1/1/11 Midnight Report: Data Speaks Softly, Will Earnings Carry a Big Stick?
It was a fairly quiet day on the market as investors get ready for earnings season, brace for an East Coast snow storm, and actively try to bet on which porn star Charlie Sheen will bang next (and for the record, Money McBags is taking Gracie Glam, in the kitchen, with his lead pipe). That said, of the shit that did happen, most of it was less positive than a Ted Williams family reunion. The market is just less interested in data right now than banks are interested in marking to market or Americans are interested in common sense (because there is really no fucking reason to own a glock, no joke here) but none of that is relevant because the market believes in the Bernanke Put more than Money McBags believes in riding the subway pantsless, so Money McBags guesses you should just buy the dip and the undip.
On the economic front, wholesale inventories fell by ~.2% which was within ~1% and an absolute value sign of economist guesses of a 1% gain. But hey, so economists missed again, it’s not like they shot anyone’s cock off so Money McBags will give them credit for guessing an actual number for wholesale sales and not something like “b.” That said, falling inventories could be a positive in that it means people are buying shit, or it could be a negative in that it means wholesalers realize people are going to stop buying shit and aren’t restocking, it just depends on if you see the glass as half full or half empty. The only thing to take from this is that the number should have a negative effect on GDP since about 2/3 of GDP growth was driven by restocking so be very careful about expectations.
Elsewhere, small business owner optimism slipped as the National Federation of Independent Businesses’ index fell from 93.2 to 92.6 which means about as much to Money McBags as or a copy of Strunk and White means to a Palin. Also, job openings decreased by 2.4% to 3.25MM which means there are only ~5 people overqualified for every job out there (or 7 if you include the discouraged, the downtrodden, and Tom Delay).
But all of that data is irrelevant because newest voting member of the Fed, Narayana Kocherlakota (“Kocher” from the Sioux for “Full of” and “La Kota” from the Inuit “The shit”) said the economy will grow slightly more rapidly” in 2011 than last year, which is a bit like saying Ellen Degeneres will suck slightly more dicks than last year, but why let details get in the way of a good narrative (you hear that James Frey or James K. Polk?). Kocherlakota guessed an inflation rate of between 1.5% and 2% by the end of this year, though he was likely using core inflation which is about as useful as a paint by numbers kit is to Ray Charles (and not because Ray Charles was blind, but because he’s dead) since it excludes necessities such as food, energy, and Bangbus memberships. Mr. Kocherlakota (gesundheit) also opined: “...it is clear to me that the recession and its subsequent recovery would have been significantly worse in the absence of the actions of the Federal Reserve” which is like thanking the iceberg for curing the Titanic’s kitchen of their problem of having run out of beef.
Internationally, Portugal says they won’t seek a bail out despite borrowing costs being at levels more unsustainable than OPEN’s stock price or a Pam Anderson marriage. After a series of dialogues, Prime Minister Jose Socrates has not revealed his method for slashing the debt but he let it be known that Portugal’s budget deficit should fall from 9.3% of GDP to 7.3%. Should that miss, Socrates may be charged with corrupting the truth. Either way, the country needs to raise ~20B euros this year and Wednesday will be their first debt offering so the market is anxious to see at what yields they raise the funds and if they will have to include Luisa Beirao as collateral. And speaking of debt, China’s foreign currencies swelled to the size of John Edwards’ ego as they now own a lot of fucking dollars. Chinese foreign reserves leaped by $199B in the Q4 to $2.85T which was much larger than economists guessed and at the rate of $2B a day, China will soon be holding more dollars than Lisa Ann‘s g-string on a Friday night at Rick’s Cabaret.
In the market today, Goldman released a 63 page report on its business practices and disclosure policies which can be whittled down to 2 words: “Suck it.” Also, financials were up today after Societe Generale upgraded European banks to overweight, saying banks can achieve more profitability than the market expects thanks to their proven ability to manipulate their balance sheets and earnings.
And earnings sort of officially started today with AA putting up decent results by beating guesses by $.02 with revenue inline, yet they traded down ~2% as the Q caused AA investors to sober up. Interestingly, AA’s CEO says he sees growth continuing from emerging economies such as India, Vietnam, and Miley Cyrus‘ pants. In other earnings news SHLD rose after posting guidance above guesses thanks to their strategy of simply having a lower tax rate. So well done Mr. Lampert, what’s next for the business, including “browsing” in revenue recognition? Despite the better than expected earnings, SHLD saw same store sales decline because even most poor people have standards (except for any of Kelsey Grammar’s wives). In other news, LEN jumped up after beating earnings guesses despite lower revenue but then again, how hard is it to beat a guess of negative infinity?
Not everyone was a winner though today as Talbots customers Tal-bought a fuckload less shit. The stock fell ~17% after the company reduced guidance and announced that revenue in the fourth-quarter is down 7% compared to a year ago which they blame on the growth of chubby chasers causing their clientele to all of a sudden care about what they wear. Finally AMD was down ~10% after their CEO resigned citing his desire to not lead such a crappy company. When asked, former CEO Dirk Meyer said: “Look guys, the economy is tough and if something should happen and AMD goes to zero, how the fuck am I going to get a job with that on my resume?”
In small caps, RICK announced that this Q’s revenue will be up only 4.3% with same club revenue down 3.7% driven by their Las Vegas club still sucking dick (actually, sucking dick might have increased revenue). Money McBags bought the stock recently and while this Q’s growth was below his guess of 10% for the year, the stock is still cheap enough that there shouldn’t be much downside as 4% growth is still growth. That said, Money McBags does have one suggestion to help grow the business: more tits. Also TSTC which Money McBags wrote about in November was down 20%+ after something called The Forensic Factor wrote a scathing analysis of the company. If you go back and read what Money McBags wrote, he was dead fucking on in his disdain of the company. There is simply no way to really know what the fuck is going on in these small Chinese companies so the only reasonable thing to do is to stay the fuck out unless you can somehow build confidence in their management teams.
Finally ININ pre-announced their Q today and crushed the fuck out of numbers as if numbers were Alexis Texas’ backside and they were Whitezilla. After their last pre-announcement, Money McBags broke them down and said they were an interesting company with growth potential, so you’ll have to excuse Money McBags while he figuratively fellates himself (though if his new found love Malene Espensen were here, he’d be happy to have her do it literally).
Anyway, ININ will grow top line ~40% this Q which is well above Money McBags’ high end guess and if they can keep that up next year, EPS will be ~$2.00 with non-Gaap eps closer to $2.25 which means at $36.50, they are only trading at 16x which is fucking cheap for 40% growth. Of course growing 40% for a year is harder than winning a land war in Asia or a cock off against Peter North so it is important to try to get some more color on the drivers of this growth when the company has its earnings call. But look, when little companies like this pop on good earnings, if they can hold that and form a new base over the next couple of days, it is usually a hella positive sign. The 24% jump today could have been a bit of short covering, but good things are happening here so as ININ creeps down a bit in the next few days, you may want to take a position here (and not just the t-square position). Money McBags will continue to point out interesting companies like this because recognizing companies early where good things are happening is the easiest way to get alpha.
Editor’s note: It’s late. There was no theme today. Fuck the headline.
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