4/12/11 Midnight Report: Macro News Blows, But Will it Swallow the Market’s Momentum?
The market traded down today as earnings season began not with a bang, or a whimper, but with a Kirstie Alley-esque thud as AA missed revenue guesses (and the 6% drop in the stock likely caused some AA investors to fall off the wagon), Japan’s market fell again as the severity of the nuclear disaster continues to worsen from “there’s nothing to see here” to “Get your free plutonium,” Oil prices dropped which capped the biggest two day drop since jheri curls went out of style, and US import prices rose to their highest level since Lucy Pinder’s last photo spread in Nuts magazine.
In all, there was little positive news (other than the Phallological Museum finally getting their human schlong, and Money McBags can only imagine what that will do for traffic) and with the market already priced as if the ponzeconomy™ has recovered, as if flat wages and spiking input prices won’t cause a decline in the average American’s standard of living on par with the decline in Bernie Madoff’s, and as if Josie Maran will be the next visitor to the delightful meinmyplace, a sell off was more inevitable than death, taxes, and a Miley Cyrus sex tape (and trust Money McBags that will happen).
In US macro news, as already mentioned import prices rose 2.7% but luckily that was only driven by a 10.5% increase in petroleum prices and a 4.2% increase in food prices (and the rise in food prices had the indirect effect of causing bacon perfume to challenge Imperial Majesty and Marisa Miller‘s vulva for the world’s most expensive scent) and as the Fed has taught us, food and energy are irrelevant for prices so a big fucking yawn (and yes that makes as much sense as saying the number 5 is irrelevant for Math or a sharp tongue is irrelevant for a cunning linguist, but as we can see from the National Debt, the Fed may not be the best source for logical proofs).
Stripping out the prices of petroleum, food, and common sense, prices rose only .3% which means that after you spend all of your money to eat, stay warm, and drive to another job interview, you’ll barely have to pay more for those non-discretionary items that you can’t afford to buy anyway. That said, the rising import prices led the trade gap to be above analyst guesses which means analyst guesses of GDP are likely too high and thus should start to fall faster than Glenn Beck’s ratings or civility. So GDP getting cut at the same time that QE2 runs out, means only one thing, buy the fucking dip because the US’ shadow(y) bank will have to reignite the market manipulation with QE3.
Speaking of the Fed, they released their minutes today which simply should have read “ibid.” The only interesting parts of the minutes were that the Fed Banks of Kansas City and Dallas asked for a 25bp raise in rates while the Fed Bank of NY asked not to be seated by those assclowns again. Money McBags does look forward to the Fed meeting next month where he hopes to finally understand the fallacy of core inflation and also hopes to get the Fed’s opinion of this cocktastic look at the TALF by Matt Taibbi (and if you are going to read one thing today, hopefully it will be the rest of this column, but if you are going to read two things today, hopefully it will be the rest of this column and Ashley Dupre’s tattoo, but if you are going to read three things today, hopefully it will be the column, the tattoo, and the piece by Matt Taibbi as he annihilates the rich shitsticks who keep abusing the system because they are the system. If reading it doesn’t make you angrier at the Fed than Christina Applegate at a Femen rally, then Money McBags can’t help you).
The only other real US market news was that the compromise budget cuts were finally announced and they will affect a wide range of programs and services including high-speed rail construction, emergency first responders, the NEA, the EPA, and likely even some T&A. More than $1 billion will also be cut from programs to prevent sexually transmitted diseases, AIDS, and viral hepatitis which means you will now be required to have health insurance before coming in contact with a Kardashian. But not everything is geting cut as some important programs and departments are actually getting increased funding such as the SEC which is getting $74MM more which should also be great for Vicki Richter’s career (and if you didn’t get that reference, this should help).
Along with the short-term budget agreement, President Obama is scheduled to give his proposal for the budget going forward which will likely include provisions that say any tax increases will need to include spending reductions, so really the worst of both worlds (Money McBags would love to hear the logic that went in to that line of thinking which sounds like the “Cut your nose to spite your face but then cut your face to spite your nose” strategy). It is said that Obama is trying to align his budget with the yet to be released objectives of the orgy-tastically nicknamed Gang of Six, which is not just the name of Faye Reagan‘s next movie, but also a group of three Republican and three Democratic senators working on a bipartisan solution (and interesting enough, Ms. Reagan will also be working on bi solutions).
Internationally, Japan lifted their atomic alert to Chernobyl levels as entropy keeps rearing it’s ugly head. Japan’s Nuclear and Industrial Safety Agency raised the rating to a 7 from a 5 after determing the East German judges had been keeping the scores down. The governemnt said the delay in reporting the radiation was because of concern that the margins of error had been large in initial computer models so they thought it was best to err on the side of whatever is the exact oppostie of caution.
In the market, CSCO flipped off their flip camera business citing shitty margins, a poor strategic fit, and too many peeping tom complaints. Elsewhere airline stocks rallied on falling oil prices and Morgan Stanley’s telecom analyst apparently hasn’t been bringing in the trading commissions as he plopped out a series of ratings changes including downgrading Nokia to underweight from equal weight, upgrading ALU to overweight from equal weight and ERIC to equal weight from underweight, and promising to increase his flow of bullshit in the future.
In small cap news Money McBags bought some more KITD at the open (so um, fuck you very much) but regardless of the sell off during the conference call, KITD is poised for at least $70MM in EBITDA next year so is trading at only ~6.5x that and for a company growing organically at 30%+ rates, that is way too fucking cheap, so Money McBags may even buy more tomorrow. Money McBags hopes to break their announcement down in more detail tomorrow but he has yet to receive their conference call tranny and Money McBags refuses to listen to calls anymore as he finds them duller and more time consuming than foreplay.
That said, Money McBags was alerted to the fact that on the call CEO Kaleil Tuzman made a veiled shout out to Money McBags by referencing the amount of teasing he has received for all of the dilution KITD has had in the past (and remember WGP originated the phrase “you can’t spell “dilution” without KITD: Ok, you can, but lets pretend it is a silent K.”). Not only does Money McBags hope to get to KITD tomorrow, but he swapped some emails with CEO Kaleil Tuzman last week and Kaleil promised to come back to WGP and answer Money McBags’ now outdated questions from last Q, so perhaps, Kaleil will show up to discuss the transaction once Money McBags gets his questions out.
In other small cap news, JOEZ continues to blow (and remember Money McBags has been telling you to short Joez since jeggings were still in style) by announcing another shitriffic quarter. Sales were down 9% and holding everything else equal, the company earned no dollars and no cents per share. The positive news is that taking out the drop in jeggings, the company would have had sales up 4%. The negative news is that taking out jeggings, the company would have lost money, so um, yeah. Their main wholesale women’s and international business was down and while their retail channel showed sales up 105%, that’s because the store count tripled as same store sales were also down 9%. So JOEZ served up the pu pu platter of ways to underperform on revenue.
Anyway, Money McBags won’t waste your time anymore with a company trading under $1 per share, earning no net income, and with a management team that is just slightly more shareholder friendly than Angelo Mozilo, because he knows you have more important things to do. That said, this company is still fucked and while it is good they had positive cash flow from operations, they only have $8MM in cash on the balance sheet and if they want to aggressively open soon to fail stores, they may need to raise funds. Money McBags isn’t sure how to value this company because any multiple times zero happens to be zero, but it is way too early to think about going long and shorting a ~$.90 stock is not as easy at it seems.
Writer’s note: Two shitty headlines in a row, fuck Money McBags.
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