1/27/11 Midnight Report: S&P Touches 1300, 1300 Says it Liked it
Despite new claims for unemployment putting up the largest weekly increase since September 2005 (and you all remember September 2005, right? Alan Greenspan was still a genius, iPads were still just the truncated spelling of a sanitary napkin, and Kim Kardashian’s vagina was still underwraps (and some guy named Damon Thomas too)), despite Japan being downgraded by S&P due to greater risk of default than Charlie Sheen’s liver, and despite a little bit of happiness being squelched by studies showing breast implants are linked to a rare form of cancer (And no shit, really? You mean to tell Money McBags cutting open your tit and shoving something artificial in there might be a health risk? Shit, what’s next, finding out that eating Twinkies causes obesity or watching CNBC causes dementia?), the market continued to rally as investors buy the fucking rip.
The S&P flirted with 1,300 today in ways that would make the delightful Lisa Ann seem like a cocktease (and Ms. Ann, Money McBags can be reached at firstname.lastname@example.org should you ever want to tease anything of his) as it nudged above that psychological support level before closing a Robert Reich nut hair below it at 1299.54. Money McBags doesn’t know what to say anymore as the market races to the next bubble top (as opposed to the next muffin top), he just hopes you all are properly hedged and can get out before cookie crumbles.
That said, before Money McBags gets to the macro news, he has to go on a bit of a rant today because the Financial Crisis Inquiry Commission released their final report on the global clusterfuck (also known as the ponzeconomy™) and the report was strangely just one sentence: “Everyone acted like a bunch of asshats.” Ok, it was a bit longer than that (probably two sentences claiming that they were asshats and douchelickers) but Money McBags only read the highlights because he is waiting for the book on tape to come out.
The point is, and what really puts a turd in Money McBags’ punchbowl (or a copy of Pride and Prejudice in his bookcase if you will), is that in a letter to the FCIC, Fed Chariman Ben Bernanke admitted that the Fed just fucking missed the complete collapse of the financial system, no really, he did. But Money McBags guesses that all is forgiven because it’s not like that was their main job. Oh wait, what’s that? That is pretty much their only fucking job? Well fuck Money McBags but at least we fired all of the assholes who fucked up and said things in 2005 like: the economy “might bend but would likely not break” from a large home-price drop, and that the market may rest on “solid fundamentals,” and now say: ” it was hard for many FOMC participants, in the summer of 2005, to ascribe substantial conviction to the proposition that overvaluation in the housing market posed the major systemic risks that we now know it did.” Oh wait, what’s that? The fucking assclowns who said that are the same people who are still running the show? Are you kidding Money McBags? Holy shit. This is more fucking cockposterous than if Exxon rehired Captain Hazelwood and put him in charge of ship safety, neighbors insisted that Roman Polanksi take their RV and drive their babysitter home, or President Obama appointed Michael Jackson’s doctor as Surgeon General. Seriously.
Look congress/executive branch/Tina Wallman, Money McBags knows that you like to keep all of your chummy buddies at GS happy and he knows you just recycle the same shitty people through the same shitty jobs, but here is DOCUMENTED PROOF that these fuckers MISSED THE ONLY THING THEY HAD TO NOT MISS. Fucking A, you think Faye Reagan would keep getting hired if she always ducked and missed the money shot? Fuck no, because taking it on the chin IS HER JOB. So how the fuck can these guys still be in charge of this shit when they SUCK AT THEIR JOBS? They have already shown that they aren’t capable, so what makes you think they won’t fail again? Sucking at one’s job isn’t a random walk and sometimes past performance is an indicator of future success and the fact that we have LEARNED NOTHING FROM THIS DOWNTURN and are still sucking off the assholes who missed it, is so fucking ridonkulous that it makes Money McBags’ balls hurt just to think about it (which is why he spends his day thinking about this). Rant over.
Anyway, as for macro news, new claims for unemployment were up to 454k, a jump of 51k and the highest the number has been since October, right before QE2 created all of those jobs, oh wait, what’s that? QE2 wasn’t geared towards creating jobs? It was just supposed to pump up the markets so rich people could have their paper net worth artificially grow and cause them to buy maybe one more tennis bracelet from Tiffany’s for their “babysitter”? Well Money McBags guesses he was misled. Anyway, witch doctors blame the huge jump in new claims on snowstorms because when in doubt just blame an inanimate variable (and the jump was so large that it made Evel Kneivel roll over in his grave and it wasn’t even within a standard deviation of analyst guesses of 405k).
In other macro news pending home sales rose 2%, which beat analyst guesses of a 1% rise and is now only 5% below last year’s ass awful number. Meanwhile, bookings for durable goods increased bv .5% according to the Commerce Department, or fell by 2.5% if we take out transportation and anything else that might have made the number look shitty. Analysts guessed durable goods would rise 1.5% but in fairness to them, no one cares about this number anyway.
Internationally, S&P downgraded Japan from “super happy fun times” to “country and western karaoke night.” The ratings agency expressed concerns over Japan’s escalating debt (which is now twice GDP) and their inability to stop Godzilla after all of these years. In their report, S&P said Japan’s government lacks a “coherent strategy” to address the debt, before adding “for fucksake, they don’t even speak in English, so how are we supposed to understand any strategy of theirs?” That said, unlike the PIIGS, most of Japan’s debt is held domestically, so when the Pokemon hits the fan, they will implode rather than explode.
In the market, a shit ton of companies reported earnings led by NFLX who grew subscribers by 3.1MM and saw their stock price rise 15% which meant shorts like Whitney Tilson once again took it in the pooper (which of course makes NFLX a win-win stock for Mr. Tilson). Profits were up 52%, revenue was up 34%, and gullibility was up 900% as the plethora of free subscribers inflated numbers and caused gross margins to go down from 38% to 34.4%, but luckily for NFLX, that part of the press release was pixelated over. After the quarter, a number of analysts raised their target prices with Cannacord Genuity (formerly Cannacord Adams which, as always, is Canadian for “Roth Capital”) leading the way with a target price of $250, which is only about $1 Billionty too low.
In other news, 1985′s NFLX, MSFT, proved that you can be too big and fail as despite 5% revenue growth, their profit fell slightly as tablet sales started to eat in to sales of computers as if sales of computers were a cheesecake and tablets were Kirstie Alley. Elsewhere, QCOM shares jumped ~6% after the company put up a good Q and raised its outlook for the year citing the need for mobile phones to have more and better chips to be able to properly display HD porn while users are dropping logs at the office. Also, Motorola’s recently spun off mobility business announced their first Q today and dropped 12% on weak guidance, proving once and for all that you can’t polish a turd.
Finally, SBUX was flat despite a blow out Q as they announced that higher input prices will start to hurt margins and as a result gave guidance way below Street guesses. When reminded that Bernanke says there is no inflation, SBUX CEO Howard Schultz replied: “Are you talking about the guy who also missed the biggest economic downturn in our lifetime? Or are you talking about Scarlett Bernanke, who is causing my assets to inflate? Either way, they can both go fuck themselves because inflation is here, though if it is Scarlett, then I’d like a window seat for that.”
In small cap news, holy shit has it been a week for Money McBags and hopefully for you, his loyal readers as well. Last week he mentioned he was looking forward to earnings from KEYN, SMCI, and CRUS and all three crushed it in the last two days with KEYN up ~22%, SMCI up ~6%, and now CRUS up ~19% after they destroyed guidance. And then out of nowhere after hours today, TMRK agreed to sell for a 35%+ premium (and remember Money McBags has been pimping this stock since it was worth ~40% of what it is now). So boo-fucking-yah.
Before Money McBags breaks CRUS down today, he wanted to let you know that he did buy a tiny bit of NEI today despite their lackluster guidance for next Q. It’s a miniscule position because Money McBags knows he is really just guessing based on stock movement, increased volume, and long-term implications of their expanded manufacturing facility in Europe. For whatever it is worth, people more familiar with the industry than Money McBags (which would include everyone except for perhaps Carrie Prejean and a slice of bacon) keep telling him that they wouldn’t be expanding that facility unless they already had signed deals to increase production. In the low margin business they are in, one simply doesn’t put the cart before the horse so we should see ramping revenue. That said, guidance was for a 20% sequential revenue decline so either they need time to build out that facility, or the people Money McBags has been talking with about the industry are more full of shit than Kirk Douglas’ adult diaper. Money McBags thinks NEI has ~20% downside from here with the potential for 100% upside, so as a small speculative position, it is a risk worth taking.
As for CRUS, well they CRUShed it. The company grew revenue by 43% (though it was down 5% sequentially) and earned $.34 per share as their audio business which sells chips to AAPL was up 54%. They gave guidance for next Q for revenue to be $91MM ( up 65% y/y but down ~4% sequentially) with gross margins to maintain in the 55% range and operating costs to scale up a bit to ~$32MM or ~$29.5MM non-gaap. Taking their guidance, Money McBags gets to ~$1.30 eps for fiscal 2011 which is exactly where he was on them last Q. The question is, what the fuck does fiscal 2012 look like because revenue has now sequentially stabilized and they remain at the whims of AAPL. Unfortunately, their transcript hadn’t been posted anywhere by the end of the day and Money McBags refuses to listen to conference call as they are more of a time suck than NSFW Muff Guessing without any of the fun. Given that, Money McBags isn’t entirely sure how to forecast their next year.
If CRUS grows audio revenue 25% and energy drops 10% while operating costs grow 10%, they can earn ~$1.50 per share, so are trading ~15x that, which seems fairly reasonable. That said, if they grow their audio business 50% (and it will grow 70%+ this year) and their energy business is flat, they could earn $2 per share and thus are only trading at ~11x that which would be for ~37% growth. So look, Money McBags has no idea if either of those scenarios are reasonable, he is pulling them so far out of his ass that he thinks he actually pulled out some tongue as well, but it does show that there still might be some upside here.
Hopefully their transcript will be out tomorrow (because their earnings release had less color than a NSFW Betty White nude photo) and Money McBags will be able to find some information (and hopefully this will be out tomorrow and Money McBags will be able to find some gyration). When CRUS hit $18 several months ago, Money McBags told you to trim and with the run up today, he would be doing the same because for it to appreciate significantly from here, you have to believe the audio business can continue to grow at 30%+ and this cyclical company with one customer can trade at at least a market multiple, even though it may be at the top of the cycle. It is possible, so perhaps they gave some better info on the call.
Tomorrow, Money McBags hopes to break down NEI’s Q, CRUS’ transcript, TMRK’s sale, and everything that is going on in this picture. He also hopes to have a headline that doesn’t suck.
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