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When Genius Prevailed

  • It’s Not You, It’s Money McBags

    Money McBags

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    Dear Readers,

    —–

    We all knew this day would eventually come, and unfortunately Money McBags is not talking about the end of Ben Bernanke’s “Reign of Error” or the Lindsay Lohan sex tape.   What Money McBags is talking about is his going back to work (well at least the kind of work that requires him to leave the comforts of his dining room, wear pants, and not spend all day thinking of puns for Kocherlakota or googling such important things as “downblouse” and “fat finger”) and thus ending this phase of the award winning When Genius Prevailed.  Trust Money McBags, this hurts him more than a purple nurple hurts Christina Hendricks as he feels like he has built something more special and unique than Enron’s accounting, the Sphinx, or Kim Kardashian’s ass, but alas, he has to eat, and other than his readers’ dignity, the award winning When Genius Prevailed has remained without monetary considerations.

    —

    It is a bittersweet decision because Money McBags’ huge cockled heart will always be with you, the readers, and writing a daily financial dick joke column for the past 1.5 years (holy fuck has it been that long?) is something that has started to define Money McBags and his life in ways that make him both blush and rage at the dying of his might have been career.  As most of you know, Money McBags started the award winning When Genius Prevailed after the hedge fund he worked for shut down (and not because of performance, but because the guy pulling the purse strings was not only pulling many other purse strings but is also what Money McBags believes is referred to in common vernacular as a “fucking scumbag who deserves to get leper AIDS of his penis”) and he needed an outlet for his creativity and basically a way to stay sharper than the tongue of the most cunning linguists such as Groucho Marx, Winston Churchill, and Portia Di Rossi.

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    Money McBags also wanted to pull off the buyside’s gaff and expose its hairy taint for retail investors to see how professionals evaluate companies (and yes, Money McBags just referred to himself as a professional which likely caused Benjamin Graham to roll over in his moderately priced grave and the polyamorous one to hide under his reputation, but whatever).  By forcing himself to write about the market on a daily basis, Money McBags made sure that he stayed on top of things (though he would have rather stayed on top of this) in what was the most brutal job market for investment analysts since, well, since ever, and to be honest, it made him hella better.  Putting out what grew from 800 words to >2k words a day for the entire world to read made him double and triple check everything because the column would never have worked if the information was off point.

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    And through it all, Money McBags found a voice and a niche, and traffic on the award winning When Genius Prevailed grew 20%+ a month, all through word of mouth (though unfortunately the word wasn’t “harder” and the mouth it was coming from wasn’t Marisa Miller‘s).  Including the reads Money McBags gets on Zerohedge, between 6k and 20k people a day now read his column (though as most of those readers stay on Zerohedge, he has less ability to monetize that traffic through shitty google ads than Larry Summers has the ability to not be a cocksnot).  And all of it started by just going to something called blogspot (this is the original website which is more of an eyesore than Amy Winehouse’s teeth or Jerome Kerviel‘s trading record) and putting up analysis and dick jokes day after day after day.

    —

    Sure Money McBags could have given it a go with newsletter but he didn’t think he quite had the scale (though it was getting there and there was interest both from readers and from people looking to fund it) and newsletters are all about marketing and Money McBags has less interest in marketing than GE has in paying taxes or Antonio Cromartie has in wearing a condom.  There was even interest in having him put out a newsletter without the dick jokes but that would have been like asking Picasso to paint without colors, the Treasury to make a decision without Goldman Sachs’ approval, or Camille Crimson to work without swallowing, so Money McBags politely declined.

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    While Money McBags did surpass his goal of 1MM readers (yep, read that again, over 1MM people in the last year and a half read Money McBags’ columns, even if some of them came to the award winning When Genius Prevailed by googling such esoteric economic theories such as “gum drop butt plug” and “midgets girls ass holes” (and yes, those were real searches)), there was just no money in it.  Shit, Money McBags allowed the guys behind this to hire an actor and shoot a couple of webisodes of his material that actually worked pretty fucking well, and that was supposed to start as a weekly series this past week, but right now, that has been pushed back a bit and Money McBags is now off to other ventures (those other ventures being working for the man to pay his rent).  But Money McBags has no doubt it could have worked (and it still might if he can find the time) because he writes his column like a slightly dirtier financial Daily Show (though watch the Daily Show and count the bleeps and you’ll be surprised how dirty that has become) only without that annoying douchey British guy and with more tits.

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    But let’s not dwell on what might have been, let’s dwell on what was.  Money McBags’ cockriffic 1 year anniversary column did a nice job summarizing his accomplishments and since then he has continued to crank out columns dealing with the most important financial issues of the day.

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    He tackled the meltdown in Japan with columns such as Market Has a Japanic Attack and Market hit by a Spoogenami.

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    He opined on the Middle East unrest with columns such as Big Flaps in Mid East May Require Libyaplasty and Protests in Egypt Cause Market to Take It in The Sphinxter, both of which will likely win posthumous Pulitzer Awards.

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    His monthly jobs report columns contain more detail, analysis, insight, and boobs than Nouriel Roubini running a regression at a Rick’s Cabaret.  He is sure it was required reading at the B(L)S and the SEC as soon as they finished their day’s work.

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    He has also written extensively about US macro news including columns about the Fed’s fallacious (and perhaps fellatious) use of core inflation such as Retail Sales Rotten at the Core while also writing about US economic policy such as Rich Guys Vote To Extend Tax Cuts For Rich, Laughter Trickles Down to Middle Class.

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    He wrote poems, he interviewed CEOs, and as he is one of the top 5 small cap analysts alive he has done deep dives in to many small companies where he obliterated anything the sell side has ever dreamed of doing by making sweet love to QCOR’s revenue numbers (and he is told Institutional Investor will be giving him their new “awesomeness” award for that one), verbally penetrating KITD’s dilutive deals and growth strategy, and anally pounding ZAGG in ways that would make Bree Olson jealous.  His small cap analysis has made the award winning When Genius Prevailed something the Street and retail investors have never seen as Money McBags has had no agenda other than to try to make money and spread the love (and he has been successful in that, so don’t forget to tip your analyst).

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    He has also tried different things such as an Oscar themed-column, fucking around with spammers, and introducing the world to the NSFW Femen Movement, NSFW Muff Guessing, and the barely SFW Brooklyn Decker nude pics.

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    And Money McBags hasn’t just tried to titillate and inform, but he has created an entirely new style of writing on the internet where he has flipped the Gawker model on it’s head by inserting funny/odd stories in to the actual text of his column (usually with the subtlety and panache of an Andrea Musser jail visit) instead of the much easier and lazier practice of posting a funny/odd story and riffing on that.

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    And the thing is Money McBags has had no editors, no fact checkers, no substitutes, no co-authors, no class, and no real input from anyone as to what he should write about in his columns.  He’s just a guy who sat in his dining room all day by himself dick joking and assfucking the market like the sweet little vixen that it is and hoping people would find it funny and interesting and come back for more.  It was like walking a fucking tight rope everyday with the wind blowing stronger than Kelly Madison in a MILF Hunter video as before he posted them, Money McBags had absolutely no idea if his daily columns would fall flat on their proverbial faces.

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    Money McBags could keep tooting his own horn, but he will digress because as any good analyst knows, one can’t be as backward looking as a politician.  Most importantly, this is not a sad time as Money McBags is going to work for what he considers to be one of the top hedge funds on the Street.  Honestly, if you were to ask Money McBags what three hedge funds he would want to work for, this fund would be one, two, and three.  Shit, Money McBags can’t believe that they were not only hiring, but that he made it through 400+ resumes, five rounds of interviews, two write-ups, and a full colonoscopy (though that last one was just for fun).  More than anything though, after making the final round of interviews for every fucking fund he found that was hiring only to be shitcanned at the end as most funds are gaping vaginas and decide to take the safe route and give the offer to the “employed guy coming from the bigger fund”, Money McBags is glad this fund judged him for the content of his content and not the off-coloredness of his spin.

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    But it is truly an amazing country we live in (as opposed to a delicious cunt tree) where a simple guy with a love of investing can go from writing dick jokes in his dining room one day to investing millions at a time the next day as one of a handful of investment professionals at a fund with several billion dollars (and yes, that is what is happening.  You all know how hedge funds work so do the math on that and understand why Money McBags can’t turn this down.  And yes, Money McBags will be performing the same exact equity research he wrote here for free, only now he will be investing $10MM+ at a time in these names.  It is stranger than Liz Taylor’s eyebrows or the B(L)S’ birth-death model and Money McBags can’t figure out if he is now more Horatio Alger or Walter fucking Mitty, but he hopes more the former than the later).

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    And the most bizarre thing is that while Money McBags’ job search had for months been barer than the Sahara desert or the Shannon sisters on Hef’s birthday, in a 24 hour span the other week, several other opportunities came back as positive, including one very outside the box (and if it had been outside of Rosie Jones‘ box, perhaps he would have accepted it).

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    Anyway, Money McBags doesn’t know what the future will hold for the award winning When Genius Prevailed.  He is not starting his new job for another few weeks and he intended to write new columns until then but after taking a vacation last week to celebrate finally having income again and being able to eat and breathe, he realized that he needs some time off to get re-energized as writing this column has left him more mentally drained than Terry Schiavio or Michelle Bachman.  He puts everything he has in to every column he writes as he always wants his next one to be the best one and thus he places unbelievable pressure on himself to deliver insightful analysis, original dick jokes, and new need to know information every fucking day and that is more taxing than Belgium.

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    Here’s an exercise for all of you.  Now here’s another one, sit down today, look at your blank screen, and then try to come up with ~2k words on the market that will be funny, informative, and get people to come back for more.  Now do this just about everyday the market is open for 1.5 years.  It is absolutely grueling, and Money McBags was literally spending 8-10 hours a day on each column (in addition to looking for a job for 5 to 6 hours), so he needs some him time.  That said, there was nothing more rewarding than finishing a daily column and knowing that some random person in the world would now be more familiar with the cockposterous way the Fed has been managing the US ponzeconomy™ or the long-term viability Alice Eve‘s best assets.

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    Right now, all Money McBags knows is that the daily column will unfortunately die, as will any kind of detailed individual company research, but he would still like to put out a weekend macro round up if time permits and may just turn to twitter during the day for quick bits of goodness.  A weekly webisode is still an option too, but it is too early to tell.  Money McBags will know more in a couple of months as he get re-acclimated to wearing pants during the day and using his slave name, but he will be checking his email indefinitely (moneymcbags@gmail.com) and is always happy to continue to interact with readers.

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    To the CEOs Money McBags has talked with both on and off the record, Money McBags appreciates all of your help and next time you are at a conference and some guy asks a really cocktacular question, look next to that guy for a dude thoroughly engrossed in his iPhone and that will be Money McBags furiously donating to charity.

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    To the portfolio managers who ping Money McBags on email all day long, the freebies are now over.  Sorry, you all had your chance to hire Money McBags (and for cheap too) but he’ll be sure to not say hi when he runs in to you at conferences.

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    To the readers, well, Money McBags couldn’t have done any of this without you.  And even though he usually ends that line with a “well he could have, but it wouldn’t have been as fun,” that simply is not true.  It has been a shitriffic last year and a half for Money McBags and without this daily column pushing him to stay sharp and forcing him to put out good analysis, his career likely would have been deader than Bernie Madoff’s trading desk.  And without you readers continuing to come to the award winning When Genius Prevailed or seeking Money McBags out on Zerohedge and letting him know you liked a joke of his or some piece of analysis he did, he’s not sure that he would have been able to keep at it.  So a sincere thank you to those of you who powered through Money McBags’ thoughts on the Fed and small cap stocks everyday (even if it was just to get another glimpse at Jessica Pare), he has much love for your time and dignity.

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    While a famous bard once wrote that “parting is such sweet sorrow,” that bard obviously never parted any of Kelly Brook‘s orifices (or is it orifi?) and thus parting is not necessarily a sad time, rather it is a very joyous occasion because Money McBags will now have a shit ton of resources and millions of dollars to put behind his ideas, so for one final time, jizzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

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    It’s hard to say goodbye, and Money McBags hopes to be back in some form later on so check back for details, but for now he is going to gently ride off in to the sunset as genius has finally prevailed.

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    To the fucking pain, loyal readers, to the fucking pain,

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    Money McBags

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  • Small Company Update: 5 Questions about KITDilution

    Money McBags

    Oh shit, Money McBags has been forced to come out of temporary and semi-retirement (though he still tweets, facebooks, and guesses NSFW muffs on a nightly basis) as his inbox (though he would prefer to be in this box) has been overflowing with questions on what the fuck KITD is doing by raising equity once again in a move that on (and below) the surface is more confusing than Obama’s jobs plan (because, um, just a few short weeks ago we couldn’t raise the debt ceiling one bit and we were going clamp down on spending, and now, well, now spend a-fucking way again), word puzzles, and intelligent design (because if we were so intelligently designed, wouldn’t our tongues be two feet longer?).

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    As most of you know, Money McBags has pimped KITD here on the award winning When Genius Prevailed as if it were an out on her ass Ashley Dupre and you, the readers, were a self-righteous fuckbag.  And while Money McBags has always defended the stock despite all of it’s strangeness and past equity raises (shit, Money McBags termed CEO Kaleil Tuzman “The Great Diluter” way back in 2010, and spewed such witticisms as “You can’t spell dilution without KITD,” and “the only time he knows KITD is going to dilute is when Kaleil Tuzman’s lips are moving”), he no longer can do so as he just doesn’t get it this time, especially after Kaleil previously said he has no need to raise more equity and will be focusing on just running the company and generating cash from operations (and as Kaleil is not a doctor, Money McBags hopes this isn’t the operation that will be generating cash for KITD).

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    Look, Money McBags still believes that KITD is at the intersection of a huge and ongoing trend (even bigger than the new interest in reading outdoors.  And note to the education system, book clubs like that might finally help with this country’s dwindling SAT verbal scores, so look in to it) with the movement of video from digital to IP and while he still believes KITD may be uniquely positioned to capitalize on it, there is finally just too much weird shit going on for him to feel comfortable and this hurts Money McBags in places he didn’t even know he had (like a heart), because he enjoyed his back and forths with Kaleil (and if Money McBags worked for CNBC or some other spineless media service, he would still be pimping this just to continue those back and forths forever).

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    So in good conscience, Money McBags has to step away from KITD and simply doesn’t know what to tell you to do because he just has no fucking clue why a company with a strong balance sheet and about to generate a fuckload of cash would once again be hitting the equity markets like Amy Winehouse hit a crack pipe.  While Money McBags respects Kaleil’s out of the box thinking (and to use a similar pun from a few paragraphs ago, if it is out of this box, then he really respects it) by going against the grain and trying to maximize the number of shares in the equation price x shares = market cap (whereas most CEOs, and by most, Money McBags means every other one) try to maximize price in that equation, Money McBags just doesn’t know what to believe here.  In the past three years while Kaleil has managed to cobble together what should be a valuable company, he has added exactly zero shareholder value over that time and as a shareholder, that is not how Money McBags wants to roll.  The stock price is the same today as it was 3 years ago despite a doubling of the market cap, so um, neat trick (much neater than pulling Money McBags’ finger), but hmmmm.

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    That said Money McBags feels it is his fiduciary duty (whereas this is his findthedoucheiary duty) to provide you with the information he can given the amount of anger that hit his inbox (and really, he has not received that kind of outright pissed-offedness in his email since the aforementioned muff guessing website was down for a couple of weeks last year).

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    And here are just a few snippets from emails he received to give you all the gist:

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    A pity that WGPs last days were dedicated to KITD.

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    In any other case this is just a fraud and their receivables are not cashing and they need the money. Fuck.

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    I am more pissed than you, what a f’ken crook

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    You are x10 times more experienced than I am so why the fuck do they
    raise more stock when they said they’re turning FCF positive in
    December?

    In any case I wonder who would be willing to buy shares??? Really…

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    I honestly don’t know how to read this situation, unless he lied about positive cash flow and increasing revs. More capital for customer acquisitions? That doesn’t smell right.

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    The test came back positive, so the kid is in fact yours, and it has herpes (ok, not all the angry emails were about KITD’s equity raise, but whatever).

    —-

    So while Kaleil will be hosting a conference call on Tuesday to speak with the investing community (none of who understand this, and yes Money McBags has heard second hand from two of the top 20 holders of the stock), below are the 5 questions Money McBags would like answered (and long shot that Kaleil comes back to the award winning When Genius Prevailed to answer them himself as apparently he is a bit peeved by Money McBags calling him a liar in personal emails as his skin is seems to be thinner than Bernie Madoff’s alibi, but it is what it is.  Though in response, Money McBags did tell him, “sticks and stones may break your bones, but losing money for shareholders will always hurt them”):

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    1.  You have $20M net cash on the balance sheet and in theory (if you are a real company as you say you are) are generating north of $10MM in EBITDA a Q and are FCF positive.  Money McBags doesn’t think you make hardware or anything capital intensive, rather you just have some smelly guys in India and Czech writing a bunch of fucking code.  So why the fuck would you need $50MM net cash on the balance sheet for that?  Are you planning on hiring this chick at $31k a month to peel back your Fortran?  Makes no sense.

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    2.  You keep claiming you are the market leader and really the only enterprise solution for VAMS or OTT or “lens to lens” or whatever you want to change it to next week, and yet in the almost Reg FD violating email you sent to investors, you say you need the cash to win bigger deals.  Ummm, not to be logical, but WHO THE FUCK ARE YOU GOING TO LOSE A DEAL TO IF YOU ARE THE ONLY GAME IN FUCKING TOWN?   Seriously, what company is saying “KITD has a shitty balance sheet (even though you have $20MM net cash and if you are a real company are spitting out more EBITDA than Taylor Rain is in Gag Factor 14) so instead we’ll take our 8 figure deal to the EVEN SMALLER SHITTIER BALANCE SHEETED competitor that doesn’t have an enterprise solution” (and yes Money McBags just made up the word balance sheeted).  And if you really need to show access to cash, why not just take down a $30MM or $50MM revolver from a bank and not fuck over your equity holders?  Are you worried about a bank coming in and doing due diligence?  It makes no sense.

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    3.  Why the fuck did you need to sell stock at these fucking levels?  What is the rush (unless Mr. Ponzi is knocking at your door)?  Put up the good fucking Q3, watch the stock hit at least $14, and then you can assrape your investors.  Again, if Money McBags were running a fraudulent company, what you did is exactly what he would have done.  It makes no sense.

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    4.  Why do you have no IR person or experienced member of management to just sit back and say “really?”  You are killing yourself here, killing yourself.  You just can’t treat a public company like a lemonade stand run with your friends or a goofy dotcom in the internet boom (and at one point Money McBags was the highest paid foosball player in the country when he worked for an even goofier dotcom than Govworks, so he gets that era and doesn’t give a shit about how people looked back then).  Why has no one told you (other than your stock price and the >25% shares that are short) that you can’t just keep going back to the shareholder ATM because shareholders don’t like being the giver in the ATM relationship.  Where is your CFO and why is a man named Robin?  It makes no sense.
    —–

    5.  This one is the most important one, so Money McBags will try to make it clear with out the use of ad hominem (or bad homonym, like cock and kok) attacks.  After each equity raise in the past you pretty much said “this is the last one” and at just about every conference since the last equity raise and with every investor, you have said you have no intention to raise equity again and that you are going to focus on running the core business and putting up clean quarters.  So um, WTF?  Sure, sure,  you say it’s different this time, this isn’t the same, daddy still loves you baby, he’d never hit you again, yadda yadda yadda.  Unfortunately, none of that matters because as far as Money McBags is concerned you have lost any credibility you may have had before this (and apparently Money McBags was the last person on the buy side to think you had any).

    —

    And you see, this is the central fucking problem with all of this as even if you have brilliant answers to the first four questions (and Money McBags does not doubt that you will have reasons that on paper make sense), how can anyone believe them?  Credibility is a slippery slope and unfortunately you have pissed all over that slope causing shareholders to fall faster than Carmen Luvana‘s pants in Tailgunners.  How can anyone buy KITD today and be assured that two months from now their ownership won’t be diluted by another 10% for some new strategic reason????????  How can they in their right mind buy KITD and say “the next three years won’t be value destroying like the first three?”  So far not one equity raise in the past two years has added any shareholder value, so why is this raise a good thing and why won’t it be repeated?  Makes no sense.

    —

    Anyway, Money McBags has not talked with anyone on the buy side, the sell side, the front side, or the back side, who understands this raise.  Not one fucking person.  So until the questions above are answered, Money McBags doesn’t know what to say here (except for the ~1,800 words he has already dropped as even when at a loss for words, Money McBags is very verbose).  Of course the problem is (and Money McBags tried to lay this out in question 5, and has been trying to lay this out since question 5). even if Kaleil answers the questions above, why should anyone believe him?  If an experienced CEO were running this company, Money McBags believes KITD would be worth $19 tomorrow, of course an experienced CEO may not have aggressively pushed KITD to where it is, so sometimes you’re stuck dancing with the girl you brought.

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    Money McBags hopes Kaleil can provide sufficient answers to the above questions for all of you to make intelligent decisions because at this point, all Money McBags can do is provide you with information as he can no longer in good faith analyze this company.  He apologizes to all of you who have lost money by investing in this on his recommendation (including himself).  He still thinks there is a ton of value here, but he can’t support this kind of treatment of shareholders, because really, what is to stop Kaleil from diluting us all again in a month?  His word or his track record?

    —

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    ****HUGE DISCLAIMER: Despite Money McBags’ near evisceration of KITD above, he still owns his shares.  Yep, he has not yet sold because if the numbers are real, KITD still has value as long as they don’t fuck any more shit up and as long as the answers to the above questions seem reasonable.  Money McBags thinks this stock is worth somewhere between $0 and $35 and he is taking a moderate risk by holding on to this highly speculative investment.  He is LIVID over this last capital raise and is sure his anger comes out in this post.  That said, he is not throwing in the towel yet (though he would love to throw in this towel) and hopes a clean Q3 and Q4 (fingers crossed) can right this ship.  He hopes you all do your own due diligence here and not follow Money McBags because he honestly is questioning himself right now.

  • Economic Update: Jobs Report (NF)Pees on Recovery

    Money McBags

    ,

    First of all, Money McBags has to apologize for this column’s lack of timeliness but ever since he has gone to the great hedge fund in the sky, he has been way too short of time and thus unable to keep abreast (or two breasts) of the stories that really matter to all of you such as whether Buffett closing his back door will mean BRK will not be undertaking any ATM financing (though with his back door closed, the polyamorous one will surely have none of this ATM financing either), how anyone would know if hackers really broke in to Fox News’ twitter account (hint: the hackers would likely get their American history correct, though to be fair, when one’s exposure to Mr. Revere consists of knowing he did it it with a whiffleball bat, it is what it is), and why California must teach gay history (which should be a boon to the James Buchanan Historical Society and will likely involve many sword fight reenactments).

    —

    The point is, just because the column has been delayed and you have all moved on from the shitacular NFP jobs report to worrying about the debt ceiling (or is it the insolvency floor?), Europe’s banks having reserves more insufficient than the Miami Heat’s reserves, and what will happen to Hummers during the Carmageddon, doesn’t make what is in the column any less valid, and as you can see, the time off has not hampered Money McBags’ ability to uncover very valuable assets or his ability to create run on sentences that would give Charles Dickens a stiffy (or make his Oliver twist, if you will).

    —

    Now that Money McBags is done with the filler (though he is certainly not done filling her), the important point of this column (other than hoping Alice Eve reads it and that she gets off on references to Alan Greenspan’s tainted reputation) is that last week’s NFP job’s report was worse than Meaghan Chung’s investigative skills, worse than John Paulson’s China due diligence, and even worse than being adopted by Casey Anthony (and as a brief aside, Money McBags knows nothing about this Casey Anthony thing because he has way too much other shit to spend his time on, like worrying about the upcoming artilect war and how to avoid getting caught in a haboob (while try to get caught in her boobs), but Money McBags will take the under on 2 years before Ms. Anthony and Amy Fisher make their first lesbian porn film, likely titled Lady Killers, A Spew to a Kill, or, Dial M for Muffdiving. And you know you’d all watch it.).

    —

    Anyway, the jobs report showed the Ponzeconomy™ added only 18k jobs, revised last month’s 54k gain to only a 25k gain in the perpetual government strategy of “Hold the shock and hope for no awe,” and raised the fictitious unemployment rate to a “we’re still fucked-ian” 9.2%.  Below are Money McBags’ belated observations on why the jobs report number was actually worse than reported, like Japan’s nuclear meltdown or the smell of Simon Hayes’ luggage.

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    1.  The labor force participation rate once again dropped to a 25+ year low which is the most brilliant way of holding down the unemployment rate short of, you know, finding people actual fucking jobs (and as a reminder, 25 years was so long ago that derivatives were just things that pissed people off in calculus class and Joan Rivers still had her original sphincter).

    —

    For those of you who have spent the past few years on the Planet Melmac eating pussy: 1. Welcome back, but you may still have some fur in your teeth, and  2. The labor force participation rate counts only those who have jobs and those who are considered to be looking for a job (so it ignores Angelo Mozillo and both Charlie Sheen and Bree Olson, which is also likely the only time Ms. Olson has been ignored).  If someone is now “discouraged,” “disgruntled,” “or fucking disgruntled,” and stops looking for a job (and how the B(L)S measures this is beyond Money McBags but he is guessing it involves the amount of ramen noodles a person consumes and where that person rates on Maslow’s hierarchy of needs), they are simply not counted as being in the labor force.  It is really fucking brilliant.

    —

    So at labor force participation rate of 64.1%, 86.07MM people were no longer in the labor force which is ~385k more than if the labor force participation rate had stayed at the already 25+ year low of 64.2% and 1MM more than if it had stayed at even a slightly more normal 64.5% (though Money McBags finds nothing normal in any of this).  If the labor force participation had been 64.2%, the unemployment rate would have been 9.4% and at 64.5%, it would have been 9.8%, and yet overall, THE SAME FUCKING NUMBER OF PEOPLE WOULD HAVE BEEN UNEMPLOYED (seasonally adjusted of course, and Money McBags doesn’t know what seasons the B(L)S is using, but he hopes one of them is saffron, because that shit tastes good).

    —

    So if Money McBags were Ben Bernanke, Timothy Geithner, or the pornstachioed Keith Hall, the first thing he would do is go to Ft. Knox, strip down, lather himself up in WD40, and roll around in the fucking porphyry that is supplying the infinite amounts of this country’s gold (and there must be infinite amounts of gold at Ft. Knox because why else would the government not want it to be audited?  Surely they are just being benevolent and saving some poor auditor from a task akin to chasing the horizon or finding out Josef K.’s real crime).

    —

    Secondly, Money McBags would find Elizabeth Warren and ask if that is Frank-Dodd in her pants or if she is just happy to see him.  But finally, Money McBags would log on to the B(L)S database and with the touch of a button simply change the labor force participation rate to 58.4% thereby making measured unemployment 0%.  Yes, just like that, with the click of one button, Money McBags could give the US full employment which would make even John Maynard Keynes’ dick hard (and likely untrap his liquidity).  While nothing will have changed in the Ponzeconomy™, all that matters is that the optics will look cocktactularly better (even better than the optics on this), and that is all anyone cares about anyway.

    —

    2.  The Birth/Death Model showed 131k jobs were somehow added to the economy and that number is derived from rigorous data and analysis that involves thoroughly manicuring one’s nails before opening Excel and goalseeking for something called “hopium.”  Money McBags has no idea how the BLS generates this number as his only experience with black box models is through his diligent research in to such important news sources as Sugah and Black Tail magazines, but he is sure it is more ricockulous than acting like the debt ceiling isn’t going to be raised or trying to figure out who qualifies for a gay softball league (Dear Seattle Softball League, You ever hear of the hummer test?  Try that and then get back to Money McBags if you still can’t figure out who qualifies).  So when calculating the unemployment rate, take the reported 18k jobs added and deduct somewhere between 0 and 131k from it to adjust for this preposterous birth/death number driven by a calculation more undefined than Christina Romer’s chin or dividing anything by Ben Bernanke’s credibility.

    —

    3.  39k government jobs were lost and if you think it is hard for private sector unemployed people to find a job, good luck handing someone a resume with a skills section that includes “four hour lunches,” “bitching,” and “bitching during four hour lunches.”  Honestly, government workers have to be worse trained than Andy Dick so this is going to create a bigger (yet less delicious) overhang than Heidi Montag’s chest.

    —

    4.  The U6 unemployment rate which isn’t so quick to subtract out things like discouraged workers, marginally attached workers, and Charles Prince, was 16.2%.  As this is a more real rate than the reported 9.2% (though more real in the sense that a unicorn is more real than Courtney Stodden’s age, because Money McBags doesn’t believe any number that comes out of the B(L)S), it should be monitored more closely than the announced number.  That said, one year ago the U6 rate was 16.7% and now it is 16.2%, so as always, buy the fucking dip.

    —

    5.  Money McBags has no idea what is going on in this barely SFW picture, but he would love to find out.  In fact, he thinks it could be the start of a better tradition than gold.  And while this has nothing to do with the jobs report, you can all admit it is very important.

    —

    6.  14.1MM people were unemployed which is more than last month and down just 500k from last year despite the titriffic recovery that has rallied the market (and that recovery apparently relies on what Money McBags is calling the inefficent-market hypothesis which is very similar to the efficient-market hypothesis, only the exact fucking opposite, and right).

    —

    7.  Once again, every fucking guess from a witch doctor was way above the actual reported jobs number which shows that either the ponzeconomy’s™ Gaussian curve has fatter tails than the Brazilian women’s soccer team or that we no longer live in a normal curve environment and thus these old economic models are more useless than the Principles of Macro Economics (unless being used as a paperweight), or Catherine Kieu Becker’s husband’s penis.

    —

    If this were a normal environment with actual working models (and this model could work for Money McBags in any environment), the jobs number would have been somewhere around the median guess by witch doctors, or at least within a standard deviation or two.  Instead, the number wasn’t even in the fucking sample set, shit, the witch doctors would have more credibility if they’d just guess the letter B or what is behind door number 2.  And yet somehow people both pay, and pay attention to these dingbats.

    —

    8.  Weekly initial claims for unemployment are still running at >400k which means in June about 1.8MM people became unemployed and yet somehow the NFP report showed net 38k new hires, so um, huh?  Is Money McBags supposed to believe that ~1.8MM jobs were added canceling out the initial claims for unemployment, or should Money McBags just continue to turn his fucking head and cough at the fact that numbers from different surveys make less sense than anyone lauding C’s quarter (because paying a reserve release today for a assfucking tomorrow is really not the best strategy) or complaining about this.

    —

    So there you have it.  The reported number of 18k is really closer to somewhere between 18k and a 113k loss when you layer in the birth/death model goal seek, and somewhere around “oh shit” when you add in common sense.  But hey, at least the government teetering towards bankruptcy and cutting off support to those without Goldman on their resumes won’t make things worse, oh wait, this is probably not good, so investors should be very careful as they take their assets on a flight to safety (especially as one never knows who they may be sitting next to on that flight).

    —

    Again, Money McBags apologizes for the delay and his absence, he hopes to be able to write more frequently and on a more timely basis in the future.  Hopefully you all read his interview with KITD’s CEO earlier in the week (and yes, it is real, and no, Money McBags has no idea why a CEO would want to come on his site (figuratively, not literally), but it is what it is) where he did things to interviews about which Barbara Walters only dreams.  And don’t forget to follow Money McBags on the twitter and the facebook where he gets a few spare minutes a night to share his thoughts, his hopes, and his analysis.

    —

  • KITD CEO Interview: IP, You Pee, We all Pee For IP

    Money McBags

    ,

    Kind readers, for months Money McBags has promised to bring you a new Q&A with KITD CEO Kaleil Tuzman (Money McBags promised even before he went to the great hedge fund in the sky) and he profusely apologizes for its tardiness.  He actually emailed the below questions to Mr. Tuzman (at Mr. Tuzman’s request no less) so long ago that Italy was still solvent, DSK had yet to be turned down by his turn down service, and Money McBags had not only not heard of Jasmine Waltz, but had no idea she was creating such thought provoking art.

    —

    But as you all know, Mr. Tuzman is in charge of running a $~500MM market cap company and thus answering the questions of a simple dick joke writer sometimes get pushed aside for more important things like managing a fantasy baseball team, a vacation, an SEC filing, and apparently needing all 20 members of his management team to properly vet his responses.  Money McBags and Mr. Tuzman did keep in close contact by email over those two months (and Money McBags hopes his estate will posthumously publish all of his CEO emails in a tome titled:  CEOs Money McBags Knows) with the emails largely revolving around Mr. Tuzman promising to answer Money McBags’ questions in short time and Money McBags wondering how much better Kelly Brook would look in IP vs. analog or digital video.

    —

    The point is, below is a verbatim Q&A from Mr. Tuzman (Money McBags did nothing to protect the innocent, or his investment) which should give investors more insight in to KITD (a stock that Money McBags has had a stiffy for during the entire existence of the award winning When Genius Prevailed) than any sell side research out there and shows why Money McBags is still thought of as the world’s most dangerous analyst.

    —

    To be fair, Mr. Tuzman did mention that his legal team took out the funniest parts of his answers, but to be fairer, Robin Williams has been using that excuse for decades, so do with it as you will.  Either way, big ups to Mr. Tuzman for recognizing that the people demand information, for playing along, and for both titillating and informing.  So put your thinking caps on and enjoy:

    —

    1.   You have talked about how your IP solution is making the current digital video hardware and firmware (and yes, you have said hard.  Huhuhuhuh) almost obsolete.  So why is the market growing only 30% (or 20% to 25% according to what you pegged ioko growth as)?  What is causing the adoption rate not to accelerate as online video grows and your solution is cheaper than digital?  Can the adoption rate ever get as high as Malawi’s?

    —

    There are certain areas of IP video that are growing more quickly—including end-consumption of mobile video-on-demand for example, which is growing at a 40%+ annual clip globally. But for the provision of business-to-business enterprise software (which is what our video platform product is, at the end of the day), a 20-30% annual growth rate implies very rapid adoption, and compounding this growth rate leads to market dominance for IP- and software-based video technology, and widespread replacement of hardware-based systems by 2020. Remember, we’re talking about long-term capex decisions here by large and often slow-moving corporations. These types of shifts don’t happen overnight, and I have seen other growth companies fall into the trap of over-promising on how quickly their industries are evolving. As a management team, we take pride in the fact that we have met or exceeded each of our quarterly and annual financial targets for the last 3 years, and we prefer to be a bit conservative at times (though perhaps not as conservative as him or her).

    —

    2.  And why is Q1 usually sequentially down for digital media in the US?  Is it because when people go home for the holidays in Q4 they spend afternoons with the family NSFW guessing muffs and thus digital media spikes?

    —

    Digital media follows the same seasonal pattern as traditional media consumption.  You might want to check with an expert on these things (like someone from Nielsen or Kantar or this brilliant commentarist), but it boils down to the fact that in much of the world people tend to watch a lot of TV during the end-of-year holiday period, and then tend to watch a little less than they did during the holiday period as they kick off their year (as a side note, will be interesting to see how this holiday effect plays out as China becomes more of a force in global media consumption—given the Chinese New Year period in February and the lack of many alternative entertainment options). Anyway, seasonality isn’t that pronounced in our business (negative seasonality tends to mean flat to low growth on a sequential quarterly basis, not actual declines), but Q1 and Q3 are the softer quarters in our business (the third quarter being soft due to people’s northern hemisphere summer holiday activities).

    —

    3.  On the latest call you talked about Q3 now being the first clean quarter for the new and improved execution focused KITD (as opposed the old and dilution-tastic KITD), what caused that timeframe to speed up?  Money McBags thought last time you said it was up to the auditors to decide and yet you must be under much pressure from shareholders to put this thing together sooner.  So what happened?  And for the record, Money McBags loves that the timeframe has been sped up, though not as much as he loves this.

    —

    To be clear, we have always been completely execution-focused but the difference now in Q3 over Q2 is that we have completed almost all acquisition-related integration efforts to date, allowing us to shift our focus squarely on organic growth. The acquisitions of ioko and Polymedia were completed during the second quarter and we made a concerted effort to take all of the tough and necessary post-acquisition restructuring and integration actions (staff reductions, lease and vendor contract cancellations, product mothballing, etc.) during the second quarter. Our auditors at Grant Thornton have ultimate say on the application and timing of restructuring and integration charges, but having worked hard to complete these actions during Q2, we did our part as management and dramatically increased the probability that these charges will be applied during the second quarter. This “front-loading” was our goal, so we could have a second half of 2011 with minimal to zero M&A-related charges. That being said, we are beholden ultimately to our auditors’ assessment on these things, and Q3 may have a small amount of residual M&A-related charges from a timing perspective.  Consistent with our previous messaging to the market, we expect any below-the-line adjustments to EBITDA in Q3 to be minimal and expect to report clean, unadjusted EBITDA in Q4.

    —

    4.  For the readers, can you explain the “stickiness” of VAMS?  This is key to the story and Money McBags wants readers to understand that VAMS isn’t just sticky from streaming Pippa Middleton all day.

    —

    Video Asset Management Systems (VAMS) become effectively integrated with a variety of internal hardware and software systems at the client, including storage, content delivery network (CDN), editing and post-production, ad-serving, customer relationship management (CRM), billing, and enterprise resource planning (ERP) systems, to name a few. Staff at our clients (and sometimes even our clients’ vendors and customers) are trained on the KIT Platform related to workflows around video ingestion and transcoding, metatagging, content localization, digital rights management, programming and bundling. Finally, as a cloud-based, multi-tenant software delivery model, we actually “hold” ( or have unique access to) the video assets and related data on our platform, including historical usage information.

    In summary, we have experienced a very “sticky” relationship with customers (with long-term contracts and overall <2% per annum attrition rates) due to (a) the integration of the KIT Platform with clients’ existing hardware and software systems, (b) clients’ investment in training and workflow on the KIT Platform, and (c) the residence and control of the clients’ video assets within the KIT Platform. At the same time, I am sure you will agree we are not the only industry with sticky products.

    —

    5.  You said by the end of the year you will be up to a run rate of ~$2.5MM in free cash flow per month.  What do you plan on doing with the cash?  And as Money McBags is a shareholder in RICK and loves when his companies have synergies, might he suggest several nights out for the bloated KITD management team?

    —

    While your suggestion of Rick’s Cabaret is appreciated, our management team is more inclined to asana poses and other important endeavors in our limited free time.

    That said, we may use internally generated cash for additional, small acquisitions in certain geographies or client verticals that help us maintain and extend our leading market share in the IP-based VAMS industry. Despite concerns around historical below-the-line charges and the hard work implied by post-acquisition integration, we believe the consolidation approach to our industry we have taken over the last several years has been the right one in terms of creating long-term shareholder value—particularly given platform stickiness and the undeniable fact that it is much easier to get a client to begin with than to dislodge a client from an existing VAMS provider. Moreover, our services-oriented architecture allows us to effectively roll over acquired clients onto our core data layer without disrupting client relationships (evidenced by the fact we have had such low client attrition rates even in the context of many acquisitions over time).

    —

    6.  And speaking of KITD’s management team, how do you deal with an organization that is now more top heavy than Christina Hendricks using iAugment?  As Money McBags has written, upper management seems more bloated than Bunny De La Cruz‘s fupa after a triple creampie (and only click the link if you must).  At least 4 of ioko’s senior managers joined KITD’s senior management team (and no offense. but this Scott Sahadi guy from ioko looks like he is 25 years late for the Miami Vice extras casting call.  For fucksake, if his shirt were unbuttoned anymore, his sphincter would be showing.  Come on Scott, you’re running a fucking company and not getting ready to go meet Jack Tripper at the Reagle Beagle, so button the fuck up) along with every other CEO/CFO/CTO/C3P0 from companies you have acquired over the past couple of years.

    —

    Not only did you have 4 speakers on your last call, but when KITD was in Vegas you said: “I think we had something on the order of 20 team members from around the Company in senior positions people were able to meet and we are hoping that many of you will have the chance to meet leaders across the business going forward.”  Bringing 20 senior managers to a conference in Vegas is more like the start of a Sabrina Deep Fan Bang than it is a way to run a company.  So how are you going to continue to manage this as too many chef’s in a kitchen is never good (unless these are the chefs and you ordered a plate of awesomeness)?

    —

    Money, I am pretty sure you will take this the wrong way (though not too worried because you have a healthy sense of self), but have you ever managed an operating company? We have over 1,200 employees across three geographical divisions (Americas, EMEA and Asia-Pacific) and have 10 executive management team members globally (P&L and divisional heads) and an additional 14 SVP-level executives—mostly in sales roles. These ratios of less than 1% (for executive management) and 2% (for senior management generally) are below general business bogeys, and significantly below software industry standards. We are proud of the fact that our lean management team has absorbed executives from previous acquisitions—which we see as evidence of successful team integration. Your reference to 20 senior KIT digital team members in Las Vegas is made out of context (though not as out of context as this). The Las Vegas-based National Association of Broadcasters (NAB) conference was going on at the time of our April conference call introducing the ioko acquisition, giving us the opportunity to introduce investors to the senior ioko team by telephone.

    NAB is one of the year’s top two trade shows for us (the other one being IBC in Amsterdam each September), where we meet with many of our top global accounts and client prospects. It is our practice to send senior salespeople from around the world to a handful of top trade shows per year, as we find this is a very cost-effective approach to sales, and we also use these trade venues to gather senior management generally for strategy sessions as a means to economize on travel expense. With due respect, avoiding duplicative expense and piggybacking internal meetings on client events (no, not that kind of piggbybacking, Money!) is precisely the “way to run a company”. I would also remind your readers that because of our disciplined approach and our use of lower cost employment jurisdictions for senior technical and operational staff (like the Czech Republic and India), we estimate we run at per capita G&A costs that are 30-40% lower than our U.S.-based competition.

    Now, with respect to Scott Sahadi’s dress code: I know that you are a suit-and-tie man, Money, but our clients (who are often technical or creative executives) don’t necessarily share the same passion for formality. Scott’s done well selling to and serving clients in the past at firms like ioko, Verisign and Bay Networks, so maybe this chest hair thing is the right approach. Seriously speaking, as a company with a truly global client base, we are a company that embraces different characters and personalities. Unlike certain competitors who force a rote or cookie-cutter approach, our clients appreciate our local resources and cultural diversity.

    —

    7.  You said that sports was a vertical with a huge opportunity for KITD, and one area Money McBags hopes you are looking in to is the water sports market.  Not only do those people love video (and Money McBags doesn’t suggest you go this UNBELIEVABLY NSFW link, but it shows their passion) but if you can get to them while competitors are lying prostrate, they will certainly shower you with gold.  That said, are you in discussion with leagues, or teams, or how does that work?

    —-

    We have a number of sports-focused clients—including IMG, ESPN, several Champions League and other top European soccer clubs, the Washington Redskins, etc.—and we are constantly pitching new business in this category. However, to be fair, a VAMS competitor of ours named Deltatre is the current leader in the sports category, which tends to require particular workflow development for editing, post-production, data overlays and rights management, as well as integration with sports-focused firmware systems. We will continue to devote R&D resources to the sports category, and as always will pay close attention to developments in the field.

    —

    8.  You mentioned wanting to ease back from talking with the Street and potentially hiring an IR person.  You know Money McBags was just in the market for a job, and as he knows your company and can handle the Street, would he have made it past the resume screen or would his demands of a foosball table, his own administrative assistant, and the need for a workplace like Ana Catarian Bezerra‘s been too much?  That said, Money McBags would have fit right in with the awesome names already on the KITD management team such as Daniel Goodfellow, Richard Craig-McTouchyFeely, and the vixenly Elin Askfelt (and Money McBags would certainly ask if that could be felt).
     —

    Money, as much as I respect your acumen in dissecting our results and how closely you have your fingers on the pulse of investors’ questions and related trends, we have exceeded our Jewish (me, Barak Bar-Cohen, Lou Schwartz et al.) and hairy-chested (Scott, Alex Blum, Robin Smyth et al.) quota on the management team, and are currently looking for someone with a French-Eskimo heritage and a good Brazilian body wax, given the current climate in the small-cap investment universe. And, yes, there do seem to be cultural antecedents.

    —

    9.  Speaking of IR, after your previous earnings call when your stock cratered, you sent out an email to select investors (and Money McBags was on that list and still would like the ok from you print your email and Money McBags’ response because the readers of the award winning When Genius Prevailed would clearly be interested to see the difference between how you handle the street and how Money McBags does) but then after the ioko deal, you sent out another email only to analysts (and Money McBags was not on your distribution list for that, so really?  Money McBags thought we shared a moment) and hosted at least two conference calls for large investors.

    —

    Can you explain this strategy and why you didn’t disseminate this information to retail investors who support your stock?  Money McBags’ email was blowing up all day when that happened with regular people who have no contact with you or the company, anxiously looking for answers (and Money McBags does find it funny that anyone would come to him looking for answers unless the answers are “69, on a trapeze, and up the butt”), so why not throw them a bone?

    —

    I am not sure I follow your reference to the thread of emails that were sent and to whom (not as clear as this logical thread for example), but I can tell you that our investor relations communication rules are as follows: 1) When we are asked specific questions by investors and the answers have been addressed previously in the public domain, we will respond directly to those investors and will occasionally copy other investors or market participants who have asked us similar questions in the past; 2) When we are expressing clarifying information to the market that is not an answer to a specific investor question, we send this to all the sell-side research analysts who cover us, as opposed to picking and choosing certain analysts or investors, in order to avoid selective disclosure, and communicate information to the market in a uniform fashion; and 3) We occasionally send general business update notes (which do not contain any non-public information) to our client and prospects database, and anybody who has signed up to be included on these updates off of the investor relations section of our website. Of course, we do reserve the right to block distribution to market commentarists who make crude, sexist jokes and/or make fun of helpless targets.

    —

    10.  When are you going to be the lens to lens backbone for spankwire.com, pornhub, and the tubes of the world because those fuckers deliver some content?  And shit, the fucking LeBrons?  Money McBags doesn’t want to point out the taintedness of LeBron’s brand (it is more tainted than Faye Reagan‘s chin after performing a rusty trombone), but Money McBags assumes you are a Celtics fan and, well, you know how that just went.

    —

    Discussing the adult content business with you is liking discussing footwork in the paint with Kevin McHale or strains of mary-jane with Robert Parish, so I will only comment that adult content has been an innovating force in the digital media arena for some time, and we work with companies that touch on this space (no pun intended) where appropriate—in fact nearly every cable or telco these days generates a material amount of revenues in this segment. And, yes, you are correct that I am a Celtics fan.

    —

    11.  And why are you even fucking around and trying to build a brand?  No really, what is the point?  You are going to be half of the market so why waste dollars on letting people know you’re better than the competition when the competition is like a He PingPing nut hair compared to KITD’s full 1980s Ron Jeremy cockstache?  That said, if you really are dead set on marketing, this seems to be an effective campaign.

    —

    Thank you for your insightful suggestion to use lewd trading cards as a marketing technique. In actual fact, we project to spend less than 2% of revenues on all marketing (including trade shows, direct marketing, search optimization and so on) this year, and virtually none of this is on what I would call “building a brand”. Although we feel that that our marketing spend should probably go up over time (cloud-based B2B software and services companies tend to spend as much as 5% on marketing), we have chosen to spend on more aggressive sales initiatives in the near-term—including generous direct salespeople commission plans, partner/channel sales commissions and paid lead generation. We had actually intended to spend more on traditional brand marketing this year but switched gears in the first quarter when we realized we had hired the ad agency that came up with this campaign. JK.

    —

    12.  Can you talk in regular non-techie English for the average retail investor about what OTT means and how you are taking over this segment?  Who else is doing this and why can you do it better?

    —

    OTT stands for “Ode to Tupac and Timbaland” and is a panegyric for two pioneers who have, each in his own way, helped shape today’s urban music sensibility.

    Alternatively, in the IP video world, OTT has been known to refer to content initiatives that are delivered “Over-the-Top”, riding on top of a service from a network operator (like an internet service provider) that you already pay for without requiring any formal affiliation (technology or business-wise) with your network operator. Good example of OTT video services that have taken off in the browser-based environment include Netflix and Hulu. Electronic device manufacturers are now building TVs and video game consoles that can use general Internet connectivity (fixed line or wireless) to pull content “over-the-top” (piggybacking on someone else’s network) and deliver it to the particular device’s screen. These connected devices need no additional hardware or advanced knowledge to operate.

    Even the cable and telco operators themselves are now diving into the OTT arena, as they realize that how important it is to provide their subscribers with the video content they might be subscribing to in one network environment (via cable connection in their living room, for example, or via a mobile operator’s on-deck services on their smartphone) in other network environments that the cable or telco may not own or control. This is being driven by the network operators’ increased cognizance that customers (particularly the under-25 cohort) demands content where they want it, when they want it.

    At KIT digital, we have been pioneers in some of the most innovative and highly-trafficked OTT initiatives globally, including deployments with AT&T, BBC, BSkyB, CUTV (China), Disney, Newscorp (Fox), Vodafone and others. We were the earliest or one of the earliest to play in this space, with large-scale commercial deployments dating back to 2003, and today we have the deepest client base in the industry, with over 2,200 clients in more than 45 countries. Because we are constantly learning from individual clients’ needs and adding functionality onto the multi-tenant KIT Platform, we are able to roll out new workflow to our overall client base more quickly than our competitors. We currently estimate that we have 40-45% market share in the IP-based VAMS segment, and would like to extend this even further over the near- and medium-term.

    —

    12.  Now that Money McBags has gone back to work on the buyside, do you think the hole in the online financial analysis market that his absence has created can ever be filled (and remember, it is a hole so big it gives both Paul Krugman and Whitezilla inferiority complexes)?  Also, are you free next week for a call with Money McBags and his new PM?

    —

    Your shoes are obviously quite big (and no, I am not obliquely trying to help you get over that dysmorphic image perception thing); I can’t imagine who will assume the throne you are abdicating…really.

    And, yes, I’d be happy to do a call next week with you and your PM, so long as there are no lewd or scatological comments. Likely?

    —

    Again, apologies for the delay. I have been quite busy.

    —

    So there it is.  We learned more about OTT, we learned more about the growth of the enterprise IP video market, and we learned more about the delicious Kate Upton (ok maybe not that last one, but one can still dream).

    —

    As much as Money McBags chides Mr. Tuzman, KITD is one of Money McBags’ biggest holdings (though not as big as this holding would be if only he had the chance) as it is cheaper than hiring Chinese auditors to juggle your receivables.  KITD is trading at only ~7x Money McBags’ 2012 EBITDA estimate and likely ~10x to 12x a normalized and clean EPS (Money McBags’ column on their last acquisition contains more detail on valuation) despite growing ~30% and being the market leader.  You just don’t find shit like that anywhere.

    —

    Money McBags has doubled and tripled down on KITD as it has mostly treaded water during the rally but he will eat a bag of dik dik (that is if it is properly sautéed) if Mr. Tuzman does not sell the company in the mid $20s within the next two years.  As always, do your own due diligence (especially if this is your due diligence, and shout out to Money McBags’ fans on Zerohedge for that), but hopefully this Q&A has helped you understand KITD in a bit more detail.

  • Where Have You Gone Money McBags? The Ponzeconomy Turns its Lonely Lies To You. Spew Spew Spew.

    Money McBags

    , ,

    Hells yeah, Money McBags is back with some content (sort of, but more on that later, and more on this now).  You’ll have to excuse his absence which has lasted much longer than he expected (though not as long as it took to put together the Mesopotamian dictionary which hopefully will be followed by the Mesopotamian Urban Dictionary where we can learn all of the different connotations of Alexander’s helmet and dropping a Hammurabi code), but Money McBags:

    —

    1.  Started a new job (labor force participation rate be damned) which has led him to spend an inordinate amount of time once again trying to fit his round peg in to the business world’s square hole while also working diligently to make a better first impression than Peter Diamond.

    —

    2.  Relocated from parts unknown to parts better known (though unfortunately none of the parts were known to be attached to Kate Upton).

    —

    3.  Spent copious hours trying to answer the B(L)S’ 54k job question which requires a shitload of hope, goal seeking, and even some Calabi-Yau shapes to get to anything resembling a healthy Ponzeconomy™ in this world of the infinite multiverse.

    —–

    But most importantly:

    ==

    4.  Was unable to toggle his computer over to WordPress to publish his titriffic columns as he found it his civic duty (and yes he said duty) to use his fat finger to analyze every inch of the very NSFW Blake Lively nude photos.  Yeoman’s, work Money McBags’ friends, yeoman’s work.

    —

    Trust Money McBags, his absence has hurt him more than a PA trade hurt David Sokol as since he has been gone we’ve had Schwarzennegger‘s love child (and Money McBags will take the over on number of mistresses the Governator has had, as well as the under if this was one of them), DSK’s forced African stimulus plan (who said the French never did anything for their colonies?), Anthony Weiner’s fucking weiner (and his figurative self-immolation where he finally got a load off of his chest, after trying to put a load on many other chests), and a swarm of angry beavers attacking Philadelphia (though unfortunately not these angry beavers).   So dear comedy gods, really?  You couldn’t have done this three fucking months ago when Money McBags was trying to make shit like the Fed Notes, Europe’s Bank Stress Tests, and the Chicago PMI funny?

    —

    Anyway, Money McBags dearly wanted to write this weekend about the NFP Jobs Report (with NFP of course standing for No Fucking Pay) as he was tickled pink by the black box model (while also dreaming of tickling the pink of this black box model) that is the BLS birth/death plug which registered a cockposturous 200k jobs added and once again showed the Ponzeconomy™ to be less healthy than Sino-Forest’s balance sheet or Pam Anderson’s vagina.  Even if the birth/death plug were real (and Money McBags believes in the Easter Bunny, Hanukkah Harry, and Newt Gingrich more than the birth/death model), the jobs number was still more disappointing to the outdated models of economists than the Disney adult entertainment fantasy cruise was to members of the Red Rooster club.

    —

    Money McBags really wanted to write about the fact that even though 54k jobs were added last month, the number of unemployed people went up from 13.674MM to 13.779MM, the labor force participation rate remained at 20ish year lows, and the Smurfs were finally exposed for the racist little fucks that they are.  Alas, he was busy getting his new life in order so he didn’t have the time, but things are starting to fall in to place and he may be able to get out content on a more frequent basis (though no promises).

    —

    That said, before he left for the great hedge fund in the sky, he had an email exchange with KITD’s CEO Kaleil Tuzman where he sent Mr. Tuzman a flurry of insightful (and titsightful) questions to be answered.  As Mr. Tuzman was in the midst of buying a different company than he led the Street to believe he would be acquiring while also furiously penning many anti-short tomes to investors to let them know that the market was misunderstanding the KITD story, he apparently didn’t have time to fully respond.

    —

    Yet after many emails back and forth (and back and forth forever, and kind reader, if you go to one Money McBags’ link today, let it be the Blake Lively NSFW photos, but if you go to two, let it be the Blake Lively photos and then the back and forth forever link), Mr. Tuzman finally got to Money McBags’ questions and promised they would be through his legal council by Monday of this week.  This Q&A is the content Money McBags promised over the weekend that he would put out today and it would have been a hella fucking deep and intriguing look at KITD to remind everyone why Money McBags is known as the world’s most dangerous analyst.

    —

    Alas (a lass? all ass), Mr. Tuzman emailed Money McBags the other day to let him know that the answers are hung up with KITD’s lawyers and will not be properly scrubbed until next week (and trust Money McBags, his questions needed scrubbing like the dirty little inquisitions that they are).  So Money McBags apologizes for promising content and then leaving you all more hung out to dry than Fabulous Fabrice Tourre whose only defense seems to be to blame it on the rain.

    —

    This of course is about the 10th time Mr. Tuzman has promised to answer Money McBags’ questions and delivered about as well as QE2 or a vaginal artesia sufferer, so who knows if Money McBags will ever get the answers.  At this point, Money McBags is seriously considering changing Mr. Tuzman’s moniker from “The Great Diluter” to the “The Big Stock (question) Tease” (of course Money McBags could have just asked Mr. Tuzman when he saw him yesterday, but Clark Kent must never reveal his secret identity).

    —

    So apologies for the lack of real content (though this pointless diatribe will still be ~1.3k words, with several dick jokes, and new bodies of thought), Money McBags hopes to have the KITD Q&A next week and then will try to be back with original material shortly thereafter.

    —

    Money McBags does appreciate you being patient (and if this were you, he would be very very patient as well).

    —

    —

    —-

    —

    *Writer’s note:  If you have made it this far, you clearly have run out of NSFW muffs to guess so Money McBags has a question for you:  Would you prefer a long (~1.5k word) weekly column or a short (~300 word) nightly update?  Money McBags isn’t sure which will work best or which he will try to do, but your input is most appreciated (especially if this is your input).  The biggest bottleneck right now is Money McBags’ inability to surf the web during the day to find the links and content you all deserve, so he will be accepting applications for interns to do that for him at moneymcbags@gmail.com (and he is only 42% joking).

  • Economic Update: Ponzeconomy Gets Hamburgled

    Money McBags

    Dear Readers,

    —

    It has been a bit of time since Money McBags has had a chance to formally reach out to you other than a quick hello on the twitter or the Facebook.  So how are things?  Hopefully better than the planned AIG equity offering, the Governator’s marriage, or Joel Hardman’s Halloween costume (and yes, Money McBags said “hard man”).

    —

    Anyway, Money McBags has been looking for ways to stay in touch and put out content while he adjusts to his new routine of putting on pants and interacting with the world for 12 hours a day, and well, he’s still trying to figure things out more than the buyers of the Timberwolf CDO.  That said, he has been talking with the guy who recently launched this site for almost a year about doing something together, and well, this is kind of what happened (and go ahead and click on that, no seriously, click on it, here it is again in case you missed it).

    —

    Money McBags will not make any comments, he will leave that to you, his readers to decide what you think and provide feedback.  Money McBags will just say 3 things about that video:

    —

    1. That is obviously not him and he had no role in picking his not really doppelganger.

    —

    2.  It was a first pass, and remember how emasculating your first time was.

    —

    3.  To be fair, Kate Upton is really fucking hot.

    —

    Anyway, Money McBags might have some content in a few days (no really, he means it), there may be more webisodes, and there likely will even be some Marisa Miller.

    —

    But if you need a fix, below is the script Money McBags sent the guys making the video (and the entirety of his contribution to the process, so you can see how that sausage was made).  You can even see the two notes he inserted and his bizarre use of the first person, (because Money McBags felt using the third person would be terribly gauche),  It is ~1k words of new content, though for the first time Money McBags does use some previously written material, but is still a cockload better than anything else out there (and not any cockload, but a Lexington Steele Cockload), so enjoy:

    —

    The market was down last week as news was generally less positive than Nouriel Roubini in a punch bowl, or a Chaz Bono pregnancy test.  New claims for unemployment rose to 474k thus claiming the economy still sucks, Portugal and Greece continued to teeter on the verge of bankruptcy like Larry Craig at the Thunder Down Under, and the Pippa Middleton topless photo proved to be less revealing than the inconceivable Lloyd Blankfein at a congressional hearing (note for web/video production:  if you can put the last two links as one visual, it makes the joke funnier.  Goldman’s CEO Lloyd Blankfein looks like the guy from the Princess Bride who says “inconceivable”).

    —-

    Not even the death of colossal asshat and world’s worst person Osama Bin Laden could rally the markets as investors bought the rumor and sold the news faster than Mark Sanford’s wife (note to whoever is editing this, Rashard Mendenhall’s sponsors may work here as well, depends on visuals, but it is a more current reference).  That said, with healthcare and terrorism now solved, the administration can focus on more important matters like figuring out how to crown a college football national champion, how to better align with the Femen movement, and exactly whose fat finger caused last year’s flash crash (though they might want to start by questioning Ellen Degeneres because she has to have some hella fat fingers to attract this).

    —-

    The big news of the week though was the Jobs Report which was so headliney good that after it was released dogs were seen hugging cats, Hatfields dancing with McCoys, and Keynesian economists sharing their crystal balls with Austrian economists (even as Keynes’ work continues to becomes more tainted than Faye Reagan’s chin while giving a rusty trombone).

    —

    Pundits lauded the addition of 268k jobs to the private sector but if you dig in to that number, you will see that it is more overblown than Charlie Sheen on “date night.”

    —

    First of all, the ponzeconomy™ added 244k jobs, not 268k, because the government pared 24k jobs and this remains troubling because public sector workers, with their 3 hour lunch breaks and 5 hour work days, are less likely to find new jobs in the private sector than eunuchs are to find jobs in the privates sector.

    —-

    Secondly, the fictitious BLS birth-death model (which is such a big black box that it makes Robert Deniro salivate) somehow added in another 175k jobs.  While we still have no idea how this is calculated (though I would guess lovingly and with a lot of hardcoding), how it is massaged in to the numbers (though I would guess with a lot of vaseline and a shoe horn), and why it oscillates so much between unbelievable and really fucking unbelievable, we are told that you can’t simply deduct the 175k from the headline number as it is somehow adjusted and folded in to the 268k new jobs created like a chicken leg folds in to one of Kristie Alley’s fat rolls.  The point is, taking out the made up birth-death numbers, the ponzeconomy™ added somewhere between a delicious 69k jobs and 244k jobs.

    —-

    But wait, there is more.  McDonalds hired 62k people last month which is 25% to 90% of the total jobs created (depending on how you want to treat the Birth-Death model numbers, though I suggest treating them with skepticism and a bottle of Fungoral) and that is enough to make investors grimace as there can only be one Mayor McCheese, so 99.9% of the 62k jobs added were likely minimum wage jobs.  And with inflation shooting up like River Phoenix at the Viper Room, minimum wage jobs are becoming less useful than running shoes are to Stephen Hawking.

    —-

    Here are some more fun facts:

    —

    2.5MM people remain marginally attached to the labor force and marginally attached in the same way that Sarah Palin is marginally attached to a copy of Strunk and White.  Among those marginally attached, 989k were labeled as “discouraged,” making the other 1.5MM fucking discouraged.

    —

    The unemployment rate was 8.8% for adult men, 7.9% for adult women, and 100% for people named Osama Bin Laden.

    —

    Kate Upton is hot.  While this fact has nothing to do with the jobs number, it is very important to know.

    —

    13.7MM people are now unemployed, which is up from 13.5MM people last month even as a headline 268k jobs were added. So um, huh?  Come again?  And if you are Rose Huntington Whiteley, then please, come again.

    —

    Just think about that for a second.  The economy added jobs, but there are more people unemployed and the unemployment rate went up from 8.8% to 9%, so using something called logic, shouldn’t the (No) Labor Department be focused on creating fewer jobs to get the unemployment rate down?  It is more of a paradox than Jamie Lee Curtis’ gender.

    —-

    But there is a reason for this and that is that the Household Survey, which actually measures unemployment, is more unrelated to the jobs number than sanity is related to an Alan Greenspan economic policy.  And the key point is that in that survey, the labor force participation rate fell to a ~30 year low of 64.2% which is such a low labor force that the ponzeconomy™ may need a c-section (and that joke may hit you in a second).

    —

    This explains why jobs were added and yet the unemployment rate went up in a mathematical sleight of hand that would make Fibbonacci proud and Bernie Madoff’s dick hard.  With a more normalized labor force participation rate, the unemployment rate would be closer to 11%  and along with the U6 unemployment rate still hovering ~16% (+/- BLS Head Keith Hall’s credibility, and I never trust anyone with a pornstache), that highlights that job growth is still slower than a conversation between Kirk Douglas and Dick Clark.

    —

    So adjusting for government layoffs (which is a trend more negative than dickflashing), the birth-death model (which is a number more made up than anything on AIG’s balance sheet), and McDonalds’ new hires (which is as positive of a sign for the unemployed as the “bridge out” sign was for Mary Jo Kopechne), the ponzeconomy™ added somewhere between 7k and 182k new jobs so anyway you look at it, the economy got hamburgled (which is slightly less healthy than getting turd burgled).

    —-

    While we know neither Rome, nor Pam Anderson, were built in a day, at this pace the recovery will be over sometime in the year 2025 which will be just in time for opening night of the Spiderman musical, so plan accordingly.

  • Site Update: Searching for the Fountain of Truth

    Money McBags

    ,

    Money McBags is going to be off for most of this week as at the last minute he decided to fly West for a spring break, and unlike the only other almost vacation he has taken in the nearly year and a half of writing the award winning When Genius Prevailed, he has sworn that this won’t be another bustman‘s holiday.  As a result, his time on the internet is going to be more limited than Gary Coleman’s kidney so he apologizes for that since he knows you all require your daily dose of dick jokes with a bit of market analysis sprinkled in for the kids.

    —

    Money McBags may be back on Friday, but will hopefully have something out this weekend where he will answer many of the rumors about him that seem to have been swirling on different sites over the past few weeks.  Plus, KITD’s CEO has said he will answer Money McBags’ questions sometime soon, so Money McBags will post those as soon as he receives them (could be tomorrow, could be Friday, could be “just kidding, now go fuck yourself” day.   The ball is no longer in Money McBags’ court on that one).

    —

    So take these few days to fuck around in the archives, email Money McBags questions (he will still be hitting up email on his blackberry as that has not been banned, so he will do his best to get back to you), and enjoy some soothing music to help you get through what will likely be a choppy market without Money McBags’ column to make you feel a bit better.

  • Small Company Update: KITD, I Ok with ioko Deal

    Money McBags

    Money McBags promised to get to his breakdown of KITD’s transformational acquisition of ioko the other day, and he apologizes for the delay, but he got busy with some other shit (that other shit mainly being the recently released NSFW Kate Bosworth nude pics), so you’ll have to forgive him for not getting to it sooner.  That said, since the deal, the stock has traded the fuck off in a move that makes less sense to Money McBags than WGO’s valuation (which is finally falling from its cockposterous levels), string theory, or country music.  Money McBags spent a great deal of time on Thursday on the phone, the twitter, and over email trying to get to the bottom of the nonsensical sell off (and to the bottom of this as well) while updating his readers on WTF was happening, so he is going through a bit of KITD overload.  But he did promise this analysis so below are Money McBags’ thoughts on the deal:

    —

    1.  It was a good fucking price.  Money McBags was nervous as fuck that based on the last couple of deals KITD would have to pay north of 2x revenues in this acquisition and that would have led to KITD doing what they do best, raising more equity.  Luckily, they were able to buy $54MM in revenue for $79.4MM when including the purchase price, cash and working cap on ioko’s balance sheet, and incentive payouts.  So ~1.5x revenues is a pretty jizztastic price and according to CEO Kaleil Tuzman on his “for analysts only” phone call Thursday afternoon, KITD wasn’t even the highest bidder.  That’s right, ioko chose KITD because they thought KITD was simply a better long-term strategic fit than others including having more sales synergies, being able to reach more geographies, and having better food in their cafeteria.

    —

    2.  You down with OTT? Yeah you know KITD.  So what ioko brings to the table is what is referred to as “over the top” functionality which isn’t just a shitty arm wrestling movie, but also “allows premium video services delivered over the Internet to be formatted for and presented on televisions and other connected devices, as well as its closed network IPTV solutions.”  And that is where KITD is going with their cockriffic “Lens to Lens” strategy (which Money McBags hopes isn’t just a one hit wonder like the “Soul II Soul” strategy).  As CEO Tuzman said:  “We are going towards OTT and we are going towards social media and we are able to combine those two worlds I think very effectively” and that seems to be the key to this deal.

    —

    ioku has the AT&T U-Verse business, has the UK’s Hulu in SeeSaw (though Money McBags isn’t sure he would brag about having the UK’s version of Hulu since Hulu is likely to turn in to a giant boo boo, but whatever), and Europe’s Netflix in LoveFilm (and some films that Money McBags love include Rushmore, Dr. Strangelove, and anything from Faye Reagan’s box set).  Here is the fucking point and this is absolutely critical to understanding why this stock has more potential than Jennifer Lawrence, people are increasingly using video across a number of different devices and getting that video in increasingly non-traditional ways and as more videos get sent and bandwidth pipes get more clogged than Jewels Jade‘s rectum in a Whitezilla video, the lower cost delivery technologies are going to prevail and KITD is the leader in this low cost fucking delivery (it’s a bit like the shift from cassettes to CDs or full bush to brazillian waxes).  Seriously, you don’t really need to know shit else here (but if you want to know something else, feel free to know that scientists finally answered Molyneux’s questions, and Nicole Trunfio is hot).

    —

    3.  IP continues to grow and well, it’s still earlier in the adoption cycle than the Papadapolis‘ in September of 1983.  This is from the call: “We believe that within five to ten years, really every mid or large-sized corporation, not just media and broadcasters, which has been the focus of this call because of the nature of the acquisition, will have some sort of IP-based video content management system in place maybe for an internal use even for security and surveillance or human resources or communications, but video is becoming a key means of communication just like audio did 60 or 70 years ago.”  So in the immortal words of Money McBags, jizzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

    —

    4.  Dilution was minimal (and please read that again).  KITD is only including 1.5MM shares in the deal which will give them 40.8MM shares when all is said and done and leave them with $40MM of cash on the balance sheet to throw another party at NAB in Vegas only this time at the Spearmint Rhino (and readers, please pour some out for Rick’s Las Vegas.  It was the right move for RICK, but still a shame).  And Money McBags will assume Kaleil was giving the award winning When Genius Prevailed a shout out when he said: “despite the fact that we have been teased at times around kind of our willingness to dilute, I want to remind shareholders that management has a significant stake in the business,” because no one has teased him more than Money McBags who coined the phrase “You can’t spell dilution without KITD. Ok, you can, but lets pretend it is a silent K.”  That said, this looks to be much better than Money McBags had guessed.

    —

    5.  They don’t have to deal with any regulatory institutions over anti-trust issues (and you know who Money McBags anti-trusts?  Lloyd Blankfein, Dick Chaney, and Smurfs).  The reason the deal was delayed was because KITD had to navigate the anti-trust and regulatory waters and they seem to have done it with much aplomb in finally buying this “plum of a company” (Kaleil’s words, not Money McBags’).

    —

    6.  If you missed this on the award winning When Genius Prevailed, then Money McBags is sorry for you, but he felt he needed to repost it just in case.  It has nothing to do with KITD, but it is a very pressing matter.

    —

    7.  No more M&A (but hopefully they will deliver some lens to lens T&A).  This is actually great fucking news and it is good that KITD is acknowledging that now with ~50% of their self-defined market (and for the record Money McBags has 100% of the financial dick joke market, so fuck you all very much), they need to concentrate on putting everything together.  It’s all about management execution now and well, if management fucks this up, Money McBags will be all for their execution (figuratively of course because Money McBags is a man of peace, especially this piece).  The point is, KITD is now going to focus on organic growth and when their restructuring charges are done in Q4, they will start showing the kind of numbers that make investors giddy.

    —

    8.  Not everything was hunky dory as their upper management seems more bloated than Bunny De La Cruz‘s fupa after a triple creampie (and only click the link if you must).  At least 4 of ioko’s senior managers will join KITD’s senior management team (and no offense. but this Scott Sahadi guy from ioko looks like he is 25 years late for the Miami Vice extras casting call, for fucksake, if his shirt were unbuttoned anymore, his sphincter would be showing.  Come on Scott, you’re running a fucking company and not getting ready to go meet Jack Tripper at the Reagle Beagle, so button the fuck up) along with every other CEO/CFO/CTO/C3P0 from companies they have acquired over the past couple of years.  KITD is at a conference in Vegas and on the call, Kaleil said: “I think we had something on the order of 20 team members from around the Company in senior positions people were able to meet and we are hoping that many of you will have the chance to meet leaders across the business going forward.”  Bringing 20 senior managers to a conference in Vegas is more like the start of a Sabrina Deep Fan Bang than it is a way to run a company.  Too many senior managers can be a fucking nightmare and this organization is getting more top heavy than Christina Hendricks, so it may be challenging for Kaleil or Alex Blum or Gavin Campion or whoever the fuck is in charge of the day to day to actually run the company.

    —

    Shit, go to the KITD website and you’ll see 31 executives listed.  Thirty fucking one.  That either makes KITD a Fudgie the Whale away from being the Baskin-Robbins of small cap stocks (and yeah Fudgie the Whale is Carvels’ and not Baskin-Robbins, but work with Money McBags here) or on the verge of having too many mohels and not enough schlongs (and Money McBags prefers that phrase to the un-PC too many chiefs and not enough indians, because Money Mcbags believes in being PC).

    —

    9.  Guidance was inline and that means the company is cheaper than a tattered Dick Pole rookie card.  Ok, let’s forget about Q1 which is going to be flat to sequentially up with Q4 2010, because nobody gives a fuck about what KITD did in the last three months as long as they didn’t blow anything up because short-term performance is less relevant than a pimple on Rosie Huntington Whiteley‘s ass.

    —

    For the full year 2010, KITD thinks they will have ~$210MM in revenue when they layer in all of the acquisitions.  But if you take the $137.5MM initial guidance and add in all of their transactions, you get to ~$235MM in run rate revenue at the end of 2011.  So slap a 30% growth rate on that, a 23% EBITDA margin (which they hope to get up to 30% in the next 18-24 months, so um, jizzzzzzz), and you get the tasty $69MM of EBITDA that Money McBags has been talking about for 2012.  After the cockdickulous sell off, KITD now has a market value of ~$425MM with their 40.8MM shares and with $40MM in cash, that means they are trading at ~5.5x 2012 EV/EBITDA (and they were at ~6.5x EV/EBITDA right after the deal, so um, huh?).  No really.  Those are the fucking numbers, unless you think EBITDA margins are going to tick up faster and then the multiple gets even stupider than Network TV.

    —

    So this stock should have rocketed the fuck up but instead it sold off as if it had a bad case of monkeypox.  It makes absolutely no sense to Money McBags and KITD’s management team was so incensed with the drop on Thursday that they sent an email to analysts (but not to regular investors, because, fuck you small guys who put your hard earned income into KITD) and held a couple of invite only conference calls that were so exclusive, it took Money McBags less that 10 seconds to get the dial-in information (but then again Money McBags does have 100% market share of the financial dick joke market, so people make sure he is taken care of).

    —

    Anyway, on the calls and the email, Kaleil Tuzman one by one refuted the issues the shorts were throwing around and added a fuckton more color (like a mauve) to the acquisition.  Money McBags thought Kaleil absolutely killed it, and you all know Money McBags would tell you if he thought Kaleil was off point.  Anyway, here are the main issues Kaleial debunked:

    —

    1.  ioko does not change the mix of software vs. services vs. maintenance vs. whatever revenues KITD currently has.  There may have been some confusion about this when Kaleil was talking about it from the customer’s perspective, but at the end of the day, shit doesn’t change.  So jizzzz.

    —

    2.  Yes, ioko’s revenue has been flatter than Keira Knightley for some time, but those numbers include some do shit legacy healthcare business in run off that KITD not only doesn’t give a shit about, but is not in any of KITD’s numbers.  The ioko business has been growing 25% with the market (but um, note to Kaleil, Money McBags thought the market was growing 30%, so hmmm) and KITD will help them up that rate and grow in the all important telco and MSO segments.  So double jizzzzz.

    —

    3.  Kaleil was not reason the Mermaid Bar shut down at Harvard’s PSK Club, but either way, the Mount Holyoke girls involved were definitely over 18 and knew the difference between Keats and Yeats (which of course is one letter).

    —

    4.  ioko was not KITD’s third or fourth choice, nor were they even sloppy seconds.  KITD targeted ioko all along and just couldn’t say shit because there were other bidders and they didn’t want to jeopardize the deal.  Money McBags has heard from many investors who were pissed off because they felt misled by Kaleil that KITD didn’t buy The Platform, Deltarte, or Elle Basey, but it is what it is.  Sure Kaleil could have handled this a bit better, but negotiations can be tricky and he didn’t want to give out too much information.  That said, he was at times perhaps purposely playing along too much with rumors, but what is done is done.  So um, blue ball no jizzzzz.

    —

    Money McBags really doesn’t know what else to say and has no idea what the shorts are thinking because either they think this company is a complete fraud and going to zero (which is always a possibility but Money McBags thinks that possibility is no larger for KITD than any other non-Chinese and non-ZAGG public company) or they are using different numbers than Money McBags.  Shit, lets say KITD somehow fucks up all of the integration and they don’t grow revenue at all.  So revenue will be ~$230MM in 2012 and say EBITDA margins get cut in half just to totally assfuck this business.  In that scenario, KITD would have ~$26MM in EBITDA and would be trading at ~15x EV/EBITDA and in that case, sure, you wouldn’t really pay more than 10x for the business and maybe the stock could drop to ~$7.50, but really?  No really?  The odds of the company not growing and EBITDA being cut in half are about the same odds of Josef Fritzl being named Father of the Century, and to make any real money on this as a short, that is the scenario you have to believe which is completely cockposterous.

    —

    The story is the same.  IP video is 5% of the overall video market and should be 100%.  KITD is the enterprise leader in this.  More and more people and companies are consuming online and mobile video, so not only should IP take share from digital, but the market overall is growing quickly.  KITD is trading at ~5.5x EV/EBITDA despite the above statements, so there is more of a disconnect between KITD’s valuation and potential performance than there is between Indonesian politician Mr Arifinto’s beliefs and his practices.  Money McBags bought after the deal and even though KITD is a big enough position for him that has basically sucked a fatty over the last year (we have to be honest here, this stock has worked less than Mayim Bialik at the Bunny Ranch this year, but patience is a virtue), he is likely gong to buy more because the story just makes too much fucking sense and this stock has the potential to climb up in to at least the mid $20s in the next couple of years with what Money McBags believes to be minimal downside.

    —

    That said, Money McBags does have some questions for CEO Kaleil Tuzman (some of them he posed after earnings and is reposting) and hopefully Kaleil will come back and answer them now that he can’t piss off the market anymore.

    —

    1.   On your earnings call you talked about how your IP solution is making the current digital video hardware and firmware (and yes, you said hard.  Huhuhuhuh) almost obsolete.  So why is the market growing only 30% (or 25% according to what you pegged ioko growth as)?  What is causing the adoption rate not to accelerate as online video grows and your solution is cheaper?

    —

    2.  After earnings when your stock cratered, you sent out an email to select investors (and Money McBags was on that list and still would like the ok from you print your email and Money McBags’ response because the readers of the award winning When Genius Prevailed would clearly be interested to see the difference between how you handle the street and how Money McBags does) and now after the deal, you sent out another email only to analysts (and Money McBags was not on your distribution list for that, so really?  Money McBags thought we shared a moment) and hosted at least two conference calls for large investors.

    —

    Can you explain this strategy and why you don’t disseminate this information to retail investors who support your stock?  Money McBags’ email was blowing up all day on Thursday with regular people who have no contact with you or the company anxiously looking for answers (and Money McBags does find it funny that anyone would come to him looking for answers unless the answersre 69, on a trapeze, and up the butt), so why not throw them a bone?

    —

    3.  You mentioned wanting to ease back from talking with the Street and potentially hiring an IR person.  You know Money McBags is not just in the market for a job, but he knows your company and can handle the Street, so should he send his resume to Gavin Campion or can we assume the job is his?  And if so, Money McBags demands a foosball table, free soft drinks, and his own administrative assistant.  Plus Money McBags would fit right in with the awesome names already on the KITD management team such as Daniel Goodfellow, Richard Craig-McTouchyFeely, and the vixenly Elin Askfelt (and Money McBags would certainly ask if that could be felt).

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    4.  When are you going to be the lens to lens backbone for spankwire.com, pornhub, and the tubes of the world because those fuckers deliver some content?

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    5.  Why are you fucking around and trying to build a brand?  No really, what is the fucking point?  You are going to be half of the market so why waste dollars on letting people know you’re better than the competition when the competition is like a He PingPing nut hair compared to KITD’s full 1980s Ron Jeremy cockstache?  That said, if you really are dead set on marketing, this seems to be an effective campaign.

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    6.  Since you now have experience in putting rumors to rest, do you have advice for Money McBags on how to deal with the persistent rumors that: 1. He is soon to be shutting down and leaving the award winning When Genius Prevailed.  2.  The award winning When Genius Prevailed is either written by more than one person or Money McBags is not human because just one regular person alone could not possibly put up all of this original content, analysis, dick jokes and boob picks every day by himself.   3. He was the real inspiration for Carly Simon’s song “you’re so vain.”

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    7.  Can you talk in regular non-techie English for the average retail investor about what OTT means and how you are taking over this segment?  Who else is doing this and why can you do it better?

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    8.  Be honest here, did you really just read all ~3,200 words of this?

  • 4/14/11 Midnight Report: As Always, New Claims For Unemployment Claim the Economy Still Sucks

    Money McBags

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    The market rallied a bit in the afternoon as rising new claims for unemployment missed analyst guesses by somewhere near a fuckton (give or take an asshair or ten), Portugal and Greece saw bond yields rocket up more than applications to LaSalle’s MBA program and even more than Kate Upton on the awesomeness scale, and the US government got even closer to banging up against their fictitious debt ceiling (and it is more fictitious than the Easter Bunny, Hanukkah Harry, and Goldman Sachs’ congressional testimony) that in the past 25 years has been lifted more times than Joan Rivers’ face or Lisa Sparxxx‘s gunt.  So as always, rally on Money McBags’ friends because the solution to a weak (or non-existent) real recovery, to global turmoil so uncertain that it has even caused Heisenberg to roll over in his grave, and to long-term unemployment more structurally fucked than a Sarah Palin sentence, is to simply buy the dip and thank the great Bernanke in the sky for making QE a permanent part of the lexicon (and for making the US government closer to insolvency than Lenny Dykstra is, though unfortunately with fewer hookers and tobacco stains).

    —

    In macro news, new claims for unemployment rose by 27k to 412k which was just a rounding error away from analyst guesses of 380k (and a rounding error in the same way that Kathy Bates is a rounding error away from Kathy Gardiner) and signals the economic recovery may be losing steam faster than John Tyler’s 1844 re-election campaign (because pissing off both parties is a worse election strategy than telling the truth, or at least more of the truth than others) or Hosni Mubarak’s heart (though who knew he had one).  And what Money McBags loves most about the number isn’t just that it was likely the result of someone at the B(L)S forgetting to hit the goal seek function, but that the (No) Labor Department chalked it up to unusually large layoffs that happen at the end of quarters, but umm, while Money McBags is no econometrician (heck he couldn’t even tell Daniel McFadden from Darren McFadden if he were given a discrete choice, and yes that was the first econometrics joke in the history of the award winning When Genius Prevailed) he is pretty sure analyst regression models should fucking account for seasonality since that is kind of the entire fucking point of a regression model.  So either all of the analyst regression models suffer from some kind of spurious correlation (and correlation more spurious than thinking people buy Playboy for the articles) or the data is more made up than the Fed’s mandate, so it is hard to have any real confidence in the numbers.

    —

    And it’s not just that the data is likely completely bogus, but in the continual “hold the shock and hope for no awe” government strategy, last week’s numbers were revised up for the infinityillionth time from 382k to 385k which made last week’s beat, now a miss.  But of course the market cares about details about as much as the Brits now care about the Royal Bride’s virginity (and Money McBags will take the over on that), so it is what it is.

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    In other macro news PPI was up .7%, though mostly because R Kelly was seen chugging bottles of Gatorade while telling his lady friends not to blink.  Excluding food and energy, the core index rose only 0.3% which is great news for rocks who as far as Money McBags can tell are the only things that don’t use food or energy to survive.  Also, foreclosures dropped 27% from a year ago to their lowest level in 3 years mainly due to lenders’ inability to keep foreclosing on the same homes.  Actually, the drop was mostly caused by the the mortgage documentation scandal delaying many foreclosures as borrowers chant “if the documents are bogus, you can’t foreclose us.”

    —

    And finally, the budget remained in the news as on Wednesday night President Obama released his deficit reduction plan which was so well received by critics that it has already been nominated for a Pen/Faulkner award.  Obama’s plan aims to cut the deficit by $4T in 12 years through overhauling the tax code, cutting defense spending, and collecting underpants.  Of course Republicans hate Obama’s plan with the main differences being a lack of an overhaul of medicare and the fact that they didn’t write it.

    —

    Look, Money McBags hates getting political (unless it is to support the Femen Movement, the Slut Walk, or the right to bare arms and barer breasts) but why do people give a fuck about this theater of the absurd which is more farcical than a Marx Brothers movie (where time flies like and arrow and fruit flies like a banana) or the notion of efficient markets?  Seriously, it is a 12 year plan.  Do you know who will be president in 12 years?  Exactly.  Shit, do you know who will be President in 2 years?

    —

    So this plan is completely irrelevant because it will change next year or the year after as whoever is in charge will continue to make short-term trade-offs for long-term pain because that is how you win fucking elections.  Sure eventually someone will get caught holding the bag, but delaying the inevitable is more American than apple pie, pick-up trucks, and Carrie Prejean so why get so worked up about which plan is less full of shit when they both will accomplish less than Heather Mills in an ass kicking contest.  And just to prove that point, the spending bill that was so fucking important last week that it threatened to shut down the government was finally passed by the House and the $38B in cuts were really only $350MM (or a year’s supply of botox for Nancy Pelosi), so wake Money McBags up when either party gets serious about anything (though if you are going to wake him up, please make sure you are appropriately dressed).

    —

    Internationally, Greece’s borrowing costs soared almost as high as Icarus as they rose to 18.3% which to put in perspective is the same as the rate on Stephen Baldwin‘s credit cards (though without the opportunity for cash back).  The reason for the jump was that Germany said for the first time that Greece may need to restructure its debt and after last year’s $140B bail out, any shenanigans with Greece’s balance sheet could be more catastrophic to Europe than the bubonic plague or a black jean shortage.  So keep an eye on Europe here, and also keep an eye on this.

    —

    The only other global news was that computer shipments fell 3.2% worldwide as earthquakes in Japan, uprisings in the Middle East, and no one having any fucking money, hindered sales.  Computer shipments in Japan fell 15.9% as something called “not going outside to avoid radiation” took precedence over buying discretionary products while shipments in the US fell 10% as consumers either switched to tablets or decided not to upgrade due to the hassle of having to transfer all of their porn to a new machine.

    —

    In the market, RIMM was down after its tablet received worse reviews than “Our American Cousin” did from Mary Todd Lincoln (apparently she liked it as much as a hole in the head).  Money McBags has been crapping all over RIMM for months now as like YHOO, EK, and Kourtney Kardashian, you never invest in the the second tier player when there is a clear market leader.

    —

    Also, GS was down today as Senator Carl Levin released the findings of a 2 year investigation that showed GS acted like a bunch of assshats by misleading clients and lying to congress.  While Lloyd Blankfein tried to slip Levin some iocane powder and some more BS before the report came out, it doesn’t really matter because the government has no interest in actually trying their own.  The fact that no one at GS has been jailed for being complicit in the biggest financial meltdown of our time is more cockposterous than Taco Bell testing a taco shell made of Doritos or the Waterfall TALF Opportunity, but it’s good to be King.

    —

    In small cap news Money McBags spent all day on KITD answering emails, tweeting away, and trying to figure out WTF sent the stock down 12% in the morning as Money McBags actually really liked their large acquisition from the other day.  Money McBags talked to a shitload of people on the Street and just couldn’t find anything that made sense so he reiterated his buy recommendation when the stock was getting absolutely clobbered and it wound up going from down ~12% to closing down only ~1%, so hopefully you all bought in today because it is at times of fake uncertainty like this that real money can be made.

    —

    And this is one of the reasons Money McBags started the award winning When Genius Prevailed, so regular investors could see how the sausage is made.  See, Money McBags is still very connected to the Street and talks with many analysts and PMs so when KITD was dropping down like Tori Black on pay day, Money McBags called the fuck out of people who are just privy to information that the average investor isn’t.  He talked with sell side analysts, hedge fund colleagues, and even fired up the magic eight ball.  Fuck, CEO Kaleil Tuzman sent out and email to analysts defending the stock and was then on an hour invite only phone call and Money McBags not only had the email forwarded to him but listened in to the phone call.  Retail investors of KITD just don’t get that kind of access which is why investing is not a fair game.  And again, that is why Money McBags started the award winning When Genius Prevailed, to shed light on what really goes on in the market and how asymmetric information and access kills the retail investor.

    —

    Anyway, Money McBags thought Kaleil absolutely killed it on the phone call and email where he basically pissed all over the shorts who thought ioko was a flat growth company (which it is only because they have a dying legacy business which is not in KITD’s projections or numbers), that ioko somehow changes KITD’s mix of service vs. software business, or that ioko was KITD’s third choice.  Money McBags still promises to get his full KITD analysis out sometime before Monday but it’s really pretty simple.  This company is going to have ~$300MM in revenue in 2012, at least $70MM in EBIDTA, is the market leader in a market growing ~30% with huge long-term potential, and is now trading at ~6x EV/EBITDA, so um what else do you need to know?  No really?  Money McBags guesses he will add ~2k words of dick jokes and hot chick pics to that thesis to spruce it up a bit, but there just isn’t much more he can say.

    —

    Oh yeah, old friend RICK is finally shutting down their club in Vegas which is a great decision since that club has been an absolute money suck (and there is a terrible pun in there somewhere).  While Money McBags applauds the decision (and as a shareholder, he is happy it will  add a few cents to earnings), his heart does go out to all of the girls who will now have no way to afford that college education.  It is a sad day for humanity, but a happy day for shareholders.

    —

    Writer’s note:  Yeah, Money McBags has used the headline before, but shit, when there is no theme of the day, writing a headline at 2:30am is fucking difficult.  Money McBags will gladly refund your dignity for having a bit of a redundancy tonight.

    Mubarak heart attack

  • Very Brief Update: Zonked Out

    Money McBags

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    Dear Readers,

    Money McBags had a minor and planned medical procedure today (nowhere near as useful as this) that unfortunately caused him to be knocked the fuck out and while he thought he could quickly shake off the cobwebs and get out a column on KITD, he wound up spending from 2pm to ~8pm drooling all over himself while soundly dreaming of both his position in RICK’s and his taking a position in this, so there will be no analysis today.  And just to show how woozy he was, he thinks that he saw KITD was down ~5%, but that clearly can’t be the fucking case because they made a titastic acquisition and are cheaper than pens in Chile, so his faculties must not be back to their fullest right now.

    —

    So while Money McBags thought he would be able to get to a break down of KITD’s acquisition today, his neurological system simply did not want to cooperate.  He did just finish going through the tranny from their call and despite being almost as long as The Magic Mountain (and only slightly less dry), the transcript seemed hunky fucking dory.  So for those of you hitting Money McBags up and asking WTF is going on with KITD, he really has no fucking idea.  Just about everything looked good to him and he bought at the open yesterday and well, that sucked in the short-term, but whatever.  Money McBags’ opinion has not changed and if anything he has become more positive, but the way this bitch is trading is more confusing than a photocopier, so it is what it is for now.

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    Anyway, Money McBags’ goal is to get out a daily report tomorrow and then a full fledged analysis of KITD Friday or over the weekend.  And then next week he finally promises to address all of the rumors that have been going around the internet about the future of the award winning When Genius Prevailed and whether or not Natalie Portman is really having Money McBags’ love child (though the short answer is, love was never involved).

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    To the pain,

    Money McBags