Posts tagged ADP job report
The market got its schwerve back on today by buying the dip as if the dip were going to cure cancer, reveal the meaning of life, and lead to a threesome with Kayla Collins and Sara Underwood (who as always, can get under Money McBags’ wood whenever she pleases). So forget about unemployment, forget about home prices, and forget about everything you never learned in your economic classes because you were too busy trying to understand crucial concepts like Giffen goods and positive externalities, and just lever up on those double long S&P ETFs because the market has nowhere to go but up (and yes, that was sarcasm).
Money McBags may be but a simple antithalian misanthrope who apparently doesn’t understand concepts such as quantative easing, core inflation, and whatever this fucking Justin Bieber thing is (and really, this is what teenage girls like? Shit, Money McBags wishes he knew that 20 years ago so he could have been much douchier), but he eagerly awaits for someone to explain to him how the market can be trading where it was in late 2005 when the unemployment rate was ~50% of what is today, home prices were not just a fuckload higher, but a fuckload higher and rising, and credit was easier to come by than a venereal disease in the Kardashian house.
Seriously, let’s say the economy was at X in late 2005 and today the economy is at X minus “a bunch of shit people can’t afford anymore,” so how can the market be valued the same unless common sense has turned in to uncommon sense, inflation is so fucking high that that it is causing corporate profits to seem better in nominal dollars (and not that bullshit core inflation number which is less useful than an organ transplant waiting list in Arizona), or the economy is simply driven by the richest 5% of the people who are now back to dining on unicorn meat and the tears of defenseless babies since the algorithms shot their investment portfolios back up to a bernankity. Money McBags remains thoroughly confused, but as a former hedge fund colleague of his tried to logically explain earlier today, and Money McBags is paraphrasing, “the market is going up, SO IT SHOULD GO UP.”
And there we have the rally in a nut shell, what goes up, should continue to go up, because why else would it fucking be going up (and Money McBags believes that is called the transitive property of insanity)? Now if you’ll excuse Money McBags, he has to go burn his CFA Charter that is propping up his door and his MBA diploma which is plugging the rat holes in his kitchen because the Underground Man was right and 2 + 2 may not always equal 4. So buy this dip, that dip, or all the dips and bask in the cognitive dissonance.
Anyway, the reason the market rallied today (other than inertia) was that the ADP jobs report came out (though we all kind of knew anyway, especially when we caught it holding hands last month with the B(L)S’ Employment Situation Summary. Not there is anything wrong with that) and demolished guesses by showing 297k private sector jobs were created vs. guesses for 100k. And it wasn’t just that, but the data was quickly followed up by the ISM’s Service Sector Report where the index reached its highest level in four years (and lucky for it, there will be no blood test tomorrow) which seemed to confirm growing strength in the economy. So hoofuckingray for macro data today.
Of course one has to look at the data critically, and not just stare in to its headlines with their dreamy big words and pithy punctuations, to properly understand what the fuck happened and when one does that, one sees the reports weren’t all lobster tails and blow jobs. First of all, while people celebrate the 297k private sector jobs created according to ADP, they ignore that the report showed that 142k government/public sector jobs were lost. So only ~150k net new jobs were added which is better than zero, but still not enough to put a dent in the “Job-Lost Generation™.”
Secondly, in looking through the details of the report spewed by the (J)ISM, we see that the employment index actually dropped from 52.7 to 50.5 which seems in direct opposition to the positive ADP report and the positive headlines telling us that the positive ISM report supposedly supported the positive ADP numbers (wow, that was a positively large mouthful). According to ZeroHedge via GS witch doctors, who never saw a market they couldn’t bullishly manipulate,“The decline in the employment index, however, suggests that the strong ADP employment number has considerable statistical distortion and should therefore be interpreted with care.” So the headlines told Money McBags the numbers were good, and yet the great Goldman Sachs is telling him that he needs to interpret the numbers with care (which is Banksta for “the data is fucked”). Color Money McBags confused here (as long as it is a nice shade of blue to match the tint of his despair).
Internationally, Portugal’s borrowing costs jumped again as they issued €500MM of 6 month bills to be able to finally pay someone to finish the Batalha Monastery and to buy enough cases of 10 year tawny port to get them through this recession. The bills had an average yield of 3.69% which was well above the 2.05% for a similar offering in September, and a fuckload above the .6% average yield for an offering early last year. Luckily, they only need to raise ~€19.5B more this year (and yes, that was sarcasm again) which will allow them at least one more year to play in the great global ponzi scheme as well as plenty of lap dances from Sara Santos.
One more interesting piece of world news is that global food prices hit a new high. Of course since food prices are not counted in core inflation numbers, this is nothing about which to worry (unless you’re hungry, poor, or a rational thinker).
In the market, just about everything was up except FDO which was down 8% as earnings missed guesses despite sales up 9.5% and same store sales up a delicious 6.9% (though the period after the 69 instead of in between it would have been enjoyed more by all parties). Guidance for $.92 to $.97 eps was also below street guesses (but enough to buy a 3-pack of socks at all FDO stores) as margin compression wreaks havoc on earnings.
Elsewhere, JCG was up as Urban Outfitters and Sears are rumored to be outbidding TPG and Leonard Green to purchase the retailer. Sears is apparently in the midst of their spaghetti strategy of just trying to throw shit against the wall to see what sticks as this potential bid comes a week after announcing their bizarre plans to take on NFLX and a week before their likely bid to take over the Ms. America pageant. Also BJs once again caused investors to choke on profits and spit out shares as the retailer announced they will be closing 5 stores and laying off ~500 employees. Finally, DIS was up after being added to the conviction buy list at GS and at ~14x next year’s eps guess, the call seems a bit fucking Goofy.
In small caps, all of Money McBags’ favorite names jumped up including TMRK which is starting to really run. Also OPEN shot up another ~7% to reach a PE just a nut hair below infinity as Money McBags continues to ask for the check on this one as valuation makes less sense than Mila Kunis claiming to be a gay man in a straight woman’s body (and Mila, Money McBags will put a straight man in your body if you think that will help).
Finally, Money McBags wanted to point out EHTH today, which has been getting yammied on an analyst downgrade from Citi, because Money McBags actually wants to give the analyst credit for proactively sticking his balls out on this name and cutting his numbers based on forward thinking and real research. Yeah, Money McBags is going to give the sell side some love today because this guy put out an against consensus opinion and backed it up, so kudos and huzzah (now Money McBags has no idea if the opinion is right, but that is irrelevant).
EHTH is a stock that has confused Money McBags for years now as they have always had a ton of cash (so looked cheap) and yet have consistently underperformed despite having the kind of business model that makes Money McBags’ dick hard (and not just this business model). EHTH runs a health insurance network/online marketplace where they basically form the backbone for insurance carriers to reach insurance seekers on the internet and in turn, EHTH gets a commission. It’s a great business model and yet it has never quite taken off in this space for a variety of reasons including regulations, work provided insurance, and uninsured people not giving a shit. That said, Money McBags followed this company quite closely a few years ago because they should have had strong earnings during the height of the depression when laid off workers were running out of their COBRA coverage faster than Money McBags was running out of similes. Alas, EHTH could never seem to get anything going so Money McBags just forgot about them since if they couldn’t outperform in an environment tailor made for them, they were just never going to be successful. Not only that, but with the potential for government health care, it was unclear what the fuck value EHTH would add unless they were picked to run the back end of the government option.
Anyway, the stock had actually been acting ok until this analyst report came out and sent the stock down ~10% by claiming EHTH will miss their Q4 number and street guesses of $.59 eps for 2011 are cockposterously high. And it’s not just that this is a ballsy call, or that this analyst awesomely stated “We don’t have a higher conviction idea over the first few months of 2011 than our Sell rating on eHealth,” it’s that he backed it up with fucking data. The guy looked at Comscore to see that traffic in the last few months to EHTH has been slowing down and also realized that regulatory issues in CA have fucked with health insurance sales in the last few months. He also postulates that commissions will eventually get close to zero when health care exchanges are introduced and provided rate card information to show that commissions are already being cut nearly in half.
The report is ~12 pages long, which is unfortunately about 13 pages too long for Money McBags to thoroughly read, but the parts he skimmed, he really fucking enjoyed. So a job well done by some guy named Carl McDonald at C and the first real analysis Money McBags has seen from the sell side since the lovely Meredith Whitney retired (wait, she’s not retired, then why won’t she return Money McBags’ calls?).
8/4/10 Midevening Report: Market continues moving on up, can now afford eastside deluxe apartment in the sky
The stock market crept up again today as the equity markets and bond markets continue to decouple like Bristol and Levi, Mel Gibson and sanity, or Carrie Prejean and her top. In terms of macro news, the ISM released their report on the services sector and it both beat analyst guesses of 53 by coming in at 54.8 and was above last month’s reading of 53.8 which Money McBags believes is the first time a piece of macro data has done both of those in the same month since crude inventories were up in May of 2007 as a result of the release of Andrew Dice Clay’s “Dice Undisputed” on DVD. The ISM’s employment gauge rose from 49.7 to 50.9 and that rounding error is enough to give economists with shorter sight than Mr. Magoo a modicum of hope.
In other slightly positive relative macro news, ADP said employers added 42k jobs last month which should be a welcome sign for the 16MM to 20MM people who are still unemployed(and yes, that was sarcasm). At this rate, the recession should officially be over sometime around the year 3MM (about when Xenu will come back to the planet Earth to set off some more volcanoes and elevate disciple Laura Prepon to sainthood) as long as the birth rate also slows down due to the increased number of headaches caused by not having any money. Luckily, the number beat analyst guesses of 40k expected new jobs added according to Reuters, or 30k expected new jobs added according to Bloomberg, or a make believe number of new jobs added according to Money McBags.
Internationally, China seems to be getting a bit more concerned with their housing market as prices are rising faster than Sofia Vergara‘s son’s popularity on take your mom to school day. Apparently the Chinese government wants regulators to give banks a new stress test where in the first part regulators will gauge the impact on bank balance sheets of 50% to 60% home price declines in some cities and in the second part, banks will have to run on a treadmill for 10 minutes while listening to Nancy Sinatra songs and having strobed pictures of Lady Gaga flashed at them. With prices already beginning to moderate, Money McBags is glad that the Chinese government is being a bit proactive here, though it was their initial pro-activity by lending money to any Tom, Dick, or Harry Wang that started this whole mess. The point is China has been bubbling for quite a while, but the global economy needs that growth right now more than a keynesian economist needs a deficit or Roger Ebert needs a jaw, so Money McBags is happy to look the other way for a minute or two while China tries to figure shit out.
In the market today, WFMI sold off like a carton of spoiled soy milk despite beating analyst guesses on revenues and having inline eps while maintaining full year guidance. Revenue was up 13%, eps was up 50%, and same store sales growth was up 8.4%, all respectable fucking numbers, but apparently same store sales growth over the second two months of the quarter was worse than the first month and so far in Q3 it has been only 7.7% so investors are taking that as a sign of deceleration. Well, that and the fact that they lowered the high end of their same store sales growth rates for the rest of the year and lowballed forecasts like forecasts were the ground and they were Abe Vigoda‘s nutsac.
WFMI’s preliminary guidance for 2011 is 4.5% to 6.5% same store sales growth, 10% to 13% overall topline growth, and $1.59 to $1.64 eps which is almost 20% growth on the high end. Money McBags doesn’t follow this stock closely and he fully understands that people hate paying for expensive shit they can get cheaper, that competition is continuing to come in to the market, and that the “organic food” craze may be more full of shit than a constipated rhinoceros with elephantitis of the large intestine, but that said, WFMI is the market leader in the space and eating healthier and better is one way people can still feel like they are treating themselves when they can no longer afford to go on vacations. The stock is now trading at ~22x-23x 2011 guidance which isn’t really cheap for an 11% top line grower but for a market leader in a still emerging market with brand equity and plenty of fucking yoga moms and tofu eaters who need their free range turkeys and chlorine free tampons, it’s not terribly expensive. Money McBags would start doing more research here as the sell off could be a nice buying opportunity.
In other market news, Toyota earned a $2.2B profit thanks to strong sales in emerging markets, cost cutting, and people with short term memories (perhaps caused by receiving concussions from crashing their Toyotas when the brakes gave out). Priceline shot up over 20% on a 72% increase in earnings as european travel came back much stronger than expected despite the volcano in Iceland having spread more ash around the continent than Keith Richards did during he Rolling Stones 1978 European tour. The company guided to eps of $4.78 to $4.98 for this upcoming Q which was well above the $4.18 guessed at by analysts but just enough to win a room at an airport Hilton in Detroit and save enough money to have the scabies taken care of afterwards. Money McBags has never understood Priceline as he likes actually picking the places he will stay, times he will fly, and service providers he will use, but if one views cleanliness, time, and comfort as a commodity, then Money McBags guesses PCLN is for you.
In small cap news, CRTX which Money McBags has written about several times as a name more speculative than Paris Hilton‘s vagina or Greece shot up 9% after it announced it has licensed worldwide rights to its nicotinic-receptor based patents to Targacept which could yield up to $75MM in payments over the next few years which will likely be enough for CRTX to actually buy a strategy. CRTX has been acquiring respiratory type drugs over the past few years so it is a bit odd that they are now in the business of licensing their own portfolio, but Money McBags can only guess the rights they sold were seen as tertiary to their respiratory strategy and won’t choke off longterm growth.
In other small cap news, one of Money McBags’ favorite little companies which had just become too expensive, SMCI, put up another disappointing Q in what is beginning to be a worse trend than flannel shirts or full muffs. Last Q, Money McBags thought they were about fairly priced but asked readers to “figure out is what the fuck is going to drive sales for SMCI next year” because everything pointed to them being at the end of their cycle with INTC having already launched nehalem. Well this Q they once again missed earnings guesses by $.01 while putting up inline-ish revenue up 6.5% sequentially but 63% y/y.
The big issues with this company right now seem to be:
1. Decling margins: Gross margins continue to tick down from the high-teens to the mid-teens and continuing to go to the lower teens would make R Kelly happy enough to pee himself (or someone else), but not investors. About 85% of the Q&A on the call was around this issue and the answers weren’t just difficult to understand because the CEO’s english is worse than Amy Winehouse‘s hygiene but because they gave about 1000 different reasons for the drop. From what Money McBags could understand, margins fell as a result of a mix shift, a shortage of components (perhaps caused by the components jumping into ice cold water), a shift in sales channels to more distributors and resellers, and a terrible case of vertigo. The point is, management didn’t do a great job in giving guidance for where margins will go in the future so investors are left to speculate if 15% is the new 18%.
2. Revenue is starting to slow down or flatten sequentially: Guidance is for flat to 5% up revenue for next Q when last year revenue grew 20% between fiscal Q4 and Q1 so one can’t blame the deceleration between Qs on seasonality (though one could blame it on Erin Andrews‘ red carpet appearances keeping buyers glued to their computer screens). The company was no help with this guidance as they kept referring to their past 30%+ growth rates and those past growth rates are good enough to buy you a cup of soup and maybe some strawberry shortcake for dessert, but that is it.
So how do we value this company when we have no feel for revenues which seem to be decelerating at best and margins that have fallen for any one of about 17 different reasons? Forecasting this company with what we currently know is a more difficult task than keeping ones pants on during a very NSFW european shark attack.
SMCI earned ~$720MM in revenue last fiscal year with the midpoint of guidance for ~$205MM in Q1 this year. With sequential growth slowing and no new INTC chips coming out of which Money McBags is aware, we’ll call revenue ~ $820MM for this upcoming fiscal year, up ~14% which is way short of their historic growth rate, but the law of large numbers and the top of the cycle have to eventually catch up. We’ll give them the benefit of the doubt that margins are at least stable and call gross margin 15.5%, push their operating expenses up ~8% to $80MM, tax them at 32%, and we get ~$30MM GAAP eps or ~$.76 per share. Now there is typically a $.02 to $.03 quarterly discrepancy between GAAP and non-GAAP eps due to stock-based comp so adding that back gets us to ~$.85 eps for next year. The company is now trading at ~12x that but has almost $2 in cash on the balance sheet.
So the point is, we can go through a mental masturbation exercise like we just did because we have no fucking idea how to forecast this company and say it looks reasonably priced based on guesses we pulled completely out of our ass (or what the sell side would call, detailed industry research), or we can wait for trends to get better and not worse. Money McBags likes this company but it will always be a cyclical buy and we are on one of those down cycles now so you can afford to wait on this name unless you can figure out from where growth is going to come and how they are going to get margins back up.
The market was flattish for most of the day until the last hour as some of the fears about Europe abated in the morning thanks to their banking system remaining open for at least another three months (so long enough for depositors to carve out space in their mattresses and pull their funds before the next bank run). The big news is that european banks didn’t seek as much capital from the ECB as people feared they would with the ECB’s 442B Euro line about to expire like the late great Diaperman. Banks only needed an additional 131B Euro 3 month loan which was below the 210B Euro estimate and only 131B Euro above being healthy. In other international news, German unemployment was down for the 12th straight month as German workers have to put in overtime to make sure their Spanish counterparts can take their proper siestas. Ahhh, to be young and in the Euro.
In US macro news, private employers added 13k jobs in the US in June according to ADP which makes a huge dent in the 20MM unemployed/underemployed/already given up people in the US (and by huge dent, Money McBags means the opposite of that). Really, 13k out of 20MM is as significant as a null hypothesis with a p-value of 1 trillion or as likely to change the current atmosphere as a stink bug crawling in to Lady Gaga’s underwear changes her cuntosis. Analysts had guessed that 60k jobs would be added in June so they were only ~250% too high which for them is good enough to win Institutional Investor’s golden shovel as analysts of the year which can then be used clear out all the crap they have been spewing. One has to remember that analysts have confidence intervals wider than the divergent opinions on global warming or Taylor Rain’s rectum. The report should quell hopes of Friday’s Labor Department jobs number release being positive so the government may need to hire Melissa Archer to deliver the release in order to keep investors from paying attention to the actual numbers. In other US news, the FCIC is beginning their two day hearings on AIG and Goldman’s relationship to understand how those firms exacerbated the financial meltdown through their selling of derivatives and then how Goldman profited when AIG was bailed out as AIG used the bail out money to repay their mortgage partners of which Goldman was one (Goldman was repaid to the tune of $12B and Money McBags is told that tune is a mash up of Flight of the Bumblebees and Don’t Worry Be Happy). While Money McBags doesn’t believe anything will come from this inquiry, if it just puts the FCIC’s Heather Murren in the spotlight for a few minutes, he will at least be moderately titillated (and yes, that is Heather on the left).
In market news, S&P is cutting their ratings of Moody’s which is a bit like Jeffrey Skilling calling Dennis Kozlowski a fraud, Attila the Hun calling Ivan the Terrible a bit mean-spirited, or Lindsay Lohan calling Paris Hilton a whore. S&P cited that with new financial regulation investors now may be able to sue (and rightfully so Money McBags will vociferously add) rating agencies for sucking at their jobs (and as a reminder, their only job is to recognize when bad debt exists, and they missed the entire subprime/Alt-A fiasco like an anorexic misses dinner), there could be reduced demand for ratings if regulation removes the need for companies to be rated by nationally recognized organizations (here here), and Moody’s sucks at their job. It is only a matter of time before Moody’s lowers their ratings of S&P on the same concerns and we get a tit-for-tat ratings agency cock-off. In other news, Playboy announced a restructuring where they will become even thinner by eliminating low level workers but will keep senior executives to remain properly top heavy and Ford was rising after paying down $4B of debt and telling people they changed their name to Tesla.
In small cap news, ISLE continues to get shellacked and was doing so even when the market was slightly up today. Two day ago Money McBags told you all shorting ISLE would be a good trade and now you should be up 8% to 15% on it depending at what price you were able to short. A healthy company with a ton of debt doesn’t just dilute shareholders by ~23% unless bad shit is happening. That said, this was purely a trade so if you want to lock in your profits and go home, Money McBags would applaud that move like he applauds charitable donations, rags to riches stories, and rainbow parties. Also, old friend COOL has dropped below $.70 and remember Money McBags broke them down after their last Q and said the $1 they were trading at was much too high and he would be short if the stock were more liquid. Well if you were able to short it, congratulations but you might want to start covering because the easy money has been made. The point is, Money McBags has been hitting some good names for you all and providing you with enough dick jokes to make even Bob Saget shudder so tell a friend, tell an enemy, and follow WGP on twitter and facebook because the revolution has begun.
6/3/10 Midevening Report: BP apologizes for oil spill while investors await market’s apology for recent 12% drop
The market held steady today like the Universe according to Fred Hoyle or the unemployment rate over the past several months. Speaking of unemployment, jobs data came out in advance of tomorrow’s already leaked positive government non farm payrolls report which will no doubt feature a birth/death model plug so large that it will be able to stop up even Jennifer Lopez’s ample backside. Today’s release by ADP showed that private firms added 55k jobs in May which was below the 70k guessed by economists. That said, 55k new jobs out of 20MM unemployed workers is so irrelevant it’s like the Octomom and her likely cavernous hoohah getting any pleasure out of being boned by the late great He Ping Ping and his little ding ding. It’s called a hot dog down a hallway my friends. Also, new claims for unemployment fell by 10k from 460k to 453k as the Labor Department apparently hired Dostoevsky’s Underground Man as their accountant and he finally got his wishes of 2 x 2 not equalling 4. Last week Money McBags reported on the 14k drop in new claims to bring the number down to 460k, but the Labor Department went to work (pun intended) and recounted their made up estimates and have revised last week’s new claims upwards to get to 463k which means claims dropped by 11k and not 14k last week. So that is how 460k – 10k = 453k. Money McBags eagerly awaits next week’s made up number that will also test the limits of believability and mathematics like claiming Josie Maran isn’t hot or trying to divide her awesomeness by zero. In other macro news, the ISM’s index of non-manufacturing businesses came in at 55.4 for the third month in a row which was below the median guess of 55.6 but still showed some expansion with the service sector going from flacid to half mast.
Internationally, markets in Europe rose before the open as economic data showed that Europe has yet to adopt the barter system even with the Euro on life support (though hopefully better life support than what Rue McClanahan was on). Markit’s UK services purchasing managers index (and Money McBags dares you to say that 3 times quickly) rose to 55.4 in May which is strangely the same ordinal number that the ISM’s US service sector index showed, so it’s good to see that the US and UK are both goalseeking for the same numbers. Now Money McBags doesn’t want to tell the governments how to collude, but perhaps they should use different fucking numbers when making shit up and make us at least attempt to use Benford’s law to call BS. While the Markit number showed expansion, digging deeper showed a slow down of new business growth and employment which is as positive of a sign for the UK as the “narrow bridge, use caution”" sign was for Ted Kennedy. Finally, Japan’s finance minister Naoto Kan, is said to be in the lead to become the new Prime Minister and who could be a better choice to run the world’s second biggest economy than a guy who has twice had to resign positions for failing to make his pension fund payments (no really, he did). With judgment and ethics like that, Kan is said to be in discussions with the US to extradite Bernie Madoff and appoint him to the now vacant finance minister role.
In stock news, Moody’s and Fitch cut their ratings on BP because apparently it wasn’t obvious to the whole world that BP is fucked. Rumor is tomorrow the ratings agencies will be cutting ratings on Enron, New Century Financial, and Jimmie Walker’s career. Also, retailers reported their monthly sales numbers and results were mixed and came in at 2.5% growth, .1% below guesses with weakness seen in the West. Surprisingly, Costco had one of the biggest misses, though they still grew 5%, as people are still buying cheap shit but apparently not as fast as expected, perhaps because they bumped into the top of their credit lines.
In small cap news today, JOEZ shot up 6% today on average volume and no news that Money McBags could find other than that they opened up a new store in Cincinatti last week. Wow. Really? You’re selling premium priced fashionable jeans and the place you find to open your 13th store is Cincifuckingnatti? Really? What’s wrong, was Des Moines? Too upscale? Opening up a Joe’s Jeans in Cincinatti makes as much sense as Simona Halep’s decision to become less top heavy (listen Simona, you’re ranked 166th in the fucking world by the WTA, so here’s a little hint: It’s not the fucking boobs that are holding you back, it’s that you’re just not that good at tennis. So as long as your ground game blows, why not continue to highlight your volleys?). Now look, if Money McBags were in charge of strategy at JOEZ, first of all, he would strategize the operations guy out the fucking door since they have controlled costs as well as Al Gore controlled his son, or his marriage. Secondly, he wouldn’t be opening any damn stores in Cincinatti or the entire state of Ohio until he had penetrated the entire East Coast, West Coast, and Amanda Seyfried. Heck, Money McBags would open a store in the deliciously named Butte, Montana before Cincinatti because where better to have a jeans store than Butte? That’s some free marketing and strategy right there. Anyway, Money McBags is sticking with his $.13 to $.15 high end range for JOEZ’ eps so he doesn’t think it is terribly cheap in an environment where uncertainty is dominating which makes small growth stocks that are highly levered to consumer spend and fashion trends riskier than playing grab ass with a person suffering from a bad case of irritable bowel syndrome.
Buenos dias on this lovely Cinqo de Mayo as investors smack the market like a pinata in hopes of breaking it open to catch some falling CDS. Things remain ugly today as Europe is still on the verge of going bankrupt thanks to Greece’s steroidal Wimpy strategy of having a gyro today while promising to pay for five of them on Tuesday. Unfortunately this strategy is finally coming back to bite Greece on its hairy proktos. Fear continues that Spain and Portugal will be next to need bailouts while even more fear continues that Heidi Montag will put out a new album or Alan Greenspan will find someone to listen to him again. Moody’s put Portugal on review telling the country that they need to start paying down their debts, show up to class on time, and stop throwing spitballs at Spain. Moody’s is threatening to cut Portugal by two notches from the contrived “Aa2″ to the less contrived “AaYour’efucked.” Of course as always, Money McBags cares what the rating agencies have to say as much as he cares about John Meriwether’s advice on starting a hedge fund or Fabulous Fab Tourre’s sales pitch for subprime bonds. Moody’s will likely be late once again to the dance with their downgrade of Portugal as by the time Moody’s figures it out, Portugal will long have fled the prom in a fit of tears after busting out of their prom dress and leaving their assets exposed and devalued. Making matters worse in Europe is that Europeans hate to shower and it’s getting hot outside, but making matters even worse than that is that three people were killed when Greek workers protested the new austerity measures yesterday. On the bright side, that is one way for the government to extinguish the debt, though on the negative side it’s a bit morally lacking. In the protests a bank branch also burned to the ground, luckily, the bank only held subprime debt and thus was worth more as ash than as a solvent entity. And finally, EU central banker Axel Foley Weber warned about “grave contagion effects” of the Greek debt crisis for the rest of Europe but added that it doesn’t mean the EU should use every instrument necessary to quell it such as more bailouts, rate changes, or sticking bananas in tailpipes (though if it is Kristin Bell‘s tailpipe and Money McBags’ banana, Money McBags will heartily disagree).
In US macro news, ADP reported that 32k jobs were added to the economy and it was the third month in a row of increases while Challenger, Gray & Christmas stopped by for some milk and cookies before reporting that planned layoffs decreased by 40% from the previous month. Also, mortgage applications soared to a 7 month high thanks to the ending of the federal home buyer tax credit and an extra strong dose of meth while the ISM reported that service industry expanded at the same pace as last month as a result of a Viagra milkshake and being shown Carmen Electra workout videos.
In stock news, News Corp put up a good quarter thanks to revenues from Avatar which Money McBags will see as soon as he grows a vagina. The company is trading down 5% though as they warned of a likely fourth quarter profit decline due to rising costs and lower revenues in their Fox network TV business, decelerating revenue in their cable business, and lower revenues in their film division as they are replacing Avatar with a film slate including the sequeals Alvin and The Chipmunks Get Rabies, The Thunder From Down Under Presents: What Happens in Vegas, and My Big Fat Greek Bankruptcy. In other market news, GOOG is up today on news they are going to start selling e-books and investors realizing that GOOG is only a nut hair away from world domination.
In small cap stocks, Money McBags’ biggest small cap holding KITD is getting pounded like they walked up to Brock Lesnar and told him not only is his mom a whore, but she’s like a shotgun because one cock and she blows. KITD has ~70% international revenue so with Europe about to join Atlantis and Chritsina Applegate’s breasts in the annals of fictional places that once really existed, it is not a surprise that there is some movement down. That said, Money McBags believes in this company and is in it for the long term (and by long term, he means until CEO Kaleil Tuzman sells to CSCO or whomever). Tomorrow pay attention to EBIX reporting quarterly results which Money McBags is sure will look good but will lack any semblance of detail as that business is more obfuscated than John Goodman’s belly button or Tiger Woods’ sense of dignity. On any metric the company is a screaming buy yet the red flags with CEO’s disdain of the Street, his self promotional nature that makes Kim Kardashian seem like a recluse, and his penchant for changing auditors like Ben Roethlisberger changes alibis, is alarming. Money McBags is going to stay away but if any of you can get comfortable with whatever it is in the insurance business they are doing other than installing johnson rods, you could have some nice upside. FHCO also reports tomorrow and with any luck they will have been protected from the European debt disease. FHCO has had a nice run on good earnings and a newly declared dividend and remains a strange and small company which Money McBags likes. He doesn’t own it as it ran a bit too much for him but he’s going to reconsider after they report the Q. Money McBags did make a couple of trades today by hedging his portfolio with EPV and selling his CIT shares for no reason other than to take profits and get some risk off the table. CIT should actually fare well with new CEO John Thain, a cleaner balance sheet (but who really knows for sure how clean it is no matter what the 10k says), and a valuation of right around book value. Should the market continue to drop, Money McBags will look to re-enter CIT while should Abigail Clancy‘s knickers drop, he will look to re-enter her.