It was another volatile day in the market as initial jobless claims came out and were much worse than expectations which is not surprising to anyone except for those who make those expectations. Claims were up by 13k to 472k while analysts had guessed that they would drop to 452k which means on average they couldn't even get the 50-50 directional guess right. And as usual, claims were part of the weekly we suck at math derby (also known as "Numbers Manipulation Thursday") as last week initial claims were 457k, so if they grew by 13k this week, that should have made claims 470k, but of course the (No) Labor Department wants to try to mitigate the fuckawfulness of the economy so they always release a slightly better number and then revise it worse when no one is paying attention. So last week's claims were revised up to 459k and thus we get the true mathmatical equation 459k + 13k = Holy shit we're fucked (or 472k, potato, puh-tato). The good news is that people claiming extended benefits dropped by 376k, the bad news is that number fell because the government voted to stop paying them, so um, welcome to the double dip (and not the kind where you only get bacteria), make sure you are properly supplied with canned foods, matches, and plenty of viewing material because this could get interesting. And to reiterate, Republicans filibustered a bill to continue extended unemployment benefits which is the first time this has ever happened with an unmeployment rate above 7.5% during a recession and it immediately cuts off 1.5MM unemployed people from cash flow they may need. If ever Money McBags wanted to lose an election, that is exactly what he would do, fuck the people who need help in the midst of the biggest recession in history. What wasn't reported was that Republican Senators also filibustered dignity and common sense while proposing legislation to have unemployed people serve as speed bumps on Pennsylvania Avenue to keep drivers from going to fast.
In other US macro news, pending home sales also hit the shitter (and hit it with the force of a taco bell bean burrito slathered in extra hot sauce and Ecoli) which surprised analysts but shouldn't have surprised readers of WGP. The pending home sales index fell to 77.6 from 110.9 because the first time home buyers tax went away which is only something that has been known for months. The 30% drop in the index dwarfed the 12% drop analysts had guessed once again proving that past performance is no indication of future performance in regression models when we live in a fat tailed economy. Finally the House passed a financial overhaul bill which will now go to the Senate for a vote on what should be sweeping changes but has been watered down more than Christina Hendricks in a wet t-shirt contest.
In addtion to macro news that was so bad not even Chris Dodd could have done something to make it worse, Goldman was further questioned by the FCIC today on their derivatives trading as relates to AIG (and as usual Money McBags would love to have the FCIC's Heather Murren question him about the exposure of his long derivative). CFO David Vinnar was nice enough to constantly conflict himself by telling the commission that Goldman doesn't have a "derivatives business," but when questioned on how Goldman can call themselves a "top five derivatives dealers in the world," he acknowledged that Goldman's derivatives business is "a very big part of what we do." Money McBags guesses that kind of logical fallacy or semantics masturbation is bound to happen when one talks out of their ass. Anyway, this whole thing is just theatre since if the government really wanted to shut themselves, I mean Goldman, down, it would take about 3 minutes of actual investigation.
Internationally, China is showing more signs of slowing down than Robert Byrd, as new data shows the second derivative of their manufacturing sector is likely abating. Two indexes (indices? indi? indiyouknowwhatthefuckimean) came in below analyst guesses, though still showed expansion (but that expansion is now more like from flaccid to quarter chub as opposed to full pitched tent). Tao Wang (not to be confused with Tiger Wang, Dong Wang, Peter Wang, or Wang Chung) an economist at UBS China said “economic growth is strong but momentum has peaked” and if that is true, the global recovery may need another shot of stimulus or else it could flatline worse than Gina Lee Nolin's acting career. In other intentational news, Spain was able to sell 3.5B of 3 year Euro bonds after promising not to default on them and promising to have Rebecca Ronda personally deliver them to all buyers along with a refreshing spanish milkshake. The fact that Spain was able to get their bonds out and not at a too exorbitant yield is a positive, though Moody's has now placed Spain’s credit ranking on review for a possible downgrade, citing “deteriorating” growth prospects, challenges in meeting deficit targets, and the fact that no one in the country works. That said, Money McBags cares what Moody's has to say about as much as he cares about Donald Rumsfield's thoughts war strategy, Chuck Klosterman's opinion on pop culture, or Aristotle's view on the heliocentric universe.
In stock news it's uglier out there today than it was in Barbara Streisand's bridal suite when James Brolin went out for a smoke. One stock moving nicely up though is Ford as they announced a 13% rise in sales for the month of June led by the Ford Focus, their Super Duty F1 series, and pure luck. That said, the company announced a $4B buyback yesterday so has had good news two days in a row which currently qualifies it for the award as greatest stock ever. In other news, financials continue to sputter because there is currently less faith in the financial system than there is in Norse mythology. The Treasury department has been reducing their holdings of C which is good because the government shouldn't own public companies, especially ones going $0.
In small cap news, ZAGG is unsurprisingly selling off after it hit $3 for no reason the other day and Money McBags broke down why the stock was at least $1 too expensive. One sector that Money McBags has liked but is getting destroyed today like a college senior's hopes and dreams is the home health care sector. Small cap names AFAM and LHCG have been solid performers as they offer a service that is both cheaper than hospital stays and better for patients as home recovery rates are better than hospitalization recovery rates. The problem is these companies rely heavily on medicare funding and their billing practices have always been questioned.
Well today, the SEC announced they are launching an investigation in to AFAM and AMED around the companies billing more home visits to medicare than they actually made. That news is less good than waking up next to an unshaven Kathy Bates. As a result the sector is down 10% today and rightfully so, in fact if Money McBags owned any of these companies he would be puking them out like a bulimic with a vomit fetish. That said, LHCG does not seem to be part of the investigation so it could be a good time to try to pick this up on the cheap once things settle. Money McBags has always preferred LHCG in this group because they are a bit more rural than the others and therefore face less competition. That said, the market is enticing as it is growing 10%-15% a year as the population ages and home health care becomes a more ready solution. It costs medicare $132 per home health care visit vs. $6k for a hospital stay and as mentioned before, recovery rates are better at home because patients aren't around so many fucking sick people all day.
LHCG earned $.64 a share in Q1 and gave guidance for $615MM to $625MM in full year revenues and $2.75 to $2.85 eps. With the sell off today the stock is trading at only 9x this year's eps guidance and yet the market is growing by double digits. Revenue was up 17% last Q and guidance does not take in to account any de novo branches which only take a year to reach full margins. The company has ~$13MM net cash to still make acquisitions and the market is ripe for continued rolling up as the top 4 players are only ~10%-12% of the market. The problems are the reliance on medicare funding and the government's ability to slash that at any time, the need for continued acquisitions, the uncertainty of any future medical liability issues (as with all health care providers), and the current SEC investigation on competitors. Still, this is a growing market and is a cheaper alternative for medicare and insurance companies that ultimately provides better service and better results so why not buy this for 9x earnings when you can? As he said, Money McBags would let this settle because the last time fudged billing fears struck the industry, these stocks got pulverized even though none of the public companies were found to be complicit. So bide your time but put this on your buy list. And to reitirate for those of you new to WGP (and if you're new, don't forget to join WGP on Facebook), Money McBags' buy/interesting list consists of KIRK, KITD, TMRK, CTGX, CRUS, QCOR, NTRI, EPAX and now LHCG among others. Many of those are getting to be pretty washed out (KIRK, KITD, CTGX) and yet have nice earnings streams and solid longterm businesses so once the market is done dying, those are companies that should see positive momentum. And while the market drops, there is always WGO and ZAGG to short, or just buy TWM and watch Wall Street burn.
Showing posts with label Spain. Show all posts
Showing posts with label Spain. Show all posts
Thursday, July 1, 2010
Friday, June 18, 2010
6/18/10 Midday Report: Gold hits new highs, silver plans an intervention
It's quadruple witching Friday today in the market which is unfortunately just the day where stock index futures, stock index options, stock options, and single stock futures all expire and not the day where the market finally gets a 5-some with Elizabeth Montgomery, Barbara Eden, Melissa Joan Hart, and Omarrosa. While this is usually a volatile day, the market has been quieter than the Clinton's bedroom as there has been little macro or company news released today. That said, owners of gold are being showered with rewards as gold has reached a record high today thanks to investors betting against the current fiat system remaining viable. While it's likely we'll hit a deflationary period before inflation takes off like Shawn Kemp from a delivery room, holding gold as part of your portfolio right now as a hedge against volatility and the potential crash of the Euro makes more sense than pairing Suaterenes with a nice foie gras. In other US news, Tim Geithner is apparently getting new and more power which he has easily earned given how he has revived this economy from dead to about to die again and helped to bail out the firms who caused this mess. Geithner is set to lead a new council run by the Treasury Department to identify companies that might be shut down because they pose a risk to the financial system. So does that mean the government is going to shut down the SEC, FCIC, FINRA, FDIC, and NAMBLA? Don't they all do the same fucking thing? Hey, I know how to solve a problem, let's just create other fucking groups to do the same thing that current groups do but hope they do it better. Unbelievable. Money McBags just wants to know when more bureaucracy has ever fixed anything other than creating meaningless jobs. Somewhere Josef K. is scratching his head.
Internationally, the Eurozone added Estonia as the lastest member in their global ponzi scheme. Estonia now has to pay $1B to Greece, and then Greece will pay 80% of that up to Spain, who will then pay 80% of that up to Germany. Funding problems solved. While it is certainly odd timing for a country to be joining the eurozone, Estonia said they had no choice after the University of Texas decided to stay in the Big 12 and and Utah beat them out for the last spot in the Pac 10. “It’s a great day for Estonia,” remarked Estonian prime minister Andrus Ansip, who was perhaps (an)sipping on a little too much Saku Originaal as getting in to the Eurozone right now is about as desirable as joining a tv show co-starring Ted McGinley or being drafted by the Washington Generals. Anyway, for those of you unfamiliar with Estonia, here are some quick facts: They were 4th out of 173 countries in the Worldwide Press Freedom Index narrowly being edged out by Canada and their NSFW Naked News, they've previously been occupied by more countries than Zsa Zsa Gabor's vagina, and the person they most admire is Yosemite Sam. They've been independent since 1991 and are finally looking to settle down after 20 years of hard drinking and nordic flirtations in order to raise their favorite offspring Tiiu Kuik in a stronger family environment. So welcome to the Euro Estonia, just don't burn all those Kroons quite yet. In other international news, the IMF backed Spain's austerity measures after downing one sangria too many and learning about imaginary numbers.
In stock news, C is planning on raising $3B because they haven't lost enough investor capital already. Just remember, this bank is so poorly run and has such bad judgment that they fired someone for being too hot, and she's not even really that hot, I mean we're not talking about Sara Carbonero for fucksake. And the best part about this is that they are raising money for their private equity and hedge fund groups right before Paul Volcker slaps his rule on the table and bans banks from owning those type of funds. Wow. Good for the funds but that makes about as much sense for C as it did for Saddam Hussein to build a new palace in Baghdad in March of 2003 or Simona Halep to go bra shopping right before the summer of 2009. Money McBags is sure C's CEO Vikram Pandit will retain some type of personal interest in these funds when the Volcker Rule takes effect so I guess it makes sense for him but for C shareholders it seems like a whole lot of wasted time and energy (though if you're a C shareholder, you have bigger problems to worry about than the company raising money for funds they are going to have to give up soon). In other news, CVS and WAG decided to end their snit over prescription drug benefit reimbursement and just go back to screwing Medicare and the American health care system together. Finally Moody's lowered their ratings of BP by 3 notches from the unintelligible Aa2 to the just as unintelligible A2 (or maybe it was the other way around, who the fuck knows). It's nice to see that weeks in to one of the biggest environmental disasters in history, Moody's is still on the ball. Good job guys, Money McBags eagerly awaits your downgrade of daguerreotype companies within the next 6 months. Though to be honest, any investor who needs Moody's to tell them BP is more fucked than a cupcake in Kirstie Alley's house probably shouldn't be investing.
In small cap news CRUS continues to rocket up. Money McBags believes $24 (20x his $1.20 estimates) is a plenty fair price but at $20 he'd start to think about trimming to take some of the hella sweet profits you've made off the table (and rememeber Money McBags first brought CRUS to your attention when they were trading under $8 and he told you he bought them shortly thereafter. The fact that he dumped them after the "Flash crash" for liquidity reasons doesn't change his valuation, it only makes him angrier that he believes the market structure is so broken that fundamentals may not matter). And if any of you are interested in a high flying small volatile momentum name, check out SPRT. Money McBags will try to break them down next week but they are basically outsourced and remote computer repair. It's like Geek Squad only you don't have to have a fat smelly skeevy fuck show up at your house and stink the place up while he wipes all of the porn off your computer to clean up whatever virus you downloaded while searching for that Miley Cyrus upskirt pic (and Money McBags will not be linking to the pic since he believes in the legal system). It's certainly an interesting and potential low cost business model and the company is currently scaling up their technicians faster than a young hollywood starlet scales up her ambitions. It is doubtful that in this market Money McBags would ever own this stock because a lot has to go right for it to be valued even near what it is trading today, but it has a nice story has some real opportunity, and more than anything it has strong momentum and a rapidly accelerating business. If you have money you don't care about, send it to Money McBags for a night out at Rick's, otherwise, do some research here as this might be a good trade.
Internationally, the Eurozone added Estonia as the lastest member in their global ponzi scheme. Estonia now has to pay $1B to Greece, and then Greece will pay 80% of that up to Spain, who will then pay 80% of that up to Germany. Funding problems solved. While it is certainly odd timing for a country to be joining the eurozone, Estonia said they had no choice after the University of Texas decided to stay in the Big 12 and and Utah beat them out for the last spot in the Pac 10. “It’s a great day for Estonia,” remarked Estonian prime minister Andrus Ansip, who was perhaps (an)sipping on a little too much Saku Originaal as getting in to the Eurozone right now is about as desirable as joining a tv show co-starring Ted McGinley or being drafted by the Washington Generals. Anyway, for those of you unfamiliar with Estonia, here are some quick facts: They were 4th out of 173 countries in the Worldwide Press Freedom Index narrowly being edged out by Canada and their NSFW Naked News, they've previously been occupied by more countries than Zsa Zsa Gabor's vagina, and the person they most admire is Yosemite Sam. They've been independent since 1991 and are finally looking to settle down after 20 years of hard drinking and nordic flirtations in order to raise their favorite offspring Tiiu Kuik in a stronger family environment. So welcome to the Euro Estonia, just don't burn all those Kroons quite yet. In other international news, the IMF backed Spain's austerity measures after downing one sangria too many and learning about imaginary numbers.
In stock news, C is planning on raising $3B because they haven't lost enough investor capital already. Just remember, this bank is so poorly run and has such bad judgment that they fired someone for being too hot, and she's not even really that hot, I mean we're not talking about Sara Carbonero for fucksake. And the best part about this is that they are raising money for their private equity and hedge fund groups right before Paul Volcker slaps his rule on the table and bans banks from owning those type of funds. Wow. Good for the funds but that makes about as much sense for C as it did for Saddam Hussein to build a new palace in Baghdad in March of 2003 or Simona Halep to go bra shopping right before the summer of 2009. Money McBags is sure C's CEO Vikram Pandit will retain some type of personal interest in these funds when the Volcker Rule takes effect so I guess it makes sense for him but for C shareholders it seems like a whole lot of wasted time and energy (though if you're a C shareholder, you have bigger problems to worry about than the company raising money for funds they are going to have to give up soon). In other news, CVS and WAG decided to end their snit over prescription drug benefit reimbursement and just go back to screwing Medicare and the American health care system together. Finally Moody's lowered their ratings of BP by 3 notches from the unintelligible Aa2 to the just as unintelligible A2 (or maybe it was the other way around, who the fuck knows). It's nice to see that weeks in to one of the biggest environmental disasters in history, Moody's is still on the ball. Good job guys, Money McBags eagerly awaits your downgrade of daguerreotype companies within the next 6 months. Though to be honest, any investor who needs Moody's to tell them BP is more fucked than a cupcake in Kirstie Alley's house probably shouldn't be investing.
In small cap news CRUS continues to rocket up. Money McBags believes $24 (20x his $1.20 estimates) is a plenty fair price but at $20 he'd start to think about trimming to take some of the hella sweet profits you've made off the table (and rememeber Money McBags first brought CRUS to your attention when they were trading under $8 and he told you he bought them shortly thereafter. The fact that he dumped them after the "Flash crash" for liquidity reasons doesn't change his valuation, it only makes him angrier that he believes the market structure is so broken that fundamentals may not matter). And if any of you are interested in a high flying small volatile momentum name, check out SPRT. Money McBags will try to break them down next week but they are basically outsourced and remote computer repair. It's like Geek Squad only you don't have to have a fat smelly skeevy fuck show up at your house and stink the place up while he wipes all of the porn off your computer to clean up whatever virus you downloaded while searching for that Miley Cyrus upskirt pic (and Money McBags will not be linking to the pic since he believes in the legal system). It's certainly an interesting and potential low cost business model and the company is currently scaling up their technicians faster than a young hollywood starlet scales up her ambitions. It is doubtful that in this market Money McBags would ever own this stock because a lot has to go right for it to be valued even near what it is trading today, but it has a nice story has some real opportunity, and more than anything it has strong momentum and a rapidly accelerating business. If you have money you don't care about, send it to Money McBags for a night out at Rick's, otherwise, do some research here as this might be a good trade.
Wednesday, June 16, 2010
6/16/10 Midday Report: BP sets aside $20B to be used on an oily day
First of all, Money McBags would like to thank all of you for your feedback yesterday. His inbox is currently overflowing like Whitezilla's urethra after downing three cases of Mountain Dew in ten minutes (and feel free to google "Whitezilla" on your own time, Money McBags refuses to link to it due to good taste) but he promises to try to get back to each and everyone of you. The feedback was helpful as Money McBags learned that he does both too much analysis and not enough, the posts are both too long and too short, and the jokes both add to the analysis and detract from it. The only thing that was universal was that his readers love the pics so Money McBags is thinking of dropping all subject matter, words, and rational thought and turning WGP into another NSFW photo site. Anyway, Money McBags is still just short of his goal of 1MM visitors so if you all could spread the word, he will be able to continue to provide you with what you like best.
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America's global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don't figure in to analysts' regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn't "dead wrong" or "not even fucking close"). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month's 672k or down only 9k from the Commerce department's newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: "readjusted"). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by "readjusting" last month's number, the market got the bump from a better than expected number in April and now doesn't feel as bad about the drop since it's being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn't "sinking his putts" in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers' tax credit was going away didn't make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don't we start by knocking some shit off the 6%, I don't know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we'll move it a couple % from there. Is that so fucking hard? While it's an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya's gender, it makes a fuck load more sense than whatever analysts are doing. So here's the deal. Money McBags isn't going to open up his excel, he isn't going to look at any data or any trends, and he's going to spend fewer than 10 seconds on this guess but he'll say next month's new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it's on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don't have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he'll dump the MDA and adopt them as the new enfants de Jerry. C'est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn't add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain's historic unemployment rate of 19%. Money McBags isn't sayng the people of Spain don't work, well, actually, that's exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA's acting director Edward J. DeMarco (and the J apparently stands for "just kidding") said that the action "does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a "reflection of current or future performance?" Fuck, if that's the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP's credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they've basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one's Punky Brewsters can do to one's career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn't want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga's face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn't heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO's earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on "couples night."
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America's global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don't figure in to analysts' regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn't "dead wrong" or "not even fucking close"). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month's 672k or down only 9k from the Commerce department's newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: "readjusted"). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by "readjusting" last month's number, the market got the bump from a better than expected number in April and now doesn't feel as bad about the drop since it's being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn't "sinking his putts" in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers' tax credit was going away didn't make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don't we start by knocking some shit off the 6%, I don't know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we'll move it a couple % from there. Is that so fucking hard? While it's an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya's gender, it makes a fuck load more sense than whatever analysts are doing. So here's the deal. Money McBags isn't going to open up his excel, he isn't going to look at any data or any trends, and he's going to spend fewer than 10 seconds on this guess but he'll say next month's new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it's on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don't have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he'll dump the MDA and adopt them as the new enfants de Jerry. C'est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn't add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain's historic unemployment rate of 19%. Money McBags isn't sayng the people of Spain don't work, well, actually, that's exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA's acting director Edward J. DeMarco (and the J apparently stands for "just kidding") said that the action "does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a "reflection of current or future performance?" Fuck, if that's the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP's credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they've basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one's Punky Brewsters can do to one's career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn't want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga's face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn't heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO's earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on "couples night."
Friday, May 28, 2010
5/28/10 Midafternoon Report: Market falls after basque-ing in Spain's downgrade
Money McBags has been busy so today's report will be brief, like the Anglo-Zanzibar war of 1896 or Gary Coleman's remaining days (what, too soon?). The market tanked again and closed down 8% for the month of May which is the worst May in 48 years which was so long ago that the Hulk comic book had just been launched and Brigitte Bardot was at the peak of her ungodly powers. Sinking the market today was that it was open, well that and Spain was downgraded by Fitch from cultutral institution to Europe's bitch. Fitch cut Spain's rating from AAA to AA+ which means absolutely nothing to Money McBags because he doesn't use the metric system. That said, if there is an algebra teacher in the house, Money McBags would love to have them solve for X in the equation AAA - X = AA+. The director of Spain's Treasury, Soledad Nunez, whose first name is so awesome that Money McBags can't bring himself to mock it, reminded the market that AA+ is "still a high rating" before reminding the market that Fitch is worse at their jobs than he is.
In US macro news, incomes rose .4% but consumer spending was flat in the first logical economic move by US consumers since sales of the pet rock fell to 0. Spending growing at a lower rate than income growth implies that people are actually saving which would go a huge way towards cleaing up this debt driven culture in the long run.
In stock news, some shit went up but most shit went down because we're in a bear market with more downside volatility than Lindsay Lohan with a dime bag. AAPL was one company that was up strong today on a price target increase to $325 from BofA Merrill, or as they are better known as BofS Merrill. With iPad sales predicted to make PCs obsolete and allow NSFW muff guessing enthusiasts to take their sport on the road with them, Apple is one company that should continue to do well even if Europe falls in to the ocean. In other stock news, GS is said to be ready to settle with the SEC to avoid fraud charges but unless the settlement is inconceivably large for Lloyd Blankfein to handle, Money McBags would like to see this go to trial. If Goldman is not guilty of fraud than Money McBags' understanding of the words "fraud" and "guilt" are worse than George W. Bush's understanding of the words "mission" and "accomplished" or Tiger Woods' understanding of the word "fidelity."
Anyway, sorry for a brief marginally funny report today but it has been busy at Chez McBags. Of course, if you send 10 or1MM of your friends to When Genius Prevailed, Money McBags will be able to spend more time analyzing the markets, knocking out dick jokes, and sharing his love of all things Sonya Kraus. So enjoy you're long weekend and remember to be careful out there.
In US macro news, incomes rose .4% but consumer spending was flat in the first logical economic move by US consumers since sales of the pet rock fell to 0. Spending growing at a lower rate than income growth implies that people are actually saving which would go a huge way towards cleaing up this debt driven culture in the long run.
In stock news, some shit went up but most shit went down because we're in a bear market with more downside volatility than Lindsay Lohan with a dime bag. AAPL was one company that was up strong today on a price target increase to $325 from BofA Merrill, or as they are better known as BofS Merrill. With iPad sales predicted to make PCs obsolete and allow NSFW muff guessing enthusiasts to take their sport on the road with them, Apple is one company that should continue to do well even if Europe falls in to the ocean. In other stock news, GS is said to be ready to settle with the SEC to avoid fraud charges but unless the settlement is inconceivably large for Lloyd Blankfein to handle, Money McBags would like to see this go to trial. If Goldman is not guilty of fraud than Money McBags' understanding of the words "fraud" and "guilt" are worse than George W. Bush's understanding of the words "mission" and "accomplished" or Tiger Woods' understanding of the word "fidelity."
Anyway, sorry for a brief marginally funny report today but it has been busy at Chez McBags. Of course, if you send 10 or1MM of your friends to When Genius Prevailed, Money McBags will be able to spend more time analyzing the markets, knocking out dick jokes, and sharing his love of all things Sonya Kraus. So enjoy you're long weekend and remember to be careful out there.
Tuesday, May 25, 2010
5/25/10 Midafternoon Report: Volatility causes market to go up and down faster than a time constrained fluff girl
The markets sold off hard again today until the late afternoon with the the sell off being caused by Europe going to zero, financial reform, and now fucking North Korea dropping a turd in the proverbial kimchee bowl, and the hardness being caused by the market having grabbed a workout with Amanda Carrier. So la-di-fucking-da. With Kim Jong Il apparently getting his Napoleon complex on and dropping a South Korean warship like a diahrreatic drops logs (that is with ease and aplomb), the markets have more to worry about than a parent who sends their kids for music lessons at Gary Glitter's house. It is ugly out there today (and not Lady GaGa ugly, but Amy Winehouse on crack sprinkled with a bit of Tina Yothers ugly) and Money McBags' screen was redder than a baboon's ass with a deep and gaping anal fissure for most of the day. So what is an investor to do other than hide under their desks and dream of long walks on the beach with Melissa Giraldo while hoping the bad man leaves them alone? If Money McBags had the answer, he would certainly let all of you know, but for now, he is hedging the volatility and waiting for things to settle before stepping back in to names that have good long term trends and are right now just guilty by association like the cast of a Robin Williams movie (names like KO, MCD, VMW, GOOG). The market could really go either way at this technical level and while Money McBags is a very cunning linguist, he is not clairvoyant and thus does not want to bet on what will win in the current pissing match between bad macroeconomics and reasonable company fundamentals.
In US news, consumer confidence was up today to it's highest levels since May 2008 when it was caught doing lines in a Hollywood bathroom with Lindsay Lohan. Americans are now rosier about job prospects as longterm unemployed people can no longer pay for phone service and thus have dropped off of the radar of people running these surveys. Adding to the optimism is the complete lack of global perspective by US workers who think "european" is just something you say to your friend at the urinal next to you. Also, LIBOR in dollars is spiking like it is Karch Karily after a health dose of PEDs. The dollar Libor-OIS spread which is a gauge of banks’ reluctance to lend widened to the most since July and signals that banks are questioning the viability of their peers like a young Michael Jackson used to question the viability of Marlon. And making matters worse is that the VIX continues to shoot up and investors have to hope that it is using one of Magic Johnson's needles and thus will soon die down. Also, housing prices fell last quarter according the Case-Shiller report and fell sequentially for the month but were up modestly year over year. So taking whatever metric and time frame you choose to use, housing prices were about as robust as Detroit's economy or Sarah Palin's vocabulary.
Internationally, shit is still all fucked up with Europe's economy sinking like Angela Merkel's neckline before a night out with the Bundestag and all investors can do is hope to grab on to some floatation devices to avoid sinking. Spain and their banking system are sparking fears today with regional bank Cajasur having been bailed out yesterday and who knows what to be bailed out tomorrow leaving Spain's banking system under more fire than the Spanish Armada at Gravelines in 1588. There is real fear that insolvency could spread like herpes in the Kardashian family and if that happens, not even extra strength Valtrex will be able to save the Europe's economy. Of course today, North Korea has slapped their tiny penises (or is it peni? Can someone exhume William Safire and ask him?) on the table to take part in the global cock off to see who can fuck shit up the most. After South Korea finally picked out the right stationary and calligrapher, they formally accused North Korea of sinking one of their warships in an incident that happened back in March. South Korea also relisted North Korea as their "principal enemy" knocking forks, Don Rickles, and Yonggary down on their list. In return, North Korea has suspended any interaction with their neighbors to the South, banned South Korean ships from territorial waters and air space, and taken out an ad in the Rodong Sinmun calling South Korea a bunch of "chodes." While this is not good news, Money McBags could give a shit if North and South Korea want to go to war, stop talking with each other, or have a fucking pillow fight. What Money McBags cares about is the markets and as long as this threat of war doesn't stop sweat shops in Seoul from banging out willy warmers, he will blissfully ignore this hissy fit and assume everything will get better.
In stock news, GS is about the only thing up big today as investors fly to the safety of the US government. Other financials continue to trade down as new legislation may require them to raise more reserves. spin off their profitable derivatives desks, and stop being such dicks. In other stocks, DELL announced plans for an iPad rival which they are tentatively calling "failure" and Microsoft announced a management shake-up with the head of their entertainment division "retiring," no doubt to spend more time with his Zune. With MSFT lagging Apple, Google, Nintendo, and the abacus in developing consumer products people actually want to buy, hiring someone with vision is going to be key for MSFT to grow back to a market leader. Finally Autozone is up 5% today after reporting numbers better than estimates due to new store openings and higher demand for auto parts. They expect continued strong demand for replacement parts as fewer people are buying new cars since it's not necessary to drive to one's living room which is where 20MM people now work.
In small cap news, KITD is getting pummeled again today. Money McBags can't defend this stock anymore as he has said everything he can say. He is going to hold on to his shares and just not pay attention to the price in this volatility. Either their A/R are fucked or they're not and if they're not, this stock is easily a double from here. Also, CTGX which Money McBags has blogged about many times and which he puked out the day of the "flash crash" may have bottomed out today as it is up in this tape. The company is trading at ~10x Money McBags' fiscal 2011 EPS which implies 50% growth. Their upside relies on government spending on electronic medical records and even if Europe falls in to the ocean and North Korea taints South Korea's kimchee supply, the US government is still going to be doling out billions of dollars to get EMR up and running. So CTGX's main IBM outsourcing business may come under fire in a bad economy, but EMR should help pull them through. There's a lot of Y2K about this company, but luckily, we're about to start the medical Y2K and they should post impressive earnings. Money McBags is likely going to buy back when shit settles down a bit. Right now low liquidity names scare him more than seemingly hot chicks with adam's apples.
In US news, consumer confidence was up today to it's highest levels since May 2008 when it was caught doing lines in a Hollywood bathroom with Lindsay Lohan. Americans are now rosier about job prospects as longterm unemployed people can no longer pay for phone service and thus have dropped off of the radar of people running these surveys. Adding to the optimism is the complete lack of global perspective by US workers who think "european" is just something you say to your friend at the urinal next to you. Also, LIBOR in dollars is spiking like it is Karch Karily after a health dose of PEDs. The dollar Libor-OIS spread which is a gauge of banks’ reluctance to lend widened to the most since July and signals that banks are questioning the viability of their peers like a young Michael Jackson used to question the viability of Marlon. And making matters worse is that the VIX continues to shoot up and investors have to hope that it is using one of Magic Johnson's needles and thus will soon die down. Also, housing prices fell last quarter according the Case-Shiller report and fell sequentially for the month but were up modestly year over year. So taking whatever metric and time frame you choose to use, housing prices were about as robust as Detroit's economy or Sarah Palin's vocabulary.
Internationally, shit is still all fucked up with Europe's economy sinking like Angela Merkel's neckline before a night out with the Bundestag and all investors can do is hope to grab on to some floatation devices to avoid sinking. Spain and their banking system are sparking fears today with regional bank Cajasur having been bailed out yesterday and who knows what to be bailed out tomorrow leaving Spain's banking system under more fire than the Spanish Armada at Gravelines in 1588. There is real fear that insolvency could spread like herpes in the Kardashian family and if that happens, not even extra strength Valtrex will be able to save the Europe's economy. Of course today, North Korea has slapped their tiny penises (or is it peni? Can someone exhume William Safire and ask him?) on the table to take part in the global cock off to see who can fuck shit up the most. After South Korea finally picked out the right stationary and calligrapher, they formally accused North Korea of sinking one of their warships in an incident that happened back in March. South Korea also relisted North Korea as their "principal enemy" knocking forks, Don Rickles, and Yonggary down on their list. In return, North Korea has suspended any interaction with their neighbors to the South, banned South Korean ships from territorial waters and air space, and taken out an ad in the Rodong Sinmun calling South Korea a bunch of "chodes." While this is not good news, Money McBags could give a shit if North and South Korea want to go to war, stop talking with each other, or have a fucking pillow fight. What Money McBags cares about is the markets and as long as this threat of war doesn't stop sweat shops in Seoul from banging out willy warmers, he will blissfully ignore this hissy fit and assume everything will get better.
In stock news, GS is about the only thing up big today as investors fly to the safety of the US government. Other financials continue to trade down as new legislation may require them to raise more reserves. spin off their profitable derivatives desks, and stop being such dicks. In other stocks, DELL announced plans for an iPad rival which they are tentatively calling "failure" and Microsoft announced a management shake-up with the head of their entertainment division "retiring," no doubt to spend more time with his Zune. With MSFT lagging Apple, Google, Nintendo, and the abacus in developing consumer products people actually want to buy, hiring someone with vision is going to be key for MSFT to grow back to a market leader. Finally Autozone is up 5% today after reporting numbers better than estimates due to new store openings and higher demand for auto parts. They expect continued strong demand for replacement parts as fewer people are buying new cars since it's not necessary to drive to one's living room which is where 20MM people now work.
In small cap news, KITD is getting pummeled again today. Money McBags can't defend this stock anymore as he has said everything he can say. He is going to hold on to his shares and just not pay attention to the price in this volatility. Either their A/R are fucked or they're not and if they're not, this stock is easily a double from here. Also, CTGX which Money McBags has blogged about many times and which he puked out the day of the "flash crash" may have bottomed out today as it is up in this tape. The company is trading at ~10x Money McBags' fiscal 2011 EPS which implies 50% growth. Their upside relies on government spending on electronic medical records and even if Europe falls in to the ocean and North Korea taints South Korea's kimchee supply, the US government is still going to be doling out billions of dollars to get EMR up and running. So CTGX's main IBM outsourcing business may come under fire in a bad economy, but EMR should help pull them through. There's a lot of Y2K about this company, but luckily, we're about to start the medical Y2K and they should post impressive earnings. Money McBags is likely going to buy back when shit settles down a bit. Right now low liquidity names scare him more than seemingly hot chicks with adam's apples.
Monday, May 24, 2010
5/24/10 Midafternoon Report: American xenophobes shout "I told you so!" as european fears send US markets tumbling
Stocks were mostly flat today like they had no gaussian curvature or had Heidi Montag's singing voice until they took a nosedive over the final 30 minutes of trading. Existing home sales in the US rose by 7.6% and bested analyst guesses thanks to the first time home buyers tax credit, foreclosure auctions, and promises by Sabrina Soto to intervene with buyers' real estate and show them where to properly lay their pipes. While home sales were up, prices also rose 4% with the median home price now $173k, or three times the cost of Detroit. Treasuries continued to gain in this uncertain market as investors sell out of their equity holdings and seek safety in bonds, even if those bonds are issued by a country whose debt is 2/3 of their GDP and a country who somehow thought naming a town Bumpass was a bright idea. In other US news, the financial services industry is still trying to figure out how they will be affected by the financial reform bill which was recently passed by the Senate thanks to a collective dose of extracorporeal shock wave lithotripsy. Many analysts think the bill will reduce profits but leave industry size and power intact, which is basically like castrating Lexington Steele. While profits could be cut by 20%, financial service companies will no doubt find new ways to exploit loopholes and the cornholes of average workers in order to extract maximum profits for doing nothing other than hitting buttons and passing paper. Fear not though, Money McBags has a solution for America's impending debt problem that doesn't involve Faye Reagan offering to service said debt. In an auction this weekend, the first US silver dollar which was minted in 1794 sold for $7.5MM. So all we need Bernanke to do is just mint a fuckload more silver dollars and fudge the dates on them. Problem solved
In international news, the Bank of Spain bailed out a regional bank named Cajasur which of course is Spanish for "We suck at lending." The bank is apparently largely controlled by the Catholic church whose strategy was to make up for losses by turning water into wine, unfortunately, they were less successful at that than Martin Luther was at keeping his complaints succinct (seriously, 95 fucking theses? I mean we know the benches were too hard and chapped your ass cheeks, but couldn't you have left that one out and just made it 94?). This marks the second time since 2009 that a regional bank has been bailed out by Spain and the also the second time since 2009 the Bank of Spain has put in longer than a two hour work day. In other international news, Britain announced 6B euro in spending cuts. They hope these cuts work out better than their spending cuts of 1932 which took dental care off of public health plans. Among the cuts in the legislation are tighter restrictions on first class travel by public employees, advertising cuts for public projects, and less material to be used for the uniforms of the national soccer team.
In stock news, C was upgraded by Goldman Sachs to buy, most likely due to a typo or Goldman trying to pump C shares so GS's majority partner, the US government, can dump them. C remains more full of shit than someone with Prader-Willi Syndrome and no anus. The company is too big not to fail and has seen a talent drain similar to the third season of Flavor of Love. Goldman analysts were busy today though as they also raised Sprint to a buy sending the stock up nearly 10%. The reason for the upgrade was a potential lower churn as Sprint has likely already lost every customer they are going to lose. Also, savings and loans banks reported their highest profit since 2007 when they were actively taking careless risks by lending money to people who couldn't afford to pay for haircuts, much less pay loans back. Of course not even Thrift banks can screw up getting free money and lending it for more than free with the government ready to bail them out should anything go wrong (well, that is all Thrift banks except for maybe IndyMac). Thus record profits aren't really anything to applaud as it is like applauding a hefty stripper in a Reno gentleman's club for convincing a patron to pay for a lap dance (and for those of you who have never been to a Reno strip club, they're all fucking hefty).
In small cap news, JOEZ was somehow up 8% despite small cap stocks being tossed off like a 21 year old virgin's wanker while guess 1629's NSFW muff. Money McBags broke JOEZ down after their last Q and thinks they could earn between $.10 and $.15 per share in 2011 whic means the stock is now trading at 13x to 20x that but the concern is obviously that with Europe going to 0, people may not have money to spend and thus JOEZ's growth may slow. While their jeans sales aren't directly related to Europe, the global economy is and the last time Money McBags checked, the US was part of the global economy. Given the current market fear and dislocation, Money McBags has no interest in stepping in to JOEZ here, even if he'd be stepping in to the overpriced and stylish Outsider, but he is keeping abreast of the stock (though he wishes he were keeping stock of Brooklyn Decker's breasts instead). In other small cap news, WGO continues their drop to $7.50 as high beta shit companies that rose for no reason are now becoming less in vogue than banana hammocks and Keynesian economics. Money McBags has said this before but WGO is not going to make money this year and next year will be lucky to earn $.50 per share much less $1.20 and it is trading at 10x $1.20. As long as the market continues to sink like all of Money McBags' hopes and dreams, WGO should be more than a big short (as opposed to these small shorts). Finally, Money McBags dumped his DFZ today. He loves the company and thinks they earn around $1.05 pretty easily next fiscal year with an accretive acquisition on the way. That said, the stock is less liquid than a hefty corn shit and with the market structure broken, Money McBags doesn't want to get caught holding anything with no way to get out. So he took his 25% profit and went home.
In international news, the Bank of Spain bailed out a regional bank named Cajasur which of course is Spanish for "We suck at lending." The bank is apparently largely controlled by the Catholic church whose strategy was to make up for losses by turning water into wine, unfortunately, they were less successful at that than Martin Luther was at keeping his complaints succinct (seriously, 95 fucking theses? I mean we know the benches were too hard and chapped your ass cheeks, but couldn't you have left that one out and just made it 94?). This marks the second time since 2009 that a regional bank has been bailed out by Spain and the also the second time since 2009 the Bank of Spain has put in longer than a two hour work day. In other international news, Britain announced 6B euro in spending cuts. They hope these cuts work out better than their spending cuts of 1932 which took dental care off of public health plans. Among the cuts in the legislation are tighter restrictions on first class travel by public employees, advertising cuts for public projects, and less material to be used for the uniforms of the national soccer team.
In stock news, C was upgraded by Goldman Sachs to buy, most likely due to a typo or Goldman trying to pump C shares so GS's majority partner, the US government, can dump them. C remains more full of shit than someone with Prader-Willi Syndrome and no anus. The company is too big not to fail and has seen a talent drain similar to the third season of Flavor of Love. Goldman analysts were busy today though as they also raised Sprint to a buy sending the stock up nearly 10%. The reason for the upgrade was a potential lower churn as Sprint has likely already lost every customer they are going to lose. Also, savings and loans banks reported their highest profit since 2007 when they were actively taking careless risks by lending money to people who couldn't afford to pay for haircuts, much less pay loans back. Of course not even Thrift banks can screw up getting free money and lending it for more than free with the government ready to bail them out should anything go wrong (well, that is all Thrift banks except for maybe IndyMac). Thus record profits aren't really anything to applaud as it is like applauding a hefty stripper in a Reno gentleman's club for convincing a patron to pay for a lap dance (and for those of you who have never been to a Reno strip club, they're all fucking hefty).
In small cap news, JOEZ was somehow up 8% despite small cap stocks being tossed off like a 21 year old virgin's wanker while guess 1629's NSFW muff. Money McBags broke JOEZ down after their last Q and thinks they could earn between $.10 and $.15 per share in 2011 whic means the stock is now trading at 13x to 20x that but the concern is obviously that with Europe going to 0, people may not have money to spend and thus JOEZ's growth may slow. While their jeans sales aren't directly related to Europe, the global economy is and the last time Money McBags checked, the US was part of the global economy. Given the current market fear and dislocation, Money McBags has no interest in stepping in to JOEZ here, even if he'd be stepping in to the overpriced and stylish Outsider, but he is keeping abreast of the stock (though he wishes he were keeping stock of Brooklyn Decker's breasts instead). In other small cap news, WGO continues their drop to $7.50 as high beta shit companies that rose for no reason are now becoming less in vogue than banana hammocks and Keynesian economics. Money McBags has said this before but WGO is not going to make money this year and next year will be lucky to earn $.50 per share much less $1.20 and it is trading at 10x $1.20. As long as the market continues to sink like all of Money McBags' hopes and dreams, WGO should be more than a big short (as opposed to these small shorts). Finally, Money McBags dumped his DFZ today. He loves the company and thinks they earn around $1.05 pretty easily next fiscal year with an accretive acquisition on the way. That said, the stock is less liquid than a hefty corn shit and with the market structure broken, Money McBags doesn't want to get caught holding anything with no way to get out. So he took his 25% profit and went home.
Wednesday, May 12, 2010
5/12/10 Midevening Report: Gold hits record high causing a run on Flavor Flav's teeth
The markets were on fucking fire today as investors shook off the historic drop last Thursday, apparently confident that the SEC looking in to the causes of the sell off will yield answers other than the current ones whch include: "Beats me," "How the fuck should I know," "and hey look, it's Enrico Pallazzo!" The head of the SEC, Mary Schapiro, who in her short time leading the never distinguished agency has already instituted sweeping reform including such things as following up on leads, proactively going after market manipulators, and clamping down on tranny porn at the office, has called last week's market failure “profoundly disappointing and troubling.” She then added, "I haven't been this disappointed with anything since Meaghan Chung worked at the SEC or since I bought a slap chop." Luckily regulators are getting closer to finding out what was wrong with the market by ruling out several potential causes such as erroneous fat finger trades (known here on WGP as Portia De Rossis), unusual trading in P&G stock, hackers, terrorist activity, and Noriel Roubini shouting "Beetle Juice" three times quickly. The SEC has sent out subpoenas to further look into this matter, though they have not said to whom they have sent them, but Mary Schapiro was seen asking Goldman's CEO if his first name is spelled with one "L" or two. While equities are bouncing back, it is still showering gold in the markets as gold has hit an all-time high which means Mt. T's neck is now the richest person in America (and he pities the fool who told him all that jewelry was silly). The fact that investors are rushing in to gold is not a good sign for the markets as it signals little faith in currencies and a fear that escalating debt will continue to cause gevernments to run their printing presses more rapidly than drunk Hollywood wannabes run through Paris Hilton's panties. Money McBags remains very afraid.
Helping drive the markets up today is that Spain has announced an austerity plan that will involve cutting wages of government employees, reducing public investment spend, and increasing the use of home grown green technologies such as spanish fly. There is real fear that workers may strike throughout the countrty, but economists are fairly certain strikes won't come to fruition because strikes would cut in to workers' daily siestas. In addition to Spain making like they are serious about their budget, in much the same way that James McGreevey made like he was serious about Dina Matos, Portugal sold the fuck out of some bonds. Portugal raised 1B euro (though the euro isn't worth what it used to be) which is a good sign for the markets, though the fact that they need to raise another ~20B by the end of the year is a sign worse than waking up pantsless in a West Hollywood alley with a sore rear end and rainbow colored socks. Joining in on all of the debt lip service in Europe (and Money McBags wishes Faye Reagan would give his growing debt some lip service), is Britain who is instituting budget cuts as unemploymnet spikes to its highest level in 16 years. The new fiscal policies could include a tax on banks, black jeans, and Lucy Pinder downloads. Also, data came out today showing GDP in Europe was up modestly in Q1, growing .2%, or as it's better known as: a rounding error.
In the US, markets rocketed up thanks to positive forecasts from tech companies who said they expect it to be sunny with a chance of silicon. Tech giants IBM and INTC both gave positive outlooks today with IBM saying they expect to earn at least $20 per share by 2015 which is double their current business and INTC's CEO saying he expects a double digit percent rise in revenues and earnings. Additionally, MSFT was up today after they said they will offer Microsoft Office free online so the whole world can spend their days dicking around with PowerPoint for no charge. Wow. Technology hasn't received news this good since Number 5 was found to be alive. Also, the US trade deficit widened to a 15 month high as exports were up 3.2% and imports were up 3.1% For March, the rise in exports reflected increased sales of American farm products, a wide range of heavy machinery, and dollars. The rise in imports was driven by a 26% jump in crude oil shipments (though not nearly as crude as Dice Clay CD shipments).
In small cap stocks, everything rode up like a hand on Alexis Texas' ample thighs. CRUS, TMRK, and KITD continue to rally even though Money McBags ditched them for liquidity reasons last week. Money McBags did buy back some KITD today in the $12.90s in anticipation of a good earnings call on Monday. If the market structure is healthy, KITD remains a high upside company. Also, QCOR is holding a conference call this afternoon to discuss the FDA panel's ruling on Acthar last week where the drug was found to be both less filling and taste great by a panel of experts. The FDA panel voted 22-1 in favor of Acthar's efficacy in treating IS but there was some concern over how manageable and reversible the complications were. Money McBags is sure QCOR will delve into all of this this afternoon, but on the surface it seems like very positive news since it points to the FDA putting IS on label for Acthar and thus allowing QCOR to market to IS doctors, something they have been unable to do despite being the favored IS treatment. Money McBags promised some analysis today and he has FHCO's Q on his to do list (though it is much behind Alice Eve and Ashley on his to do list), but time ran short today so tomorrow he will try to hit you up with some micro to go with the macro.
Helping drive the markets up today is that Spain has announced an austerity plan that will involve cutting wages of government employees, reducing public investment spend, and increasing the use of home grown green technologies such as spanish fly. There is real fear that workers may strike throughout the countrty, but economists are fairly certain strikes won't come to fruition because strikes would cut in to workers' daily siestas. In addition to Spain making like they are serious about their budget, in much the same way that James McGreevey made like he was serious about Dina Matos, Portugal sold the fuck out of some bonds. Portugal raised 1B euro (though the euro isn't worth what it used to be) which is a good sign for the markets, though the fact that they need to raise another ~20B by the end of the year is a sign worse than waking up pantsless in a West Hollywood alley with a sore rear end and rainbow colored socks. Joining in on all of the debt lip service in Europe (and Money McBags wishes Faye Reagan would give his growing debt some lip service), is Britain who is instituting budget cuts as unemploymnet spikes to its highest level in 16 years. The new fiscal policies could include a tax on banks, black jeans, and Lucy Pinder downloads. Also, data came out today showing GDP in Europe was up modestly in Q1, growing .2%, or as it's better known as: a rounding error.
In the US, markets rocketed up thanks to positive forecasts from tech companies who said they expect it to be sunny with a chance of silicon. Tech giants IBM and INTC both gave positive outlooks today with IBM saying they expect to earn at least $20 per share by 2015 which is double their current business and INTC's CEO saying he expects a double digit percent rise in revenues and earnings. Additionally, MSFT was up today after they said they will offer Microsoft Office free online so the whole world can spend their days dicking around with PowerPoint for no charge. Wow. Technology hasn't received news this good since Number 5 was found to be alive. Also, the US trade deficit widened to a 15 month high as exports were up 3.2% and imports were up 3.1% For March, the rise in exports reflected increased sales of American farm products, a wide range of heavy machinery, and dollars. The rise in imports was driven by a 26% jump in crude oil shipments (though not nearly as crude as Dice Clay CD shipments).
In small cap stocks, everything rode up like a hand on Alexis Texas' ample thighs. CRUS, TMRK, and KITD continue to rally even though Money McBags ditched them for liquidity reasons last week. Money McBags did buy back some KITD today in the $12.90s in anticipation of a good earnings call on Monday. If the market structure is healthy, KITD remains a high upside company. Also, QCOR is holding a conference call this afternoon to discuss the FDA panel's ruling on Acthar last week where the drug was found to be both less filling and taste great by a panel of experts. The FDA panel voted 22-1 in favor of Acthar's efficacy in treating IS but there was some concern over how manageable and reversible the complications were. Money McBags is sure QCOR will delve into all of this this afternoon, but on the surface it seems like very positive news since it points to the FDA putting IS on label for Acthar and thus allowing QCOR to market to IS doctors, something they have been unable to do despite being the favored IS treatment. Money McBags promised some analysis today and he has FHCO's Q on his to do list (though it is much behind Alice Eve and Ashley on his to do list), but time ran short today so tomorrow he will try to hit you up with some micro to go with the macro.
Tuesday, May 4, 2010
5/4/10 Midafternoon Report: Monty Python to rewrite script as somebody expects the Spanish Inquisition
Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrr. The market is trading down as if Europe is going to go bankrupt like John Edward's morals or like investors think it will give them AIDS (which means Magic Johnson is happily buying today since he can't be infected again). The news continues to be fears that even with austerity measures and a bailout, Greece is going to be more fucked than Custer at the Battle of Little Bighorn or Houston after the Houston 620. As a result, the dollar is at its one year high against the euro, though to be fair, part of that high is because 90% of dollars have traces of cocaine on them. Adding fear to Greece's impending doom is worry that the debt contagion is spreading to the other crappy European countries about which no one cares (you hear that Liechtenstein with your alps, tax haven, and policy of neutrality?). Spain is once again worrying the markets as Spanish banks are proving to be weaker than the force carried by W and Z bosons or Tiger Wood's "sexual addiction" excuse. Apparently two banks in Northern Spain were supposed to merge but that is now some sort of power struggle to see who gets to be in charge of the crappy loans which sounds a bit like Dustin Hoffman and Warren Beatty arguing over who gets the marketing rights to Ishtar. Along with bank issues, the country's current unemployment rate is over 20% and considering they have like a 15 hour work week, that is fucking shocking. Spanish Prime Minister Jose Luis Rodriguez Gonzalez Ramirez Guerrero Zapatero is shocked by the speculation that his country may be facing worse fiscal problems and claimed his country has “strong solvency” and the possibilty of needing a bailout is “complete madness” before he asked reporters if they'd like to buy an unfinished church and promised he'd make them a deal, even throwing in a Shake Weight for free. The market is scared today with Europe's debt crisis pulling a Coleman Silk and spooking investors but we were due for some consolidation so as long as you hold names you are comfortable with, don't panic.
In US macro news, pending home sales rose 5.3% which beat guesses and reached a 5 month high. As always, this increase was driven by tax breaks for new home buyers and cardboard boxes now being included in reported home sales numbers. Also, factory orders jumped 1.3% in March and were up 3.1% when excluding transportation orders which is the biggest surge in 5 years since the great home redecoration bubble of 2005. The US macro news continues to be encouraging but we still need to see unemployment decline until we will start feeling giddier than Amanda Carrier's bowflex.
In stock news, everything is down so this could be a buying opportunity for real companies. Unfortunately, SIRI isn't one of them despite putting up a quarter where they actually earned a $.01 per share profit. SIRI's business model is more flawed than Amy Winehouse's face or supply side economics. With the prevalence of iPods, podcasts, internet radio, and Brooklyn Decker (not clear what Brooklyn Decker has to do with this, but she is hot), there is absolutely no reason to pay for radio unless you are a fan of the great Howard Stern and when Stern retires at the end of the year, Sirius will be deader than Larry Craig's political career. Money McBags would rather be subject to 24 hours of Celine Dion's music while watching re-runs of Friends and having his anus waxed than go long SIRI. In other news, MRK and PFE both had good quarters as untemployed people still need to stay medicated to stave off depression, anxiety attacks, and the stench from Paris Hilton's vagina.
In small cap news, Money McBags is getting absolutely obliterated like Alf Landon in the 1936 election (perhaps he shouldn't have eaten all of those cats) or Carmella Bing in Sodom 4. CRUS is getting pounded, though it has run up so much that momentum investors are likely just taking profits. This is true of most of Money McBags' names but he is holding steady as he believes in their stories and they are not overvalued (except for maybe VMW which is a bit overvalued, but whatever). Yesterday Money McBags told all of you to watch NTRI's Q last night and they are up 20%+ after putting up moderately better numbers than the street was expecting yet giving what Money McBags thinks is pretty good guidance. For the Q, NTRI earned $.15 per share on revenue of $159MM of revenue but they had $8MM of potential one-time marketing expenses so absent those, they would have earned closer to $.28 per share. While revenue was basically flat with last year, new customers were up 11% and new customer revenue was up 14% due to a mix shift back to more expensive products. New customers basically drive this business as they help with reactivation as recency of dropping out plays a big role in getting people to rejoin plus the weak new customer additions from the past two quarters have hurt their regular program revenues. The bad news was that their Walmart/Walgreen's/Sam's club retail promotions bombed worse than Michael Richards on Showtime at the Apollo. The roll out of those programs cost them $3MM in marketing expense which won't be repeated again and was part of the $8MM excess marketing spend. Of course that other $5MM came from higher ad rates so it's not clear how much of those are really temporary vs. a shift in demand for ads and thus persistently higher rates. The company guided to $1.02-$1.12 eps for the year and $.33-$.36 eps for next Q with moderate topline growth so they are banking on marketing spend going back down to ~29% of sales while their gross margin and op ex improvements maintaining. They are trading at ~20x that with their 20% run up today and are still pretty cheap on an EBITDA basis. They earned ~$70MM EBITDA last year but with their guidance they should slightly exceed that so call it $75MM. With $90MM cash and no debt, they now have an EV of $600MM and thus are <9x EV/EBITDA on 2010 earnings. That's about inline with peers but pretty cheap for their cash flow business model. The stock is still 33% below its high from the beginning of the year which means they have 50% more to go to get back to where the market thought they should be valued if growth was to come back. The point is, strong growth isn't quite here yet but they are starting to get trickling sequential growth and adding that to operating improvements gives you a stock with the potential that is now reasonably priced for a static environment. But the thing is, we know there are a ton of fat people in this country so programs like this are always going to be in demand until society stops shunning bulimia. NTRI's diabetic targeted product is continuing to grow and apparently hiring the once delicious Angie Everhart has spiked up sales to their women's segment. Money McBags is going to let the shorts cover today but may be buying tomorrow when this thing settles. There is plenty of room to move up while downside seems limited, that said, the stock is near fairly valued if you think their weight loss products will only have moderate growth.
In US macro news, pending home sales rose 5.3% which beat guesses and reached a 5 month high. As always, this increase was driven by tax breaks for new home buyers and cardboard boxes now being included in reported home sales numbers. Also, factory orders jumped 1.3% in March and were up 3.1% when excluding transportation orders which is the biggest surge in 5 years since the great home redecoration bubble of 2005. The US macro news continues to be encouraging but we still need to see unemployment decline until we will start feeling giddier than Amanda Carrier's bowflex.
In stock news, everything is down so this could be a buying opportunity for real companies. Unfortunately, SIRI isn't one of them despite putting up a quarter where they actually earned a $.01 per share profit. SIRI's business model is more flawed than Amy Winehouse's face or supply side economics. With the prevalence of iPods, podcasts, internet radio, and Brooklyn Decker (not clear what Brooklyn Decker has to do with this, but she is hot), there is absolutely no reason to pay for radio unless you are a fan of the great Howard Stern and when Stern retires at the end of the year, Sirius will be deader than Larry Craig's political career. Money McBags would rather be subject to 24 hours of Celine Dion's music while watching re-runs of Friends and having his anus waxed than go long SIRI. In other news, MRK and PFE both had good quarters as untemployed people still need to stay medicated to stave off depression, anxiety attacks, and the stench from Paris Hilton's vagina.
In small cap news, Money McBags is getting absolutely obliterated like Alf Landon in the 1936 election (perhaps he shouldn't have eaten all of those cats) or Carmella Bing in Sodom 4. CRUS is getting pounded, though it has run up so much that momentum investors are likely just taking profits. This is true of most of Money McBags' names but he is holding steady as he believes in their stories and they are not overvalued (except for maybe VMW which is a bit overvalued, but whatever). Yesterday Money McBags told all of you to watch NTRI's Q last night and they are up 20%+ after putting up moderately better numbers than the street was expecting yet giving what Money McBags thinks is pretty good guidance. For the Q, NTRI earned $.15 per share on revenue of $159MM of revenue but they had $8MM of potential one-time marketing expenses so absent those, they would have earned closer to $.28 per share. While revenue was basically flat with last year, new customers were up 11% and new customer revenue was up 14% due to a mix shift back to more expensive products. New customers basically drive this business as they help with reactivation as recency of dropping out plays a big role in getting people to rejoin plus the weak new customer additions from the past two quarters have hurt their regular program revenues. The bad news was that their Walmart/Walgreen's/Sam's club retail promotions bombed worse than Michael Richards on Showtime at the Apollo. The roll out of those programs cost them $3MM in marketing expense which won't be repeated again and was part of the $8MM excess marketing spend. Of course that other $5MM came from higher ad rates so it's not clear how much of those are really temporary vs. a shift in demand for ads and thus persistently higher rates. The company guided to $1.02-$1.12 eps for the year and $.33-$.36 eps for next Q with moderate topline growth so they are banking on marketing spend going back down to ~29% of sales while their gross margin and op ex improvements maintaining. They are trading at ~20x that with their 20% run up today and are still pretty cheap on an EBITDA basis. They earned ~$70MM EBITDA last year but with their guidance they should slightly exceed that so call it $75MM. With $90MM cash and no debt, they now have an EV of $600MM and thus are <9x EV/EBITDA on 2010 earnings. That's about inline with peers but pretty cheap for their cash flow business model. The stock is still 33% below its high from the beginning of the year which means they have 50% more to go to get back to where the market thought they should be valued if growth was to come back. The point is, strong growth isn't quite here yet but they are starting to get trickling sequential growth and adding that to operating improvements gives you a stock with the potential that is now reasonably priced for a static environment. But the thing is, we know there are a ton of fat people in this country so programs like this are always going to be in demand until society stops shunning bulimia. NTRI's diabetic targeted product is continuing to grow and apparently hiring the once delicious Angie Everhart has spiked up sales to their women's segment. Money McBags is going to let the shorts cover today but may be buying tomorrow when this thing settles. There is plenty of room to move up while downside seems limited, that said, the stock is near fairly valued if you think their weight loss products will only have moderate growth.
Wednesday, April 28, 2010
4/28/10 Midafternoon Report: The debt claims in Spain fall mainly down the drain
Same shit, different day. The markets continue to bounce around on news of Europe's impending doom, though this time not by the Daleks or the smell emanating from Posh Spice's girl power, but rather from bankruptcy. While Angela Merkel continues to tease Europe's proverbial cock with her low cut dresses and constant pledging of support to Greece only to quickly pull that support back like Lucy pulling back a football when Charlie Brown is about to kick it, the US vigorously debates financial reform (only whatever the exact opposite of vigorously is). Unfortunately Senators accomplished nothing in their questioning of Goldman Sachs yesterday as Lloyd Blankfein, or his doppelganger, answered every question asked to him by simply squawking "inconceivable." When Senator Carl Levin responded "I don't think that word means what you think," Blankfein pointed to the clock behind the Senators and quickly downed a vial of iocane powder while they weren't looking thus ending the day of questioning. With the drama out of the way, Democrats and Republicans can now get together and argue the merits of real financial reform and agree to sweeping legislation that will correct the wild west of Wall Street where incentives to cheat the system are more perverse than a Vincent Gallo film. Oh wait, politicians can't even agree to start the debate as they are too busy trying to keep their egos from running in to the common sense portion of their brains. At least the interests of the American people are at the forefront of all of this, and yes that was sarcasm.
Anyway, macro data was light today with markets anticipating the Fed notes in the afternoon (and as an aside, Money McBags was privy to one of those notes before it was released and it read: "Janet, when you said you "liked me" did you mean you "like liked me" or just "liked" me. Circle one. Bennie B."). The only economic data is that mortgage applications fell, though that was driven by a lack of refinancing as purchase applications were up 9% with 50% of that gowth coming from people trying to get the $8k government tax credit before it runs out. These are just more signs that we are skidding along the bottom (though if it were Alexis Texas' bottom, Money McBags would happily enjoy the skidding) and the question remains how long will it take for a real recovery to occur and will Europe going bankrupt deter further growth.
As for Europe, the Greek financial crisis rages on and has now become the second longest greek saga after the Iliad. However, there was a new wrinkle to the mess in Europe today and that was Spain being downgraded from entree to tapas by Standard and Poor's. Apparently the 16 hour work week and 24 hour siesta week has finally caught up with the Spanish. Now Money McBags isn't calling them lazy, but their top tourist attraction is a church that has been under construction since 1882. Seriously, when it's finished it better have one hell of a good organ and some pimped out confessionals as only Joan Rivers' face has had construction lasting that long. Anyway, Germany is back to bailing out Greece as expeditiously as possible, or until tomorrow, which ever comes first (and Money McBags bets whichever one is watching Helena Mattsson will come first) so the markets will continue to bounce around this uncertainty.
In stock news, Comcast's profit rose 12% as they grew their subscribers and apparently started charging for calls of complaints. Advertising revenue was up 24% mainly due to whatever company is behind Xfinity blasting the airwaves to get their new brand image out. The stock is up almost 2% today and analysts think they might be starting a meaningful growth trend but Money McBags thinks the cable/high speed internet model will be going the way of black and white TVs and civility longterm, so he couldn't care less. In other stocks news, DOW saw pricing grow 17% and volume grow 16% as they put up a quarter that was so good it seemed to be made out of bone china and not plastic. They earned $.43 per share easily besting analyst guesses of $.30 and saw strength pretty much across all business lines.
In small cap news, CRUS continues to run so hopefully you are all enjoying an extra visit to the champagne room on Money McBags, while BWLD and SMCI are going down faster than a hefty 18 year old girl in Tommy Lee's trailer. BWLD same store sales fell by ~3% across the board as Americans have decided that shitty chicken wings, crappy beer, and awful decor are no longer in vogue. BWLD now thinks they will be challenged to meet their full year targets and Money McBags would avoid this company like he avoids their crapy restaurants. SMCI is a different story. Money McBags has written about SMCI on When Genius Prevailed several times and after their last quarter remarked that they were likely reaching the high end of their valuation. Of course SMCI ran up about 30% since then so good for you if you owned it but after today's ugly guidance, they are almost back down to where they were. The company actually just put up a decent fiscal Q3, beating top line street guesses with 87% y/y revenue growth and coming in line at $.21 eps. There is a lot to like about that like, maybe not as much to like as Kate Hudson's thong, but it was good nonetheless. The problem is that their guidance for next Q was a bit short on the bottom line with guidance for $.20 to $.23 eps and analyst guesses at $.24. So guidance is for sequential topline growth, but a potential flat to down bottom line as margins appear to be coming back down which is usually a sign of increased price competition. Money McBags has not had a chance to listen to their call, but since the CEO's english is about as good as Ben Roethlisberger's dating advice, Money McBags is going to wait for the transcript. That said, the company has a decent balance sheet with $73MM in cash and no debt even though they had negative operating cash flow as their inventories and A/R have spiked (with their topline rapidly growing, that is mostly explainable). The comany is trading at ~9x this year's EV/EBITDA and depending on your forecast, ~7x to 9x next year's EBITDA. That said, it's not clear what growth is going to be for next year as this year featured both a bounce back from the dwindling economy and positive momentum with INTC's launch of the nehalem chip. Analyst estimates for fiscal 2011 are ~$1.20 so if you believe those a $14 price isn't unreasonable for a cyclical company at the peak or moving towards the peak of its cycle. That said, we may already be at peak earnings for SMCI as they rely to some degree on new chip launches and with nehalem already out, Money McBags is unaware of the next chip release. The point is, this is a well run company with a real competitive advantage in that they are able to nimbly meet customer demand and get in early in the cycle, but that early cycle may be over for now. Their CEO still runs it like a small firm which is good in that they have a singular focus, but bad in that he probably needs to step back a bit for it to continue to grow. Either way, Money McBags doesn't have a great feel for what next year will look like for SMCI and thinks the price is probably pretty fair. They've been earning ~.20 per quarter so in a no growth scenario, annualize that to $.80, throw a 12x to 15x multiple on it and you get a $10 to $12 stock which is probably the low end of where SMCI should trade. If they can continue to grow, this is a good entry point so the real question you all should try to figure out is what the fuck is going to drive sales for SMCI next year because if you think they can continue to grow, the stock is reaching another good entry point, though not quite as good of an entry point as Megan Fox's mouth. Money McBags would never short this company, but without more details it is too early for him to go long.
Anyway, macro data was light today with markets anticipating the Fed notes in the afternoon (and as an aside, Money McBags was privy to one of those notes before it was released and it read: "Janet, when you said you "liked me" did you mean you "like liked me" or just "liked" me. Circle one. Bennie B."). The only economic data is that mortgage applications fell, though that was driven by a lack of refinancing as purchase applications were up 9% with 50% of that gowth coming from people trying to get the $8k government tax credit before it runs out. These are just more signs that we are skidding along the bottom (though if it were Alexis Texas' bottom, Money McBags would happily enjoy the skidding) and the question remains how long will it take for a real recovery to occur and will Europe going bankrupt deter further growth.
As for Europe, the Greek financial crisis rages on and has now become the second longest greek saga after the Iliad. However, there was a new wrinkle to the mess in Europe today and that was Spain being downgraded from entree to tapas by Standard and Poor's. Apparently the 16 hour work week and 24 hour siesta week has finally caught up with the Spanish. Now Money McBags isn't calling them lazy, but their top tourist attraction is a church that has been under construction since 1882. Seriously, when it's finished it better have one hell of a good organ and some pimped out confessionals as only Joan Rivers' face has had construction lasting that long. Anyway, Germany is back to bailing out Greece as expeditiously as possible, or until tomorrow, which ever comes first (and Money McBags bets whichever one is watching Helena Mattsson will come first) so the markets will continue to bounce around this uncertainty.
In stock news, Comcast's profit rose 12% as they grew their subscribers and apparently started charging for calls of complaints. Advertising revenue was up 24% mainly due to whatever company is behind Xfinity blasting the airwaves to get their new brand image out. The stock is up almost 2% today and analysts think they might be starting a meaningful growth trend but Money McBags thinks the cable/high speed internet model will be going the way of black and white TVs and civility longterm, so he couldn't care less. In other stocks news, DOW saw pricing grow 17% and volume grow 16% as they put up a quarter that was so good it seemed to be made out of bone china and not plastic. They earned $.43 per share easily besting analyst guesses of $.30 and saw strength pretty much across all business lines.
In small cap news, CRUS continues to run so hopefully you are all enjoying an extra visit to the champagne room on Money McBags, while BWLD and SMCI are going down faster than a hefty 18 year old girl in Tommy Lee's trailer. BWLD same store sales fell by ~3% across the board as Americans have decided that shitty chicken wings, crappy beer, and awful decor are no longer in vogue. BWLD now thinks they will be challenged to meet their full year targets and Money McBags would avoid this company like he avoids their crapy restaurants. SMCI is a different story. Money McBags has written about SMCI on When Genius Prevailed several times and after their last quarter remarked that they were likely reaching the high end of their valuation. Of course SMCI ran up about 30% since then so good for you if you owned it but after today's ugly guidance, they are almost back down to where they were. The company actually just put up a decent fiscal Q3, beating top line street guesses with 87% y/y revenue growth and coming in line at $.21 eps. There is a lot to like about that like, maybe not as much to like as Kate Hudson's thong, but it was good nonetheless. The problem is that their guidance for next Q was a bit short on the bottom line with guidance for $.20 to $.23 eps and analyst guesses at $.24. So guidance is for sequential topline growth, but a potential flat to down bottom line as margins appear to be coming back down which is usually a sign of increased price competition. Money McBags has not had a chance to listen to their call, but since the CEO's english is about as good as Ben Roethlisberger's dating advice, Money McBags is going to wait for the transcript. That said, the company has a decent balance sheet with $73MM in cash and no debt even though they had negative operating cash flow as their inventories and A/R have spiked (with their topline rapidly growing, that is mostly explainable). The comany is trading at ~9x this year's EV/EBITDA and depending on your forecast, ~7x to 9x next year's EBITDA. That said, it's not clear what growth is going to be for next year as this year featured both a bounce back from the dwindling economy and positive momentum with INTC's launch of the nehalem chip. Analyst estimates for fiscal 2011 are ~$1.20 so if you believe those a $14 price isn't unreasonable for a cyclical company at the peak or moving towards the peak of its cycle. That said, we may already be at peak earnings for SMCI as they rely to some degree on new chip launches and with nehalem already out, Money McBags is unaware of the next chip release. The point is, this is a well run company with a real competitive advantage in that they are able to nimbly meet customer demand and get in early in the cycle, but that early cycle may be over for now. Their CEO still runs it like a small firm which is good in that they have a singular focus, but bad in that he probably needs to step back a bit for it to continue to grow. Either way, Money McBags doesn't have a great feel for what next year will look like for SMCI and thinks the price is probably pretty fair. They've been earning ~.20 per quarter so in a no growth scenario, annualize that to $.80, throw a 12x to 15x multiple on it and you get a $10 to $12 stock which is probably the low end of where SMCI should trade. If they can continue to grow, this is a good entry point so the real question you all should try to figure out is what the fuck is going to drive sales for SMCI next year because if you think they can continue to grow, the stock is reaching another good entry point, though not quite as good of an entry point as Megan Fox's mouth. Money McBags would never short this company, but without more details it is too early for him to go long.
Friday, February 5, 2010
2/5/2010 Midday Report: Unemployment rate drops as more jobs are lost, for next trick, unemployment rate to solve world peace by creating more wars
The market is down again today as Europe's sovereign debt problem keeps rearing it's ugly head like Mayim Bialik on the ABC Family network. The big news in the US markets is that the unemployment rate fell to a measly 9.7% (though if you include people who stopped looking for work and those working part time, it was 16.5%, but that is just a minor detail, like needing to keep your eyes on the road when you drive or not crossing the streams). The economy lost 20k jobs in January while totals for November were revised up by 60k (to 64k jobs created) and the totals for December were revised down by 65k (to 150k jobs lost, or as they say on the streets, a "fuckload"). While the revised numbers essentially cancel each other out, it does leave us wondering if any of these numbers are reliable at all, like the brakes on that shiny new Prius you just bought. Money McBags will wager Alan Geenspan's credibility and Eliot Spitzer's dignity (and since both of those are non-existent, it may be a bit of a sucker's bet) that the 20k number released today is not within 20k of the actual revised number to come out in two months when no one will really care. The point is, people are not working regardless of what made up number Hilda Solis and her No-Labor Department release.
In international news, potential sovereign debt defaults in Greece, Portugal, and Spain have investors questioning the viability of the Euro like people with working auditory canals question Heidi Montag's singing career. European Central Bank President Jean-Claude Trichet (or as he's known in investment circles, "deluded") has said there is nothing to worry about as the budget shortfall will be smaller than that of Japan and the US. He then called Haiti and said not to worry because their recent earthquake was smaller than the Chile earthquake in 1960, and later was heard telling NBC President Dick Ebersol not to worry because ad revenue is way overrated. With the debt of Greece, Spain, and Portugal all forecast to be near or above their GDPs by 2011, investors are questioning if/when the EU will bail them out. The good news is that the Greeks are trying their best to help out in all of this mess by going on a two day worker's strike, which means they will be working three more days than they usually do (though to be honest, a worker's strike to protest an economy in the shitter is like the state of Alabama burning books to protest their high illiteracy rates or Noise Free America blasting anything by the Black Eyed Peas to protest noise pollution).
In business news Toyota is apologizing for selling you a car that could kill you but reminding you that even if your brakes went out causing you to plummet to an early death, at least you would have cut down on your carbon footprint while you were alive by owning a Prius. Berkshire Hathaway is selling $8B of debt to finance their acquisition of BNI and outfit executives with their own conductor caps (of course those conductor caps will be made 100% from the shards of Giaocometti's "The Walking Man I"). Finally, AETNA missed on earnings as their medical costs grew 14% as a result of increased brain aneurysms for those who sat through an entire screening of Avatar (that joke was brought to you by the Jay Leno Appreciation Society, making comedy dull and unfunny one observation at a time).
In small cap news TSYS beat their quarterly esimates thanks to 15% revenue growth and 17% EBITDA growth to $10MM. For the year EBITDA was $50MM and 2010 guidance was for $80MM-$85MM EBITDA with revenue guidance for over 40% growth (though they are an acquisitive company so that is not all organic). The company is now trading at around 7x 2010 EV/EBITDA and continues to be in growth markets and consistently beats estimates. Of course it is down 5% today despite the solid Q and the good backlog because apparently people hate owning businesses that work. Some analysts are concerned about their long term net interest margins but the company is getting cheap enough for those concerns to be less worrisome than a back hair on Marissa Miller. Money McBags is not yet an owner of TSYS, as he is going to let the market creep down a bit before he gets his invesment on, but this company is worth all of you digging in and trying to get a better feel for their organic growth and competitive advantage in the location based software and military businesses.
Money McBags is off until Monday, so enjoy the Super Bowl.
In international news, potential sovereign debt defaults in Greece, Portugal, and Spain have investors questioning the viability of the Euro like people with working auditory canals question Heidi Montag's singing career. European Central Bank President Jean-Claude Trichet (or as he's known in investment circles, "deluded") has said there is nothing to worry about as the budget shortfall will be smaller than that of Japan and the US. He then called Haiti and said not to worry because their recent earthquake was smaller than the Chile earthquake in 1960, and later was heard telling NBC President Dick Ebersol not to worry because ad revenue is way overrated. With the debt of Greece, Spain, and Portugal all forecast to be near or above their GDPs by 2011, investors are questioning if/when the EU will bail them out. The good news is that the Greeks are trying their best to help out in all of this mess by going on a two day worker's strike, which means they will be working three more days than they usually do (though to be honest, a worker's strike to protest an economy in the shitter is like the state of Alabama burning books to protest their high illiteracy rates or Noise Free America blasting anything by the Black Eyed Peas to protest noise pollution).
In business news Toyota is apologizing for selling you a car that could kill you but reminding you that even if your brakes went out causing you to plummet to an early death, at least you would have cut down on your carbon footprint while you were alive by owning a Prius. Berkshire Hathaway is selling $8B of debt to finance their acquisition of BNI and outfit executives with their own conductor caps (of course those conductor caps will be made 100% from the shards of Giaocometti's "The Walking Man I"). Finally, AETNA missed on earnings as their medical costs grew 14% as a result of increased brain aneurysms for those who sat through an entire screening of Avatar (that joke was brought to you by the Jay Leno Appreciation Society, making comedy dull and unfunny one observation at a time).
In small cap news TSYS beat their quarterly esimates thanks to 15% revenue growth and 17% EBITDA growth to $10MM. For the year EBITDA was $50MM and 2010 guidance was for $80MM-$85MM EBITDA with revenue guidance for over 40% growth (though they are an acquisitive company so that is not all organic). The company is now trading at around 7x 2010 EV/EBITDA and continues to be in growth markets and consistently beats estimates. Of course it is down 5% today despite the solid Q and the good backlog because apparently people hate owning businesses that work. Some analysts are concerned about their long term net interest margins but the company is getting cheap enough for those concerns to be less worrisome than a back hair on Marissa Miller. Money McBags is not yet an owner of TSYS, as he is going to let the market creep down a bit before he gets his invesment on, but this company is worth all of you digging in and trying to get a better feel for their organic growth and competitive advantage in the location based software and military businesses.
Money McBags is off until Monday, so enjoy the Super Bowl.
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