6/22/10 Midafternoon Report: Home Un-Improvement

The market had trouble finding a direction for most of the day as news is thin and the summer is beginning so most volume is moving to the Hamptons where portfolio managers can sip on lemonade, listen to yacht rock, and denigrate the poor all while ignoring the economic data which has been so lackluster that it is in line for its own NBC prime time sitcom (tentatively titled:  Just Dilute Me!).  There was one bit of macro data released today which was about as encouraging as the letter "L" is to Jackie Chan on a read through script and helped send the market tumbling end of day.  Purchases of existing homes fell last month and somehow analysts are surprised about that since reading comprehension is not one of their strong suits and thus they missed the part about the government tax credit running out and sales being pulled forward like Eddy Curry's pay check.  Home sales dropped 2.2% from last month despite near record low mortgage rates and falling prices and are now starting to roll over and play dead like a trained circus dog or Brittany Murphy.  The best part is that the National Association of Realtors is blaming part of the drop on a processing delay which is holding up 180k mortgages as apparently the red "Rejected" stamp has run out of ink.  Analysts guessed sales would be up 5.5% to 6.12MM homes which was such a close guess that it only missed by a nut hair, that is if the nut hair belonged to a brontosaurus, and not any brontosaurus, but a brontosauros with elephantitis of the nuts.  But hey, maybe the 180k "processing" hold up was real (though something smells fishier about it than Paris Hilton's penis flytrap after pissing out a Long John Silver's fish taco platter with extra tartar sauce because Money McBags doesn't remember hearing about any processing holdups when 7MM+ mortgages, or 25%+ more than last month, were being processed monthly in 2005, but whatever).  Anyway, if we assume the hold up was real and add the 180k home sales that were delayed due to "processing" to the monthly figures, exisiting home sales would have been up .8% which is still way fucking short of the 5.5% increase analysts guessed.  And making it even worse is that analysts used a lower number to build their forecasts as last month's sales were just readjusted upwards to the 579k number so analysts were actually forecasting greater than 6% growth.  Money McBags hasn't seen a miss this bad since Men Who Stare at Goats (and really, that movie was so fucking awful Money McBags wanted to stare in to the fucking sun so his retinas would burn and thus he wouldn't have to watch the whole movie) or any economics paper released by Art Laffer.  With the expiration of the government tax credit, the real question is if home sales are merely taking a breather after an artifically pulled forward sales surge or if the housing market is about to take another dip and send the economy back to it's bad place. 

In international news, Britain released a new emergency budget which includes an additional 17B Euro of budget cuts (25B Euro in total, or about what Money McBags would pay Britain for a chance to have Lucy Pinder and Nikkala Stott star in his personal home movie "The Mystery of Bonehenge").  The cuts are aimed at stricter rules for what qualifies someone to get disability pay (simply listening to Madonna's music will no longer be considered a disability, though listening to it and liking it will remain a sign of real impairment as only the auditorily challenged can bear that shit), a freezing of welfare benefits, an increase in the value added tax from 17.5% to 20%, a new tax on banks, and the biggest revenue generator will be a fine levied on those with crooked teeth.  In other international news, the yuan fell back a bit after yesterday's rise as the Chinese government is determined not to let it appreciate too quickly for fear of losing a large part of their manipulated competitive advantage.  Chinese state owned banks are now buying up dollars to either prevent a rapid yuan appreciation or to have more worthless paper to burn to keep warm when fiat currencies fail and the world reinstitutes the barter system.

In stock news, Walgreens announced a crappier than expected quarter and is trading down as if it spilled 1B tons of oil in to the Gulf.  The stock was down 7% after revenues rose 6% and earnings came in at ~$.53 taking out one-time charges which was $.04 below analyst estimates.  Speaking of Gulf oil spills, BP was down another ~3% today because it still has not hit zero (and yes, Money McBags is going to use that same joke every day until BP is actually at zero which will be sometime between tomorrow and when investors get their heads out of their asses).  And finally, AAPL is up today because in direct opposition to BP, it hasn't reached infinity yet.  AAPL's price target was raised by Deutsche Bank to $375 based on their new iPhone 4 release, the continued strong sales of the iPad, and a need to publish research to get portfolio managers to trade with Deutsche Bank.

In small cap news, WGO sold off hard on no news that Money McBags could find other than perhaps people realizing that paying more than 30x for a company in a declining industry with an expensive discretionary consumer product and a fleet of cheaper alternatives, is probably not the best thing to own.  Shit, Money McBags would rather own NTZ which might be the worst idea for a business right now (high end furniture in Europe), worse than even selling ice to eskimos, unfunny jokes to Jay Leno, or panties to Britney Spears.  The difference between NTZ and WGO of course is that NTZ is trading like it is a stupid fucking business while WGO is trading like it is selling super powered iPhones which give off pheremones to attract Aubrey O'Day rather than $100k gas guzzling unnecessary RVs.  After last Q, Money McBags hesitantly raised his WGO top end target to $9 from $7.50, so there is still plenty of room for the stock to go down.  In other small cap news NTRI has continued to try to make a run.  Money McBags wrote about them after thier last Q and they remain a very interesting watch list name as the company has a ton of earnings power, trades like a momentum name, and just put up a quarter of positive new customer growth which fuels their sales.  It's still a bit early for this company as they keep fucking up their ad spend and their affiliate program sucked a donkey dick (which was certainly pleasurable for Eeyore, yet did nothing for investors) to the tune of a $3MM charge last Q, so management clearly needs to figure out how to better execute (perhaps they should ask the state of Utah for ideas) but it's trading inline-ish with peers, has a nice dividend, and if they can put up a good next Q should have significant upside.  The only problem is Money McBags doesn't have a lot of faith that next Q will be good and he doesn't gamble (unless he is in Las Vegas, Atlantic City, his apartment, the car, etc..), so he is not going to buy.  Money McBags prefers more certainty than he has for NTRI right now so while it has a number of things going right, Money McBags would still just be guessing at their next Q.  One data point is good, two are better, three is a trend, and four is time to think about selling.  We're at the first data point now, so do your due dilligence.

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.

3/23/10 Midday Report: Health care bill passes causing market to turn its head and cough

Money McBags was unable to provide market insight yesterday because he was waiting in line at his doctor's office to receive his now monthly health care rations (sorry, couldn't resist).  Since like 99.9% of Americans Money McBags hasn't read the health care bill (though he eagerly awaits the movie, especially if Alice Eve stars as the naughty nurse and Jessica Biel as her saliva deficient patient), nor does he desire to (Money McBags would rather get a colonoscopy with no anesthesia and a rusty camera), he has absolutely no idea what congress passed but he is 100% sure it is neither as onerous as teabaggers grunt about while flexing their abnormally large brow ridges, nor as ball ticklingly fantastic as democrats pontificate while using their unusually acicular heads for ring toss targets.  More than likely, it will have no effect on anything other than giving people with too much free time (talk radio hosts, congressmen, Rosie O'Donnell's dietician) something about which to get their panties in a bunch (and if it is Brooklyn Decker's panties that are bunched, Money McBags will unselfishlessly volunteer to unbunch them).  So big fucking yawn to health care.  If this country could survive slavery, Andrew Johnson, and Ronald Reagan Jr. in the White House, it can survive an undefined program that accomplishes some good and some bad.  Money McBags will now get off his high horse (mainly because the horse has the munchies from being so high) and get to investing.  Interestingly, the market seems to be unconcerned with the death of America and their 37th ranked health care system in the world as the rally continues despite moderately negative macro economic news.  Existing home sales numbers came out and were down .6% to an eight month low, though in line with the median analyst forecast.  Interestingly, the number of previously owned homes on the market jumped up 9.8% which National Association of Realtors Chief Economist Lawrence Yun claimed was "unusual."  Wow, really Larry?  An increase in homes on the market in a 10% unemployment economy with no job growth and a weakening currency is "unusual?"  It's like calling a rise in the death rate during to the bubonic plague a bit "strange."  Or the increase in internet usage if a Kate Bosworth-Blake Lively college shower scene leaked out as "confusing."  To quote the New York Times (and as always, it may all be made up), "Mr. Yun also cited the winter weather as a reason for some of February’s lackluster results, although sales were strongest in the storm-plagued Northeast and Midwest and weakest in the West."  Great job again Larry.  Apparently the National Association of Realtors has been trolling craigslist for their economic hires and Money McBags only wonders if the pay Mr. Yun in "roses."

In stock news, Google and China are continuing their game of find the button as China has moved to restrict access of mainland users to Hong Kong's Google site.  This is after Google gave a big middle finger to China's censorship and redirected mainland users to their Hong Kong site which features uncensored web access and thus allows mainland Chinese to guess muffs to their hearts content (and if you don't check out the NSFW 1465, you clearly hate life).  Money McBags couldn't be more excited by any of this and eagerly awaits the upcoming pillow fight.  For investors, this should create a buying opportunity for GOOG as Money McBags has said before, China is a small part of their revenues and by the time it can become material, all of this censorship crap will have worked its way out.  In other stock news, KB Homes came out today and said their loss for the Q narrowed from $.75 per share to $.71 per share, so whoop de dam doo.  That's like going from getting your name right on the SATs to getting your name and address right (not so fast Derrick Rose).  Chairman, CEO, and fantasy world dweller Jeffery Mezger said "Encouraging data in recent months suggest that a number of housing markets may be stabilizing or starting to rebound."  He then went on to say those housing markets showing a rebound include Park Place and Ventnor Avenue, but not the B&O railroad.  But fear not for he predicted KBH will return to profitability in the latter part of this year as apparently they will now be building homes out of hopes and dreams.  Finally, Walgreen's posted a 4.6% increase in profits as restructuring charges were less and prescriptions filled were up 6% (no doubt due to people stocking up on prescription drugs ahead of the health care legislation, and yes that is a joke).

In small cap news, Digimarc (DMRC) continues its push upward after signing an agreement with Arbitron ending their lawsuit and requiring Arbitron to pay DMRC $4.5MM and to license DMRC's digital watermarketing patents in DMRC's quest to be a pain in everyone's ass.  DMRC is a very interesting little company which basically has a huge patent portfolio, a bunch of lawyers, and a fuckload of time.  Their most important patents revolve around digital watermarking (and Money McBags would break this market and technology down for you but everytime he thinks about it he teeters on the precipice of catatonia) and they basically go after any company needing to use some kind of digital tracking since DMRC has patented that space like Carrie Prejean has patented stupidity and Thomas Pynchon has patented gibberish.  The point is, this company really doesn't do anything other than litigate the hell out of any real company trying to enforce security or fend off the pirating of their actual online/digital content by claiming patent infringement on whatever security/tracking measures the real company enacts.  In this way DMRC confrontationally secures rev shares for themselves while impeding real innovation in the anti-piracy space (so good on you DMRC for being the digital watermarking bully).  They have around 1/3 of their market cap in cash but no real earnings stream until some of their deals start kicking in in the next few years.  One could argue there is a ton of value here as online piracy picks up and DMRC's patents will get more use, but one could also argue that Weekend At Bernie's should have won an Academy Award.  The point is, this is a very interesting company that holds the keys to a potentially huge market, but their revenue model is not quite there, difficult to fully grasp, and not something in which they have a lot of control.  For anyone who wants to really dig in to a business and an idea, this is a good place to start.  For those of you who don't, this is a good pace to start.