A funny thing happened on the way to the frontrun today as after a huge opening driven by slightly positive relative macro data and NFLX’s jizztacular earnings, the market dove on no real discernible news other than maybe investors waking up to just about EVERY FUCKING PIECE OF ECONOMIC DATA released in the last few years (though highly unlikely).  As for the real cause, well Money McBags would like to say it was common sense or gravity (that is if gravity existed) but he’s less sure why the rapid sell-off occurred than he is why people hire economists or who killed the bees (though it looks like it was a fungus tag-teaming with a virus that did it).

News sources all say the jump in the dollar caused by traders getting their panties in a bunch about currency wars was the reason, but that is stale news and would have hit at the open if anyone really gave a shit.  The most interesting reason Money McBags could find was laid out nicely by zerohedge as they postulated that the dip was triggered by the Fed’s reverse repo (which is kind of like a reverse rodeo, only a bit less romantic) which sucked liquidity out of the market like Taylor Rain on a payday.  Whatever the answer, something is rotten with the state of Ben’s market and with real structural problems, one needs to remain more careful than Justin Beiber at a NAMBLA convention.

As for macro news, it was Money McBags favorite day which of course was “New Claims for Unemployment Thursday” where the (No) Labor Department gets to perfect the government’s “hold the shock and hope for no awe” strategy.  This week, new claims were down by a headline number of a whopping 23k to 452k which sounds fan-fuckingtastic if:

1.  The 23k wasn’t off of an UPWARDLY REVISED 475k from 462k.  But hey, what is 13k among friends?

2.   452k wasn’t still an absolute fuckawful number of new claims.  The again, with 64k private sector jobs being added a month and only ~160k government jobs being lost a month, at the pace of ~450k new jobs lost weekly, we should be out of this recession sometime between now and when Rosie O’Donnell flies.

3.  JWOWW had not turned down playboy.  And yes this has nothing to do with the number, but we can all agree it was also not fan-fuckingtastic.

So the 452k beat analyst guesses of 455k and would have beat guesses by more if analysts had put the upwardly revised 475k in to their broken regression models as last week’s data point rather than the 462k.  So while the headline number seems like a positive, remember it will be revised upwards to ~460k next week after (No) Labor Department’s analysts get through massaging the data and finishing it off with the least happy ending since Old Yeller.

In other macro news, US leading economic indicators increased for the third straight month (and the month was so straight it refused to even look at other months of the same gender).  The New York-based Conference Board’s index of leading economic indicators climbed 0.3% which shockingly matched analysts guesses for the first time since analysts were asked to guess a whole number between 1 and 3 (but to be fair, they were allowed to use their fingers).  Also, manufacturing expanded in the Philadelphia region in October as the index rose to 1 from -.7 but was still below analyst guesses of 2.  That said, it was the first time since July that factory payrolls grew and the fact that the index wasn’t negative is the second most positive thing about Philadalphia after “not having to live there.”


Internationally, China’s GDP growth slowed to 9.6% though that growth rate still makes it more bubblicious than Gonzo Grape with only slightly fewer cavities.  The most interesting part is that China’s CPI jumped up 3.6% to a 2 year high as a result an 8% jump in food prices.  However, many witch doctors (Money McBags means economists) think food prices are really up ~30% as the market weighted basket of goods used to calculate inflation in China’s CPI model has not been updated since 1993 and thus real inflation is being distorted by the calculation using old weights and outdated goods such as McDLT‘s, and Zima.

In the market, as mentioned before NFLX soared after a slight topline beat ($553MM vs. $551MM guesses), a bottom line miss ($.70 vs $.71 guesses) and a 52% fucking gain in new subscribers y/y which is amazing considering they still refuse to stream porn.  These results drove their valuation from ridiculously overpriced to ridonkuously overpriced (and the difference between those two is like the difference between Nikki Hilton hot and Hanna Hilton hot, so it is quite stark).

That said, an astute reader of the award winning When Genius Prevailed pointed out that without the 300% growth in unpaid subscribers thanks to extending their free two week sign-up promotion to a free month, they would have missed the consensus guess at new subs.  But that is just a detail as they only have ~17MM subscribers and there are still 1.5B people in China and once inflation ceases there and those people can afford food again and thus have $ to waste on TVs and then NFLX subscriptions, the valuation will finally make sense.  But if you’re going to invest in the market and want to hang with the cool kids, just buy AAPL and NFLX and watch your portfolio grow faster than the Crystal Church’s debt (but don’t forget to have a quick trigger finger because if/when it breaks, these stocks will lead the way down).

In other earnings news, MCD served up a 10% growth in profits which beat analyst guesses thanks to smoothies and people being poor and thus not being able to eat at restaurants that serve actual food.   The company had 6% global same store sales growth and said they see this momentum carrying over to Q4.  As loyal readers know, Money McBags believes this is a company you should own (if you want to gamble) as global aspirational brands that sell cheap products should continue to do well when mature markets develop dementia since brand equity matters in emerging markets.  Finally, EBAY went to the highest bidder today as it shot up ~7% thanks to a strong Q from Paypal as users continue to send money online to free that pesky Nigerian prince.

In small cap news, CRUS got absolutely crushed today like they had gotten in the way of Keely Shaye Smith at two for one day at the local Long John Silver’s.  The company was down ~15% on a quarter that barely missed analyst guesses and guidance that was below guesses and sequentially down.  That said, their quarter was actually pretty good as revenue grew 81%, earnings rose to $.40 per share, and gross margin was up y/y to 56%.

Money McBags thought they would have a good Q and they certainly did, though his estimates were for $.44 per share based on their guidance and they came up short of that.  Numberswise, this company is still fucking cheap as they are on pace to earn ~$1.30 this year and grow revenue 80%+ and are now only trading at ~10x that, but there are three things Money McBags has learned in life:  1.  Never spit in to the wind.  2.  Never get involved in a land war in Asia.  And most importantly, 3.  Never own a growth stock when estimates are coming down.  Seriously, fuck valuation, fuck common sense, fuck it all, momentum rules these names and once you lose it, it’s not coming back until you put up a couple of quarterly beats in a row.

That said, Money McBags first told you about this stock when it was < $8 so depending on where you sold, you’ve been able to make >100%, or if you’re still holding, you are up >60%, so you’ve done well.  And remember, Money McBags told you to start trimming ~3 weeks ago when he said:

In small cap stocks, CRUS dropped ~6% after yesterday’s rise as fears are that AAPL will be replacing them in the iPhone 5 and iPad 2 and this has been the issue with this company.  AAPL basically drives their revenues right now so if they lose their slotting, they will be more fucked than Heather Mills and her partner in a three legged race.  This is the reason the company is so cheap despite the fact that they have been putting up huge quarters and will put up another huge quarter shortly.  Where there is smoke, there is usually Paris Hilton, but there is also usually fire and Money McBags would be trimming like shit in to this news because if it is accurate, CRUS will tumble.  Just ask yourself, would I feel stupider?”

CRUS was trading ~$18 when Money McBags wrote that so hopefully you took his advice.  So while last Q he thought they would continue to put up strong numbers (and they have), it appears they are likely rubbing up against some softness (like titty fucking Christina Hendricks) and when that happens with growth companies, just get the fuck out and let value investors have their way.

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