The market is trying to rally after last week’s sell off which was caused by Obama letting Paul Volcker threaten to open up a can of whoop ass on the banking system, the senate seemingly hedging on reaffirming Ben Bernanke as Chairman of the Federal Reserve proving once and for all that the Senate is as good at making decisions as NBC is at handling their prime time schedule, and something called “data” which showed that unemployment remains higher than Brittany Murphy on the morning of 12/20/09.  Money McBags has been saying this for a while, but we are at an inflection point.  The market has rallied back to above a fair value based on earnings, so either earnings are going to have to be strong, or the market is going to have to do a very public walk of shame and re-trace some of its steps.

The news today is that the Senate has defied all known human physiology and started to think with their asses (because that is where their brains appear to be) and is likely going to reconfirm Ben Bernanke as Fed Chairman.  This move is said to largely be a result of the Senate’s other top choices, Bernie Madoff and Raj Rajaratnam (or Raj-squared for short), currently being a bit indisposed (though to be honest, Money McBags highly approves of Mr. Rajaratnam’s hiring practices and only wonders if he would have hired Mrs. Brosnan to cover large cap stocks or some woman named Heidi Montag to cover plastics).  InTrade is betting there is a 95% chance Bernanke stays as Fed chair which are exactly the same odds of the US highest income tax rate being above 38% in 2010 and Hilary Clinton being a man.

In macro news, US existing home sales plunged 17% which was the biggest decrease since they started keeping records in 1968 (thus after both the Great Depression of the 1930s and the scratch and sniff paint fad of the 1940s).  The drop in home sales was driven by the end of government tax incentives for first time buyers, continued unemployment, tougher lending standards, and not being able to find a carpet to match the drapes (a problem which Jenny McCarthy can sympathize with in this very not safe for work image).

In stock news, it’s still earnings season and most people are eagerly awaiting Apple’s earnings tonight after the bell.  If they beat estimates, will they be able to rise or will the market sell the news like they did to GOOG, INTC, and Jay Leno on prime time?  Haliburton announced earnings today and profits were down 7%. The company cited weaker drilling activity and the fact that Dick Cheney is no longer vice-president.  And Ericcson will be cutting 1,500 jobs due to an 82% drop in profits.  However, the drop in profit does disprove Tiger Woods theory that Swedes don’t go down.

In small cap news, HAFC continues it’s fall from a silly rally as it shows that the book value depends on the book (you hear that Peter Cooper Village?), and ZAGG is also taking it in the yingus as the market realizes that no one wants to pay $30 for an iPhone cover (and honestly, this might have been the easiest short since Bridget the Midget).  In fact on 12/31/09, Money McBags said this in the comment section of this very blog while debating with a reader: “In fact I will wager 1 share of ZAGG (and that is funny because ZAGG is going to $0).”  Just a few months ago, ZAGG was trading at a multiple greater than 30x, despite the fact that they sell one product which is overpriced, don’t even own the technology, are in a market with low barriers to entry with a lot of competitors coming in, and it is easier and less time consuming to get Artie Lange off drugs than it is to apply their ZaggSkin product.  Plus management was talking about building ZAGG stores for all of their future products instead of figuring out how to make their current product easier to apply and cheaper.  They are now trading at around 14x 2009 expected earnings of $.20 per share, a number by the way which has maintained stagnant despite top line growth (which happens when you have to distribute products to more expensive channels and you pay more for shipping than you receive).  The easy money has been made on this short, but it is unlikely their ZaggBox sells even as well as Rosie O’Donnell’s box and their App Store or marketplace or whatever they want to call it is more commoditized than fake boobs at a casting call for Van Wilder 3: The Rise of My Pants.  In other small cap news, MED pre-announced a good quarter today of 75% growth and EPS to be $.17 to $.20 in this Q.  The company has great ROEs, is growing faster than a steroidal weed, and is trading at only around 20x 2010 earnings and estimates will likely move up after today’s pre-announcement.  Money McBags would ordinarily like a stock like this, especially after it’s big recent sell-off, but there is something about multi-level marketing that feels oh so dirty to him and apparently others agree.  MED could be a big winner, but Money McBags is going to sit this one out.

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