided influence. This thought was reitirated yesterday at The Boar's Nest by Fed Governor and Bo and Luke's long lost and full chromosome having cousin, the lovely Elizabeth Duke. Ms. Duke was quoted as saying: "In the current environment, the FOMC continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." So perhaps Greenspan's influence isn't waning afterall, ugh. Duke then went on to say, "to quote my good friend Roscoe P. Coltrane, in time, the economy will be "Good, Good, Good.""
In market news, Ford has reached it's highest price since 2005 as traders anticipate Ford's December sales numbers which are being released today. A strong number will be very positive for the economy because if people are buying Ford's shitty cars, they will likely buy anything and thus discretionary spend will be back. Finally, Kraft upped their offer to buy Cadbury to the tune of issuing 370MM new shares in the proposed take over. This has drawn the ire of Warren Buffett who owns a 9.4% stake in Kraft. Buffet argued that issuing shares will dilute the already cheap Kraft stock at a price $6ish below where Kraft bought shares back themselves in 2007, will give Kraft a "blank check" to renegotiate the deal higher whenever they want, and will make him really really angry to the point that he will go to his room and not come out or talk to anyone until the company rejects the plan. The 78 year old Buffett was then heard to complain about those damn kids on his lawn, CBS's decision to take Matlock off the air, and the fact that dames no longer have yams like Eleanor Powell.
The one real effect of the news though was the dollar falling again as optimism that the Fed will raise rates sooner rather than later is beginning to wane, like Alan Greenspan's misguided influence. This thought was reitirated yesterday at The Boar's Nest by Fed Governor and Bo and Luke's long lost and full chromosome having cousin, the lovely Elizabeth Duke. Ms. Duke was quoted as saying: "In the current environment, the FOMC continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." So perhaps Greenspan's influence isn't waning afterall, ugh. Duke then went on to say, "to quote my good friend Roscoe P. Coltrane, in time, the economy will be "Good, Good, Good.""
In market news, Ford has reached it's highest price since 2005 as traders anticipate Ford's December sales numbers which are being released today. A strong number will be very positive for the economy because if people are buying Ford's shitty cars, they will likely buy anything and thus discretionary spend will be back. Finally, Kraft upped their offer to buy Cadbury to the tune of issuing 370MM new shares in the proposed take over. This has drawn the ire of Warren Buffett who owns a 9.4% stake in Kraft. Buffet argued that issuing shares will dilute the already cheap Kraft stock at a price $6ish below where Kraft bought shares back themselves in 2007, will give Kraft a "blank check" to renegotiate the deal higher whenever they want, and will make him really really angry to the point that he will go to his room and not come out or talk to anyone until the company rejects the plan. The 78 year old Buffett was then heard to complain about those damn kids on his lawn, CBS's decision to take Matlock off the air, and the fact that dames no longer have yams like Eleanor Powell.
Monday, January 4, 2010
1/4/10 Midday Report: It's 2010, yet the market is partying like it's 1999
Hide the women and children because the market is coming back with a vengeance, like Dirty Harry Callahan or Don Knotts on Three's Company. The market appears to be determined to show all of the traders who manufactured complex derivitaves such MBS, ABS, and plain BS, that financial engineering can only keep it down for so long as eventually people have to consume. The big news is that manufacturing continues to improve as inventories which were cut to bare bones minimums (and at a minimum, I would bone a bare Eva Wyrwal with my inventory) are now starting to be replenished. China's manufacuring grew the fastest it has grown in 5 years which is great news for the lead paint industry but bad news for infants. In the US, manufacturing grew faster than it has in 3 years according to the ISM. This increase was driven by the stimulus spend, inventory build back, and increased sales of electronics to replace those which were broken by being thrown against the wall in disgust as the market cratered. Along with China and the US, Europe also saw an increase in manufacturing to a 25 month high causing red light sales to cease across the red light district of Amsterdam.
While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model. The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up "geysers") and China's manufacturing prowess spurring inflation concerns. Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building. Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.
In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring. TMRK is in the colocation/hosting business along with RAX and EQIX. This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced. The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one's programs, files, and downloaded spankwire videos will be hosted in a "cloud," thus leaving the actual pc as just an interface. Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week's supply of viagra. TMRK is one of the companies building facilities to host all of this data. It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don't grow on trees). Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites. This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks. The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.
While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model. The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up "geysers") and China's manufacturing prowess spurring inflation concerns. Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building. Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.
In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring. TMRK is in the colocation/hosting business along with RAX and EQIX. This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced. The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one's programs, files, and downloaded spankwire videos will be hosted in a "cloud," thus leaving the actual pc as just an interface. Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week's supply of viagra. TMRK is one of the companies building facilities to host all of this data. It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don't grow on trees). Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites. This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks. The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.
Monday, December 21, 2009
12/21/09 Midday Report: The recovery is on, I read it on the internets
The market is rising today as people are becoming convinced that the economic recovery is real and not just the beginning of a double-dip recession (which is actually worse than double-dipping your chip at a party and not nearly as exciting as a good ATM double dip). Chicago Fed Chief Charles "Chuck E." Evans maintains that inflation will be tame (woohoo), unemployment will remain high (boohoo), and the Fed will keep rates low to help stimulate the economy (market voodoo). Meanwhile, the market is betting on inflation as it can actually count the amount of dollars the US has printed/borrowed/pulled out of a hat during the recession. The inflation debate now promises to be one of the three most hotly argued questions over the next several months along with the always fun post holiday "Does my ass look fat in these jeans?" and "Brittany Murphy: Cocaine, anorexia, or who gives a shit?"
In market news, Intel (INTC) was upgraded by Barclays to "overweight" as the analyst claims the market has been too harsh in dinging INTC for potential peaking gross margins, an FTC investigation, and the senate's failure to ratify Moore's law. Of course this has led investors to wonder, "Who the fuck is Barclays??" Also moving the market today is french company Sanofi-Aventis who is buying toiletry and fragrance producer Chattem in their quest to end France's 2000 year old assault on proper hygiene. The French buying a hygiene company is a bit like the State of Alabama buying Encyclopedia Britannica or Shawn Kemp investing in Church and Dwight, but one has to start somewhere.
The next few days should see relatively light trading with managers locking in their gains and taking off for the holidays so be careful about interpreting market moves, though be more careful about interpreting the results of your breathalyzer test.
In market news, Intel (INTC) was upgraded by Barclays to "overweight" as the analyst claims the market has been too harsh in dinging INTC for potential peaking gross margins, an FTC investigation, and the senate's failure to ratify Moore's law. Of course this has led investors to wonder, "Who the fuck is Barclays??" Also moving the market today is french company Sanofi-Aventis who is buying toiletry and fragrance producer Chattem in their quest to end France's 2000 year old assault on proper hygiene. The French buying a hygiene company is a bit like the State of Alabama buying Encyclopedia Britannica or Shawn Kemp investing in Church and Dwight, but one has to start somewhere.
The next few days should see relatively light trading with managers locking in their gains and taking off for the holidays so be careful about interpreting market moves, though be more careful about interpreting the results of your breathalyzer test.
Wednesday, December 16, 2009
12/16/09 Midday Report: Inflation aint what it used to be
The market anxiously awaits Ben Bernanke's language on interest rates today after the FOMC meeting (and at the meeting, I am told they are serving GDP growth with a side of bank lending, while the kitchen has been told explicitly to hold the Rates, make sure there is absolutely no inflation, and to not put any smiley face cupcakes out). Bernanke's language in the FOMC minutes will be analyzed in greater detail than the dead sea scrolls, Natalie Portman's nude scene in Hotel Chevalier, and Tiger Woods' appointment book. Newsflash: He's going to hold rates steady for at least another fucking year, because, you know, banks hate lending when they have to pay more than 0% and the stimulus is wearing off like the scent of last night's hooker, I mean advice columnist. And with the CPI out showing core inflation to be flatter than the demand for a perfectly elastic good (Giffen goods be damned), rates don't need to move anywhere yet.
And speaking of Bernanke, he apparently has been named Time's Person of the Year narrowly beating out President Obama, your own Money McBags, and Ernie Anastos, so keep fucking that chicken Benny boy. Female PhD students of economics everywhere are said to be anxiously awaiting the centerfold pictures to go with the article to see just how expansionary Bernanke's "monetary policy" really is. So Ben, just make sure you don't keep rates too low for too long and reinflate Greenspan's folly.
In stock news, Intel is being sued by the FTC for being a big bully and threatening to take the other chip companies' lunch money if they spoke out of turn, while Iconix Brand (ICON) turned out to be just a stock tease in their attempt to buy Playboy (PLA)(though just for the articles). This never would have happened were Hugh Hefner still alive.
The market awaits Bernanke's meeting notes this afternoon, so hold on to your seats as what he says will mean absolutely nothing to you in one week.
And speaking of Bernanke, he apparently has been named Time's Person of the Year narrowly beating out President Obama, your own Money McBags, and Ernie Anastos, so keep fucking that chicken Benny boy. Female PhD students of economics everywhere are said to be anxiously awaiting the centerfold pictures to go with the article to see just how expansionary Bernanke's "monetary policy" really is. So Ben, just make sure you don't keep rates too low for too long and reinflate Greenspan's folly.
In stock news, Intel is being sued by the FTC for being a big bully and threatening to take the other chip companies' lunch money if they spoke out of turn, while Iconix Brand (ICON) turned out to be just a stock tease in their attempt to buy Playboy (PLA)(though just for the articles). This never would have happened were Hugh Hefner still alive.
The market awaits Bernanke's meeting notes this afternoon, so hold on to your seats as what he says will mean absolutely nothing to you in one week.
Tuesday, December 15, 2009
12/15/09 Midday Report: Porter trims forces to 4 as commodities laugh at competitivie advantages
The big news today is that wholesale inflation is up 1.8% and manufacturing in the US is churning out more goods people can't afford to buy, especially if prices have to be raised now that input costs/commodities are moving up faster than expectations (weird that expectations were wrong, though much less weird than the new hair trend sweeping across the US). With the continued increase in commodity prices, unemployed aging workers are rushing to their dentists to have their gold/silver/mercury fillings pulled to sell them on the black market.
In world markets, Greece is the latest country now seemingly assfucked (which apparently the Greeks actually enjoy, so kudos to them on that) as their credit rating was downgraded last week by Fitch from "you need a little perfume" to "take a fucking shower." The Greek prime minister George Papadapolis has said he will cut Greece's current 12.7% budget deficit to 3% over the next few years by exporting more baklava, feta cheese, and Greek Helmets.
And in stock news, WFC becomes the latest bank to raise money to pay back their TARP funds in order to be able to pay bonuses to all of the employees who didn't destroy value (surely someone gave a small business loan that worked out, I mean they are getting free fucking money. Even Bernie Madoff could make money doing that.). At this rate, the banks will have their balance sheets all squared up in no time so they can continue to not lend to consumers and businesses without having to worry about the pesky government.
In world markets, Greece is the latest country now seemingly assfucked (which apparently the Greeks actually enjoy, so kudos to them on that) as their credit rating was downgraded last week by Fitch from "you need a little perfume" to "take a fucking shower." The Greek prime minister George Papadapolis has said he will cut Greece's current 12.7% budget deficit to 3% over the next few years by exporting more baklava, feta cheese, and Greek Helmets.
And in stock news, WFC becomes the latest bank to raise money to pay back their TARP funds in order to be able to pay bonuses to all of the employees who didn't destroy value (surely someone gave a small business loan that worked out, I mean they are getting free fucking money. Even Bernie Madoff could make money doing that.). At this rate, the banks will have their balance sheets all squared up in no time so they can continue to not lend to consumers and businesses without having to worry about the pesky government.
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