Money McBags tweeted, facebooked, and even semaphored that he will be traveling Monday through Wednesday of this week and thus likely would be absent from When Genius Prevailed for a few days (even God took one fucking day off), but with the market going back to hell (or at least the 666 low), Money McBags is going to make today what is called a busman’s holiday (or what we here on WGP call a bustman‘s holiday).  That said, he will have to be brief so today will be some quick hits at what is going on, tomorrow may just be a tweet or two, and Thursday Money McBags will be back with his regular column and analysis.


The market is once again dropping like Abe Vigoda‘s balls in a steam room and this time it’s a result of existing home sales falling off a cliff steeper than Nanga Parbat’s Rupal Flank or Jay Leno’s chin.  Existing home sales were so fuckawful that not even Tiger Woods would have slept with them as they fell 27% to a 3.83MM annual rate which is the lowest since May of 1995 which was so long ago that the S&P 500 was still in the 500s, Christopher Reeve was still walking (well at least until the 27th), and muff guessing had only one answer: full bush.

The most interesting part about the number is that of 74 economists/analysts/witch doctors surveyed by Bloomberg, the lowest estimate was for existing sales to fall to 3.93MM.  So all 74 “experts” (and Money McBags uses that term loosely, like Paris Hilton uses her vagina) were way too fucking high because for the 1MMth time here on WGP, ANALYST MODELS ARE NOT PROPERLY CALIBRATED FOR WHAT IS HAPPENING.  We are no longer in a standard bell curve gaussian economy where one can rely on the central limit theorem to make everything ok like a gentle taint tickle from Hillary Fisher.  We are in an unprecedented global clusterfuck where everything has become more intermingled than a fucking Amish family tree so all of the data from the past 70 years, which fuels analyst models, is more irrelevant than Art Laffer’s views on the economy, learning how to say “double dip” in the dead language if Chitimacha, or a pedicure on Christina Hendricks (because not even Richard Simmons looks at her feet).  Money McBags is convinced that opening up excel and using the random number generator to supply data for any kind of economic forecasting model would yield better results than trying to somehow compare the last 20, 30, 40 or however many years of data to what is happening today, so all you really need to know is that things are getting shittier than Betty White’s adult diaper and it’s not clear what is going to turn things around for a sustainable period other than everyone finally getting paid for helping free those Nigerian princes or technological innovation.

Anyway, the 3.83MM annual existing home sales pace was almost 1MM below the 4.65MM guessed by analysts and last month’s number was also revised downwards because, well, it seems like the trendy thing to do.  There are now ~4MM homes on the market which represents over a year of inventory and doesn’t include the shadow inventory of potentially twice that size as banks hold back putting foreclosures on the market and many sellers simply don’t list their properties in an attempt to keep prices somewhere above free and the price of Tom DeLay‘s dignity.

Internationally, there is also increased fear of the upcoming double dip recession as Greece’s economy continues to take it in rear (which it apparently actually enjoys, so Money McBags guesses it is a bit of a Pyrrhic victory) and Hungary continues to be in jeopardy of starving for funding.  In Asia, the Bank of Japan is saying domo aregoti for nothing Mr. Economy as deflation contines to both handcuff and fingercuff the economy as if it were trying out for an Irving Klaw movie.  While the economy grew only .1% last Q, hopes for recovery took another blow yesterday (and unfortunately not the kind from Faye Reagan) when PM Naoto Kan and the governor of the Bank of Japan, Masaaki Shirakawa, opted not to hold a widely anticipated meeting, but instead engaged in  brief phone call that involved Shirakawa asking PM Kan if he had any “Prince Albert in a can” before cackling loudly and hanging up.  The problem in Japan is that people simply don’t want to spend due to the uncertainty around the economy and the government is out of options to further stimulate it, especially with the yen now appreciating and thus hurting exports as in most other countries the demand for bukakke films (Japan’s leading export) is elastic.

In small stock news, ZAGG is somehow up 20% around midday on almost record volume and no news other than people apparently want to lose money.  And speaking of losing money, KIRK continues to trade down after missing estimates by a measly fucking penny the other day and guiding to contracting margins and apparently confessing to being responsible for bringing AIDS to the US in the 1980s (ok, that last one was made up but it is the only reason Money McBags can think of for its spectacular sell off).  Money McBags broke the company down the other day after their earnings and even in taking a hatchet to their downwardly revised numbers, they still appeared to be cheaper than a used Magic Johnson condom.   The company is trading at ~11x Money McBags’ “how can I make numbers look really bad analysis in a very unlikely scenario” plus $3.50 in cash on the balance sheet.  Money McBags understands the price action less than he does the Japanese translation of a Thomas Pynchon novel.  Unfortunately, Money McBags has to run so can’t do a real deep dive but below are some quick reasons he can think of for the massive and continued sell off.

1.  Momentum investors and quant funds had made a shitload of money on this name, up >10x from the bottom so the first bad Q that tripped their models, and it was smell ya later.


2.  Once it got puked out by the momos, retail investors gave up and decided to take their profits as well as defending a small name that is falling makes less sense than Gary Busey‘s face.

3.  Value investors are fucking slow to do their work.  They want to be able to make sure every last fucking NIBL is flowing through to their cash flow statement and DCF model before buying and that shit takes time.  Plus, they look back at the last several years and performance was fuck awful and without knowing the story, they equate that performance to what could happen in an upcoming consumer crash.  Of course the beauty of the KIRK story is that new management (or old management to be precise) came in and fixed shit up by cutting out shitty SKUs and better managing locations and real estate thus those shitty numbers from the past shouldn’t be repeated even if the economy continues to crumble.  Though one must trust that management really did turn things around and it wasn’t just the economy and as value investors are the turtles of the fucking investment world, they are going to want to see a lot of proof of this.

4.  Volume has been rindonkulous over the past several days so perhaps HFTs are now swinging their algorithms here as there were 5MM shares traded the other day on <20MM total shares outstanding and average volume of ~300k.

5.  Somehow, they are really fucked.  Look, Money McBags just went to their site today and it was “under construction” so now he’s not sure what to think.  What kind of retail company has a site under construction in the year 2010?  This makes absolutely no sense.  It was fine the other day when Money McBags linked to it, but now it is gone.  Very fucking weird and now makes Money McBags about as confident in KIRK as a eunuch in a cock off.  Can someone explain this?

Money McBags has to run.  He will be back Thursday and maybe late tomorrow.

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