2/10/10 Midday Report: Bernanke's statement stuns meteorologists, causes it to rain on market's parade in the middle of a snowstorm

The big news moving the market down today was the statement from Ben Bernanke about the FED's future policy plans.  Bernanke was supposed to testify in front of the House Financial Services Committee but the snow storm in Washington caused the hearing to be postponed giving Barney Frank more time to make snow angels and less time to suck at his job.  Bernanke did release his full statement which serves to make Crime and Punishment read like a fucking Dr. Seuss book (I will kill her with an axe, I will kill her with hot wax. It will be an act of enormous enormance! No rational performer's performed this performance!).  I'm not saying it was boring to read, but Ambien is said to be suing Bernanke's statement for patent infringement.  However, since Money McBags is here to serve the people, he made it through the whole statement and can sum it up in fourteen words: "We did a bunch of shit, now we are going to try other shit."  The important parts are that eventually rates will rise (duh), though not in the immediate future, and in the meantime, the FED will investigate other ways to control interest rates and bank lending, such as paying banks interest on reserve balances held at the FED.  Below are Bernanke's actual words on this (no jokes, real information):


"By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in longer- term interest rates and in financial conditions more generally"
 
The FED has also been developing a number of additional tools to use to reduce the large quantity of reserves held by the banking system.  Those tools include offering term deposits, selling securities, and using reverse repos and their more deliciously effective cousin, the reverse cowboy.

In macro news, the US trade deficit increased, widening to $40B as both exports and imports increased.  However, the rise in the dollar over the last couple of months may be hurting export growth in a classic Catch-22 situation, like mark to market accounting for bank balance sheets in a declining asset economy or finding Gia Carangi in your bed in 1985 and not having any condoms.  While the trade gap was driven to some degree by a larger quantity of petroleum being imported, and while a 3% growth in exports is still growth, the US needs exports to take off like a young Milton Friedman in the mid 1940s in the University of Chicago Economics department where he proved the hypothesis that chicks dig rising permanent income (generally speaking).


Internationally, China's exports grew 21% while imports grew 85%.  Container companies were said to have raised their shipping rates as export growth is causing steel containers to become more scarce in China than Andrew Johnson supporters in 1867 or female smurfs.  The export growth in China has increased the calls to unpeg the renminbi and let it float to reflect its actual value, of course if it were up to Money McBags, he would just peg all currency to the the Vietnamese Dong (and yes, learning that Vietnam's currency is named the dong was pure comic gold for Money McBags, like whe he ran in to Tiger Wang on linkedin.  Of course it does make Money McBags wonder if Lexington Steele would be the richest man in Vietnam due to the amount of dong he carries.  Thanks, and don't forget to tip the waitress, though not too much because she has a bit of vertigo).

And we can't forget about Greece where civil servants went on strike and walked off the job for 24 hours thus shutting down airports, hospitals, and schools, in their attempt to become Camden, New Jersey.  The EU's bailout will force the country to freeze salaries, raise the retirement age, and require citizens to purchase deodorant.  But it's nice to see the workers protesting these cuts becuase I am sure they didn't receive any benefits from the enormous amount of debt taken on by the Greek government (and yes that was sarcasm).

In stock news, The New York Times had a quarter that beat expectations but the company continues to run a declining and outdated business.  Their newspaper advertising revenue was down 17%, slightly better than the 30% decline from the first three quarters of the year, but still about as good as Emo Phillips hosting a Def Comedy Jam remake or  Jennifer Love Hewitt's ass.  New director of strategy, Phil Von Werescrewed, said "we expect the newspaper advertising revenue to level out any quarter now, unfortunately that level is going to be zero, so we're actively looking at new ways to be profitable, like shutting down, or restarting out dauggerotype business."  In comparison to the Times' 1940's business, BIDU announced first quarter revenues to be above estimates as they gained advertising dollars from Google's potential pull out of China (which would make GOOG the most famous thing to pull out of Chyna since Triple H).

In small cap news, DFZ continues to rise after their huge Q which  Money McBags broke down for you yesterday.  Money McBags did have a chance to go through their call last night and it all sounded pretty good.  They did say they expect to be unprofitable for the next six months which is consistent with previous years as the first six months of the calendar year is mostly replacement and replenishment business (hence their desire to make an acquisition to counter the seasonality of the slipper business).  However, they did guide for slight revenue growth, though to be somewhat offset by an increase in marketing, but gross margins should be over 40% for the year, operating margins between 10% and 12%, and they are having no input pricing issues in China.  The company has earned $.95 so far this year, so let's just call it $.90 in total for the fiscal year assuming a loss of $.05 in the next two quarters (though Money McBags thinks they might actually earn a profit with international sales increasing and the Dearfoam brand getting increased marketing, but whatever).  They are now trading at 11x this number which is for the fiscal year ending in June (so not even really forward earnings).  That is a ridiculously low multiple for a cheap growing company with a solid balance sheet.  Money McBags thinks this is at a minimum at $12 stock but could easily see $15 if they continue to execute.

12/23/09 Midday Report: Consumer confidence rises enough to spur consumers to still not buy new houses

Another day and more mixed data so Bulls and Bears can both rejoice (Yay!!!  Things are getting better and Yay!! Things are staying crappy.  See we can all get along, you hear that Israel and Palestine and Tiger and Elin?).  US consumer confidence rose to 72.5 according to the Michigan Consumer Sentiment Index, though it was down from the preliminary reading of 73.4 just over a week ago.  It's good to see even Michigan is adopting the Commerce's departments' "downward revision" strategy which Money McBags outlined for you yesterday.  In addition to Consumer Sentiment rising to some undefined number, personal spending and incomes were up (though less than forecast) as the second derivative of unemployment has slowed and the economy has been stimulated from flaccid to almost semi-erect with all of the dollars the government has printed and strategically placed into their g-string.

But Bears don't worry because in contrast to the stronger consumer (though not as strong as estimates, Magnus ver Magnusson, or the odor from a Mickey Rourke corn shit), new home sales fell to a seven month low and dropped 11%.  I'm no Robert Shiller (for fucksake I'm not even Karl Case) but when home foreclosures are at a record, why the fuck would anyone buy/build a new home when they can get an existing one for 70% of the price (and backing this sentiment up was the news from yesterday that existing home sales were up)?  But fear not everyone, because Timothy Geithner says there will be no "second wave" financial crisis and we all know how good Treasury Secretaries have been with their predictions.

In stock news, newspapers are moving up (and that is not an error as bizarre as it seems, so there will be no retraction necessary) as a Wells Fargo analyst upgraded the sector from "underweight" to "equalweight" after sniffing four packages of glue, downing a fifth of Jack Daniels, and revving up the flux capacitor in his DeLorean and travelling back to the 1980s, thus forgetting about this little thing called the interfuckingnet.  Along with that report, the analyst also predicted that New Coke will soar, Ishtar will revolutinize the movie industry, Teddy Ruxpin will be the best selling toy in history, and AIDS will be but a fleeting virus and thus he also downgraded CHD.

Tommorrow is a half day on the markets so get your trades in while you can and then enjoy your day off.