The market ran up again today because Warren Buffett said the economy is fine (and as we at the award winning When Genius Prevail know, if you keep saying something, people will eventually believe you) as noted by the fact that he is back to eating four scrambled faberge eggs for breakfast with his soylent green as opposed to just two, Basel III was agreed to by central bankers, regulators, and shamans (to be potentially ratified sometime later this year), and all of the regression models which use outdated data to forecast the economy have decided to draw hockey stick charts in honor of the coming winter season.  So it was a good day if you were long equities and locked in some profits, but probably a better day if you were long Sophie Monk and locked in your twig and bits (and yes, that is the worst pun in the history of the award winning WGP, but you get what you pay for).

The new bank regulations caused financials to rally as the regulations are seen as not stringent enough to keep banks from further manipulating the market, and yet stringent enough to give the optics that they will curtail the predatory lending behavior that started this whole global economic recession cum depression.  The most important part of the new requirements is that banks will now need to hold 7.5% of common equity as reserves (up from 4% in the US, 2% in most of Europe, and 0% in Greece) and will be forced to comply by 2019, which only gives banks 9 more years to manipulate the shit out of lending and cause another global meltdown before different rules are not put in to place when these become outdated before they are even implemented.   Whew.

Seriously, Money McBags is breathing so much easier now that in potentially 9 years (that is if Basel III is fully ratified by the end of the year and the EU still exists by 2019), banks will have to hold more reserves, or simply just push more loans down to off-balance sheet accounting sleights of hand like conduits, structured investment vehicles, and the inconceivable Lloyd Blankfein‘s E*Trade account.  The market simply wants to rally but you’ll excuse Money McBags if he is more fascinated that blind people read Playboy than he is in anything that will likely not happen for 9 years as with the exponential acceleration of technology and medicine, in nine years we all may be living on Uranus (or the slightly larger and infinitely more comfortable Ines Sainz’ anus) grokking the downfall of society and not caring one iota about whether or not C or BAC is holding reserve capital.

There wasn’t much US macro news today which allowed investors to forget the worsening fundamentals and instead focus on their feelings.  Internationally, the EU raised their 2010 growth forecast to 1.7% from “fuck if I know.”  Growth forecasts were raised based on strong second quarter output and bored analysts who want to see how long they can mess with people before being caught.  That said, the recovery is still going to be more uneven than a Kafka novel or Tara Reid‘s boobs as the EU has disparate economies that misreport their borrowings in many different ways (for instance, Greece misreports their borrowings in semaphore).

In the market, just about everything was up led by financials thanks to Basel III (and Money McBags hears Basel III will contain much more nudity than Basel II: Regulator Bugaloo and the original BASEL I:  Central Bankers Have More Fun).  In M&A news, HPQ is buying ARST for a ~25% premium and Hertz is spending $1.5B on Dollar Thrifty (with most of that money going to clean out the puke stains in the back seats of the cars).  While in T&A news, Sheyla Hershey sold off her assets for nothing but the promise of living another day in a world where no one will ever pay attention to her again, damn you vanity, damn you.  MSFT was bizarrely up 5% today on no news other than Steve Ballmer pimping technological innovation and that people apparently like companies that haven’t innovated in 20 years and sell a product that sucks.  Strangely, classic large cap growth company VMW, which has been bending the market over for months now as if it were Bedman and the market were Throbbin, was down on the day.  As always, Money McBags is a big fan of VMW and the whole cloud computing space but it is time for some sector rotation after the run up but that should soon yield a decent entry point for VMW.

In small cap news, just about everything was up as well.  One company that has had a strong last two weeks and Money McBags has no idea why, is MLNK.  Money McBags broke the company down after their awful earnings the other month (and if you’re going to read one thing today, it should be that analysis, if you’re going to read two things today, it should be that analysis and Leticia Cline‘s fortune).  Basically MLNK is a global supply chain management company levered to the consumer technology industry.  They have 50% of their market cap in cash and are at a $32MM EBITDA run rate so are trading at ~5x EBITDA and with any kind of consumer pick up should be back earning positive EPS as there is more bottom line leverage in the model than there is bottom line leverage in this model. That said, the company’s last conference call was a bit confusing and as for management’s execution, well, Money McBags is all for it with how they have crapped the bed as of late.  Money McBags didn’t ditch his shares after the last Q because it was just too cheap but he may look to do so in the next few days.  However, volume has been good (300k+ shares traded at the bottom on both 8/31 and 9/1, but perhaps a fund was just liquidating or something) so Money McBags may hold on for a bit longer with a nice stop loss order at $7ish.  Just strange timing for this stock to be moving, though earnings are in a couple of weeks so maybe someone knows something (unfortunately that someone is not Money McBags because all he knows is that this company sucks).  Worth keeping an eye on this name but Money McBags would not be a buyer in front of their Q.

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