10/4/10 Midevening Report: Rally comes to an end, always knew it was an ass man
The market fell today ahead of Q3 earnings as a result of downgrades, the usual relatively ok yet absolutely shitty macro news (known as the skinny girl in fat camp or the world’s tallest midget syndrome, speaking of which , Money McBags did find Mr. Reich’s opinion piece surprisingly unfull-of-shit today, but then again, Money McBags only read the first paragraph before scrolling down for the pictures), and the realization that Europe’s banking system may be shakier than an angry Michael J. Fox on a magic fingers vibrating bed in the middle of an earthquake. With earnings estimates coming down ahead of the quarter and the market having risen by ~10% recently, a sell off would be less surprising than Amy Fisher getting in to porn (though remarkably less hurtful to the eyes), so if you are a gambler (Money McBags means equity investor), be careful right now because gold ATMs aren’t being installed just for shits and giggles (if you want shits, and perhaps some giggles, use these ATMs).
As far as macro news, factory orders fell by .5% which was slightly worse than analysts guessed but excluding the volatile transportation number, orders were up by .9% so as long as the Commerce Department tells us which numbers to exclude on a monthly basis, positive economic reports can go on indefinitely. Along those lines, the government has mandated that all data released from now on be rounded up to the prior release, the unemployed be referred as “pre-employed,” and Jaime Edmondson be in charge of reading any and all future economic releases while gently tickling investors taints because that is the easiest way to make sure no one is paying attention to the facts.
In other macro news, home sales rose by 4.3% which slightly beat analyst guesses though sales were still a full 20% below last year’s tax break manipulated number. The rise was driven by a 7% jump in the South, a 6% jump in the West, and 0% jump in logic. That said, home sales could start seeing some strange readings with foreclosure paperwork more fucked up than the Boston Globe’s new business plan (because readers are really going to pay for shitty undifferentiated journalism when they can read the same shit for free on like every other website in the world, so kudos to the Boston Globe’s management team for trying a business model that failed globally in 19 fucking 98) or Jenna Jameson’s face (and seriously Jenna, WTF happened to you? Perhaps there should be a limit on facials one receives?). Money McBags has sort of avoided this story because he’s not quite sure what to do with it (like Christine O’Donnell with a vibrator) but GMAC, JPM, BAC, and NAMBLA have apparently screwed up/misdocumented/mishandled (surprise surprise) a plethora of mortgage/foreclosure documents which will likely at least delay a spate of upcoming foreclosures. This will probably hurt bank earnings and may or may not have an effect on home sales as it could artificially lower inventory and prop up home prices in the short run, but eventually, the banks will find a way to get paid and home inventory will continue to increase.
Also the President of the Philly Fed, Charles “Chuckles” Plosser told the FT that he isn’t necessarily for QE2 and Benny B. betta check himself before he wrecks himself because printing money forever is bad for the economy’s health. Plosser cited his view that inflation will still be a problem, his fear that the Fed won’t be able to undo what QE2 does when the time comes, and his belief in common fucking sense that says that rates are already lower than Rick Sanchez’s Q score so trying to lower them further isn’t going to accomplish much (other than the collapse of fiat currency, the crumbling of western civilization, and a devaluing of the dollar to a point where it isn’t even worth a dong)? Money McBags likes that there seems to be some actual debate within the Fed, that said, QE2 seems to more of a certainty than Heidi Montag eventually posing nude in Playboy (and Money McBags will take the under on December, 12 2012).
Internationally, Switzerland proposed tougher rules on banks aimed at making Swiss banks UBS and Credit Suisse hold more capital so the next time those banks fuck up, Switzerland won’t have to whore itself out like Greece or Karen F. Owen, as according the Switzerland, those banks are “Too big to be rescued.“ Money McBags’ favorite part of this story is that the group who came up with the proposition is called the “Commission of Experts,” and Money McBags has no joke for that, he just likes the awesomeness of the name.
In stock news, MSFT was downgraded by GS to neutral as GS tries to get their clients to increase their trading with the firm because otherwise there is absolutely no reason to change any rating of MSFT today. The company sells the same shitty near monopoly software they have always sold and continues to fail at everything else other than hoarding cash so any analyst changing their opinion today on no news is as ridiculous as the steady state theory or the plot to an A-Team episode (and pour some out for Mr. Cannell), but that’s how the street works, by pumping out volumes of worthless shit (like Chuck Klosterman, only less sex-offender-y looking). In other news, F was up 5% after an upgrade from JPM (read Money McBags’ rant from the previous sentence about the sell side and yawn loudly) while AXP dropped 6% as they have decided to fight an anti-trust battle around their merchant restrictions as they claim they are not anti-trust, they just have daddy issues.
In small cap news HSTM jumped again today to a five year high on no news and Money McBags isn’t really sure why. As Money McBags mentioned the other week, on the surface this looks like an at most reasonably priced company with a good balance sheet and in a seemingly growing market and since then their volume has been oddly spiking by trading over 100k shares in 4 of the last 8 days (200k+ shares on 2 of those days) when the company has only traded 100k shares+ one other time this year. It could be a random statistical fluctuation (though Money McBags doubts it even as we live in a very fat tailed economy) or an HFT bottom fishing but it seems like someone is building a position here. If Money McBags were still running a fund, he would probably take a nibbler here and dip his toe in with a starter position until he could get management on the phone but he wouldn’t make it a full position until he, you know, actually understood something about this fucking company (like their competitive advantage and what growth can be) other than that it screens well, has nice returns, and is starting to get some momentum.
Elsewhere ZAGG continues to defy logic and common sense and was up ~6% today to ~16x Money McBags’ high end, lobster tails and BJs for everyone estimates. Apparently some sell side shop called Northland Securities initiated ZAGG with an outperform $7.50 price target today and Money McBags hasn’t read the report but he assumes it is filled with lively charts, plenty of guesses, and no mention of the fact that this company sells one fucking overpriced product in an increasingly competitive space without ownership of the patent for the materials that make the fucking product. It’s only a matter of time before this company’s revenue shows up on the back of a milk carton so this ride up will only make it a steeper fall.
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