10/13/10 Midevening Report: Even more bulls hit
Oh shit, it is on again like white on rice, stink on shit, and Black on Scholes (and for you quants, just know that Brownian motion has more than one meaning), as a flurry of blue chip companies beat earnings guesses and pushed the market higher. With the 50 day moving average now rising above the 200 day moving average the S&P has hit the fabled Golden Cross (which is kind of like the Hindenburg Omen only less fiery, with fewer McClellan Oscillators, and the exact opposite), which means technicians are expecting to be showered with returns.
Of course Money McBags believes in technical analysis about as much as the LPGA believes in letting former wood swingers on to their tour or Bristol Palin believes in condoms (or rhythm), but with HFTs controlling the market and their algorithms likely hardcoded to trigger when shit like this happens, the market could push much higher here even as ~20MM people remain out of work, foreclosures continue on (minus the technicalities), and Olivia Munn continues to refuse to do a nude Playboy photo shoot. To say Money McBags is perplexed by all of this would be more of an understatement than saying the Abacus CDO was a bit of a bad deal for investors or Moby Dick was a bit long (and Money McBags is talking about this Moby Dick, so get your heads out of the gutter). But it is what it is so enjoy the capitulation while it lasts.
Interestingly, the driver of the rally had nothing to with US macro news as the only macro news today was that import prices declined (fueled by a drop in petroleum, so prices were actually up using the “core” number that the government likes to use when it is more favorable to do so, unlike today) and applications for refis rose for the first time in 6 weeks as homeowners eagerly await robosignatures to sign off in order to refi to lower rates and take more money out of their homes to be able to buy necessities like food, clothing, and 50 inch flat screen TVs.
As stated earlier, the reason for the rally was that blue chip earnings beat expectations. JPM beat analyst guesses even though revenue declined ~10% and margins declined as they were able to channel their inner Jack Welch and manage earnings by slashing their provisioning (and if Money McBags ran a bank, first he would hire Debrahlee Lorenzana to train the tellers, and then he would move his provision for loan losses to $0 because if shit goes bad, the government will just bail him out since they already exhibited worse moral hazard than Roman Polanski driving the baby sitter home).
Along with JPM, Intel in-told (yes, it is bad pun day here) the double dip recession (or single extended dip ex. the stimulus) to eat a fat dick by posting earnings above street guesses, guiding revenue to above street guesses, and saying that they see “2011 as being a “pretty good” year for computer sales.“ Of course those computer sales are being driven by emerging markets and enterprises (as they need machines to make up for laying so many people off) with “consumer demand in developed markets being a little less than we thought when we started the quarter.“ In other blue chip earnings, CSX also beat guesses as freight volumes keep chugging higher.
But here is the interesting thing, while the market rallied on those numbers, two of those three stocks (JPM and INTC) actually traded down which is as perplexing as that whole tramp stamp trend. Seriously, if the numbers were so good that the market got swept up in the frenzy of positive earnings announcements to come, why the fuck did the stocks putting up those numbers sell off? Something is fishier here than Portia De Rossi‘s breath in the morning, but Money McBags guesses a rising QE2 lifts all stocks.
Internationally, Chinese exports are surging again as their trade surplus reached $16.9B thanks to the Chinese government keeping their currency down thus making their electronics, clothing, and Coke infused with pee pee (no joke), cheaper to foreign countries. This currency manipulation is fueling new global currency wars which Treasury Secretary Tim Geithner addressed on Charlie Rose’s TV show (because apparently George Lopez was already booked up) by downplaying the risks but re-iterating that this is a global issue and not just a US issue (like Madonna).
Elsewhere in the market, AAPL broke $300 a share on their way to a bazillion, WMT announced that they are going to stop discounting so much to try to help margins and hopefully bring in a more respectable clientele, and natural gas provider WMB tooted up ~10% as they announced a CEO succession plan. Also, JOE dropped 10% as David Einhorn crapped all over them in front of his minions at the Value Investors Conference where tickets to the Whitney Tilson kissing booth were completely sold out, and finally, MGM dropped ~11% after their largest shareholder said they were reducing their position, they announced a secondary offering, and they doubled down on a 12 with the dealer showing a 6.
In small cap news, Money McBags’ favorite little name KITD bizarrely filed a $250MM shelf (plus another 242k shares) even though they currently have ~$46MM in cash, have only a ~$293MM market cap themselves (well it was >$300MM until they announced this fucking shelf), and have diluted shareholders more times in the last nine months than Ben Bernanke has diluted the dollar. Honestly, as a shareholder, Money McBags is more confused/perplexed/annoyed (and not regular annoyed, but a-fucking-nnoyed) by this than he was when NBC canceled the A-Team in the late 1980s.
In the award winning When Genius Prevailed’s comment section at the end of August, a reader brought up KITD’s filing to get approval for more shares at their annual meeting and this is what Money McBags had to say about a potential capital raise:
“Fucking A, if they do something like that, Money McBags will personally fly to Prague and nail his shares to the front of their office door to protest ala Martin Luther in 1517 (though he will stay in Prague a day or two for some indulgences). The company already raised an assload of cash by diluting shareholders and is currently sitting on a war chest so unless they want to raise money in order to change their business plan and become a bank, Money McBags can not think of one reason they would need to do so.
So Money McBags will assume you are just making up that rumor because it is as preposterous as a straight porn movie with no money shot or David Hasselhoff’s career.”
Followed by bold (and now likely wrong statements) such as: “Money McBags would be very very surprised if they issued shares anytime in the next 6 months, basically before doing any new deal. Then again he was shocked at the last raise so take it for what it is worth” and “Money McBags has been wrong before, especially about KITD’s capital raises, but he doubts we see dilution again this year.”
So Money McBags guesses he doesn’t know what the fuck he is talking about when it comes to CEO Kaleil Tuzman and his alter ego “The Great Diluter.” Look Kaleil, Money McBags thought we were friends here, we had our little interview, we exchanged many emails, heck Money McBags was even thinking of inviting you over for Pesach this year, but then you go out and do something like this just as the taint from your shitastic explanation of the DSO spike 2Qs ago and previous capital raises was wearing off.
So this begs three questions:
1. What the fuck is KITD going to do with the funds? Money McBags is taking it as a given that they will raise funds and it will likely be a pretty substantial raise (and that is based on nothing other than the huge shelf they filed, their history of doing this, and sheer exasperation) so who is out there to buy? Brightcove is probably too big, so what does Mr. Tuzman have his eyes on (and if his eyes are on this, then Money McBags understands)? Money McBags is assuming they have a deal lined up and are not just going to raise capital to be able to fly the whole company to Amsterdam for a night on the town (as we know Amsterdam is only a hop skip and a hump away from Prague), but who are they after? They look for geographies they are not in and companies that need balance sheet help, so what company is that?
2. What the fuck is an investor supposed to do here? No one likes getting diluted over and over and over again as fool me once, shame on you, fool me twice, shame on me, but fool me three times and I am a fucking idiot who doesn’t want to be fooled by you anymore. So now that we have established that, how can an investor be confident in anything KITD is doing if they say one thing about growth and then continue to do another. Yeah, Mr. Tuzman has always said he will look at strategic options, but there is a little something about crawling before you can walk, walking before you can run, and getting to first base before you try for the Cleveland steamer. So slow the fuck down a bit and show investors that you can, you know, CREATE POSITIVE EPS (though operating EPS is positive, but not every investor is willing to dig through numbers as Money McBags is) before you try to take over the world. Anyway, Money McBags is stumped here because he likes the company but knows dilution is coming so his shares will likely be worth less in the short run and now he has no way to value them and is a bit tired of feeling like a second class citizen.
3. Do you think Brooklyn Decker has an open marriage (and this has nothing to do with KITD, but Money McBags is wondering if he should keep aiming high)?
So Mr. Great Diluter Tuzman, the stock was finally moving, the company seems to be working, and the short story seems to have abated, so why the fuck did you have to do this now? You have Money McBags’ email address (firstname.lastname@example.org), feel free to let him and his loyal readers know when the dilution will ever end and if there is a game plan (and please, no cock shots).
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about 5 years ago - 9 comments
Oh shit, Money McBags has been forced to come out of temporary and semi-retirement (though he still tweets, facebooks, and guesses NSFW muffs on a nightly basis) as his inbox (though he would prefer to be in this box) has been overflowing with questions on what the fuck KITD is doing by raising equity once
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