With market news quieter than a prisoner’s dilemma that actually reaches a Pareto efficient Nash equilibrium, and even quieter than the “Free Bernie Madoff” campaign, Money McBags had time to ponder some of biggest questions of the day.

He wondered why there wasn’t more flashing in the flash crash?  Why they give out degrees for a “science” that doesn’t work in the real world (or why they don’t just change the name to “Theoretical Economics,” redundancies be damned)?  How new claims for unemployment can be trending at ~1.6MM a month and yet the B(L)S data from the (No) Labor Department shows private sector jobs flattish?  And why life expectancy in the US has slipped (though this one is easy to answer as it is mostly the result of people having watched one of those Real Housewives of whereever shows and developed brain aneurysms from something called “punching oneself in the face”)?  There is just little going on until the new year so feel free to ignore Money McBags’ daily commentary and instead guess NSFW muffs to your heart’s content.

That said, there was a bit of macro news out yesterday as The Conference Board’s leading economic indicators jumped 1.1% in November as those leading indicators apparently include “buying shit you can’t afford,” “odds of more stimulus,” and “Jennifer Lawrence‘s movie career.”  The jump did represent the biggest rise since March, was the fifth straight monthly gain, and means absolutely nothing to Money McBags since he doesn’t trust anything that comes from a source focused on something called “business intelligence.”

The only other bit of US news was that the compromise tax cut bill, or as its better known as, “business as usual” (because the only thing compromised was integrity and the fate of the middle class) went to Obama so he could put his George W. Bush on it (who knew that “change we could believe in” consisted solely of organic vegetables at the dinner table?).  The bill includes $801B of tax breaks for the rich so they can not spend even more money that they have sitting in money market funds and $57B in extended unemployment so 45 year old people who got laid off can afford Spaghetti-Os instead of just cock flavored soup.  The bill received bipartisan support (apparently it liked other bills of the same gender) and showed that whether Democrat or Republican, rich people hate taxes and prefer short-term gratification to foreplay.

Internationally, Moody’s cut Ireland’s credit rating by five notches from something called Aa2 to Baa1 and warned it could further downgrade it to Baadfuckingidea.  Money McBags doesn’t know what is more absurd, Moody’s rating system or that anyone would give a fuck about it.  But hey, blinding insight like “the Irish government’s financial strength could decline further if economic growth were to be weaker than currently projected or the cost of stabilizing the banking system turn out to be higher than currently forecast,” provides a valuable tool for the market (the tool of course being the analyst who wrote that).  But it wasn’t just Moody’s who changed their farcical, nonsensical, and cockposterous ratings of Ireland as the IMF cut their forecast for Ireland saying the Irish economy could sag worse than Zara Phillips’ boobs and could lead to a more significant threat of contagion than sharing a toilet seat with Paris Hilton.  The IMF now expects Ireland’s economy to grow only 0.9% in 2011, which is down from their previous 2.3% estimate and any downward deviation could lead to a default more epic than than Winter Pierzina’s cleavage.

The big news in the market was earnings, earnings, and more fucking earnings.  Honestly, Money McBags is starting to question his bearish stance as companies plow through lowered expectations thanks to emerging markets and, well, see that is the part that confuses Money McBags,  With greater than 15% real unemployment, is it possible that the other 85% of the people can spend enough to make up for that gap thanks to more stimulus and an outright denial of the harm of a spiraling deficit?  Money McBags is more confused by this than he was to learn that frogs can pee out foreign objects (though the real question is what were the frogs doing to get those objects in there?).  He is starting to wonder what if the shit never hits the proverbial fan?  He is actively rethinking this, though more actively rethinking this.

Anyway, in terms of earnings Oracle was up 5% after sales of new software foretold a good Q.  The company earned $.51 per share which beat analyst guesses of $.46 per share as sales of new software climbed 21% to $2B (thanks to likely using the brilliant new non-profit sales model) which beat their guidance of 6% to 16% growth.  Elsewhere, RIMM had stronger sales and profit than analysts guessed and grew top line 40% which is amazing seeing as how they are now 4th in the mobile device market after the iPhone, Goog’s Android, and the pocket rocket.  RIMM also raised revenue guidance for next Q from a consensus $5.46B to the higher $5.5B to $5.7B as they expect a strong holiday season once iPhones sell out.

In other earnings news, Assenter (known more formally as Accenture) shot up after a 20% rise in earnings and after they raised their full year revenue guidance to 8% to 11% growth thanks to surging demand for Power Point slides by companies who need materials to make sure their shredders are working properly.  BMO bought MI for a 34% premium because apparently they don’t teach US geography in Canada and the Bank of Montreal thought Wisconsin was New York’s 6th borough.  Finally, AZN was down ~6% as the approval of their blood thinner drug Brilinta, was delayed again as the drug was deemed not to be brilliant (see how easy it is to write a stupid Jay Leno monologue joke.  How late night talk shows don’t hire Money McBags is more of a mystery than why you would want to flash the amish).

In small cap news, not much happened today as Money McBags spent hours scratching his head over how WGO can trade at 40x earnings (though the head scratching could have just been crabs).  Money McBags broke WGO down yesterday and showed they are at a ~$.40 EPS run rate and to make sure he isn’t crazy (well, technically Money McBags may be a bit out there, but he is talking specifically about WGO), he skimmed some sell side reports today on WGO just for shit and giggles (and it was mostly giggles from reading that shit) to see if the Street has any fucking explanation for WGO’s valuation.

The analyst from C has WGO’s top line growing 17% in 2011 and 6% in 2012 with earnings per share of $.50 and $.58 respectively.  So those don’t seem too far out of the ballpark, but this is the part that makes Money McBags’ taint hair stand on end.  Guess what multiple this highly paid C analyst named Gregory Badishkanian puts on a company not even guessed to grow 20%?  16x EV/EBITDA.  Wow.  Money McBags wouldn’t pay 16x EV/EBITDA for anything unless it was growing a fuckload faster than 17% for 1 year and could lick his balls from across the room (shout out to Dice).  So using that 16x EV/EBITDA multiple on 2012 EBITDA, Mr. Badisnotgonnaworkherenaymore gets to a $17 price.  Unfucking real.  Oh yeah, and he arrives at that multiple by saying WGO has traded in a range of 5.5x to 99.9x (though not 100x, because it is important to not round that last .1).  Wow.  You know when it likely traded at 99.9x?  When it was going to zero in the recession as they didn’t have any fucking EBITDA, in fact it was trading at cockfinity times back then so why not use that as a range?  Is this what they teach at CFA school these days (and yes Money McBags is a CFA charterholder, but don’t hold that against him)?

Now the Robert Baird analyst, and he’s likely at Robert Baird because C wasn’t hiring (which is a bit like having to be driven to school because the short bus was too full, but whatever), has 2011 EPS at $.54 and 2012 at $.68, so slightly more positive than our delusional friend at C and has revenue growing at 19% a year despite backlog being down 50%, dealers being back to fully stocked (he even assumes that from now on dealer orders will be only for replenishment), and people not needing to drop an assload of money on a fucking motor home.

That said, his valuation is based on Money McBags’ favorite piece of mental masturbation (other than anything in the MILF section of the NSFW Spankwire.com), a DCF model.  Unfortunately the model was not attached to the note, but Money McBags is sure the perpetual growth estimates were perfectly reasonable (and yes that is sarcasm) since the terminal valuation only determines like 80% of the DCF’s value.  Anyway, the Baird guy’s DCF tells him WGO is worth $16 or 24x his 2012 EPS and if he thinks WGO can grow 19% a year, that is at least only ~25% too high.

—-

So the C analyst uses a ridonkulous multiple on low growth, and the Baird analyst uses witchcraft on high growth which translates to a slightly more reasonable multiple.  Even if you wanted to use fiscal 2012 as your baseline and even if you thought WGO would grow 19% a year, at most you’d put an 18x on that so even using the most optimistic numbers, the stock is ~20% overvalued.  Either way, it all makes less sense to Money McBags than celibacy or tramp stamps and he is happy to short here and wait this one out because time and logic are on his side (though he’d prefer if Carla Ossa were on his front).

Anyway, enjoy your weekend.

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