The market was up today as PIMCO is set to get their equity on, Fed Ex plans to deliver a fuckload of packages in the next year (even more packages than Victoria Givens took for delivery in 2004, and like all proper businesses, she required they all be delivered in the rear), and former Obama confidant Peter Orszag is going to C so the next time C almost brings the economy to zero, they can get a sweet deal like Goldman did.  Oh wait, they already got a sweet deal.  Hey Vikram, Money McBags hates to tell you how to run your business (though he would recommend doing the opposite of everything you have done in the past), but why the fuck are you spending a few hundred Gs on a guy to do something you were able to do without him?  This makes as much sense as shoving shit up your ass to get rid of a superbug. But alas, Money McBags has never crippled an entire financial system, so take his advice for what it is worth.

As for macro news, initial claims for unemployment fell by 3k to 420k (or by 1k, depending if you want to use the upwardly revised number or the downwardly reported number).  Analysts guessed that the number would come in at 425k so the claims were a slight beat until next week’s upward revision in the “Hold the shock and hope for no awe” strategy.  While marginally beating guesses and still trending down is relatively positive news (like finding out congress extended unemployment benefits is relatively positive news for those long-term unemployed, because either way, they’re still out of fucking work with skill sets deteriorating faster Heidi Jones’ credibility), the unemployment rate has now been at 9.5% or higher for 16 consecutive months which is the longest stretch since they began keeping track of such things in 1948.  Holy fucking shit.  People always whine about how the 1970s were a shit environment to live through (and not just because of all of the dirty hippies with their lack of shaving and love of horrible music, but because of a little something called stagflation), but the 1970s seem like a mouthful of lobster tails and hummers compared to today.


In other macro news, the Philly Fed survey showed manufacturing rose in the Philly area in November, which would be great if whatever was produced in Philly (such as Butterscotch Krimpets, heart attacks, and the smell of despair) wasn’t likely to be stolen before it hits the economy.  The survey came in at 24.3 and witch doctors (or economists, take your pick) guessed it would come in at 15.  The interesting part of the guesses is not that they were off by so much (and one can’t really blame an economist for being off, after all, they are only what is a few lifeforms below human), but that not one guess was for greater than 24, proving once again that economist models are less correlated to today’s economy than laughing is correlated to a Jay Leno monologue.

Elsewhere, housing starts rose 3.9%, while housing finishes still remain flat.  Most troubling was that permits for future home construction dropped to a 1.5 year low as the housing market continues to be weaker than the US educational system and about as fucked as Irish banks. And finally, the Fed may slash debit card fees that issuers charge banks by 90% as they try to take all of the fun out of usury lending.  The Fed proposed a cap of $.12 per transaction which is much lower than the current 1% average and caused MA and V to plunge which likely made the looks on unsuspecting investors’ faces priceless.

Internationally, the ECB is set to double their reserves by increasing their capital to €10.76B from €5.76B which will allow them enough of a war chest to eventually bring the Spiderman Broadway play to the continent.  It is the first increase in 12 years and will somehow help to better offset the risks of both more European sovereign defaults and Lucy Pinder‘s potential move to the States.  The ECB is getting this infusion of capital from national central banks in just three easy annual installments and in return, the national central banks will get a Flowbee thrown in for free.  Of course the decision to raise reserves will affect taxpayers but why care about taxpayers when you have a ponzi scheme to protect?  But here’s the part Money McBags loves best, unlike a commercial bank, the ECB can print money and cannot go bankrupt (which makes it a better business model than Brooke Paller‘s House of Chicken and Reacharounds) , so um, 1.  Why don’t they just print the excess reserves and 2. Why don’t they just not do anything since it doesn’t fucking matter?  Apparently economists fear the bank could lose credibility if its losses exceeded its reserves, but when did a loss of credibility ever stop a central bank from operating?

Also in Europe, the cost of debt in Spain increased as they sold ~2.3B Euros worth of bonds at 100bps to 150bps higher than they did in November, but to be fair, these bonds did not come SWAK from Nereida Gallardo.  And finally, Moody’s put Greece on review for downgrade after doing the same for Spain yesterday.  That said, caring what Moody’s rates your debt is a bit like caring what Meagan Chung concludes about your hedge fund.

In the market, as mentioned earlier Fed Ex was up despite a shitty Q as they raised their full-year forecast thanks to cost “headwinds” blowing away in the next few months (and Money McBags has no idea who “away” is, but if this is headwinds, then congratulations.  And yes Money McBags realizes that was an awful pun, but if you can drop 1.5k words a day of dick jokes on the market without having to find some filler every now and again, be Money McBags’ guest).  Lastly, Goldman added SBUX to their conviction buy list just days after adding AAPL to that same list which means AMZN, GOOG, and Angelina Jolie are likely next in Goldman’s attempt to replay 2003.

In small cap news, one of Money McBags long-term favorite shorts, WGO, put up a marginal Q and yet shot up 13% because either they should be valued richer than NFLX or a bunch of shorts lost their balls and got squeezed tighter than these shorts.  Their quarter was almost identical to last Q which Money McBags broke down for all of you a few months ago.  Revenue was flat sequentially, though up 50% y/y and earnings came in at $.13 per share (and last Q Money McBags pegged them at a $.10 to $.15 per share run rate, so guess you all very much).

There were some real positives for WGO in the Q with prices in the used markets going up, the continued shift to more expensive A Class motor homes which caused ASPs to rise 9%, slightly improved gross margins (up to 9%), and the need for fewer retail promotions (like “Buy one, save 10 factory workers’ jobs” Wednesdays).  That said, dealers have now all restocked with backlog down 54%, the product remains highly discretionary and premium priced, and they’ve now had 2 quarters of flat to down sequential growth with this next q supposedly a seasonally bad Q.

So look, the management team deserves credit for keeping this company afloat, but the valuation is as cockposterous as finding Henry IV’s embalmed head. The headline number is $.13 EPS but that includes a $644k gain on sale of an assembly facility and uses only a 25% tax rate (and remember last Q Money McBags told you they are going to have to start paying taxes again this Q or next).  So taking out the gain and taxing them at 35% gives them closer to $.10 in EPS which is fucking flat with the $.09 that Money McBags calculated for the last Q.  So guess what?  The business momo has lost its mojo.  They are now at a ~$.40 run rate EPS which means they are trading at 37.5x that number.  Umm, really?  A company with a business that was in secular decline BEFORE the recession and has now had consecutive Qs of flat growth and is looking at re-stocked dealer inventories should be trading at 37.5x earnings?  No fucking way.

And it’s not just earnings, as their EBITDA run rate is ~$28MM which means they are trading ~13x EV/EBITDA.  So unless they plan on streaming movies on their RVS, selling restaurant reservations with their vehicles, or having Emma Frain install new wipers on each Winnebago, this company is epically overvalued like CFA charters, Saturday Night Live (and even though everyone knows SNL sucks, that is still overvaluing it), and foreplay.  While Money McBags is well aware that one can fall in love with ideas and not rationally look at them, this makes no fucking sense and Money McBags just doesn’t see where the growth will come from now that they have gone through the restocking.  They’ll generously earn $.50 per share next year and Money McBags would pay at most 15x for that so the stock has at least 50% down to go,  Money McBags is going to remain shorter than Bridget the Midget here and this is a great time to add to that short because nothing should trade at ~40x EPS unless it comes with a twin sister and no gag reflex.

Writer’s Note: Money McBags is aware that today’s headline sucked, but after reading the column, you can all see there was really no theme to the day and unfortunately headlines don’t grow on trees.  Money McBags hates putting out shit he is not pleased with, and while he likes the column, the headline makes his balls hurt.  Alas it is late, and his inspiration has faded, so it is what it is.

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