10/7/10 Midnight Report: Market flat enough to be part of the itty bitty returns committee
The market closed moderately down today as investors, gamblers, and algorithms everywhere await tomorrow’s jobs report which will likely be as telling as one of Eddie Long’s altar boys (well for the ten or so years prior to this one) because thanks to the delightful birth/death model (where the output is more hard-coded than the Kryptos sculpture) the numbers will be more manipulated than Lexington Steele’s johnson on the set of any of the Manhammer films. Look Money McBags doesn’t have a crystal ball (though if he had a Krystal Ball, he would make sure he always wore a dildo on his nose just for her*), so he has no idea if the numbers will beat or miss guesses, but he talks to a hella lot of people on the Street and in business and many of them continue to be out of work with no end in sight so Money McBags will probably ignore the number released tomorrow and stick with his actual primary research which points to job openings being more non-existent than the tooth fairy, Steve Jobs’ liver, or money shots in lesbian porn.
Speaking of jobs, new claims for unemployment beat guesses today by coming in at 445k which was 11k below the upwardly revised 456k from last week and likely at least 5k below what it will be upwardly revised to next week as once again the “hold the shock and hope for no awe” strategy by the government (which is the worst kept government secret since Valeria Plame’s cover was blown or Bill Clinton’s cigar was blown) once again rears its ugly head.
Interestingly, some people were touting continuing claims dropping by 48k as somehow being positive since it was the lowest since June but the number of people on emergency and extended benefits increased by 257k. So look, Money McBags is no labor expert (though he did wake up for just long enough during that shitacular Knocked Up movie to see Katherine Heigl‘s character give birth, so that has to count for something), and he’s also no mathemetician (though he does know the difference between Ito’s lemma and Judge Ito’s dilemma, which of course was that he had to let OJ go free), but if the number of people getting emergency and extended benefits increases by more than continuing claims decrease, doesn’t that mean that net unemployment increased? Sure it would be great if the Underground Man were right and 2+2 did not always equal 4 and thus we could all ignore numbers as if we were long the S&P, but in this non-abstract universe we live in, the laws of math hold and thus instead of saying that continuing claims dropped by 48k to try to paint a rosy picture, what needs to be reported is that all claims increased by ~210k with the largest portion of that coming from people who still can’t find work and see their skills diminishing faster than Sheyla Hershey’s chest (and one can assume her social life) or Lou Dobbs’ credibility.
In other macro news, retail sales in September beat analyst guesses thanks to back to school specials like buy one get one free, 20% off, and something called “going out of business liquidation sales.” Analysts say the increased sales were driven by consumers feeling more confident thanks to a rising stock market (Way to go Ben! Nothing like putting the cart before the donkey), better weather, and widespread cognitive dissonance. Same store sales rose by 2.8% well above analyst guesses of 2.1% and were driven by retailers geared towards teenagers as those stores were up 6.7% as teens stocked up on Twilight paraphernalia, bottled nut sweat from that Justin Bieber kid, and plenty of lipstick for the start of rainbow party season.
In international news, the ECB held rates steady, whispered sweet nothings in their ear that everything will be ok, and gently caressed them as if they were Lucy Pinder. The ECB also announced they would start removing liquidity from troubled banks which means if Money McBags were European, he would start removing his liquidity from European banks as well. Elsewhere internationally, Greek public servants went on a 24 hour strike (or as it’s more commonly known in Greece: “Thursday”) while Fitch downgraded Ireland from AA- to A+ and Money McBags downgraded Fitch from F- to completely irrelevant.
In stock news, Adobe spiked up ~11% on rumors of a MSFT take out of the company while PEP fizzled out after lowering the top end of their guidance due to currency exchange rates expected to impact top line by 1% as the US dollar loses value faster than a single female after the age of 30. Elsewhere MAR put up a decent Q but sold off by 6% as an analyst from Raymond James was unimpressed with the company’s revenue guidance for 2011 citing the effect that reduced revenue will have on leverage and the fact that he recently stayed at a Marriot and still can’t get the mold and dead stripper smell off of his clothes. And finally YHOO dropped 2% as their unsavvy investor base got their dial up internet connections to work just long enough to realize that there is a little something these days called GOOG.
In small cap stocks, MLNK, which Money McBags has covered exhaustively here on the award winning When Genius Prevailed, was sent a letter by an activist investor group basically calling management out for being a bunch of asshats (no doubt after those shareholders read Money McBags’ scathing diatribe on MLNK’s last Q after their quarterly diarrhea struck for the third time in a row). The activists rightly criticized MLNK management for basically sucking at their jobs worse than a dyslexic trying to paint by numbers and for creating less value than “just being friends.” They mentioned many of the same issues Money McBags brought up such as shitty acquistions and lousy oversight (and remember, operating costs were up due to management receiving bigger bonuses despite the company destroying more value than an Abacus CDO, well maybe not that much value, but you get the point). The reason this company remains interesting to Money McBags is due to this simple paragraph from the activist letter:
“The Company’s $174 million in cash and investments are equal to approximately $4.00 per share, and working capital on hand exceeds $220 million, or 80% of the Company’s current market capitalization. Yet the Company’s enterprise value totals just $120 million, or less than three times its Fiscal 2010 EBITDA of $46 million.”
So the company is ridonkulously cheap and in an ok market and with a management team focused on creating value for shareholders rather than making sure they can adequately tip their caddies, the stock has the potential to really run. At one point this company was on a $72MM EBITDA run rate but in just three short quarters they have managed to cut that to a $20MM EBITDA run rate thanks to new business declining, pricing discounts, and shitty acquisitions leading to goodwill write downs despite this having been a huge buyer’s market. Money McBags fully supports these activist investors who are seeking to gain 3 board seats and will even selflessly nominate himself for one of those positions so he can make sure no one gets a bonus until this company figures shit out.
And to Money McBags’ new readers from zerohedge, welcome. Money McBags hopes you enjoy the insight, analysis, and dick jokes he brings on a daily basis. So far he has enjoyed his stay on zerohedge, especially when his column rotates through the top of the page and he finds himself as lucky pierre between Reggie Middleton and some guy named williambanzai7, something for which he has always aspired (well that and to be Karissa Shannon’s thong).
*As a brief aside, Money McBags is well aware that our society is devolving in to one where good manners, civility, and common sense are becoming more passe than full bush, and Money Mcbags is also aware that he has a very silly name for which he often derides his parents as it has caused him much trouble in life, but Mr. and Mrs. Ball, if you’re reading this, (and frankly, why wouldn’t you be?) why the fuck would you ever name a child of yours Krystal? Seriously, that is so annoyingly iditiotic that it makes Money McBags’ balls hurt, and not in the good way like he imagines they would hurt after overuse by the lovely Odette Yustman, but in the bad way like a jagged catheter gone awry. Having the last name Ball and naming your daughter Krystal should be grounds for child protective services to immediately take your kids away and supply a forced vasectomy. Most of all, it leaves Money McBags to wonder if those dickholes had a son and named him Harry,
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