7/13/10 Midafternoon Report: The market is AA-ok as Alcoa foils bears

The market was off to the races today as if it the races were going to feature Usain Bolt taking on Sara Jane Underwood in the 100 meter dash with the loser having to run a lap in the buff.  The big news of course was that Alcoa started off the earnings season by destroying analyst guesses of $.12 eps by earning a whopping $.13 per share in the last Q.  That's right, the fact that a whole extra penny (with rounding) is the difference between a down market and an up 2% market makes as much sense as the theory that gravity is an illusion or candwiches.

Making it even more ridiculous is that as ZeroHedge points out, just last month Bloomberg showed consensus analyst guesses of $.16 for AA's Q.  So with analysts lowering their guesses before the quarter, AA is now back to where it was when guesses were for $.16 so the would have been $.03 miss has been mitigated by strategic downgrades.  Brilliant stuff.  As the late great Kurt Vonnegut would say, "No damn cat, and no damn cradle."  Analysts are now quickly dropping their guesses on companies across the board because they only get paid when the market goes up and with unemployment benefits going away, they need to keep their jobs like Kathy Griffin needs to keep off of HDTV.  That said, AA did raise their guidance for aluminum consumption for the year from 10% to 12% and revenue was up 22% despite cratering aluminum prices as a result of demand slowing down and oversupply given that aluminum is the 3rd most prevalent element in the earth, behind only oxygen and whatever medal Mr. T wears around his neck.  That said, the declining prices and rising energy costs are hurting overall profitability but with foreclosures up, demand may surge as the recently homeless grab sheet aluminum to build shanty towns to be known to future generations as WhothefucklentthosepeopleallofthatmoneyVilles or for short Goldmanvilles.

In macro news today, the US trade gap widened to 4.8% or $42B, which is the largest since November 2008 and a gap wider than between the antenna on a new Apple iPhone or the gap between Paris Hilton's legs on a Sunday morning.  Not surprisingly, a trade gap is the exact opposite of what economists had guessed and thus once again proves that "economist" is not a real job, like rap music spell checker.  Imports were up 3% thanks to a 12% increase in imports from China which, as pointed out yesterday, was driven by people not having any money and thus only being able to afford the cheap shit made overseas.  US exports continued to see strength, which is a bit surprising given the weakness in the Euro last Q, as they were up 2.4% which was their best month since September 2008 when the US instituted buy one get one free Wednesdays for foreign countries.

And finally, the National Federation of Independent Business (known better as NFIB or "irrelevant") said optimism declined among small businesses by 3.2% in their monthly survey to which no one pays attention to anyway.  NFIB's chief economist William Dunkelberg (who is still smarting from his decision to leave his hosting gig at Small Business Idol to pursue other career opportunities) opined that: “Confidence is lacking and the news out of Washington is discouraging. Until this changes, don’t expect small businesses to start hiring.”  He then went and stole an ice cream cone from a little kid, told his wife she looked fat in those jeans, and ordered a ton of coal so he'll be prepared to adequately fill the stockings of everyone at the NFIB during Christmas time.

Internationally, Moody's cut Portugal's debt rating by two whole notches which means absolutely nothing to Money McBags as he cares what Moody's has to say about rating debt as much as he cares what Art Laffer has to say about tax policy,  Jeffrey Dahmer has to say about cuisine, or Mel Gibson has to say about anything.  Moody's dowgrade stems from Portugal's national debt having risen sharply relative to GDP as a result of stimulus measures and the 168 siesta hour work week.  Moody's also warned that weak growth would weigh on government finances for two or three more years while Portugal warned that weak analysis would weigh on Moody's finances for eternity.  European markets are up on this news as even they realize that Moody's is worse at their job than a eunuch sperm donor or Alan Greenspan.

In large cap stocks, just about everything was up as we move in to earnings season with INTC, C, BAC, and GOOG to report this week so hopefully analysts already lowered their guesses in order to keep the market moving.  One interesting stock to note is AAPL as the company is down after Consumer Reports said it will not recommend the new iPhone 4 due to reception glitches, and Steve Jobs simply being a dick.  In their defense, Apple maintains that any cellphone will lose reception if held a certain way, like in a toilet, at the bottom of Lechuguilla Cave, or up Candice Swanepoel's well chiseled buttocks (and Money McBags is volunteering to test that theory out) so there is really no big deal.  Plus, to fix the problem, AAPL claims all one needs to do is wrap some duct tape around the iPhone where the gap in the antenna is and who doesn't want a piece of metallic tape draped around their sleek and expensive gadget?  It would almost be like fixing a tear in the Mona Lisa by putting a SpongeBob Squarepants band aid over it.

In small cap news, LHCG was down ~6% today after competitor AMED announced a shitactular Q and dropped nearly 25%.  Money McBags broke LHCG down the other week after the SEC announced they were investigating AMED and AFAM for potential shadiness in how they were charging medicare for visits that may not ever have happened or visits that were unneeded.  Anyway, guesses for AMED were for quarterly earnings of $1.37 per share and today they said that earnings will be closer to $1.12 which makes it almost as big of a miss as the Edsel or Glitter.  Money McBags did not hear AMED's call but it is reported they said that their client base changed and they will need to reevaluate their structure and will hold off on full-year forecasts.  Now look, without further color Money McBags isn't sure how this will affect LHCG because he has no idea what AMED means by their "client base changing" because either they stopped treating sick people (which would seem a silly thing to do for a home fucking healthcare company) or they started treating fewer sick people and thus had fewer home visits (which is a more likely scenario, especially with the SEC all in their business about charging for too many medicare visits).  More concerning though is that shareholders have filed a suit against LHCG for an investigation from April into LHCG's reimbursement procedures, so fuck Money McBags on that one.

The industry makes sense longterm, the cost savings to insurance companies are too great, and home care is simply better, so it remains a good way to play the aging population trend but there is way too much fucking noise right now for an investor without access to industry insiders to get a leg up on the billing practices.  As a result, Money McBags would stay the fuck away from this sector even though a few days ago he said LHCG was an interesting longterm buy (and it still remains that way but Money McBags needs more information to be able to make a sensible decision about the SEC investigations).  Anyway, with all of this uncertainty, there are easier ways to make money (like TMRK which is a great takeout candidate and is getting a boost with MSFT's entry into cloud computing ) so keep watching LHCG but you probably want to avoid going long in the short term unless you have better contacts in the industry than Money McBags has.  In times of turmoil, money can be made, but to do so, one needs to be confident that they have all of the information, so do your work here carefully.

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.

5/3/10 Midafternoon Report: Consumer spending up as sales of moral hazard increase (though to be fair it does come in blue this season)

Stocks are off to the races again today and the good news is that the market is seemingly being ridden by Calvin Borel.  Sending the market up is that Greece is once again set to be bailed out, Warren Buffet was out defending Goldman Sachs, and people are spending more than they earn.  Hold on a second on that last one.  Now look, Money McBags is no historian (though he knows the difference between Dred Scott and Avy Scott, knows that neither tea nor pot was involved in the Teapot Dome scandal, and knows that the War of 1812 not only ended in 1815 and thus is a bit of a misnomer but also ushered in the "Era of Good Feelings" where bipartisanship was shunned and taint tickling Tuesdays swept the nation), but spending more than one earns is what got us in to this whole fucking recession.  Anyone remember the popular sport from the mid 2000s called flipping fucking houses?  Well it caused the economy to be flipped as people just borrowed the fuck out of shit because banks were able to package all of those crappy loans and sell them to yield hog investors who wanted those extra 10bps of interest income.  The point is, consumers not managing their personal balance sheets with eyes on the future (though if their eyes were on Katie Price, Money McBags can almost forgive them) is a recipe for fucking disaster which we just learned, oh I don't know, 24 months ago.  Ugh.  To highlight the shortsightedness of consumers, consumer spending was up today, but it grew twice as fast as incomes grew.  And if you do the math on that (and remember, math likes to be done in the reverse cowgirl position), that means savings declined, which again, is exactly what got us in to this mess.  American people apparently just like buying shit and then whining about it when they lose their jobs and can't afford to pay their too expensive mortgage or their maxed out credit card bills.  This is a nation of infants and if they don't figure it out soon, Money McBags is going to go door to door with Jeremy Grantham and the pinheaded Suze Orman and he and Jeremy will take turns buggering Ms. Orman and her inflated FICO until people understand having money saved for retirement is more important than buying a new Shake Weight.  Rant over.

In other macro news, manufacturing grew at its fastest pace since 2004 as the ISM's factory index rose to 60.4 which was inline with analyst guesses.  The growth was driven by new equipment orders and increased production of default notices.  Also new construction was up modestly, but the fact that it was up at all has Bulls giddier than Peter North's son on take your kid to work day.  What drove new construction was public construction which was up 2.3% and state and local government construction which was up 2.5% as new line dividers were constructed to keep the crowds at the unemployment office running smoothly.

Internationally, Greece is getting a 110B bailout in euros over a three year period, until tomorrow when Angela Merkel's cold feet and colder heart once again change her mind.   To get the bailout, Greece has to instill a 30B austerity plan, cut their debt, and promise to tell native born son Yanni to shut the fuck up.  Even with the bailout,  Greece's debt is estimated to rise to 140% of GDP in 2014 which is a whole lot of souvlaki they can't afford.  The bailout may be giving investors a day to breathe a bit easier but with the amount of debt Greece is going to have to repay and the cuts to their publc spending, the country is now facing real threats of deflation and the first potential revolt since Alexander Ypsilantis led the Filiki Eteria.

In the markets today, Warren Buffett was out defending Goldman because, well because he owns a fuckload of GS preferred so you know, he has to defend his fucking book.  Buffett defending Goldman is about as much of an endorsement as Michael Brown defending the hurricane Katrina response, Jerome Kerveil defending his trading, or Tara Reid defending plastic surgery.  So big fucking yawn there.  In other market news, United and Continental  announced a $3B merger.  The deal was actually consummated a month ago but was held up due to weather (feel free to steal that one Jay Leno).  And Apple annonuced they sold over 1MM iPads thanks to them coming installed with Diora Baird wallpaper.  Lastly, semiconductor sales were up 4.6% in March as PC and smartphone sales continue to rise and inventories climb back to normal levels.  Money McBags is longer the technology/smartphone trend than Lexington Steele is before a scene with the lovely Lisa Ann.

In small cap news, Money McBags bought TMRK close to the open today in the mid $7.30s.  He has talked about TMRK many times (starting on 1/4/10) and finally pulled the trigger for no particular reason and he has no idea why it is up so much today other than the fact that Money McBags is a market mover.  Money McBags is feeling better about TMRK after they raised $50MM last week which should give them enough growth capital and they are still trading at a discount to larger peers.  TMRK has a competitive advantage in that they have a lot of government business (~22% of revenue) and they are in a market growing 20% a year with some big players (Amazon, Google) who are clearly going to be looking for acquisition targets to consolidate the space.  TMRK is trading ~9x 2011 EV/EBITDA estimates but that is lower than where EQIX bought SDXC and not only that, but VMware who is the leading software developer in this space (and portfolio holding of Money McBags) has a nice sized investment in TMRK.  If VMware doesn't know this space better than 99.7% of the world, than Money McBags will eat a giant shit sandwich with extra diarrhea.  Now Money McBags doesn't expect this stock to rocket up any time soon as they are still going to have lumpy quarters and are still investing in building out data centers, but cloud computing growth is more real than Pam Anderson's tits (though perhaps that is a low bar) so TMRK should continue to be in a fragmented multi-year growth industry.  In other small cap news, NTRI reports tonight and Money McBags is very curious to see what happens to their advertising spend.  If you remember, two months ago Money McBags broke down NTRI's craptastic guidance which was so bad it caused investors to throw up for days and thus more effectively lose weight than using NTRI products.  The company is still trading ~7x EV/EBITDA which is pretty cheap for a solid cash generator and nice business model when they aren't fucking up their advertising strategy.  Money McBags has no idea what NTRI's Q is going to look like but it is worth paying attention to tonight because the stock should be more volatile tomorrow than Mike Tyson after missing a week of his medication and having some of his pigeons stolen.  This could be a good entry point (though still not as good of an entry point as Jessica Alba's derriere), so pay attention to earnings.

4/26/10 Midafternoon Report: Financial reform bill coming after Senators talk dirty to it

The markets were relatively flat today despite the financial sector reaching down for its cankles as the Senate prepares to probe the sectors' cavernous derivatives loophole.  Financial reform is coming, the only question is if it will be weak or really weak but until then financials should be a bit volatile with a downward bias.  While it is likely any Senate bill will be more toothless than Amy Winehouse after downing a box of pixie sticks, smoking a case Stallion cigarettes, and getting punched in the fucking mouth, the markets hate uncertainty like Ron Paul hates the Fed, Hemingway hates adjectives, and females hate giving blumpkins.  That said, the US Treasury is apparently going to start dumping their shares of C before C once again becomes too big and fails.  At current prices the government stands to make $11B which should be enough to finally get new drapes in the Lincoln Bedroom, something other than Natty Light in the White House fridge, and enough tech support to clean all of the SEC computers of porn.  C is trading down 4% on the news but is still above book value and still above zero so it's too early for Money McBags to buy.

Internationally, Greek bonds are still plunging lower than necklines at the AVN awards or on German Chancellor Angela Merkel at the Lolas.   Merkel is out shouting "nein" to the Greek bailout until Greece shows a "sustainable and credible" plan for fiscal responsibility as opposed to their current plan which involves stealing underwear and then somehow profiting.  Germany keeps hedging on their support for Greece and nothing German has been this indecisive since Aschenbach eyed little Tadzio for days on a beach in Venice.  But it's no longer just Greece that has the EU's panties all in a bunch as CDS in Portugal have hit record highs.  Portuguese Foreign Minister Luis Amado said "We are not in such a critical situation as Greece. We didn't cheat with our statistics" he then went on to say "that's right, we fucked up the old fashioned way, we earned it."  It looks like JFK's old Domino Theory in foreign policy may finally be coming to fruition but instead of the spread of communism, bankruptcy is spreading from one country to the next.  

In stock news Catepillar put up a nice quarter which would likely have sent noted lepidopterist Vladmir Nabokov into a tizzy.  Revenue fell but the company earned a profit and raised 2010 guidance as they were able to metamorphosize their operations to a leaner cost structure.  Guidance for 2010 was raised from $2.50 per share to $2.50 to $3.25 per share as the company cited rebounding mining and construction especially in China and Heidi Montag's pants.  Whirlpool also put up a ginormous quarter and is up 10%+ as the emerging middle classes in China and Latin America drove appliance sales.  The company earned $2.51 per share demolishing analyst guesses of $1.33 per share and they raised their full year guidance to 4% to 6% growth and eps to $8.00 to $8.50 from $6.50 to $7.00.  Interestingly, what helped drive sales in the US was people ordering refrigerators in order to use the boxes as shelters once their homes were foreclosed upon.  Finally GOOG is down today after some research showed their market share dropped in China and after they dropped Verizon as the provider of wireless access for their Nexus One phone.  GOOG is now dropping to Money McBags "add fucking more price" as the company is getting very cheap for an entity that is dominating the world like Rasputin dominated young Russian lasses in the early 1900s.  Money McBags is going to wait for the stock to settle but will likely be adding more in the next few days.

In small cap stocks, TMRK raised $50MM through 12% senior secured notes which is actually pretty big for the company.  Money McBags has talked about this stock quite a bit but has continued to hold out as he was pretty sure they were going to have to raise capital in the next year and wasn't sure what their plan was to do so.  Well now we know and the stock is up 4% on the news.  They are in a terrific growth area as cloud computing is as certain as death, taxes, and Heather Vandeven being hot.  TMRK is trading at ~9x 2011 EV/EBITDA and ~15x Money McBags' 2011 eps estimate so it's not wicked cheap but it is more reasonably priced than dignity in reality TV or a date with Jessica Pare.

4/21/10 Midday Report: You can not stop AAPL, you can only hope to contain them

The news today is earnings, earnings, earnings, and Sophie Turner.  The markets are inching up after a strong slate of mostly positive earnings reports (not so fast AT&T and GILD).  However, before we get to earnings which featured Apple taking other handset makers out to eat, getting them drunk, and then giving them a cleveland steamer as a reminder of their dominance, Greece is back in the news.  Investors are worried that Greece may take 45B euros in aid before actually agreeing on the terms which is very TARP-esque of them (one wonders if they are going to use Hank Paulson's preferred contractual device of a napkin to agree to country changing policies).  With terms of the aid more open than Joslyn James' anus right before Tiger Woods "sinks a putt," the risk premium on Greek bonds has soared to 512bps which is higher than anything in Greece has gone since Icarus let his ego get the best of him.  Concerns remain that Greece may not be able to pay the 8B euro coming due in a month and in a show of support, Greek workers are about to embark on their 3rd 24 hour strike since the crisis began which would be crippling if that weren't somehow still more hours than they typically work in a day.  Luckily for them, France is gearing up to loan Greece 6B to 8B euros as part of the aid package.  French economy minister Christine Lagard, who in 2009 was named Best Finance Minister in Eurozone by the Financial Times after a stunning rendition of "Mo Money Mo Problems" in the talent portion of the show, tried to calm the fears of a Euro meltdown by opining:  "I won’t say Portugal is next in line..." before adding "but I just saw Prime Minister Jose Socrates listing the Iberian Peninsula on Craigslist for "roses." Boooyah!!!  Can I get a Quelle Quelle?"

As for earnings, AAPL crushed their quarter with iPhone sales up 130% leading to a 90% increase in profit and a 49% increase in sales.  Apple earned $3.33 per share, well above analyst guesses of $2.45 and said they were "shocked" by how well the iPad was selling.  Holy fucking shit is it on.  Apparently Apple's app for taking over the world is a little too good as their products are selling faster than Adam Smith's invisible hand can fondle unwitting young ladies during New York's Fashion Week.  In other earnings news, Morgan Stanley traded the fuck out of some shit (and Money McBags apologizes for getting overly technical there) earning $1.03 per share after one-timers largely because of their sales and trading unit.  Book value is up to ~$28 per share and ROEs are creeping back up hitting 13%.  Like every other investment bank, revenues and profits were driven by fixed income traders who bought and sold shit we'll never know about, who we can't actually track to see what the fuck they are doing, and who are likely ignoring all but one SEC regulation (and that one of course is to not get high off their own supply).  The paper economy lives on, long live made up shit.  Also, MCD beat guesses by earning $1.03 per share after one-timers and Money McBags is an owner of this stock because there is huge brand equity for continued international expansion.  Operating margins were up 2.2% and same store sales were up 4.2% for the quarter and 5.2% in March driven by 4.2% growth in the US, 5.9% growth in Europe, and 7.9% growth on Mars.  MCD is not going to be a high flyer but it offers a nice yield for a franchise that should do well in a world becoming more globalized, even in a down economy.

In other earnings, BA beat numbers, YHOO had a nice bottom line (though not nearly as nice as Jessica Biel's bottom line) yet missed on revenues since they compete with something called GOOG, and AT&T had a good Q but is selling off as new subscribers were the lowest since 2004 during the bizarre and short lived rotary phone trend.  Also, VMWare put up a huge quarter and Money McBags did something he rarely does by buying the quarter of a ridiculously high priced stock.  Honestly, Money McBags hates buying things this overvalued more than he hates long walks on the beach, sentences that end with prepositions, and Jane Austen, but he believes in virtualization.  This not a fucking fad like Wacky Wall Walkers, YoYos, or the way way too short lived rainbow parties.  Revenue was up 35% to $634MM, Non-Gaap earnings were up 45% to $.32 per share, free cash flow was up 68% to $326MM, and overall cash on the balance sheet was a healthy $2.8B.  Guidance was for 30% 2010 revenue growth of $2.6B to $2.7B which means the company is currently trading at around 9x 2010 revenues but closer to 6.5x 2011 revenues ex. cash.  Yeah, it is a total bullshit metric and Money McBags crapped all over metrics like this yesterday when he advised that SFSF was too fucking expensive, but companies like VMWare often get purchased at multiples of revenue between 6x and 10x so we're still at the low end of 2011 potential revenue multiples.  It certainly isn't cheap and on a P/E basis it is trading somewhere between astronomical and Warren Buffet heart attack high, but they are a market leader in a space that is absolutely here to stay.  IT departments are cutting costs quick and deep, like Lexington Steele losing his virginity, and VMWare's virtualization software is at the forefront of this (or, to continue with the Lexington Steele analogy, the foreskin of this).  Money McBags believes in this sector and cloud computing almost as much as Burton Malkiel believes in efficient markets or as much as aspiring Hollywood actors believe in Scientology and it is why Money McBags will soon be buying TMRK (who by the way received a big investment from VMWare last year).  So yes, the stock is pricier than an Ashley Dupre blumpkin, but sometimes you have to pay up for quality.

In small cap news, a Money McBags favorite and his largest small cap holding KITD is bouncing back after a big block trade on them yesterday afternoon which sent them stumbling.  The stock is probably range bound to down until they announce a new acquisition or until their next quarterly call in a couple of months so there is no reason to panic and if you are are not an owner, buying any dip is certainly worthwhile.  Also, CRUS which Money McBags owns and has written about many times is getting some AAPL momentum today as they produce an iPhone audio chip and as said earlier, iPhone sales were ridonkulous.

2/9/10 Midday Report: Greece once again open for business, no longer a Euro school dropout

The market is up strongly this morning after EU Bank president Jean-Claude Trichet decided to leave Australia where he was attending the Reserve Bank of Australia’s 50th Anniversary Symposium which was a party likely as raucous as a staring contest between Bea Arthur and JD Salinger (mainly because they're both dead).  Even so, we are told things got a little out of control when the bankers let their toupees down and played a little game of "name your favorite currency" with Vietnam's Dong easily winning out even if it is not as big as the other currencies.  Trichet flew back to Europe where he was invited to a summit of European leaders called by the deligthfully named Herman Van Rompuy (and Money McBags is calling bullshit on this whole thing because no one is named Herman Van Rompuy).  This is leading to speculation that the EU has a plan to bail out Greece, and Portugal, and Spain, and maybe Italy, and then maybe even Freedonia (where time flies like an arrow and fruit flies like a banana).  As one analyst said: “The markets are smelling a deal for Greece, and for that reason, we’re seeing some stabilization."  Of course, that smell could actually be Greece and not a deal for Greece but Money McBags remains optimistic because as he has been saying all along, the Euro is not going away, it's just not.  Now it's unclear how the EU plans to deal with the struggling countries, whether it's a good old fasion bail out, some kind of debt guarantee, or a lifetime ban on Nia Vardalos movies, but help is on the way.

In US macro news, there's not a whole lot of new information.  Wholesale inventories unexpectedly dropped by .8% in December while sales rose .8%.  Both numbers were marginally below estimates yet close enough that the market let out a collective yawn.  Inventories bear watching though as we've made it through the obvious restocking and now we're at the point where they need to at least maintain their new level in order to signal new steady state or some real growth.

In stock news, KO had a blow out quarter as earnings rose 55% thanks to India and China who love them some sugary water.  Overall revenues were up by 5.4% even though they were down 4.5% in the US thanks to some people apparently giving a shit about not being fat.  Luckily, developing countries haven't yet reached the point where they have large middle classes whose teenage girls read People magaine and stress about weight from the caloric intake of soft drinks and thus KO benefitted from 19% growth in Latin America, 29% in China, and 20% in India.  Coke also annonuced they bought back $1.5B (known colloquially as a "shitload") of their own stock last year which was $500MM more than they committed.  Money McBags is an owner of KO for the simple reason that it has ginormous brand equity in developing countries and is a relatively cheap product that people can buy to feel like they are part of American/pop culture (kind of like Paris Hilton's vagina).   MCD, another longtime holding of Money McBags came out with their monthly sales numbers which featured a 2.9% rise in same store sales driven by a 4.3% increase overseas.  Sure, people were disappointed that US same store sales were down .7% but people were also disappointed that the Kim Kardashian sex tape was a bit grainy.  So as always, you can't please everyone (unless you are Blake Lively and are manning the free blumpkin and waffles booth at the local greeting center), but you can be happy with MCD's numbers and Money McBags owns them for the exact reason he owns KO.  They sell cheap shit with huge brand equity that developing countries love the fuck out of (and this will be the first sentence in When Genius Prevails' short and illustrious history that will end in a preposition).  Also, ERTS put up a terrible quarter as their attempt to take on the Grand Theft Auto franchise with Moral Theft: Vatican City failed to generate sales while damning them all to hell (or as it is more commonly known, the guest audience of The View).

In small cap news, two companies Money McBags follows reported today with TMRK putting up a marginal quarter with lackadaisical guidance and DFZ slipping it's quarter some ruphies and having their way with it like a young Charlie Sheen at the Viper Room.  DFZ has been a small holding of Money McBags for a few quarters because it has been cheaper than Valtrex at Lindsay Lohan's house in addition to being a well run company with growth prospects completely under the radar of investors because their business is more boring than a Jane Austen novel or watching two pieces of lint hump (and now that I think about it, watching lint hump may not be so boring afterall, so scratch that).  They are the market leader in slippers, yeah, you know, the things your significant other bought you that you never wear.  The point is that even though the market is small (about $300MM), they dominate it like Nipsey Russell dominated the 1970s Hollywood game show circuit.  They have 35% of the market and are the sole owner (pun intended) of the slipper business for a little company called Walmart.  DFZ continues to win business from smaller players as their supply chain and logistics management give them an advantage in winning business by giving buyers confidence in their ability to easily handle a relatively unimportant vertical.  Since turning the business around, they have had yearly EBITDA no worse than $12MM and had been trading at 6x that trough EBITDA even though prior to their announcement last night, they guided for slight growth.  In the quarter released last night, they earned $.74 per share, which was around 30% growth on sales growth of nearly 15% ($56MM compared to $49MM) thanks to margins moving from 39% to 43%.  Cash on hand was up to $37.5MM and they have no debt so they are now trading at around 4x to 5x EV/EBITDA depending on how much credit you want to give them for growth in the second half of the year (Money McBags has not had a chance to listen to their conference call yet).  Before this huge Q, Money McBags was pegging them to earn $.80 per share this fiscal year by maintaining a 41% margin but they almost beat that $.80 number just this quarter.  Now it's likely they'll earn closer to $1 (again, Money McBags has not listened to their call yet to know if there was any guidance) so they are trading at less than 10x fiscal year 2010 earnings and they have a June Q so they are probaly closer to 8x full year 2010 earnings.  The company is so cheap it makes my balls hurt, or in the case of DFZ, it makes the balls of my feet hurt which can be soothed by slipping on my DFZ made Dearfoams.  Not only are they cheap, but they have been rumored to be in talks with WMT's international business to expand there and were actively looking to get into Payless/DSW/other shoe stores and to be honest, Money McBags is shocked they are not already in those stores.  The other rumor is that they are looking at acquisitions, potentially of a sandal or flip flop company to help smooth out the seasonality of the slipper business.  They also recently launched a Levis brand and earlier last year turned down a take out offer of $7.50 per share for the company, so we have some good downside protection in cash and in potential buyers if this company were to shit the bed.  There is no reason this company shouldn't trade for at least 12x earnings which would yield at a minimum a $12 stock price and it is currently trading for $9.50 (and this is not even to mention the now stupid multiple of EBITDA for which it currently trades).  The downside is that it is a tiny company with little institutional ownership and almost no coverage, but that is more of an opportunity than a concern.  Money McBags is happy with his current position and may buy more should it dip down tomorrow or after he goes through their call.

As for TMRK, they gave guidance for $95MM to $100MM 2011 EBITDA so despite a decent quarter, they are already trading at around 8x 2011 EBITDA.  While that is cheaper than competitors, and while TMRK is in a terrific growth market as Money McBags believes more in the growth of cloud computing and colocation than he does in the existence of Hanna Hilton (and as he watched about 22 hours of her terrific performances yesterday, he is 99.87% sure she is real),  they do carry around a large amount of debt and have significant cap ex.  This was Money McBags analysis of TMRK from last month and he stands by it (especially as TMRK was trading at around where it fell back to today).  The growth targets announced this Q are a bit below expectations but if the stock continues to drop, Money McBags will likely start a position.  No need to get involved today as the momentum buyers fly out, but worth watching.

1/21/10 Midday Report: With healthcare solved, Obama to take on banking industry

The big news spooking the market today is Obama's unknown plan to try to regulate banks.  He is now said to be giving former Fed Chairman Paul Volcker the keys to palace and Volcker is rumored to be getting all Glass-Steagall on bankers's asses telling them they can't trade financial securities using their own deposits.  Money McBags is usually for the free market (especially if that free market specializes in foie gras or taint cleanings), but large financials firms need to be regulated.  They have too much sway over the global economy, like Rasputin had over the Tsaritsa Alexandra or ugly chicks have over former President Bill Clinton.

The other news moving the market today is that China's GDP rose the fastest it has in two years as it grew 10.7% thanks in part to their ability to make really cheap shit and therefore have consumers need to continually replace said really cheap shit when it breaks/tears/poisons them.  Q4 economic growth was driven by a $586B stimulus package, subsidies for consumer purchases, a credit-fueled investment boom, and buy one get one free happy endings at local Shanghai massage parlors.  The strong growth in China has investors worrying that the Chinese government will finally try to slow down their lending to avoid more of a bubble than they have already created, which in turn will dampen the global economic recovery.

In US macro news, first time claims for unemployment rose last week by 36k to 482k defying analyst expectations for a 4k drop.  Money McBags is not going to harp on analysts for getting the number wrong as he knows it's not easy to guess at a number that can be anywhere from 0 to 300MM, but guys (and gals), can we at least get the fucking direction right?  You have a 50-50 chance on that one which is slightly better than your odds of not contracting herpes from shaking Tiger Woods' hands, so can we do a little better?  Luckily an economist for the  U.S. Labor Department (or as it is soon to be renamed, the U.S. Non-Labor Department or simply You're Fucked) cleared everything up by claiming that last week's numbers were higher than expected in part because the Christmas and New Years holidays created a backlog in some states.  To quote this brilliant economist: "It is not an economic thing -- it is an administrative thing."  He then went on to explain that the recent market crash also "wasn't an economic thing, it was a math thing," John Edwards denials about being some broad's baby daddy "wasn't a lying thing, it was a syntax thing," and for the ladies out there, swallowing after a hummer "isn't a romantic thing, it is a nutrition thing, so bottoms up" (when of course, we all know it is both).  The main point is, whether or not the rise in new unemployment claims was due to an anomalous administrative glitch or more people simply losing their fucking jobs (you know, what the statistic actually measures), there were still at least 450k people who recently filed for unemployment so this economy is about as healthy as Amy Winehouse at an all you can smoke crack bar or a Krispy Kreme donut with extra transfats.

Also, the Philly Fed showed the pace of manufacturing slowed a bit in January as the index fell to 15.2 from 22 and was below the expectations of 17.  Apparently a positive number still signals growth so since we have no idea of the impact of the relative values of the arbitrary numbers (how much worse is a 15 than a 17?  And about 10% is not likely the correct answer), all we can say is that the Philadelphia area produced some shit, though it was likely all stolen by the residents, so should have minimal economic impact.

In stock news EBAY put up a huge quarter as PayPal revenue was up 28% thanks to an uptick in Nigerian princes needing funds to return to their homelands and reclaim their fortunes, while Starbucks (SBUX) beat analyst estimates by quadrupling profits from a year ago.  Same store sales were up 4% proving that overpriced coffee may be a giffen good.  The biggest stock news of the day though was Goldman Sachs beating profit estimates by raking in $4.95B in the Q.  More surprising than Goldman's success under the Obama administration was the Streltsys' profitability during the reign of Ivan the Terrible, the benefits earned by the Imperial Guard during the Napoleonic era, and Haliburton's favorable business wins during Dick Cheney's vice-presidency.  Goldman's revenue was mostly inline and their outperformance was caused by putting aside only $16B for bonuses.  The pay ratio dropped to 38.5% which means the average worker will be forced to scavenge with only a $500k bonus and with the way the dollar is dropping, that means these poor Goldman employees will only be able to buy one Maybach and 3 nights with Charisma Cappelli (though to be honest, if all 32k employees had 3 nights with young Ms. Cappelli, she may get a little tired, so to those Goldman employees reading this out there, try to be in the first 1k if possible).

As for small stocks, HAFC continues to love it's long time shareholders as it erupts for the second day in a row on no news.  As stated yesterday, TBV is somewhere around $3.60 so this stock has plenty of room to move up, but this is very speculative as Money McBags trusts that TBV number about as much as he trusts politicians, Mexican water, and 35 year old virgins.  Also, anything that has recently risen, like RICK, is selling off faster than Rachel Uchitel's 10 minutes of fame.  This is going to present some buying opportunities for the better companies.  Over the past several weeks Money McBags has mentioned several companies he thought were solid but had run up a little too much (CRUS, NTRI, TMRK, heck even INTC) so use this sell off wisely to re-evaluate and make some smart decisions like the guy who married Christina Hendricks.  Oh yeah, a big shout out to When Genius Prevailed reader Matthew who has nailed NLS like a 19 year old girl in her first Monsters of Cock video.  Kudos on that pick.

1/4/10 Midday Report: It's 2010, yet the market is partying like it's 1999

Hide the women and children because the market is coming back with a vengeance, like Dirty Harry Callahan or Don Knotts on Three's Company.  The market appears to be determined to show all of the traders who manufactured complex derivitaves such MBS, ABS, and plain BS, that financial engineering can only keep it down for so long as eventually people have to consume.  The big news is that manufacturing continues to improve as inventories which were cut to bare bones minimums (and at a minimum, I would bone a bare Eva Wyrwal with my inventory) are now starting to be replenished.  China's manufacuring grew the fastest it has grown in 5 years which is great news for the lead paint industry but bad news for infants.  In the US, manufacturing grew faster than it has in 3 years according to the ISM.  This increase was driven by the stimulus spend, inventory build back, and increased sales of electronics to replace those which were broken by being thrown against the wall in disgust as the market cratered.  Along with China and the US, Europe also saw an increase in manufacturing to a 25 month high causing red light sales to cease across the red light district of Amsterdam.

While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model.  The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up "geysers") and China's manufacturing prowess spurring inflation concerns.  Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building.  Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.

In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring.  TMRK is in the colocation/hosting business along with RAX and EQIX.  This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced.  The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one's programs, files, and downloaded spankwire videos will be hosted in a "cloud," thus leaving the actual pc as just an interface.  Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week's supply of viagra.  TMRK is one of the companies building facilities to host all of this data.  It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don't grow on trees).  Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites.  This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks.  The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.