Archive for December, 2010
2010 is going out with a bang as every piece of data beat guesses today including new claims for unemployment, pending home sales, and days until Christine O’Donnell was once again found out to be a fraud (and note to FBI agents, if you’re looking for where she may have hidden misappropriated funds, you might want to check her bush). And yet despite the flurry of good news, the market reacted with more of a yawn than if it had just read Paul Krugman’s senior thesis (titled Essays on Flexible Exchange Rates: A Love Story) or sat through the first seven hours of the play Gatz. It was a bizarre day in that macro news is hitting its apex while investors remain content to lock in their bonuses and play in the snow until the new year.
As mentioned, initial claims for unemployment fell below 400k for the first time in two years as only 388k people (to be revised up next week in the continued “hold the shock and hope for no awe” government strategy) were fired, laid off, outsourced, or attacked with a dildo last week. So break out the champagne, boil water for the lobster tails, and invite Kayla Collins over for a game of “hide the CDO,” because the economy is coming back (just don’t tell that to the 388k people who are now out of work, the ~18% of the people who are unemployed, the 8.7MM people still getting unemployment benefits, or something called the Federal Reserve Bank who thinks the economy is so fuck awful that they continue to stimulate it by buying bonds, keeping interest rates cockposterously low, and pleading for Super girl to bail them out). With only 388k workers losing their jobs a week and with ~40k new jobs being added to the economy every month, we should be back to full employment in only around negative 250 months, or by Money McBags’ calculations, 1980, so just in time for the 1981 Reagan recession. Sweet.
As always, the most interesting part about the initial claims number was that once again economist guesses proved to be less valuable than a tush turner for Tara Reid (and not because she has no ass, but because it is a stupid fucking product) as they guessed the number would be 415k, which was only off by ~10%. But hey economists, continue to use those broken models which were calibrated to work in an unconnected global economy where it took more than nano-seconds to find out that Argentina has better reality TV than the US. Really, good luck with that, let Money McBags know how it continues to not work. Money McBags is hella glad new claims for unemployment are dropping on an absolute level, but at some point, there are just fewer people to lay off and with job growth somewhere between stagnant and non-fucking-existent, Money McBags will continue to be very skeptical about the pace of the non-recovery.
In other macro news, pending home sales were up last month more than guessed as they rose 3.5% vs. guesses for a 2% rise, yet on an absolute level, they remained absolutely crappy. The index showed sales were still 5% lower than in November of last year as the last four digits of your social security number, a caricature, and a heart beat are no longer considered valid documents to qualify for a mortgage. Also today, business activity in the midwest jumped up to 68.6 from 62.5 while economists guessed it would fall to 61. As always, Money McBags has no idea what the difference between 68.6 and 62.5 is (other than 6.1), so his ability to interpret this data is about as useful as Stevie Wonder’s ability to interpret a Marcel Marceau performance. The index was driven by employment and new orders, which sounds fairly positive, especially if the orders were caused by demand for Money McBags’ new favorite t-shirt (and if you click one link on the award winning When Genius Prevailed today, or any day, let it be that one).
And the positive data didn’t stop there as flows into equity funds were positive for the first time in 8 months as investors rush to top tick the market. Net flows were a whopping $355MM which should put a major dent in the $90B that was pulled out of funds since the “flash crash” in the same way that Flavor Flav’s upcoming memoir will likely put a major dent in Phillip Roth’s potential 2011 Nobel Prize nomination (and Money McBags dares the Nobel committee to read Operation Shylock and then vote for some douchenozzle like Mario Vargas Llosa again). Not only that, but commercial real estate transactions are heating up again as Normandy Real Estate Partners and Five Mile Capital Partners put their John Hancocks on the actual John Hancock for $930MM which is ~50% above where the property was ditched in the throes of the real estate bubble bursting.
In the market, less happened today than in Tom Cruise’s honeymoon suite (except for the crying and disbelief as to what was supposed to go where) with the only mildly interesting news being that bond insurer MBIA was up ~15% after JP Morgan and Barclays dropped lawsuits around MBIA’s restructuring plans. Now Money McBags doesn’t find this interesting because the stock was up so much, rather he finds it interesting because he can’t believe MBIA is still in business. Next thing someone will tell him is that RDN, GM, and Nina Hartley are still open for business as well (umm, maybe scratch that last one). Finally the big rumor is that Groupon may go public (though Money McBags liked it better in 2000 when it was called MobShop or Mercata) after it turned down a $6B offer from GOOG and is trying to raise $950MM. With internet valuations as ridonkulous as that, Money McBags is officially putting the award winning When Genius Prevailed up for sale and won’t accept anything less than $10MM or a year of taint tickles from Erin Heatherton.
In small caps, STVI (which Money McBags pointed out yesterday) unsurprisingly fell 20% because it had been pumped more than Bobbi Starr in Ass Trap. It probably has another 50% down to go but there is something mildly interesting about it and as Money McBags said yesterday, it is worth trying to understand for when things settle. Otherwise not much happened so Money McBags will be back breaking down small cap stocks in the new year.
Writer’s note: Money McBags is 94% likely to take tomorrow off since it is New Years Eve (though he may pop in for a few quick jokes or throw them up on the twitter), his writing has been struggling a bit this week (the effort is there, really it is), nothing is going to happen in the markets, and he’d like to get his champagne on as early as possible. It has been a long year and Money McBags appreciates all of his readers for making this one of the top 700k websites in the world and growing every day. He hopes 2011 will bring more readers, more interesting stocks, and more NSFW Alice Eve nude scenes. So enjoy your celebration and Money McBags will see you all in 2011.
The market continued to rise today on volume lighter than Ben Bernanke’s private sector experience and even lighter than ad sales for the proposed reality TV show tentatively titled “Two and a Half Men” where Hank Paulson, Paul Krugman, and Robert Reich will live in a house and try to solve the economy’s problems using only their wits and empty cans of Pabst Blue Ribbon.
With the year coming to an end (and Money McBags only hopes the end it is coming to is Stacy Keibler‘s) and the Northeast snowstorm still keeping investors out of the office, there was less action today than in Abe Vigoda‘s pants. The lack of news did give Money McBags some time to ponder if gold is in a bubble as it bangs against 2 week highs (yes, but the bubble isn’t popping anytime soon), if Bennie B.’s hail mary QE2 will be followed by a bigger hail mary QE3 (actually, of course it will, so not much to ponder), and how humans are intelligent enough to come up with something as awesome as this doubly-true anagram and yet if left to their own devices will often devolve into playing real life games of Frogger (and Money McBags has no answer for this).
We truly live in a bizarre, dynamic, and quickly changing world and given the unpredictable nature of mankind (and womankind, though this is the kind of woman Money McBags would predict), it is important to realize that the unexpected could happen at any moment. Given that, relying on past data and historical periods as a guide is becoming less telling than Andy Dick at a military recruitment office (though don’t ask, don’t tell was finally repealed, soon to be replaced simply with “get the fuck out”). So be careful with your portfolios in the New Year as macro data remains sluggish to assawful while the market remains manipulatedly up, because things could change at the cock of a trigger (as opposed to the cock of this Trigger).
There was literally no macro data out today so Money McBags was left reading this Bloomberg expose on corporations using tax free cash for both acquisitions and to make sure they have enough lipstick for rainbow parties. Money McBags commented on this a few months ago, but companies are able to use strategies with nicknames such “the Killer B”, “the Deadly D,” and “the Burning P,” to push their profits to low tax domiciles such as the Netherlands, the Bahamas, and Lindsay Lohan‘s pants. Companies devote enormous resources to sheltering this money from the government which creates jobs for auditors, tax accountants, and other professions that create no value. Money McBags is 100% for simplyfing the tax codes, but he is also 100% for “Pantsless Mondays” so take that for what it is worth.
In the market, private equity firm Leonard Green wants private BJ’s as apparently public BJ’s leads to performance anxiety. Green has threatened a hostile takeover to get BJs (a move known in married life as “foreplay”) if the company does not put itself up for auction in the next few weeks. This will be the third retail take over for Leonard Green partners in short time, having also been involved in the take-outs of J. Crew and Jo-Ann Stores, as they try to top tick consumer spend.
The only other market news is that Sears is set to stream movies and thus take on NFLX in a business move that makes less sense than the Governor of New Mexico wasting his time on determining if he should pardon Billy the Kid and even less sense than the Tourettes syndrome ALF episode. Seriously, this is just fucking bizarre as it is so far outside of Sears’ main competency (which is poorly running shitty stores with crap merchandise in rundown geographies) that Money McBags is more speechless than he was at the prospect of a Brooklyn Decker nip slip pic (and if the lighting is just right, and you crane your neck at a 48 degree angle while shouting Beetlejuice three times, you can almost see it). When asked why they were pursuing this business, Sears management said they chose this opportunity because their algorithm for internet search to take on GOOG is still months away, their book reader to take on Kindle still has some kinks, and the models they hired to open up a competitor to Hooters just weren’t up to par. This is one of the strangest business decisions Money McBags has ever read, and it will likely fail faster than a Palin in a spelling bee, but why the fuck not? It’s not like they have anything else working.
In small cap news, DTLK continues to creep up and Money McBags broke them down after their last Q as a kind of interesting little company for a short term trade. More interestingly, STVI continues to go apeshit after this Bloomberg article on them last week that claims they are adding 50k users a week and are the top dating app on the facebook (though Money McBags would never know because the facebook still won’t recognize him as a caring, feeling, individual, so he’ll have to take them at their word).
It’s certainly an interesting company, kind of like the facebook LOV (and Money McBags broke down LOV in February when it was trading at the same price as it is now and said it wasn’t a buy) as they run the Areyouinterested dating application (and if the dating application involves Rachael Taylor, then Money McBags is more than interested) which got a whopping 1.9 out of 5 stars on the facebook fan page, so um, yeah. Anyway, they have been experiencing rapid growth since they switched to the subscription model last year. In Q3, they grew the top line 113% y/y and 35% sequentially which is certainly exciting (though not quite as exciting as a taint tickle from Sarai Givaty) and on their $1.7MM of revenue they manged to earn a whopping $0.00 EPS (and yes, Money McBags realizes that as a start-up-ish growth company there is an investment phase, so current earnings are mostly irrelevant).
What is interesting is that now that they have moved to a subscription based model, their cost of advertising has rocketed up from nothing to $800k this last Q and will likely continue to move up since Alexis Texas has more barriers to entry than their business does. The stock is obviously overvalued on any current metric (trading at a Bernankity times earnings and 15x revenue), but Money McBags isn’t quite sure how to model out revenue.
They claim to have had ~25MM downloads but they only had ~$1.7MM in revenue this last Q which equals ~$.07 per user and that just seems cockposterously wrong. Obviously not all 25MM downloads are active but for the love of Riley Steele, Money McBags can’t find out what their monthly subscription fee is, seriously, google it for yourself and let Money McBags know what you find. All Money McBags knows is that they claim to be adding ~50k users a day (more than Match.com’s 20k per day and probably more than Dickflash.com’s 20 sexual offenders per day) which would give them ~1.5MM new users a month (assuming no attrition which is a terrible fucking assumption, but lets play best case scenario here) and 4.5MM a quarter. At $.07 per sub per Q, that is an additional $300k revenue per Q, which is ok, but not preposterous valuation ok. Now obviously that $.07 per sub is fucking wrong and obviously they are going to have some kind of attrition, but Money McBags just has no ability to forecast this company until he can at least try to get a better handle on the drivers of revenue (and since they were nice enough not to include subscription or attrition numbers in their Q, Money McBags is more out in the cold than a marginally NSFW Alaskan beaver).
The point is, Money McBags wanted to mention this little company because it is flying higher than John Belushi at the Chateau Marmont, but in his first pass through the company, Money McBags just doesn’t have enough information to make an intelligent decision. The revenue potential seems spurious, and Money McBags hates their seeming lack of a competitive advantage and their zero leverage with the facebook, but he does like their growth, their already decent sized network, and Melissa Giraldo’s bikini (which has nothing to do with STVI, but it is delightful). So watch as this stock gets pumped right now like Dick Bove’s ego at an ABA conference and try to do some homework because when it falls back down, there could be something here (shit, there could be something here now, but Money McBags just doesn’t have the data to even begin to hazard a guess as to future revenue). Money McBags just finds this shit interesting and thought he would pass it on to his readers.
Writer’s Note: Yeah, today’s headline sucked, but fucking A is it hard to write one when shit isn’t happening. And yes, yesterday’s headline sucked too as Money McBags was going to go with “Falling Consumer Confidence Causes Retail Sales to Rise, Next Up, Kathy Bates to Cause Boners” but that just seemed too juvenile. He will try to do better, but really, this shit ain’t easy on a daily basis (anyone hear that tiny violin playing?).
12/28/10 Midnight Report: Consumer Confidence Falls Yet Retail Sales Rise as Christmas Miracles Continue
The market continues to putter along in the last trading week of a year that has thoroughly confused Money McBags like the subprime meltdown confused Ben Stein, the cosmological constant confused Einstein, or a grocery store freezer confused Carrie Harkness. Money McBags remains cockposterously perplexed and today was a microcosm of his befuddlement as consumer spend continues to refudiate, repudiate, and refuckingdoodyiate negative macro trends such as high unemployment, falling housing prices, and increasing memberships to the lemon party (and kind readers, if Money McBags were you, he would not go to the url in the sign that guy is holding up in the picture. Money McBags simply reports the news, so don’t say he didn’t warn you).
Anyway, the point is that Money McBags is struggling to interpret the data in any meaningful way (his past attempts to interpret it using modern dance and the Rosetta Stone have failed miserably) other than that we now live in a completely bifurcated society (more bifurcated than Kenny Easterday) where income inequality is growing and the rich continue to spend on shit they don’t need with only desperation and despair trickling down the other 95% of the country. How else does one explain whole towns going into bankruptcy while sales of jewelry, pocketbooks, and roses remain at absurd levels?
In macro news today, holiday retail sales were said to be up ~5.5% according to MasterCard’s SpendingPulse and were led by apparel (up 11.2%), jewelry (up 8.4%), and Michelle Ryan’s newest video (up podophilia %). Guesses are that the sales increase was the biggest in five years with spending reaching around $584.3B (and if spending were Elisabetta Canalis, Money McBags wishes it would reach around him), compared with $566.3B in the same period of 2007. Money McBags can only conclude that a rising stock market sinks all grips (on reality).
In stark opposition to the retail sales numbers, consumer confidence declined in December (now that’s a mouthful or what is more commonly known as, a “Joe Dimaggio”). The Conference Board’s index of consumer confidence slipped to 52.5 from an upwardly revised 54.3 in November as apparently consumers just got their credit card bills from their holiday spending sprees. That said, the index was below even the most pessimistic witch doctor surveyed by Bloomberg as economic models continue to use data more outdated than the theory of luminiferous aether or one-pieces. Most interestingly, the “jobs hard to get” index (with jobs hard to get including the President of the US, Small Forward for the Miami Heat, and Bar Refaeli‘s brazillian waxer) rose to 46.8% in December from 46.3% last month, while the “jobs plentiful” index dropped to 3.9% from “Suckers!”
And consumer un-confidence numbers weren’t the only shitty macro news out today as according to Case-Shiller (the Bartles and Jaymes of macro data if you will, since they thank you for supporting their 3 month old numbers), home prices continue to fall (or at least they fell in October which the data measures). The index showed that single-family home prices fell for the for the fourth consecutive month thanks to a supply greater than hypocritical politicians as a result of home foreclosures, high unemployment, and people needing to use their money for health insurance instead of on houses in case they are called on to perform in that new Spiderman play which is now on their 104th round of understudies. The index of 20 metropolitan areas declined 1% in October from September on a seasonally adjusted basis which is a much steeper drop than the 0.6% fall expected by economists but consistent with the “economy sucks” theory.
Internationally, France’s GDP was revised down “un peu” to un poo poo (and yes that could be the worst line Money McBags has written in the history of the award winning When Genius Prevailed, and if asked, he will tell you that he is not bilingual, though he is a big supporter of their community). Anyway, France’s GDP was lowered as a result of weaker investments in public works, slower consumer service activity, and wasted time by workers trying to catch a glimpse of Carla Bruni.
As for the markets, they were pretty much deader than Dick Cheney’s chance of becoming the next King of Nigeria, or human. The only interesting news is that Wall Street likes GM again as the Street suffers from worse memory loss than a concussed amnesiac after downing a fifth of Mad Dog and a bottle of roofies. Apparently analysts are all jazzed up about GM’s new and refreshed models (while Money McBags is all jizzed up about Hawaiian Tropic’s new and refreshed models) as 2012 will be different from all other years because 2012 will finally be the year that consumers start demanding shitty cars. Money McBags now anxiously awaits tomorrow’s analyst upgrades of Enron, Lehman, and Bo Derek‘s career.
As for small cap stocks, EPAY (which Money McBags has mentioned frequently, just throw it in to the search box) was up ~6% on big volume and has been spiking more than Andrew Jackson’s popularity after the Battle of New Orleans. Money McBags didn’t see any news but perhaps someone is speculating on an upcoming transaction since the company says they will be acquirers with their extra large shitload of cash. Otherwise, there isn’t much going on right now and Money McBags needs to rerun his screens to find some new ideas. He thinks RICK has a good 6 months in front of them, continues to like CTGX and wishes he could get a better update on the profitability of their EMR installations as well as capacity, and thinks SAAS has some real upside. Otherwise, shorting WGO is a good idea here, though not as good as shorting Teena Marie’s career. Money McBags’ research may be a bit sparse this week with the holidays, New Years, and release of the NSFW Natalie Portman-Mila Kunis lesbo scene from The Black Swan, but you can always ask him questions at email@example.com or in the comments section. He has also been fucking around a bit more with the twitter, so feel free to join him there.
With nothing happening today in the market, Money McBags decided to use the Twitter to get his market on in 140 characters or fewer (and none of the characters were Humbert Humbert, Gloria Delgado-Pritchett, or Mr. Horton). Below is what you may have missed:
1. MMB back tomorrow. spent today shoveling, wondering who keeps giving AIG cash, and buying Hef gift for his new bride http://fxn.ws/glPm3j
2. AIG gets lines from 30 banks http://bit.ly/fJ7APb in order to repay those banks. also being sued by ponzi family for trademark infringement.
Twas the night before Christmas, when all through the White House
Not a politician was stirring, not even a louse;
The economy was flung by Timmy without care,
In hopes that St. Bernanke soon would be there;
The regulators were nestled all snug in their beds,
While visions of trannies danced in their heads;
And Obama in his ‘kerchief, listening to his rap,
Had just started contemplating the US debt trap;
When out on the lawn there arose such a clatter,
Tea partiers? Femen? What was the matter?
Away to the window Obama flew like TARP cash,
Which even Kashkari now admits was too rash.
The buffoon with the breasts, you know the dodo
Was heard in the back, cackling on her fake news show,
When, what to Bill Clinton’s wandering eyes should appear,
But a man with no toupee, who loved to interfere,
This bald little man, who kept the economy in the tank,
Obama knew in a moment, it must be St. Bernank.
More rapid than quant easings his governors they came,
And he whistled, and shouted, and called them by name;
“Now Dudley! now, Bullard! now, Tarullo and Yellen!
On, Duke! On, Raskin! Leave Hoenig, don’t tell him!
To the top of the press! We hear the call!
Print money! Print money! Print money for all!”
The policies of Keynes they say will certainly fly,
And if it meets with an obstacle, make Greenspan the fall guy.
So up to the money printing press, the governors they flew,
The sleigh full of jobless; Goldman bonuses too.
And then, with a crashing, Obama heard on the roof,
The crumbling of Fannie Mae, gone with a poof.
As Obama drew in his head, PIIGS falling all around,
Down the chimney St. Bernanke came, holding interest rates cockposterously down.
He brought a wealth transfer, the middle class under foot,
But hoped to keep the market rising with the Bernanke put;
A bundle of papers he had flung on his back,
Shares of Netflix and Apple, T-Bills in a stack.
His policies confounded, his balance sheet so scary!
Mortgages under foreclosure, tax payers be wary!
His droll bankster friends, who thought up CDOs,
Could be heard partying in back, with their lobbyist hos.
Fillings of gold he held tight in his teeth,
While visions of Japan circled his head like a wreath.
He had a currency to debase, it was said on the Telly,
And lucky for taxpayers, a bowlful of jelly!
The economy he would hump, like another old elf,
And Obama laughed when he saw him, as if he sold an AIG shelf!
A wink of his eye and a nod to the Fed,
Mo’ money, mo’ money, mo’ money to dread.
He spiked the yield curve, claiming that surely will work,
And created moral hazard for banks, what a fucking jerk.
And laying his middle finger aside of his nose,
And laughing at the suckers, up the printing press he rose!
He sprang to his sleigh, to his team gave a whistle,
And away they all flew, giving common sense a dismissal.
But Obama heard him exclaim, ‘ere he drove out of sight,
“Buy the fucking dip, and it all will be right!”
Editor’s Note: Money McBags will be off until next week for the holidays, though it is possible he will do something on the twitter or the facebook or Lisa Ann‘s face between now and then (though hopefully the later of the three). While loyal readers know Money McBags lights the menorah, he is happy to join in the pagan festivities right now (such as Jebus’ birthday, Kwanza, and Festivus) and spend a little time on himself. That said, Money McBags does firmly believe in the holiday spirit, and the charity he will be supporting this year is Charity Hodges. He hopes you all find causes to give to that are as near and dear to your hearts as Ms. Hodges is to his. If you need to get in touch with Money McBags before then, he can always be reached at firstname.lastname@example.org or just leave a comment. And if you liked the poem, forward it on to friends, siblings, and Natalie Portman (or just forward it on to her) as a way to spread cheer during this holiday season.
The market crept up again today like Jessica Simpson’s pants or like Pete Townshend at a boy scout overnight (though all for research, wink wink). With the year ending next week and investor’s preparing for tonight’s lunar eclipse where the Earth will happily play Lucky Pierre between the Moon and the Sun (and this hasn’t happened during the winter solstice since 1638, or back when gold was the preferred currency, liberals tried to control thought in Massachusetts, and Larry King was patching up another marriage, so um, Money McBags guesses some things never change), the market is destined to float along as portfolio managers are more likely to challenge Lexington Steele to a cock off than they are to do anything to cause volatility right before bonus season. So feel free to ignore the market movements over the next week and a half and rebalance your portfolio for the first of the year.
With a dearth of macro news today (in fact macro news was scarcer than panties on Britney Spears and even scarcer than astatine), the only news Money McBags could find relevant to the markets was that retail sales had another strong holiday weekend. The strength of retail sales remains cockposterously confounding to Money McBags, even more confounding than the efficient market hypothesis or this food insurance thing (that video was some kind of farce, right?).
How is it possible that according to some guy named Craig Johnson, the President of some place called Customer Growth Partners, holiday sales this season will surpass 2007′s total sales record of $508B (and Craig, Money McBags hates to tell you how to run your business, but if you bill yourself as a consumer and service strategist, perhaps you should have a website that doesn’t look like it was made in 1994 using MS-DOS and whatever carayola crayons were left over in the box)? This just doesn’t make sense to Money McBags and he proposes that instead of having smart people waste their time proving that genes cause infidelity (especially these jeans), we get them to look in to how people can block out potential disastrous future events (like spiraling debts, diminished retirement accounts, and Nikki Cox turning in to Carrot Top. Oh Nikki, you once had such great promise) and continue to spend on shit they don’t need and can’t afford. Money McBags just doesn’t get it, but then again, he doesn’t get Dancing with the Stars or Paul Krugman OpEds, so perhaps he is the one who is in the wrong.
Anyway, according to something called SpendingPulse (and someone needs to take Money McBags’ pulse over all of this spending), eCommerce sales rose 13.5% and apparel sales were up 9.8% from the start of the holiday season through Dec. 11 compared with the same period a year ago So just think how strong sales will be once QE3 hits. ComScore showed online sales in the most recent week ended Dec. 17 grew 14% to $5.15B and there were four individual days last week where sales topped $900MM (those days of course included “Green Monday”, “Plastic Tuesday”, and “Bankruptcy Wednesday”). But hey, as long as people will keep selling hamburgers today for payment on Tuesday, and as long as banks don’t take any risk when lending since Uncle George and Uncle Obama have had their backs, then there is no reason the economy can’t go to cockfinity. So buy away, buy away.
Oh yeah, Money McBags loved this story about middle of the road bankers (known collectively as Jefferies) who are getting their cuff links all in a bunch about the prospects of potentially not getting bonuses. Money McBags would feel badly for them if they 1. Did anything productive for society (like writing dick jokes on the market from their dining room table). 2. Didn’t just have their base pay doubled to make up for the lack of bonuses. 3. Needed that money to release Angeline Moncayo nude pictures. But since none of those are true, Money McBags will gladly give them a full case of “who gives a shit” should they require further compensation.
In Europe, stocks closed at 27 month highs because apparently no one gives a shit about Ireland and their lack of liquidity. In a position paper published on its website (and Money McBags only hopes that position was the Iraqi Drill Press), the ECB said legal flaws in Ireland’s bailout legislation could affect its rights over collateral security which is the multi-syllabic way of the ECB saying “there is a bit of a chance we may have fucked up.”
In the market, NFLX’s CEO called out noted turd in the punchbowl Whitney Tilson (who never met a copy of Securities Analysis whose pages he couldn’t stick together), about Tilson’s NFLX short. The CEO said competitive threats, bandwidth costs, and the CFO departure weren’t issues and that as soon as people in China get running water, and then electricity, and then TVs, and then wifi, NFLX’s valuation will look only mildly expensive.
Elsewhere, AXP was down ~3% after Stiffy Nicolaus wondered if consumers will start leaving home without it (and that is the Jay Leno joke of the day). The analyst warns that now that the Fed has proposed a cap on debit card interchange fees merchants are forced to pay, it could cause merchants to steer consumers away from credit cards. Stifel Nicolaus said the company is “more exposed” following last week’s Federal Reserve proposals, though not as exposed as Snooki will be when she drops in the ball (and Money McBags finds that a nice change of pace since usually the balls drop in her), and worries that cutting interchange fees could be next for credit cards.
Finally, Chesapeake energy chesa-peaked up 7% after it was learned that Carl Icahn built up a ~6% position in the firm and Raytheon announced they are paying an 8.5% premium of $490MM for APSG. APSG provides surveillance and cybersecurity equipment to the Pentagon to make sure viruses aren’t downloaded on to important government servers after intelligence officers play the NSFW silicon challenge.
In small cap news, RICK was up ~6% and remember last week Money McBags broke down their Q and said now was the time to buy back in to this consumer necessity product. The company should earn between .044 and .050 lap dances per share in fiscal 2011 and they are trading at only 8x to 9x that with consistent 10% growth (and Money McBags can assure he grows at least 10% every time he goes to Rick’s). This isn’t a long-term trade, but RICK has the momentum and a decent margin of safety, trading at only 5x EV/EBIDTA and <10x earnings, to have a nice 40% or 50% run here to reach a price of .60 lap dances to .80 lap dances.
Most cockpleasingly though, ZAGG channeled their inner NFLX and released a statement today refuting some “random implications” about their company posted on some blog at SeekingAlpha. Oh god, this makes Money McBags’ balls tickle with the absurdity of it all. While it is bizarre enough that NFLX felt the need to call out Whitney Tilson, at least they did it point by point and at least one person other than Mrs. Tilson has heard of Whitney. In contrast, ZAGG called out some anonymous short, didn’t say which comments they objected to, didn’t try to set them straight, and at the end said “Further comment on this matter will not be provided by the company or its advisors.” Wow, that is some weird ass shit, even weirder than Carnie Wilson admitting she is fat as fuck. But here is the best part, the short ZAGG was addressing is some guy called Worthless Pennies and this was likely his latest missive.
Look ZAGG management, Money McBags shouldn’t have to tell you how to run your company, and he has been critical of you in the past (because your business is selling a commodity product where eventually margins will be frittered away like a married guy’s dignity), but YOU DON’T RESPOND TO SOME DICKBAG WITH A MADE UP NAME POSTING A BLOG. Seriously, do you need someone named Money McBags to tell you that?
For fucksake, it’s one thing if Whitney Tilson gets a bug up his ass about your company because he can tell all of his douchey rich hedge fund friends and they can band together to manipulate your stock, but Worthless Pennies ain’t no fucking Whitney Tilson. Trust Money McBags on this, there is not one institutional investor or hedge fund (you know, the people who have enough money to move your stock), who is reading anything this guy writes. So if you want to build credibility and act like a real fucking company, just shut the fuck up and manage your business unless you plan to respond to every sith lord and hornyass69 that posts on Yahoo! as well.
Here’s the deal, Money McBags has no idea if what Worthless Pennies says is true, and frankly, he doesn’t give a shit. It’s irrelevant to him. Money McBags thinks the business has long term flaws and an inexperienced and promotional management team and this ill-advised missive from ZAGG management does nothing to quell the later. The whole thing just looks silly, but kudos to ZAGG for beginning “an investigation into the circumstances around the trading in ZAGG stock and options on Thursday, December 16, 2010. The company has filed a formal complaint with the Chicago Board Options Exchange and will report this matter to the Securities and Exchange Commission’s Division of Trading and Markets and Division of Enforcement.” No really, Money McBags is sure that at the end of the investigation the SEC will send Worthless Pennies to his room with no dinner and maybe even not let him go to prom. Anyway ZAGG, if you think some seekingalpha article can cause that much REAL movement in your stock, then that is all Money McBags needs to know about your management team.
The point is, this does nothing to change Money McBags’ long-term short view of ZAGG (which is based on logic and reason) and he will continue to give them credit for the nice quarters they have put up (he just doesn’t see them lasting). That said, he now eagerly awaits their next statement where they may take on someone named Goh Lik Kok on 4chan for posting that ZAGG eats babies.
With this week likely to be less eventful than a year as Paul Volcker’s prostate and even less eventful than Amanda Heard’s night at the Thunder Down Under (Google that one yourselves), Money McBags thought he would take a second to get to know his readers. In the past year, you’ve all asked many questions about Money McBags and he has answered them to the best of his abilities, but he thought it was time to shed a little light on who comes to the award winning When Genius Prevailed (other than The Bernanke, Dick Bove, and Robert Downey Jr.).
You see, when Money McBags started the award winning When Genius Prevailed, he envisioned there would be lively banter about stocks in the comments section which would provide great insight to readers, lead to the fleshing out of money making ideas, and provide endless nanoseconds of entertainment. And while there has been quite a bit of that (like this, when a poor deluded Graham-Dodder tried to use some sort of hocus pocus logic and old information to claim DGIT was too cheap), there should be more.
Money McBags’ columns get considerable feedback on Zerohedge, but the discussion on the award winning When Genius Prevailed has been a bit muted. Now some of that is Money McBags’ fault as he is not always prompt in answering reader questions, but mostly, it is likely because you all don’t feel comfortable with each other.
So to break the ice, Money McBags will start this off by shedding light on who you all really are. Below are the actual Google searches that led people to the award winning When Genius Prevailed this weekend. Many of them were used several times and they are listed below in alphabetical order, not by frequency. While this probably says more about Money McBags than it does you, Money McBags has never been prouder.
GOOG Searches that led to Traffic on the Award Winning When Genius Prevailed 12/18/10 and 12/19/10:
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|death, abortion, aids, drinking, fuck blog, producer||photos de kim kardashian|
|dec 2010 unemployment report||picture of kelly brook vagina|
|eliza dushku earnings||pop tarts hit no. 2 thanks to the “tremendous buzz lift from their retail store opening on times square|
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|hanna_s links – shemale tern gets face messed up with ji||small ass|
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Money McBags will do his best this week to try to put up some entertaining shit (he hopes to have a column tonight), but either way, feel free to use the comments section for suggestions, ideas, and anything Alice Eve. And most importantly, remember, this site is for you (especially if you have a twin sister, low self esteem, and making fun of stocks growing <10% trading at 16x EV/EBITDA turns you on).
Editor’s Note: Money McBags has to clear up some confusion as many of you have emailed about the Google Searches above. Goog search traffic represents <5% of the traffic on the award winning When Genius Prevailed. The majority of the traffic is people interested in unique insight in to the markets and stocks. Money McBags has not optimized the site for GOOG search traffic, nor does he care to do so, which is why he finds the above table funny.
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.
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.
12/15/10 Midnight Report: Rich Guys Vote To Extend Tax Cuts For Rich, Laughter Trickles Down to Middle Class
The market continued to move sideways today as economic data was less relevant than Bernie Madoff’s thoughts on the CAPM and fund managers don’t want to rock the boat (though they’ll happily tickle the little man inside of it) this close to year end bonuses. This lack of volatility in the market is less surprising than John Boehner crying over a paper cut (or a tax cut) or finding out that old men still want sex (and you really needed to do a study to for that?).
The big news of the day was that the Senate passed the tax cut plan ensuring the “spend and don’t tax” policies of George W. Bush will continue to bankrupt this country for generations to come. It is the Government’s ultimate fuck you to anyone who still believes in the Ricardian equivalence proposition or the mathematical concept of compounding.
The bill extends all of the tax cuts that were enacted in 2001 and 2003 for another two years (until they will be extended again so Wall Street traders who make billions of dollars by hitting a button won’t ever have to downgrade from their daily diet of five unicorn fetuses to only four) and it extends expanded unemployment insurance benefits through 2011 (so the unemployed can eat for another few months while employers tell them their skills have become more obsolete than rotary phones, penny-farthings, and full bush). The compromise will also cut payroll taxes by 2% (which might stimulate hiring if margins weren’t going down like Gayle King at Oprah Winfrey’s house) and will allow businesses to write off 100% of capital investments until 2011 which means executive suites will all soon be redone with neorests, rockstars, and Ashley Dupre. At this rate, Wesley Snipes will be let out of jail early, and not for good behavior, but rather for paying too much in taxes over the past 10 years. But party on, politicians, party on.
In macro news, both the core and actual CPI rose by .1%, slightly below analyst guesses of .2% and completely irrelevant to anything. Industrial output rose by .4% which was its biggest gain since July as a spike in utilities partly offset a 6% decline in the production of motor vehicles and a 15% reduction in hope. Finally, applications for home loans fell last week as mortgage rates rose to 7 week highs and people still don’t have any fucking money to waste on expensive declining assets (which is terrible news for Elizabeth Taylor’s vagina).
The only other bit of interesting US market news was that the inconceivable Lloyd Blankfein and his fellow warlords are slated to get $111MM in bonuses from this year and 2007 as a reward for destroying the economy but having enough political pull to stay afloat. Wow. And who said only massages have happy endings? Blankfein will net $24.3MM by himself which he promises to put towards world peace, making sure all of Camille Crimson’s classes (probably NSFW) at the Learning Annex are free, and developing a vaccine for iocaine powder. Just kidding, he’s probably going to put it all in a pile in the middle of his bedroom and dance naked around it as he wildly cackles at the robbery he got away with in front of everyone’s eyes. Damn it feels good to be a Banksta.
Internationally, fears of European defaults are once again rising (though it’s unclear why they ever sank) as Moody’s said they are putting their credit rating of Spain on review for a possible downgrade. While this would have more credibility if Moody’s hadn’t both missed the biggest global financial meltdown in 80 years and also been complicit in it, it was enough to spook the markets (and Money McBags means spook in the literal sense, so don’t go all Coleman Silk on him). This news, coupled with violent worker strikes in Greece (and Money McBags would have coupled that news with a nice Chianti, and not worker strikes, but whatever), sent the Euro down and once again made people realize that like RuPaul, Europe’s banking system may be hiding something underneath.
In the market, Goldman and Nomura cut EPS guesses for Morgan Stanley from “made-up” to “made-up and shitty.” Joy global was up~7% after a better than expected Q which saw profits rise 18% as the CEO said they “simply dug the fuck out of some more shit.” Elsewhere, Honeywell fell a bit after they gave below guesses 2011 earnings guidance even though profits are supposed to rise 17% to 24% thanks to the production of huge cockpits. And finally, Best Buy continued to get pounded as this is one dip investors refuse to buy (and this is another dip investors refuse to buy).
In small caps, an old Money McBags favorite that we all made money on earlier in the year put up an ok quarter today and jumped up ~7%. That stock is of course RICK, where we were once proud not just to be owners, but also to be clients, especially when we basked in the greater than 50% returns we had before selling at the beginning of March. One of the reasons we sold was their announced acquisition of competitor VCG Holdings but apparently RICK pulled out of that early as they didn’t have proper protection, so that makes this company much more interesting again.
On the call, they said the economy is still too hit or miss to give guidance, but November was on par with October after seeing a ~10% drop in that time period last year. Other positives include the Las Vegas club not leaking money anymore (because right now all of the Vegas club owners have a truce on not paying cabbies too much to bring people in) and coming up basically EBIDTA breakeven (ok, it’s bad that this club is still eating a dick, unless it were Money McBags’ dick the lovely entertainers were eating, but whatever). They’ve also started having success with promotions such as $2 drink night. The CEO said $2 drink night packs the clubs so much that they are able to upsell more VIP tables so guys can get away from the mass of cock crowding the main floor and enjoy their tits in a much more refined area. As bottle service is usually about $500 per in these VIP areas (and Money McBags has the credit card bills to prove so), that certainly makes up for the cheap drink promotion.
Other positive include the announcement that they are buying two more clubs (one in Indianapolis and one by the Dallas airport) and have been snatching up (pun intended) shares in the market at ~$6 (or .3 lap dances, and for the rest of this piece, Money McBags will be using his preferred denomination of lap dances). And oh yeah, the Super Bowl is in Dallas this year where RICK’s will have 7 clubs so that January weekend will likely make it rain in RICK’s P&L like the P&L were in Tutunendo, Colombia.
So look, RICK’s top line has shown it can hold up in the recession having grown ~11% for this fiscal year with same club sales up ~7%. Even unemployment officers understand lap dances aren’t discretionary but rather therapeutic distractions to help people forget that they live in a cruel and angry world. For the year, RICK had a GAAP loss of ~400k lap dances but taking out the 1MM lap dance impairment of assets they took on their Las Vegas club (for buying it at the top of the fucking market a few years ago), they would have earned ~485k lap dances and taxing that at 35% would have equaled ~.033 lap dances per share so the stock is trading at ~11.5x that trailing number which is not bad for a consistent grower.
They also earned ~880k lap dances of adjusted EBITDA for the year which means they are trading at just over 5x EV/EBITDA (and they have been buying shittier clubs on sale for only 3x EBITDA). So the stock is actually pretty fucking cheap. That said, this stock will always trade at a discount just because one toothy hummer in the champagne room to the wrong Senator and they could be shut down in a second.
That said, if they can grow top line 10%, have operating costs only grow 7.5% (like they did in 2010, though they just upgraded their systems so operating costs shouldn’t grow as much), lose 200k lap dance in interest expense and pay a 35% tax rate, they will earn ~.044 lap dance per share and they are currently trading at only 9x that. This company has all of a sudden become interesting again with a solid year.
Yeah, it’s a bit of a shady business, and sure they have made some bad acquisitions (which is why walking away from the VCG Holdings deal makes Money McBags feel a fuckload better), and of course it is a bit disconcerting that the economy is so fucked that they can’t get a proper read on next year, but as long as the company can maintain the same pace that they have had throughout the downturn, it is pretty fucking cheap. Should this sell off and get back down to ~.3 lap dances per share, it is certainly worth buying.
Anyway, pay attention for the next couple of days to see if it can build a new base, and if it does, that could mean a good entry point (though not as good as this entry point) and should provide enough returns for plenty of champagne in the champagne room.
Editors Note: As the next 2.5 weeks promise to be duller than amish porn or a Henry James novel (and Money McBags still hasn’t forgiven Mr. James for the 4ish hours of his life he wasted reading The Bostonians which had all of the action, intrigue, and humor of a shriveled taint hair), Money McBags may struggle a bit to make this shit interesting. He could just post pictures of Rosie Jones, fabricate stories like other great media outlets, or simply try to write in only rhyming iambic pentameter (Today nothing went on in the market, news was lighter than a tiny ant’s shit) but those are all gimmicks and you all know Money McBags is cockposterously against gimmicks and all for originality. So bear with Money McBags for the next few weeks as he navigates the dulldrums (misspelling intended) of the end of the year, and tries to continue to take the market from boring and stuffy, to boring and slightly less stuffy.